UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                 FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


        FOR THE FISCAL YEAR ENDED                   COMMISSION FILE NO.
            DECEMBER 31, 2004                             0-28606

                          NUWAVE TECHNOLOGIES, INC.
                (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

                DELAWARE                               22-3387630
                --------                               ----------
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)



                        1416 MORRIS AVENUE, SUITE 207
                           UNION, NEW JERSEY 07083
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                (908) 851-2470
               (Issuer's telephone number, including area code)
                                ______________

        Securities registered under Section 12(g) of the Exchange Act:

                   COMMON STOCK, PAR VALUE $0.001 PER SHARE
                               (TITLE OF CLASS)

Check  whether  the  issuer  (1) filed  all  reports  required  to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 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 [   ]

Check if there is no disclosure  of delinquent  filers in response to Item 405
of Regulation S-B contained  herein,  and no disclosure will be contained,  to
the  best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference to Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $0

Aggregate market value of the voting stock held by non-affiliates based on
the last sale price for such stock at April 8, 2005: $159,000.

The number of shares of Common Stock outstanding as of March 30, 2005:
2,062,013

Transitional Small Business Disclosure Format:  Yes [   ]   No  [X]

                                       1
<PAGE>

NUWAVE TECHNOLOGIES, INC.
                                 FORM 10-KSB
                              TABLE OF CONTENTS

PART I.....................................................................1
  FORWARD-LOOKING STATEMENTS...............................................1
  ITEM 1.  DESCRIPTION OF BUSINESS.........................................1
  ITEM 2.  DESCRIPTION OF PROPERTIES.......................................6
  ITEM 3.  LEGAL PROCEEDINGS...............................................8
  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............8
PART II....................................................................9
  ITEM 5. MARKET FOR NUWAVE TECHNOLOGIES, INC.'S COMMON EQUITY AND RELATED
  STOCKHOLDER MATTERS......................................................9
  ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......13
  ITEM 7. FINANCIAL STATEMENTS............................................21
  ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE....................................................21
  ITEM 8A.  CONTROLS AND PROCEDURES.......................................22
Part III..................................................................23
  ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS...23
  ITEM 10.  EXECUTIVE COMPENSATION........................................25
  ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
  PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT.............27
  ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................29
  ITEM 13.  EXHIBITS......................................................30
  ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES........................33
  EXHIBIT 31.1............................................................35
  EXHIBIT 32.1............................................................37
FINANCIAL STATEMENTS.....................................................F-1

<PAGE>

                                     PART I

                              INTRODUCTORY NOTE

FORWARD-LOOKING STATEMENTS

      Information  included or incorporated by reference in this Annual Report
may contain  forward-looking  statements.  This  information may involve known
and unknown risks,  uncertainties and other factors which may cause our actual
results,  performance  or  achievements  to be materially  different  from the
future  results,  performance  or  achievements  expressed  or  implied by any
forward-looking   statements.   Forward-looking   statements,   which  involve
assumptions and describe our future plans,  strategies and  expectations,  are
generally  identifiable  by  use  of  the  words  "may,"  "should,"  "expect,"
"anticipate,"  "estimate," "believe," "intend" or "project" or the negative of
these words or other variations on these words or comparable terminology.

      This Form 10-KSB  Annual  Report  contains  forward-looking  statements,
including statements  regarding,  among other things,  (a) our projected sales
and profitability,  (b) our growth strategies,  (c) anticipated  trends in our
industry,  (d) our future  financing plans and (e) our  anticipated  needs for
working   capital.   These   statements  may  be  found  under   "Management's
Discussion and Analysis or Plan of Operations" and  "Description of Business,"
as well as in this  Annual  Report  generally.  Actual  events or results  may
differ  materially  from those  discussed in  forward-looking  statements as a
result of various factors,  including,  without limitation, the risks outlined
under "Risk  Factors" and matters  described in this Annual Report  generally.
In light of these risks and uncertainties,  there can be no assurance that the
forward-looking statements contained in this Annual Report will in fact occur.

ITEM 1.  DESCRIPTION OF BUSINESS

General

      NuWave  Technologies,  Inc. ("NuWave" or the "Company") was incorporated
in Delaware on July 17, 1995.  Since its formation in 1995,  NuWave has been a
technology  company,  focused upon the development and marketing of technology
and technology products related to enhancing image and video output.  NuWave's
annual sales have  declined  from $20,000 in 2003 to $0 in 2004, as it has had
difficulty  securing buyers for its technology  products in a very competitive
market  environment.  NuWave has  incurred net losses of $790,000 and $336,000
in 2003 and 2004, respectively.

      During 2003,  in  conjunction  with a  restructuring  with the Company's
primary  lender,  all of  NuWave's  officers  and  employees  resigned or were
terminated.  On September 10, 2003,  NuWave entered into an agreement with its
existing  lender,  Cornell  Capital  Partners,  LP,  to  settle a  default  on
indebtedness  owed  to  Cornell  Capital  Partners,   LP.  This  indebtedness,
consisting of notes payable of $484,000 and accrued  interest of approximately
$93,000,  was  settled in full for the net sum of $460,000  on  September  10,
2004.

      During  2003,  NuWave  made  changes to its product  lines and  business
strategy.  NuWave has had  difficulty  in selling  its  technology  related to
image and video  enhancement.  This  technology is designed to enrich  picture
and  video  output  with  clearer,  more  defined  detail in  texture,  color,
contrast and tone.  NuWave competes in a very competitive and quickly evolving
market.  NuWave's products have not been price competitive in the market,  and
this has made it difficult to obtain  placements  within  end-use  electronics
markets.  NuWave previously marketed three product lines; however,  based on a
reevaluation  of  these  lines,  it is no  longer  marketing  the  retail  and
security/surveillance  products  and the  Company's  marketing  efforts of the
digital  filtering  technology  and the NuWave  video  processor  ("NVP")  are
limited to responding to inquiries from potential technology customers.

      The Company  would like to broaden its base of products and  investments
in  order  to  diversify  its  product  portfolio  into a  broad  spectrum  of
industries and to improve  profitability.  In 2003 and in the first quarter of
2004,  NuWave  formed five new  subsidiaries  for the purpose of acquiring and
holding  real estate and other  assets.  On October 20,  2003,  NuWave  formed
Lehigh  Acquisition Corp  ("Lehigh").  On December 22, 2003,  NuWave,  through
its wholly owned subsidiary,  Lehigh,  acquired vacant land that it intends to
develop into a community  for residents  over the age of 55.  During  November
2004, Lehigh sold a 20% interest in the vacant land.

                                      A-1
<PAGE>

      In January and February 2004,  NuWave formed NuWave  Acquisition  Corp.,
Harwood  Acquisition  Corp., WH Acquisition  Corp. and JK Acquisition Corp. On
April 30, 2004,  NuWave,  through its wholly owned subsidiary,  WH Acquisition
Corp.,  purchased a parcel of residential real estate for $122,000,  utilizing
approximately   $113,000   in  cash  and  the   application   of  deposits  of
approximately  $9,000.  NuWave's plan is to redevelop and then later sell this
property.

      As of April 11, 2005,  the Company has not as yet  identified  any other
properties,  markets, or investments,  and has made no commitments to purchase
any such assets.

Other Potential Products

      The Company  continues to search for companies and investments,  as well
as  products  that use the  Company's  technology.  Each  opportunity  will be
evaluated  for both its fit for the  Company  and the time frame upon which it
will bring a  satisfactory  return on the  Company's  investment.  As of April
11, 2005,  the Company has not  identified  nor purchased  any new  investment
products or companies.

Research and Development

      During the one year period  starting on October  31,  2003,  the Company
made its research and  development  testing  facilities and testing  equipment
available  to an  independent  commissioned  agent who worked  with  potential
customers  and markets to develop  sales  opportunities  for the Company.  The
marketing agreement with the agent expired in October 2004.

       During  the  years  2004 and 2003,  NuWave  incurred  $0 and  $134,000,
respectively,  on  research  and  development  activities.  The  research  and
development  expenses incurred in 2003 were in engineering  salaries,  outside
consulting  fees  and lab  supplies  of  approximately  $79,000,  $28,000  and
$9,000, respectively.

Marketing and Sales

      In its technology business,  from October 31, 2003 through October 2004,
NuWave  marketed  its  products  through  a  sales  and  marketing  agent  who
assisted  with the  marketing  and  sales of our NVP  technology.  This  agent
previously  served as the  Company's  chief  technology  officer.  This  agent
worked with the NuWave under a marketing  agreement  for the  one-year  period
ended October 2004,  during which there were no sales of our products.  NuWave
currently is evaluating  whether to renew its agreement  with that agent or to
engage a new agent to assist NuWave in marketing its technology.

Manufacturing

      The Company does not contemplate  that it will directly  manufacture any
of its products.  In the past, the Company has  contracted  with third parties
to manufacture  NuWave's NVP Application  Specific  Integrating Chips ("ASIC")
and its product line up.  NuWave also may license to third  parties the rights
to manufacture  the products,  through direct  licensing,  Original  Equipment
Manufacturer ("OEM") arrangements or otherwise.

      The Company  intends to produce the NVP ASIC chips only as ordered under
firm commitments by customers.

Patents; Proprietary Information

      The  Company is  presently  re-evaluating  its  technology  line-up  and
product  strategy.  In the past,  the  Company has filed U.S.  patents  and/or
copyright  applications  for certain of its proposed  products and technology.
The  Company  has  also  filed   applications  in  key  industrial   countries
worldwide.  The Company  intends to protect  patents and  technologies  in key
strategic technology product areas.

      In April 1996, the Company filed two U.S. patent  applications on behalf
of Rave Engineering  Corporation  ("Rave") for its Randall  connector  system.
One patent was  granted in  November  1997 and the second  patent was  granted
January  1998.  Under the  terms of a  settlement  agreement  with  Rave,  the
Company retains the exclusive license rights to these patents.


                                      A-2
<PAGE>

      In April 1998,  the Company  filed three U.S.  patent  applications  for
certain of its independently  developed products:  one for the NVP and two for
the Softsets,  these patents were granted in November 2000,  February 2001 and
May  2001,   respectively.   In  August  1999,  the  Company  filed  a  patent
application  for its digital  software  technology as used in its  PicturePrep
product line,  this patent was granted in October 2001.  There is no assurance
that any  patent  will  provide  the  Company  with  commercially  significant
protection  of our  technology  or that we will  have  adequate  resources  to
enforce our patents.

      The Company  historically  sold its  technology  and products in foreign
markets.  As  such,  it  has  filed  for  foreign  patent  protection  in  the
countries  forming the  European  Union,  Japan and Korea.  The patent laws of
other  countries may differ  significantly  from those of the United States as
to the patentability of the Company's products and technology.  Moreover,  the
degree of protection  afforded by foreign  patents may be different  from that
in the United States.

      Patent  applications  in the  United  States are  maintained  in secrecy
until the patents are issued, if a non-publication  request is timely made and
the applications are not foreign filed, and are otherwise  published 18 months
after filing.  Publication of  discoveries in scientific or patent  literature
tends to lag behind actual  discoveries by several  months.  As a result,  the
Company  cannot be certain  that it will be the first  creator  of  inventions
covered  by any  patent  applications  it  makes or the  first to file  patent
applications on such inventions.

      Management  believes that the products the Company intends to market and
sell do not  infringe  the  patents  or  other  proprietary  rights  of  third
parties.  Further,  it is not aware of any patents  held by  competitors  that
will prevent,  limit or otherwise interfere with the Company's ability to make
and sell its  products.  However,  it is possible  that  competitors  may have
applied for, or may in the future apply for and obtain,  patents which have an
adverse impact on the Company's  ability to make and sell its products.  There
is no assurance  that  competitors  will not infringe the  Company's  patents.
Defense and prosecution of patent suits,  even if successful,  are both costly
and time  consuming.  An adverse outcome in the defense of a patent suit could
subject the  Company to  significant  liabilities  to third  parties,  require
disputed  rights to be  licensed  from  third  parties  or require it to cease
selling its products.

      The Company also relies on unpatented proprietary  technology.  There is
no  assurance  that others may not  independently  develop the same or similar
technology   or  otherwise   obtain   access  to  the   Company's   unpatented
technology.  To protect its trade secrets and other  proprietary  information,
the Company  requires  employees,  advisors  and  collaborators  to enter into
confidentiality  agreements.  The Company  could be adversely  affected in the
event that these  agreements  fail to provide  meaningful  protection  for its
trade secrets, know-how or other proprietary information.

Competition

      The technology  markets in which the Company competes are  characterized
by  intense  competition,  and,  particularly  with  respect to the market for
video  editing,  video  production  and video  processing  products,  there is
typically   significant  price  erosion  over  the  life  of  a  product.  The
Company's   products   will   directly   compete   with   those  of   numerous
well-established   companies,  such  as  Sony  Electronics,   Inc.,  Panasonic
Division of Matsushita  Electric  Industrial Co., Motorola,  Inc.,  Mitsubishi
International  Corp.  and  Royal  Philips   Electronics,   NV,  which  design,
manufacture  and/or market video  technology and other products.  All of these
companies  have  substantially  greater  financial,  technical,  personnel and
other resources than the Company and have established  reputations for success
in the  development,  licensing,  sale  and  service  of  their  products  and
technology.  Certain of these  competitors  dominate their industries and have
the  necessary  financial  resources to enable them to  withstand  substantial
price competition or downturns in the market for video products.

      In regard to real estate  development,  we will have to compete  against
other real estate developers.  However,  in these markets  competitors tend to
be more  localized.  The Company will be competing  against other providers of
housing for those in the over age 55 category.  Potential  purchasers  of real
estate units have the  opportunity to choose from a rental  community  housing
or  housing  in which  individual  units  are  purchased,  and from a range of
service  offerings.  The  Company  will  be  competing  against  all of  these
housing providers in its real estate business.

Employees

      The Company  currently  has two full-time  employees,  of whom one is an
executive  and  depending on its level of business  activity,  expects to hire
additional  employees  in the next 12 to 18  months,  as  needed,  to  support


                                      A-3
<PAGE>

marketing and sales,  development and  construction.  The Company also retains
a number of  consultants  on an  as-needed  basis.  None of  NuWave's  present
employees  are  represented  by a  labor  union.  The  Company  considers  its
employee relations to be good.

                                 RISK FACTORS

      NuWave  is  subject  to  various  risks  that  may  materially  harm our
business,  financial condition and results of operations. You should carefully
consider  the  risks  and   uncertainties   described   below  and  the  other
information  in this filing before  deciding to purchase our common stock.  If
any of these risks or uncertainties  actually occurs, our business,  financial
condition or operating  results could be materially  harmed. In that case, the
trading  price of our common  stock  could  decline  and you could lose all or
part of your investment.

We Have Historically Incurred Losses and Losses May Continue In The Future

      To date,  we have  received  only  limited  revenue from the sale of our
technology  products,  and no revenue  yet from the real estate  business.  We
have  historically   incurred  losses.  NuWave  has  experienced  losses  from
operations  as a result of its  investment  necessary to achieve its operating
plan, which is long-range in nature.  For the year ended December 31, 2004, we
had a net loss  applicable  to common  stockholders  of $336,000.  In the year
ended  December 31, 2003 we had a net loss  applicable to common  shareholders
of $809,000.  Management  anticipates that we may continue to incur losses for
at least the next twelve to eighteen  months.  Accordingly,  we may experience
significant   liquidity  and  cash  flow  problems  because  historically  our
operations  have not been  profitable.  As of  December  31,  2004,  we had an
accumulated   deficit  of   approximately   $28,259,000  and  a  stockholders'
deficiency of $1,671,000.  We anticipate  receiving only limited revenues from
the  technology  business  during  2005.   Revenues,   if  any,  on  developed
properties  from real estate  investments are not forecast until 2006 or 2007.
We may be unsuccessful in reaching or maintaining profitable operations.

Our Continued Development Efforts And Future Growth Depend Upon Our Ability
To Raise Additional Capital Which May Not Be Available To Us When Needed Or
On Acceptable Terms.

      We have relied on significant  external financing to fund our operations
and expect to rely on external  financing  for the  foreseeable  future.  Such
financing has  historically  come from a combination of borrowings and sale of
common stock from third parties. We cannot assure you that financing,  whether
from external  sources or related  parties,  will be available if needed or on
favorable terms. We have sufficient funds to continue  operations for one year
under  our  Standby  Equity   Distribution   Agreement  with  Cornell  Capital
Partners,  LP but will require  additional capital to complete our real estate
development projects.  We anticipate,  based on our current proposed plans and
assumptions  relating  to our  operations,  that  we will  require  additional
capital in order to  implement  our  business  plan.  Our  inability to obtain
adequate  financing  will result in the need to curtail  business  operations.
Any of these  events  would be  materially  harmful  to our  business  and may
result in a lower stock  price.  We will need to raise  additional  capital to
fund our anticipated future expansion.  Among other things, external financing
may be required to cover our  operating  costs.  To the extent that any future
financing   involves  the  sale  of  our  equity   securities,   our  existing
stockholders could be substantially diluted.

The Standby Equity Distribution  Agreement and Convertible  Debentures Contain
Certain Covenants  Prohibiting Us From Raising Capital At Less Than the Market
Price Or Pledging Assets to Other Lenders

      The Standby Equity  Distribution  Agreement and  Convertible  Debentures
contain covenants that restrict the following activities:

      o     Raising capital from the sale of common stock or other securities
            convertible into common stock at a price less than the market price
            of NuWave's common stock on the date of issuance; or

      o     Granting a security interest in NuWave's assets, which security
            interest may be needed in order to obtain borrowings or capital from
            a lender.

The  existence of these  covenants  may  severely  limit  NuWave's  ability to
borrow money or raise  capital  from the sale of common  stock or  convertible
securities  because any  potential  lender will likely  require  collateral in
the form of a  security  interest  on  NuWave's  assets  to  secure a loan and


                                      A-4
<PAGE>

purchasers  of our common stock or  convertible  securities  may want to pay a
discount to the market price of our stock.

We Have Been the Subject Of A Going  Concern  Explanatory  Paragraph  Included
Within the Reports From Our Independent  Registered  Public  Accounting Firms,
Which  Means That We May Not Be Able To Continue  Operations  Unless We Obtain
Additional Funding

      Our independent registered public accounting firms have added an
explanatory paragraph to their audit reports issued in connection with the
consolidated financial statements for the years ended December 31, 2004 and
2003, which states that NuWave has experienced recurring net losses, negative
cash flows from operations, a net working capital deficiency and a stockholders'
deficiency, which raise substantial doubt about the Company's ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

We Could Fail To Attract Or Retain Key  Personnel,  Which Could Be Detrimental
To Our Operations

      Our success  largely  depends on the efforts and  abilities of our Chief
Executive  Office,   Principal  Accounting  Officer  and  our  President,  Mr.
Kanakis.  The loss of the services of Mr.  Kanakis could  materially  harm our
business  because  of the cost and  time  necessary  to  replace  and  train a
replacement.  Such a loss would also  divert  management  attention  away from
operational  issues.  We do not  presently  maintain a key-man life  insurance
policy on Mr. Kanakis.  To the extent that we are smaller than our competitors
and have fewer  resources we may not be able to attract the sufficient  number
and quality of staff.

We Have A Limited Operating History Upon Which You Can Evaluate Our Business

      As to our  technology  business,  until June of 2001 the  Company  was a
development   stage   enterprise.   At  that  time  the  Company   shifted  to
commercialization  and thus has had only a limited  operating  history.  Since
inception  in July 1995,  the Company has been  engaged  primarily  in raising
funds and  continuing  the  development  of the NuWave Video  Processor  (NVP)
Technology.  During the second half of 2001,  the Company began  producing and
selling the NVP Video  Processor in an ASIC format for the Original  Equipment
Manufacturer  market  and our  first  set top box  product  utilizing  the NVP
technology the Video Game Enhancer ("VGE") for the retail market.  During late
2002 and throughout  2003, the Company  terminated all  engineering  employees
and most of its engineering and product  development  consultants in an effort
to reduce  costs.  During the one year  period from  October 31, 2003  through
October 2004,  the Company  utilized the services of a sales agent to identify
and develop markets and  opportunities  for our proprietary  video and imaging
technology.  NuWave  currently is  evaluating  whether to renew its  agreement
with  that  agent or  whether  to  engage  a new  agent to  assist  NuWave  in
marketing its technology.  The Company may not be able to generate significant
revenues or achieve profitable operations.

      The  Company  entered  the real  estate  market in  December  2003.  The
Company is not likely to see  revenue on  developed  properties  from its real
estate  investments  until  some time late in 2006 or 2007,  if at all.  There
remain many risks,  such as market risks,  interest  rates and  competition in
this market. Our real estate business may not be able to generate  significant
revenues or achieve profitable operations.

Our Common Stock May Be Affected By Limited Trading Volume And May Fluctuate
Significantly

      There has been a limited  public  market for our common  stock and there
can be no assurance  that an active  trading  market for our common stock will
develop.  An absence of an active  trading market could  adversely  affect our
shareholders'  ability to sell our  common  stock in short  time  periods,  or
possibly  at  all.  Our  common  stock  has  experienced,  and  is  likely  to


                                      A-5
<PAGE>

experience  in the  future,  significant  price and volume  fluctuations  that
could adversely  affect the market price of our common stock without regard to
our  operating  performance.  In  addition,  we believe  that  factors such as
quarterly  fluctuations  in our  financial  results and changes in the overall
economy or the  condition of the  financial  markets  could cause the price of
our common stock to fluctuate substantially.

Our  Common  Stock Is  Deemed  To Be  "Penny  Stock,"  Which  May Make It More
Difficult For Investors To Sell Their Shares Due To Suitability Requirements

      Our common  stock is deemed to be "penny  stock" as that term is defined
in Rule 3a51-1  promulgated  under the Securities  Exchange Act of 1934. These
requirements  may reduce the potential market for our common stock by reducing
the  number  of  potential  investors.  This  may make it more  difficult  for
investors in our common stock to sell shares to third  parties or to otherwise
dispose of them.  This could cause our stock price to  decline.  Penny  stocks
are stock:

      o     With a price of less than $5.00 per share;

      o     That are not traded on a "recognized" national exchange;

      o     Whose prices are not quoted on the NASDAQ automated quotation system
            (NASDAQ listed stock must still have a price of not less than $5.00
            per share); or

      o     In issuers with net tangible assets less than $2.0 million (if the
            issuer has been in continuous operation for at least three years) or
            $5.0 million (if in continuous operation for less than three years),
            or with average revenues of less than $6.0 million for the last
            three years.

Broker-dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker-dealers are required to determine whether an investment in a penny
stock is a suitable investment for a prospective investor.

ITEM 2.  DESCRIPTION OF PROPERTIES

      NuWave  maintains its  headquarters in Union, New Jersey, a shared space
for which NuWave pays $500 per month, on a  month-to-month  basis,  based upon
an oral agreement.  In addition,  NuWave maintains  approximately 1,000 square
feet of lab and  storage  space in  Fairfield,  New Jersey and pays $1,200 per
month, on a  month-to-month  basis,  based upon an oral  agreement.  Effective
July 2004,  NuWave entered into a five-year lease agreement for  approximately
3,500  square feet of office tower space in Jersey  City,  New Jersey.  NuWave
incurs a net cost of  approximately  $5,000  per  month for this  space,  when
combining the rent and other costs such as utilities,  taxes and  maintenance.
This net cost reflects the benefit of NuWave  subleasing  approximately 50% of
the  space  to  a  subtenant.  NuWave  believes  that  its  property  is  well
maintained and suitable for NuWave's current needs.

      Effective in December  2003,  NuWave began  making  investments  in real
estate properties.  Currently, there are no limitations on the types of assets
NuWave  may  invest.  This  policy  may be  changed  without  the  consent  of
shareholders.  It is NuWave's  policy to invest in  properties  primarily  for
possible capital gain.

      NuWave may invest in most property,  including, for example, undeveloped
acreage,  shopping  centers,  single family  residences and office  buildings.
NuWave  intends to  finance  the  acquisition  of these  properties  through a
combination  of debt and equity  financing.  NuWave intends to hold and manage
properties  for only  the  duration  which  will  facilitate  the sale for the
possible capital gain.

      NuWave  has no current  intention  to invest in real  estate  mortgages.
NuWave  may  invest  in the  common  stock of  companies  that are in the real
estate business.  Primary real estate activities in which NuWave may invest in
the future include investing in undeveloped and developed properties.

      In  April  2004,  NuWave,  through  its  wholly  owned  subsidiary,   WH
Acquisition Corp.,  purchased  residential  property  consisting of land and a
residential  building in Jersey City, New Jersey for a total purchase price of
$122,000.  The purchase price was paid with $113,000 in cash and $9,000 in the
form of a  deposit.  NuWave  intends  to  redevelop  and then  later sell this
property.

      On December 22, 2003,  NuWave  acquired a parcel of undeveloped  acreage
in Cranford,  New Jersey.  This land was purchased for  $4,950,000  from Stone
Street Asset Management,  LLC ("Stone Street"), a company under common control
with  Cornell  Capital  Partners,  LP.  NuWave  obtained  an  appraisal  by an
independent  certified general real estate  appraiser,  who valued the acreage
at  $4,950,000.  In  exchange  for  the  undeveloped  acreage,  NuWave  issued
$3,550,000 in convertible  debentures and $1,400,000 in a note payable. Of the
total  $3,550,000  convertible  debentures,  a single  $3,300,000  convertible
debenture,   which  was  replaced   during  January  2005  with  a  $3,481,274
non-convertible  promissory note (including  $181,274 of accrued  interest) is
collateralized  with a first mortgage lien on the land, and is held by Cornell
Capital  Partners,  LP. The  $1,400,000  note payable is secured with a second


                                      A-6
<PAGE>

mortgage on the land and was held by Stone  Street Asset  Management,  LLC and
was  subsequently  assigned  to Cornell  Capital  Partners,  LP on January 26,
2005.  Stone Street and Cornell  Capital  Partners,  LP are related parties in
that  they  have  common  ownership.  The  $4,950,000  purchase  price  of the
undeveloped  acreage  represents  a price  that was  approximately  $2,035,000
greater than the cost basis in the hands of Stone Street  immediately prior to
the sale. Stone Street purchased the property from an independent  third party
in  August  2003.  As a result of Stone  Street's  relationship  with  Cornell
Capital Partners,  LP and Cornell Capital Partners,  LP's ability to influence
the  management  of NuWave,  NuWave has  recorded the land on its books at the
cost basis of the seller.  NuWave has a deeded  interest in the  property.  Of
the  convertible  debentures  issued to acquire  the land,  $250,000  of these
convertible  debentures  are due  December  2005.  The  remaining  convertible
debenture of $3,300,000  has been  replaced with a $3,481,274  non-convertible
promissory  note  (including  accrued  interest) that is due in December 2008.
The  holders of the  convertible  debentures  may  convert  any portion of the
convertible  debentures into NuWave's common stock at any time. The $1,400,000
note, as amended,  is payable over 48 months,  starting  January 1, 2006.  All
of these obligations accrue interest at a 5% annual interest rate.

      During July 2004 and August 2004, the Company  entered into an Agreement
of Sale and a Convertible Debenture,  respectively, related to its transfer of
a 20% fee  simple  interest  in its land  held for  development  and sale as a
tenant  in  common.  During  November  2004,  the  Agreement  of Sale  and the
Convertible  Debenture  were  terminated  and rescinded in their  entirety and
replaced  with an Amended and  Restated  Agreement  of Sale issued in November
2004, as described below.

      The  terms of the  July  2004  Agreement  of Sale  and the  August  2004
Convertible Debenture are outlined below.

      The  Company  sold a 20%  fee  simple  interest  in its  land  held  for
development  and sale as a tenant in  common  to an entity  which is a related
party to Michael Kesselbrenner,  a current holder of the Company's convertible
debentures   ("Investor")   and  received  cash   proceeds  of   approximately
$1,784,000.

      The  Company may  reacquire  an  interest  in the  property  ("Company's
Option").  At any time after closing and upon 15 days advance  written notice,
the  Company  may  repurchase  all or a  portion  of the  interest  sold  at a
purchase price computed at 120% of the price, or portion thereof,  paid by the
Investor on the effective date.

      The  Investor,  at any  time  after  closing  and  upon 15 days  advance
written  notice,  may  sell  back to the  Company  all or any  portion  of its
interest in the  property  ("Investor's  Option").  The Investor may sell this
property  back to the Company  through  exercise  rights  under a  convertible
debenture  agreement,  discussed below. The Investors Option expires on August
1, 2007,  and shall  thereupon be exercised  automatically  for any portion of
the property interest not already reacquired by the Company.

      In  addition,  the  Investor  has  provided  the Company with a right of
first offer to reacquire  the Company's  interest in the property.  If, at any
time prior to August 1, 2007,  the  Investor  wishes to sell its interest to a
third party, it must first notify the Company.  Upon such notice,  the Company
may, within 30 days,  repurchase all of the remaining  property interest for a
price equal to a pro-rata  portion of the original  price paid by the Investor
at the  effective  date  (approximately  $1,784,000).  If the Company fails to
exercise  this offer  within the 30 day  period,  then the  Investor  shall be
allowed 90 days in which to sell all of its  interests  in the  property  to a
third party.

      In conjunction with this  transaction,  the Company issued a convertible
debenture  in  favor  of  the  Investor  for  approximately  $1,784,000.  This
convertible  debenture  bears  interest  from July 14,  2004 at 10% per annum,
with  the  interest  payable  monthly,   starting   September  1,  2004.  This
convertible debenture matures on August 1, 2007.

      Under  the  terms  of the  convertible  debenture,  an  exercise  of the
Company's  Option to reacquire its former  interest in the property is treated
as a redemption of all or a portion of its  obligations  under the convertible
debenture.  The Company's  purchase price in this case is a premium of 120% of
the price, or portion thereof,  paid by the Investor on the effective date, as
discussed above.

      An exercise of the  Investor's  Option to sell its  interest in the land
back to the Company is  accomplished  through the Investor's  right to convert
the amount  outstanding  under the  convertible  debenture  into the Company's
common  stock.  The aggregate  amount of principal and any unpaid  interest is
convertible  at the per  share  price  equal to the  lesser of (a) 120% of the
closing  bid price at August 20,  2004,  or (b) 80% of the lowest  closing bid
price for the five days  immediately  preceding the conversion date. Upon such
conversion,  a pro-rata  portion of the  interest in the property is sold back
to  the  Company.  Upon  the  maturity  of  the  convertible  debenture,   the
Investor's  Option  terminates  and any  remaining  amount of the  convertible
debenture is  automatically  converted into the Company's  common stock.  Upon
such  conversion,  the  remaining  portion of the  interest in the property is
sold back to the Company.



                                      A-7
<PAGE>

      The Company's  reacquisition  of its interests in the property under the
terms of the rights of first offer,  as  described  above,  shall  represent a
satisfaction   of  its   obligations  at  face  value  under  the  convertible
debenture.

      Upon the  Investor's  sale of the  property  to a third  party under the
terms of the rights of first offer,  as described  above,  all  obligations of
the Company under the convertible debenture shall immediately terminate.

      In accordance  with the  provisions a Statement of Financial  Accounting
Standards  ("SFAS") No. 66, "Accounting for Sales of Real Estate," the Company
has  accounted  for this  transaction  as a financing  transaction.  Under the
provisions  of SFAS No. 66, when the seller has an  obligation  to  repurchase
the property,  or the terms of the  transaction  allow the buyer to compel the
seller to repurchase the property or interest,  then the transaction  shall be
accounted  for as a  financing  transaction,  rather  than a sale.  Under  the
terms of this  transaction,  the  Investor's  Option  requires the Investor to
sell the property  back to the Company.  This sale back to the Company will be
satisfied  through  the  conversion  of  the  Investor's  interest  under  the
convertible debenture into the Company's common stock.

      Upon the  Investor's  sale of the  property  interest  to a third  party
under the  terms of the  rights  of first  offer,  as  described  above,  this
financing  transaction  shall be deemed  to have  terminated  and the  Company
shall  thereupon  account for the proceeds  received as a sale of its interest
in the  property,  with  any  gain  or loss  on  such  sale  to be  recognized
accordingly at that time.

      During  November  2004,  the July 2004  Agreement of Sale and the August
2004  Convertible  Debenture  were  rescinded  and  terminated  pursuant to an
Amended and  Restated  Agreement  of Sale.  Under this  Amended  and  Restated
Agreement  of Sale,  for a  selling  price of  approximately  $1,427,000,  the
Company has sold a 20% fee simple  interest  in its land held for  development
and sale as a tenant  in  common  to an  entity  which is a  related  party to
Michael   Kesselbrenner,   a  current  holder  of  the  Company's  convertible
debentures.  The Company has applied the  $1,427,000  sale amount  against the
proceeds from the convertible  debenture and has incurred  interest expense of
$38,000 for the three month period ended September 30, 2004,  $30,000 of which
has been paid to the  buyer  through  September  30,  2004.  The  Company  has
incurred   additional   interest  expense  of  $20,000  through  the  date  of
termination.  On November 29, 2004, NuWave paid approximately  $326,000 to the
buyer, representing  approximately $28,000 in accrued interest and $298,000 in
refunded proceeds.

      NuWave  intends to develop the property  into a 55 and over  residential
community.  NuWave intends to develop  residential  dwelling units and limited
retail  space on the site.  The  residential  dwelling  units  will be sold to
individual  buyers.  Currently the acreage is not developed.  NuWave  believes
that there is a demand for these 55 and over units.  Reasons  include an aging
population with disposable  income,  the continued  positive  economic outlook
for the Northeast  economy and the positive  local  economics in the Cranford,
New  Jersey  area.  NuWave  expects  that  planning  for the  project  will be
completed by the end of 2005 and that  construction and development will begin
in late 2006 or 2007.  NuWave is currently  developing  cost estimates for the
development of the property.

      The Company maintains  adequate  liability  insurance on the undeveloped
acreage.


ITEM 3.  LEGAL PROCEEDINGS

      None.

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

      None.


                                      A-8
<PAGE>

                                   PART II


ITEM 5.  MARKET FOR NUWAVE  TECHNOLOGIES,  INC.'S  COMMON  EQUITY AND  RELATED
STOCKHOLDER MATTERS

Market for Common Equity

      The Company's  Common Stock,  par value $.001 per share is traded on the
Over-the-Counter   Bulletin  Board  (the  "OTCBB")  Market  under  the  symbol
NUWV.OB.  The OTCBB is a regulated  quotation service that displays  real-time
quotes,  last-sale prices and volume  information in  over-the-counter  equity
securities.  Prior to  August  13,  2002,  the  stock  had been  traded on the
NASDAQ SmallCap  Market.  The following table sets forth the range of high and
low closing  sale prices for the Common  Stock as reported on the OTCBB Market
during each of the  quarters  presented.  The  quotations  set forth below are
inter-dealer  quotations,  without retail mark-ups,  mark-downs or commissions
and do not necessarily  represent actual  transactions.  On July 21, 2003, the
Company  affected a 1:50  reverse  stock  split,  as  previously  approved  by
shareholders.   All   closing   sales   prices   below   have  been   restated
retroactively for the effect of the reverse stock split.



                                                        Common
                                                        Stock
                                                   HIGH        LOW

               Three Months Ended March 31,       $8.00       $0.18
               2003
               Three Months Ended June 30, 2003    0.45        0.10
               Three Months Ended September        0.60        0.10
               30, 2003
               Three Months Ended December 31,     0.31        0.10
               2003

               Three Months Ended March 31,        0.18        0.10
               2004
               Three Months Ended June 30, 2004    0.17        0.04
               Three Months Ended September        0.085       0.065
               30, 2004
               Three Months Ended December 31,     0.09        0.065
               2004

      As of April 8, 2005, there were  approximately  196 holders of record of
the  Company's  common stock and  2,062,013  shares of common stock issued and
outstanding.

      During October,  2003, the Company  redeemed its  convertible  preferred
stock. In accordance  with the redemption,  the Company paid a one time deemed
dividend  -  redemption  premium  in  total  of  $19,400.   These  convertible
preferred  shares  have now all been  redeemed  are  there  remain  no  shares
outstanding.

      The Company has never  declared or paid any cash dividends on its common
shares.  The  Company  currently  intends  to retain any  future  earnings  to
finance the growth and development of its business and future operations,  and
therefore  does not  anticipate  paying  any  further  cash  dividends  in the
foreseeable future.

Recent Sales of Unregistered Securities

      Standby Equity Distribution Agreement



                                      A-9
<PAGE>

      On January 26, 2005, NuWave entered into a Standby Equity Distribution
Agreement with Cornell Capital Partners, LP. Pursuant to the Standby Equity
Distribution Agreement, we may, at our discretion, periodically sell to
Cornell Capital Partners, LP shares of common stock for a total purchase
price of up to $30 million. For each share of common stock purchased under
the Standby Equity Distribution Agreement, Cornell Capital Partners, LP will
pay NuWave 99% of the volume weighted average price on the Over-the-Counter
Bulletin Board or other principal market on which our common stock is traded
for the 5 days immediately following the notice date. Further, Cornell
Capital Partners, LP will retain a fee of 10% of each advance under the
Standby Equity Distribution Agreement.  In connection with a now-terminated
Standby Equity Distribution Agreement, we paid Newbridge Securities
Corporation a fee of 111,111 shares of common stock.

      Convertible Debenture

      During August 2004, the Company raised approximately  $1,784,000 through
the  issuance  of a  convertible  debenture  to a  party  related  to  Michael
Kesselbrenner,  a current  convertible  debenture holder.  This debenture bore
interest  at 10% per annum,  with  interest  payable  monthly  and was secured
through an interest in the land held for  development  and sale. At the option
of the holder or the Company,  at any time, this  convertible  debenture could
be converted  into the  Company's  Common  Stock.  The value of principal  and
accrued  interest was  convertible  at the per share price equal to the lesser
of (a) 120% of the  closing  bid price at August 20,  2004,  or (b) 80% of the
lowest  closing  bid  price  for  the  five  days  immediately  preceding  the
conversion   date.  In  connection  with  the  issuance  of  this  convertible
debenture the Company  transferred a 20% fee simple  interest in its land held
for  development  and sale. In addition,  the Company and the transferee  each
had the option to  effectively  void all or a portion of the transfer.  In the
event that  neither  option was  exercised  within  three  years,  the 20% fee
simple   interest  would  revert  to  the  Company  upon   settlement  of  the
convertible  debenture.  Upon  issuance  NuWave  recorded a debt  discount  of
$446,000,  for the August 2004  debenture.  This debt discount was recorded to
reflect  the  value  of  the  beneficial  conversion  feature  related  to the
convertible  debentures.   Accordingly,  NuWave  recorded  the  value  of  the
beneficial  conversion  feature as a reduction to the  carrying  amount of the
convertible debt and as an addition to additional  paid-in capital.  This debt
discount was being  amortized over the term of the related  debentures,  which
was 36 months,  and the amortization of such discount was recorded as interest
expense on the accompanying  consolidated statement of operations for the year
ended December 31, 2004.

      During  November  2004,  the July 2004  Agreement of Sale and the August
2004  Convertible  Debenture  were  rescinded  and  terminated  pursuant to an
Amended and  Restated  Agreement  of Sale.  Under this  Amended  and  Restated
Agreement  of Sale,  for a  selling  price of  approximately  $1,427,000,  the
Company has sold a 20% fee simple  interest  in its land held for  development
and sale as a tenant  in common  to an  entity  which is a related  party to a
current  holder of the  Company's  convertible  debentures.  The  Company  has
applied the $1,427,000  sale amount against the proceeds from the  convertible
debenture  and has  incurred  interest  expense of $38,000 for the three month
period ended  September 30, 2004,  $30,000 of which has been paid to the buyer
through  September  30,  2004.  The Company has incurred  additional  interest
expense of $20,000  through  the date of  termination.  On  November  29, 2004
NuWave paid approximately  $326,000 to the buyer,  representing  approximately
$28,000 in accrued interest and $298,000 in refunded proceeds.

      Convertible Debentures

      During   October  2004,   NuWave   issued   $100,000  in  a  convertible
debenture.  This  debenture  bears  interest  at a rate of 5% per annum,  with
interest  due at  maturity  or upon  conversion.  This  debenture  matures  in
October  2006.  NuWave has recorded a debt  discount of $25,000 at issuance of
this convertible  debenture to reflect the value of the beneficial  conversion
feature  related  to  the  convertible  debenture.   Accordingly,  NuWave  has
recorded the value of the beneficial  conversion feature as a reduction to the
carrying  amount of the  convertible  debt and as an  addition  to  additional
paid-in  capital.  This debt discount is being  amortized over the term of the
related  debenture,  which is 24 months,  and such amortization is recorded as
interest  expense in the consolidated  statement of operations.  At the option
of NuWave,  upon the maturity  date,  this  convertible  debenture and accrued
interest may be converted  into NuWave's  Common  Stock.  At the option of the
holder,  at any time  prior  to  maturity,  any  portion  of this  convertible
debenture  may be converted  into Common  Stock.  The value of  principal  and
accrued  interest is convertible at the per share price equal to the lesser of
(a) 120% of the closing  bid price on date of issue,  or (b) 80% of the lowest
closing  bid price  for the five days  immediately  preceding  the  conversion
date. In addition,  NuWave may redeem,  with 15 days advance notice, a portion
or all of  this  outstanding  debenture  at 110% of the  dollar  value  of the
amount redeemed plus accrued interest.



                                      A-10
<PAGE>

      In June 2004,  NuWave issued $250,000 in a convertible  debenture.  This
debenture  bears  interest at a rate of 10% per annum,  with  interest  due at
maturity or upon  conversion  and matures in June 2006.  NuWave has recorded a
debt discount of $83,000 at issuance of this convertible  debenture to reflect
the value of the  beneficial  conversion  feature  related to the  convertible
debenture.  At the option of NuWave,  upon the maturity date, this convertible
debenture and accrued  interest may be converted  into NuWave's  Common Stock.
At the option of the  holder,  at any time prior to  maturity,  any portion of
this  convertible  debenture may be converted into Common Stock.  The value of
principal and accrued  interest is convertible at the per share price equal to
the lesser of (a) 120% of the closing bid price on April 26, 2004,  or (b) 75%
of the lowest  closing bid price for the five days  immediately  preceding the
conversion  date.  In  addition,  NuWave  may  redeem,  with 15  days  advance
notice,  a  portion  or all of  these  outstanding  debentures  at 125% of the
dollar value of the amount redeemed plus accrued interest.

      During January 2004,  NuWave issued $110,000 in convertible  debentures.
These  debentures  bear interest at a rate of 5% per annum,  with interest due
at maturity  or upon  conversion.  These  debentures  mature in January  2006.
NuWave  has  recorded  a  debt  discount  of  $27,000  at  issuance  of  these
convertible  debentures  to  reflect  the value of the  beneficial  conversion
feature  related  to  the  convertible  debentures.  Accordingly,  NuWave  has
recorded the value of the beneficial  conversion feature as a reduction to the
carrying  amount of the  convertible  debt and as an  addition  to  additional
paid-in  capital.  This debt discount is being  amortized over the term of the
related  debentures,  which is 24 months, and such amortization is recorded as
interest expense on the accompanying  consolidated statement of operations for
the year ended  December 31, 2004. At the option of NuWave,  upon the maturity
date, these convertible  debentures and accrued interest may be converted into
NuWave's  Common  Stock.  At the  option of the  holder,  at any time prior to
maturity,  any portion of these  convertible  debentures may be converted into
Common Stock.  The value of principal and accrued  interest is  convertible at
the per share  price  equal to the lesser of (a) 120% of the closing bid price
on the date of issue, or (b) 80% of the lowest daily volume  weighted  average
price  for the  five  days  immediately  preceding  the  conversion  date.  In
addition,  NuWave may redeem, with 15 days advance notice, a portion or all of
these  outstanding  debentures  at  110% of the  dollar  value  of the  amount
redeemed plus accrued interest.

      During October 2003,  NuWave raised  $200,000  through the issuance of a
convertible  debenture to Cornell Capital  Partners,  LP. In addition,  during
December  2003,  NuWave raised  $195,000  through the issuance of  convertible
debentures to various  unrelated  parties.  In September 2004, NuWave redeemed
the $200,000  convertible  debenture  with Cornell  Capital  Partners,  LP and
$70,000 of the  convertible  debentures  issued in  December  2003 and January
2004.  On  December  22,  2003,  NuWave  issued a  convertible  debenture  for
$3,300,000 to Cornell Capital Partners, LP, which was subsequently  terminated
and replaced  with a $3,481,274  non-convertible  promissory  note  (including
accrued  interest of $181,274) on January 26, 2005,  and $250,000 to unrelated
parties in connection  with the  acquisition of land held for  development and
sale  which is  secured  through a first  mortgage  lien on the  land.  All of
these  debentures  bear interest at a rate of 5% per annum,  with interest due
at maturity  or upon  conversion.  These  debentures  mature at various  dates
ranging  from October 2005  through  December  2008.  At the option of NuWave,
upon the maturity date, these convertible  debentures and accrued interest may
be converted into NuWave's Common Stock.  At the option of the holder,  at any
time prior to maturity,  any portion of these  convertible  debentures  may be
converted  into Common Stock.  The value of principal and accrued  interest is
convertible  at the per  share  price  equal to the  lesser of (a) 120% of the
closing bid price,  or (b) 80% of the lowest  daily  volume  weighted  average
price  for the  five  days  immediately  preceding  the  conversion  date.  In
addition,  NuWave may redeem a portion or all of these outstanding  debentures
at 110% of the dollar  value of the amount  redeemed  plus  accrued  interest.
Under the conversion  limitation for the  debentures,  NuWave may issue shares
under  conversion only so long as, at conversion,  the holder has no more than
9.9% of NuWave's outstanding shares.

      Note Payable - Related Party

      On December  22,  2003,  Lehigh  issued a note for  $1,400,000  to Stone
Street in  conjunction  with its purchase of land in New Jersey.  The note, as
amended,  provides for the payment of forty-eight  equal monthly  installments
of principal and interest of $35,546 beginning on January 1, 2006,  matures on
January 10,  2010 and is secured  through a second  mortgage on the land.  The
note  bears  interest  at a rate of 5% per  annum.  The note was  assigned  to
Cornell Capital Partners, LP on January 26, 2005.



                                      A-11
<PAGE>

      Warrants

      On  September  24,  2003,  NuWave  issued  200,000  warrants to purchase
NuWave's  common stock at $1.00 per share.  These  warrants were issued to two
former  officers  for prior  services  provided to NuWave.  The  warrants  are
exercisable over a five-year period which expires in September 2008.

      Equity Line of Credit

      As of January 1, 2003,  NuWave had a  $3,000,000  Equity  Line of Credit
Agreement with Cornell Capital Partners,  LP, under which NuWave could, at its
option,  periodically  require the purchaser to purchase up to $100,000 in any
seven day period of NuWave's  common  stock.  For  issuance  under this Equity
Line of Credit  Agreement,  as of January 1, 2003  there were  280,000  shares
registered under the Securities Act of 1933.  NuWave  registered an additional
1,200,000 shares on January 10, 2003,  bringing the total registered shares to
1,580,000  under  the  Equity  Line of  Credit  Agreement.  For each  share of
common stock  purchased  under the Equity Line of Credit,  the Purchaser  paid
97% of the then market price,  and was paid a fee of 4% of each advance.  This
Equity Line of Credit Agreement expired on April 15, 2004.

      During  July 2003,  NuWave  reached  the limit of  1,580,000  registered
shares that were issuable under the Agreement.

      NuWave  received  loans  aggregating  $357,000  during  the  year  ended
December 31, 2003 from Cornell Capital Partners,  LP. NuWave repaid certain of
these  loans in the amount of  $273,000,  during the year ended  December  31,
2003 through the issuance of 1,151,490  shares of NuWave's  common stock.  The
common shares issued to repay these notes were issued at a 3% discount.  These
loans were non-interest  bearing during their terms, which ranged from 90 days
to 180 days.

      The  balance of these loans as of  September  2003,  totaling  $284,000,
were not repaid within their term and were in default.  During September 2003,
NuWave entered into an Agreement with Cornell Capital  Partners,  LP to settle
the  default  on  these  loans.  In  connection  therewith,   Cornell  Capital
Partners,  LP agreed  not to  foreclose  on its  outstanding  indebtedness  of
$284,000 owed by NuWave. In addition,  on September 29, 2003,  Cornell Capital
Partners,  LP entered into a new loan agreement with NuWave for $200,000 to be
deposited in escrow to be used to satisfy certain  outstanding  obligations of
NuWave,  including trade payables,  unpaid wages, and settlement of employment
agreements.  The loan was  non-interest  bearing for its original  term of 180
days.

      On  March  27,  2004,  the  $200,000  loan  matured  and was not  repaid
according to its terms. On April 5, 2004, Cornell Capital Partners,  LP agreed
to extend  the due dates of the  $284,000  of loans and the  $200,000  loan to
April 15,  2005.  On May 11,  2004,  Cornell  Capital  Partners,  LP agreed to
further  extend  the due dates of these  $484,000  in loans to August 1, 2005.
On July 20, 2004,  Cornell Capital  Partners,  LP agreed to further extend the
due dates of these  $484,000 in loans to  December  5, 2005.  While in default
and  through  the  extended  maturity  date,  the  $284,000  of loans  and the
$200,000  loan accrued  interest  from the default  dates at a rate of 24% per
annum. On September 10, 2004,  NuWave  satisfied its obligations for principal
and  accrued  interest  related to its  $484,000  in loans to Cornell  Capital
Partners, LP.

      Convertible Preferred Stock

      During May 2003,  NuWave  entered into a Securities  Purchase  Agreement
with several  independent  buyers whereby NuWave issued and sold to the buyers
67,000  shares of Series A  Preferred  Stock at $1 per share.  The buyers were
entitled,  at their  option,  to  convert  the Series A  Preferred  Stock into
shares of NuWave's  Common Stock at any time  commencing  after May 1, 2004 at
an adjusted  conversion price of $0.05 per share. Any unconverted shares as of
May 1, 2005 would  automatically  convert into shares of NuWave's Common Stock
at an adjusted  conversion  price of $0.05 per share.  NuWave had the right to
redeem  the  outstanding  Preferred  Stock  upon 30 days  written  notice at a
redemption  price of 150% of the  subscription  amount  plus  interest  on the
purchase  price of 24%. If NuWave  chose to redeem  some,  but not all, of the
Series A  Preferred  Stock,  NuWave  could  redeem a pro rata amount from each
holder of the Series A Preferred  Stock.  The preferred  stock was redeemed by
NuWave in October 2003 for a total  redemption  price of $86,400.  The $19,400
excess of the amount of the  redemption  over the amount of the original issue
has  been  recorded  as  a  deemed  dividend  -  redemption   premium  on  the
convertible preferred stock.



                                      A-12
<PAGE>

      Shares issued for services

      On June 30, 2003,  NuWave issued 25,000 shares of common stock valued at
approximately $5,000 in exchange for services provided to NuWave.

      On May 25,  2004,  NuWave  issued  111,111  shares  of  common  stock to
Newbridge Security Corporation,  which were valued at approximately $10,000 in
exchange  for  services  provided  to NuWave  under a  now-terminated  Standby
Equity Distribution Agreement.

      Effective  June 1, 2004,  NuWave issued 75,000 shares of common stock to
George Kanakis, its President and Chief Executive Officer,  under the terms of
his employment  contract.  Mr. Kanakis is also entitled to options to purchase
100,000  shares  of  common  stock at some  future  date.  NuWave  has not yet
adopted a stock option plan,  and as such, no options have been granted to Mr.
Kanakis.

      Reduction in Par Value and Reverse Stock Split

      On July 21,  2003,  NuWave's  Board of  Directors  declared  effective a
reverse  split of NuWave's  common  shares in the ratio of 1 to 50 as voted on
and approved by the  stockholders  at NuWave's  Annual  Stockholders'  meeting
held on December 20, 2002,  and effective on July 21, 2003.  All share and per
share amounts have been retroactively restated for the stock split.


ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

                        Summary Financial Information

            The summary  financial  data set forth below are derived  from and
should be read in  conjunction  with the  consolidated  financial  statements,
including the notes thereto, filed as part of this Form 10-KSB.


                              Year Ended       Year Ended
 Consolidated Statement of   December 31,     December 31,
      Operations Data:           2004             2003
(in thousands, except for
share and per share data)
Revenues                     $          0     $        20
Net loss applicable to
common stockholders          $       (336)    $      (809)
Net loss per common share,
basic and diluted            $       (.17)    $      (.56)
Weighted average number of
shares -basic and diluted    $  1,986,640     $ 1,455,365
Comprehensive loss           $       (211)    $      (809)

                             December 31,
 Consolidated Balance Sheet      2004
           Data:
Working capital deficiency   $       (36)
Total assets                 $     3,203
Total liabilities            $     4,874
Stockholders' deficiency     $    (1,671)

Forward-looking Statements

            The  following   discussion   and  analysis   should  be  read  in
conjunction with the Consolidated  Financial  Statements and the Notes thereto
included  herein.  The  information  contained  below  includes  statements of
NuWave's or management's beliefs,  expectations,  hopes, goals and plans that,
if not historical,  are  forward-looking  statements  subject to certain risks
and  uncertainties  that could cause actual results to differ  materially from
those  anticipated  in the  forward-looking  statements.  For a discussion  on
forward-looking  statements, see the information set forth in the Introductory
Note to this Annual  Report under the caption  "Forward  Looking  Statements,"
which information is incorporated herein by reference.



                                      A-13
<PAGE>

General

      Our mission is to profitably exploit our proprietary  imaging technology
and to identify and develop other business  opportunities  that will diversify
the Company's  operations.  We have  diversified  the Company's  operations by
acquiring land for  development  and sale. We also continued to offer for sale
our  technology  related  to image and video  enhancement  designed  to enrich
picture and video output with clearer, more defined detail in texture,  color,
contrast and tone, at low cost,  including our NUWAVE Video Processor  ("NVP")
Technology (see "Marketing and Sales").

Note - the Company will discuss its technology business under Results of
Operations and will discuss its new real estate development business under
Plan of Operation.  See below.

Going Concern

      Our  independent   registered   public  accounting  firm  has  added  an
explanatory  paragraph to their audit  report  issued in  connection  with the
consolidated  financial statements for the year ended December 31, 2004, which
states that NuWave has experienced  recurring net losses,  negative cash flows
from  operations,  a  net  working  capital  deficiency  and  a  stockholders'
deficiency,  which  raise  substantial  doubt about the  Company's  ability to
continue as a going  concern.  Our  consolidated  financial  statements do not
include  any   adjustments   that  might  result  from  the  outcome  of  this
uncertainty.  The  Company's  annual sales have  declined  from  approximately
$20,000  to $0 for each of the  years  2003  and  2004,  respectively,  as the
Company has had difficulty  securing  buyers for its technology  products in a
very  competitive  environment and that there have yet to be revenues from the
sale of developed  real estate  properties.  The Company has  incurred  annual
net  losses  of  approximately  $790,000  and  $336,000  for the  years  ended
December  31,  2004  and  2003,  respectively,  resulting  in a  stockholders'
deficiency of approximately $1,671,000 at December 31, 2004.

Critical Accounting Policies

      NuWave's consolidated  financial statements and related public financial
information  are based on the application of accounting  principles  generally
accepted in the United  States  ("GAAP").  GAAP requires the use of estimates,
assumptions,   judgments   and   subjective   interpretations   of  accounting
principles  that  have an  impact  on the  assets,  liabilities,  revenue  and
expense  amounts  reported.  These  estimates  can  also  affect  supplemental
information  contained  in  our  external  disclosures  including  information
regarding  contingencies,  risk and financial condition. We believe our use of
estimates  and  underlying  accounting  assumptions  adhere  to  GAAP  and are
consistently and conservatively  applied.  We base our estimates on historical
experience and on various other  assumptions  that we believe to be reasonable
under the  circumstances.  Actual  results  may differ  materially  from these
estimates  under different  assumptions or conditions.  We continue to monitor
significant   estimates  made  during  the  preparation  of  our  consolidated
financial statements.

      Our  significant  accounting  policies are  summarized  in Note 3 of our
consolidated  financial  statements  at  December  31,  2004.  While all these
significant  accounting policies impact its financial condition and results of
operations,  NuWave  views  certain of these  policies as  critical.  Policies
determined to be critical are those  policies  that have the most  significant
impact on NuWave's  consolidated  financial  statements and require management
to use a greater degree of judgment and  estimates.  Actual results may differ
from those  estimates.  Our  management  believes that given current facts and
circumstances,  it is unlikely that applying any other reasonable judgments or
estimate  methodologies  would  cause a  material  effect on our  consolidated
results  of  operations,  financial  position  or  liquidity  for the  periods
presented in this report.

      NuWave's  critical  accounting  policies  include the  accounting for an
acquisition  of a parcel of land,  outlined as follows.  On December 22, 2003,
Lehigh  acquired a parcel of land in New Jersey for $4,950,000 that it intends
to develop  and then sell.  This land was  acquired  from Stone  Street  Asset
Management LLC ("Stone  Street"),  a company under common control with Cornell
Capital  Partners,  LP. In  connection  with  this  purchase  of land,  NuWave
incurred debt obligations  consisting of a $3,300,000 convertible debenture to
Cornell Capital Partners,  LP, which was subsequently  terminated and replaced
with  a  $3,481,274   promissory  note  on  January  26,  2005,   $250,000  of
convertible  debentures  to unrelated  parties and a  $1,400,000  secured note
payable to Stone Street,  which was  subsequently  assigned to Cornell Capital
Partners,  LP on January 26, 2005. As a result of Stone Street's  relationship


                                      A-14
<PAGE>

with  Cornell  Capital  Partners,  LP,  and  Cornell  Capital  Partners,  LP's
relationship with NuWave,  NuWave has recorded the land at the historical cost
basis as recorded by Stone Street of  approximately  $2,915,000  in accordance
with  accounting  rules  regarding   transfer  of  non-monetary   assets.  The
difference of  $2,035,000  between the fair value of the land as determined by
an  independent  appraiser  and the  carryover  cost  basis of land from Stone
Street has been recorded as an adjustment to additional paid-in capital.

      Additionally,  during July 2004 and August  2004,  the  Company  entered
into an Agreement of Sale and a Convertible Debenture,  respectively,  related
to its transfer of a 20% fee simple  interest in its land held for development
and sale as a tenant in common.  During  November  2004, the Agreement of Sale
and the Convertible  Debenture were terminated and rescinded in their entirety
and  replaced  with an  Amended  and  Restated  Agreement  of Sale  issued  in
November 2004, as described below.

      The  terms of the  July  2004  Agreement  of Sale  and the  August  2004
Convertible Debenture are outlined below.

      The  Company  sold a 20%  fee  simple  interest  in its  land  held  for
development  and sale as a tenant in  common  to an entity  which is a related
party  to  a  current   holder  of  the   Company's   convertible   debentures
("Investor") and received cash proceeds of $1,783,549.

      The Company may reacquire an interest in the property ("Company's
Option").  At any time after closing and upon 15 days advance written notice,
the Company may repurchase all or a portion of the interest sold at a
purchase price computed at 120% of the price, or portion thereof, paid by the
Investor on the effective date.

      The  Investor,  at any  time  after  closing  and  upon 15 days  advance
written  notice,  may  sell  back to the  Company  all or any  portion  of its
interest in the  property  ("Investor's  Option").  The Investor may sell this
property  back to the Company  through  exercise  rights  under a  convertible
debenture  agreement,  discussed below. The Investors Option expires on August
1, 2007,  and shall  thereupon be exercised  automatically  for any portion of
the property interest not already reacquired by the Company.

      In  addition,  the  Investor  has  provided  the Company with a right of
first offer to reacquire  the Company's  interest in the property.  If, at any
time prior to August 1, 2007,  the  Investor  wishes to sell its interest to a
third party, it must first notify the Company.  Upon such notice,  the Company
may, within 30 days,  repurchase all of the remaining  property interest for a
price equal to a pro-rata  portion of the original  price paid by the Investor
at the  effective  date  ($1,783,549).  If the Company  fails to exercise this
offer within the 30 day period,  then the Investor shall be allowed 90 days in
which to sell all of its interests in the property to a third party.

      In conjunction with this  transaction,  the Company issued a convertible
debenture  in  favor  of  the  Investor  for  $1,783,549.   This   convertible
debenture  bears  interest  from  July  14,  2004 at 10% per  annum,  with the
interest  payable  monthly,  starting  September  1,  2004.  This  convertible
debenture matures on August 1, 2007.

      Under  the  terms  of the  convertible  debenture,  an  exercise  of the
Company's  Option to reacquire its former  interest in the property is treated
as a redemption of all or a portion of its  obligations  under the convertible
debenture.  The Company's  purchase price in this case is a premium of 120% of
the price, or portion thereof,  paid by the Investor on the effective date, as
discussed above.

      An exercise of the  Investor's  Option to sell its  interest in the land
back to the Company is  accomplished  through the Investor's  right to convert
the amount  outstanding  under the  convertible  debenture  into the Company's
common  stock.  The aggregate  amount of principal and any unpaid  interest is
convertible  at the per  share  price  equal to the  lesser of (a) 120% of the
closing  bid price at August 20,  2004,  or (b) 80% of the lowest  closing bid
price for the five days  immediately  preceding the conversion date. Upon such
conversion,  a pro-rata  portion of the  interest in the property is sold back
to  the  Company.  Upon  the  maturity  of  the  convertible  debenture,   the
Investor's  Option  terminates  and any  remaining  amount of the  convertible
debenture is  automatically  converted into the Company's  common stock.  Upon
such  conversion,  the  remaining  portion of the  interest in the property is
sold back to the Company.

      The Company's  reacquisition  of its interests in the property under the
terms of the rights of first offer,  as  described  above,  shall  represent a
satisfaction   of  its   obligations  at  face  value  under  the  convertible
debenture.



                                      A-15
<PAGE>

      Upon the  Investor's  sale of the  property  to a third  party under the
terms of the rights of first offer,  as described  above,  all  obligations of
the Company under the convertible debenture shall immediately terminate.

      In accordance  with the provisions a SFAS No. 66,  "Accounting for Sales
of  Real  Estate,"  the  Company  has  accounted  for  this  transaction  as a
financing  transaction.  Under the  provisions of SFAS No. 66, when the seller
has an obligation to repurchase the property,  or the terms of the transaction
allow the buyer to compel the seller to  repurchase  the property or interest,
then  the  transaction  shall be  accounted  for as a  financing  transaction,
rather  than a sale.  Under  the  terms of this  transaction,  the  Investor's
Option  requires the Investor to sell the property  back to the Company.  This
sale back to the  Company  will be  satisfied  through the  conversion  of the
Investor's interest under the convertible  debenture into the Company's common
stock.

      Upon the  Investor's  sale of the  property  interest  to a third  party
under the  terms of the  rights  of first  offer,  as  described  above,  this
financing  transaction  shall be deemed  to have  terminated  and the  Company
shall  thereupon  account for the proceeds  received as a sale of its interest
in the  property,  with  any  gain  or loss  on  such  sale  to be  recognized
accordingly at that time.

      During  November  2004,  the July 2004  Agreement of Sale and the August
2004  Convertible  Debenture  were  rescinded  and  terminated  pursuant to an
Amended and  Restated  Agreement  of Sale.  Under this  Amended  and  Restated
Agreement  of Sale,  for a  selling  price of  approximately  $1,427,000,  the
Company has sold a 20% fee simple  interest  in its land held for  development
and sale as a tenant  in common to an  entity,  which is a related  party to a
current  holder of the  Company's  convertible  debentures.  The  Company  has
applied the $1,427,000  sale amount against the proceeds from the  convertible
debenture  and has  incurred  interest  expense of $38,000 for the three month
period ended  September 30, 2004,  $30,000 of which has been paid to the buyer
through  September  30,  2004.  The Company has incurred  additional  interest
expense of $20,000  through  the date of  termination.  On  November  29, 2004
NuWave paid approximately  $326,000 to the buyer,  representing  approximately
$28,000 in accrued interest and $298,000 in refunded proceeds.

Effects of New Accounting Pronouncements

      In December 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation Number 46R "Consolidation of Variable Interest
Entities."  FIN 46R, which sets forth criteria to be used in determining
whether an investment in a variable interest entity should be consolidated.
These provisions are based on the general premise that if a company controls
another entity through interests other than voting interests, that company
should consolidate the controlled entity.  The Company believes that
currently,  it does not have any material  arrangements  that meet the
definition of a variable interest entity, which would require consolidation.

      In November  2004,  the FASB issued  SFAS No.  151,  "Inventory  Costs -
An Amendment of ARB No. 43,  Chapter 4" (SFAS No. 151).  SFAS No. 151 requires
all  companies to recognize a  current-period  charge for abnormal  amounts of
idle  facility  expense,   freight,   handling  costs  and  wasted  materials.
This  statement  also  requires  that  the  allocation  of  fixed   production
overhead  to the costs of  conversion  be based on the normal  capacity of the
production  facilities.  SFAS  No.  151 will be  effective  for  fiscal  years
beginning  after June 15,  2005.  The Company  does not expect the adoption of
this  statement  to  have a  material  effect  on its  consolidated  financial
statements.

      In December  2004, the FASB issued SFAS No.123R,  "Share-Based  Payment"
(SFAS  No.  123R).  This  statement  replaces  SFAS  No.  123  and  supersedes
Accounting   Principles   Board   ("APB")  No.  25.  SFAS  123R  requires  all
stock-based  compensation  to be  recognized  as an expense  in the  financial
statements  and that  such cost be  measured  according  to the fair  value of
stock   options.   SFAS  123R  will  be  effective   for   quarterly   periods
beginning  after  December 15, 2005.  The Company is currently  evaluating the
impact this statement will have on its consolidated financial statements.



                                      A-16
<PAGE>

      In  December  2004,  the  FASB  issued  SFAS  No.  153,   "Exchanges  on
Nonmonetary  Assets - An  Amendment  of APB  Option  No.  29,  Accounting  for
Nonmonetary  Transactions"  (SFAS 153). SFAS 153 eliminates the exception from
fair  value  measurement  for  nonmonetary  exchanges  of  similar  productive
assets  in   paragraph   21(b)  of  APB  Opinion  No.  29,   "Accounting   for
Nonmonetary   Transactions,"   and   replaces   it  with  an   exception   for
exchanges  that do not have  commercial  substance.  SFAS 153  specifies  that
a nonmonetary  exchange has  commercial  substance if the future cash flows of
the entity are  expected to change  significantly  as a result of an exchange.
SFAS 153 is effective for fiscal  periods  beginning  after June 15, 2005. The
Company  does not expect the  adoption  of this  statement  to have a material
effect on its consolidated financial statements.

Overall Financial Performance

      Overall,  we incurred a net loss of $336,000  and $790,000 for the years
ended December 31, 2004 and 2003,  respectively.  This  represented a $454,000
decrease  in the  Company's  net  loss.  This  decrease  in the net  loss  was
primarily  attributable  to the  recognition  of a  gain  on  the  sale  of an
interest in real estate,  as further explained Plan of Operation - Real Estate
Activities, below.

      General and  administrative  expenses  for the  overall  Company for the
year ended  December 31, 2004 were  $741,000,  as compared to $958,000 for the
year ended  December 31, 2003,  a decrease of $217,000 or 23%.  This  decrease
was the result of  reductions  in  salaries  of  $167,000  resulting  from the
resignation  of all  management and employees with only a new CEO in September
2003 and one other  administrative  employee hired on November 1, 2003.  There
were also  decreases  in insurance  of $190,000  and  depreciation  expense of
$37,000.  There were  increases in accounting  fees of $70,000,  financial and
other  consulting  fees  of  $46,000,   and  legal  fees  of  $53,000.   These
professional  fees  increased  on  account  of the  Company  having to rely on
consultants  to perform  functions  such as  accounting  and  reporting,  that
previously  were  performed by employees,  as well as to support the Company's
efforts to prepare for its registration  filing relating to the Standby Equity
Distribution  Agreement  and  other  financing  programs.  Real  estate  taxes
increased  by $47,000 on account of the  Company's  investment  in real estate
properties for development.  The Company allocated  approximately $256,000 and
$943,000 of these general and  administrative  expenses to the Video and Image
Technology  segment and approximately  $485,000 and $15,000 to the Real Estate
segment, for the years ended December 31, 2004 and 2003, respectively.

Results of Operations - Technology business operations

      Revenues  for the year ended  December  31,  2004 were $0 as compared to
$20,000  for the  year  ended  December  31,  2003.  Revenues  for  2004  were
negatively  impacted by our  inability to secure  customers  for our image and
technology  products.  This matter is made difficult by the heavy  competition
and  price  compression  in the image and  video  sectors  of the  electronics
markets.  For the technology business  operations,  the Company recorded a net
loss of approximately  $412,000 and $773,000, for the years ended December 31,
2004 and 2003, respectively.

      During  December 2001, we entered into a strategic  alliance with Gemini
Industries ("Gemini"),  a manufacturer and distributor of consumer electronics
accessories.  Gemini was granted a five-year  exclusive  license to market and
distribute  NuWave's  Video Game Enhancer  ("VGE") in North  America.  Initial
shipments  of the VGE and ASIC  chips to Gemini  took  place  during the first
quarter of 2002.  Minimum  ongoing  purchase  requirements  under the contract
were to begin in July 2002.  After  having  received a  three-month  extension
Gemini still had not met their minimum contractual  purchase  requirements and
management  determined it was in the Company's  best interest to terminate the
agreement.  The sales for the year  ended  December  31,  2003 were  primarily
sales of the  Company's  remaining  domestic VGE  inventory to Gemini,  as the
Company's efforts were concentrated on sales of NVP 1104.

      Cost of sales for the year ended  December 31, 2004 was $0 versus $5,000
for the year ended  December  31,  2003.  The  decrease in cost of sales was a
result  of no sales in  2004.  Research  and  development  costs  for the year
ended  December 31, 2004 were $0; a reduction of $134,000 from the prior year.
This  reduction  primarily  resulted  from a  reduction  in all  research  and
development  due to liquidity  constraints  and the head count  reductions  in
order to decrease  costs.  The decreases in research and  development  were in
engineering  salaries,   outside  consulting  fees  and  lab  supplies,  which
represented  costs  in 2003 of  approximately  $79,000,  $28,000  and  $9,000,
respectively.  General and  administrative  expenses related to the technology
business  for the year ended  December 31, 2004 were  $256,000,  a decrease of
$687,000  from the prior year.  This  decrease was the result of a significant
reduction  in  most  all  expenses  resulting  from  the  resignation  of  all
management  and employees  with only a new CEO in September 2003 and one other
administrative  employee  hired on  November  1, 2003.  The  decrease  is also
attributable  to a decrease in management time and resources to the technology
business,  in  favor  of  the  land  development  segment.   Interest  expense
allocated to technology  operations increased to $206,000 in 2004, as compared
to $53,000 in 2003, an increase of $153,000,  as a result of additional  notes
payable to finance  liquidity and paying  interest rates on these notes at the
default  penalty rate of 24% per annum.  Gain on forgiveness of debt decreased
to $20,000 in 2004 from $347,000 in 2003, as the financial  restructuring with
vendors,  reflecting the settlement of various  liabilities for  approximately
10% of the amounts owed, was effectively completed in 2003.



                                      A-17
<PAGE>

Plan of Operation - Real estate activities

      The  Company's   first  real  estate   investment,   of  land  held  for
development and sale,  acquired through its wholly owned  subsidiary,  Lehigh,
was made on December 22,  2003.  On April 30,  2004,  the  Company,  through a
separate wholly owned subsidiary,  WH Acquisition Corp., purchased a parcel of
residential  real estate for  $122,000,  utilizing  approximately  $113,000 in
cash and the  application  of deposits of  approximately  $9,000.  The Company
recorded  net  income  (loss)  on the real  estate  segment  of  approximately
$76,000 and ($17,000) for each of the years ended  December 31, 2004 and 2003,
respectively.

      NuWave  intends to develop  the land held for  development  and sale and
the  parcel  acquired  in April  2004 and then  sell  both of these  developed
properties  for a gain.  To  date,  there  are no  revenues  from  the sale of
developed properties.  Revenues from development  activities are not projected
to be realized until mid to late 2007.

      During the year ended  December  31,  2004,  the real estate  activities
incurred general and administrative expenses of approximately $485,000,  which
consisted  principally  of real  estate  taxes  and  maintenance  expenses  of
approximately  $65,000 and an allocation  of other general and  administrative
expenses of approximately  $420,000.  During the year ended December 31, 2003,
the real estate  activities  incurred general and  administration  expenses of
$15,000,  representing  real  estate  taxes.  Interest  expense  for the  real
estate  activities  was  approximately  $312,000  and $2,000,  for years ended
December  31,  2004  and  2003,  respectively,   with  the  increase  in  2004
attributable  to the costs of financing  the  acquired  real estate for a full
year. In addition,  the Company capitalized  interest and development costs of
$273,000 and $37,000,  respectively,  for the year ended December 31, 2004 and
$0  and  $53,000,   respectively,  for  the  year  ended  December  31,  2003,
respectively.

      NuWave follows SFAS No. 34,  "Capitalization  of Interest Costs",  which
provides for the  capitalization of interest as part of the historical cost of
acquiring  certain  assets.  Interest is  capitalized on assets that require a
period of time to get them ready for their  intended  use, such as real estate
development  projects.  Interest  is  capitalized  from the period  activities
begin,  such as  planning  and  permitting,  until such time as the project is
complete.  Interest costs include  interest  recognized on obligations  having
explicit  rates,  as well as the  amortization  of discounts  that result from
imputing   interest   on   convertible   debentures   over  the  life  of  the
obligation.  Interest  is  capitalized  on only the net book value of the land
and  improvements,  net of the  discount  recorded on the  acquisition  of the
land.  Interest on specific  borrowings  associated with the land, that are in
excess of its net book value are expensed as incurred.

      During July 2004 and August 2004, the Company  entered into an Agreement
of Sale and a Convertible Debenture,  respectively, related to its transfer of
a 20% fee  simple  interest  in its land  held for  development  and sale as a
tenant  in  common.  During  November  2004,  the  Agreement  of Sale  and the
Convertible  Debenture  were  terminated  and rescinded in their  entirety and
replaced  with an Amended and  Restated  Agreement  of Sale issued in November
2004, as described below.

      The  terms of the  July  2004  Agreement  of Sale  and the  August  2004
Convertible Debenture are outlined below.

      The  Company  sold a 20%  fee  simple  interest  in its  land  held  for
development  and sale as a tenant in  common  to an entity  which is a related
party  to  a  current   holder  of  the   Company's   convertible   debentures
("Investor") and received cash proceeds of $1,783,549.

      The  Company may  reacquire  an  interest  in the  property  ("Company's
Option").  At any time after closing and upon 15 days advance  written notice,
the  Company  may  repurchase  all or a  portion  of the  interest  sold  at a
purchase price computed at 120% of the price, or portion thereof,  paid by the
Investor on the effective date.

      The  Investor,  at any  time  after  closing  and  upon 15 days  advance
written  notice,  may  sell  back to the  Company  all or any  portion  of its
interest in the  property  ("Investor's  Option").  The Investor may sell this
property  back to the Company  through  exercise  rights  under a  convertible
debenture  agreement,  discussed below. The Investors Option expires on August
1, 2007,  and shall  thereupon be exercised  automatically  for any portion of
the property interest not already reacquired by the Company.

      In  addition,  the  Investor  has  provided  the Company with a right of
first offer to reacquire  the Company's  interest in the property.  If, at any
time prior to August 1, 2007,  the  Investor  wishes to sell its interest to a
third party, it must first notify the Company.  Upon such notice,  the Company
may, within 30 days,  repurchase all of the remaining  property interest for a
price equal to a pro-rata  portion of the original  price paid by the Investor


                                      A-18
<PAGE>

at the  effective  date  ($1,783,549).  If the Company  fails to exercise this
offer within the 30 day period,  then the Investor shall be allowed 90 days in
which to sell all of its interests in the property to a third party.

      In conjunction with this  transaction,  the Company issued a convertible
debenture  in  favor  of  the  Investor  for  $1,783,549.   This   convertible
debenture  bears  interest  from  July  14,  2004 at 10% per  annum,  with the
interest  payable  monthly,  starting  September  1,  2004.  This  convertible
debenture matures on August 1, 2007.

      Under  the  terms  of the  convertible  debenture,  an  exercise  of the
Company's  Option to reacquire its former  interest in the property is treated
as a redemption of all or a portion of its  obligations  under the convertible
debenture.  The Company's  purchase price in this case is a premium of 120% of
the price, or portion thereof,  paid by the Investor on the effective date, as
discussed above.

      An exercise of the  Investor's  Option to sell its  interest in the land
back to the Company is  accomplished  through the Investor's  right to convert
the amount  outstanding  under the  convertible  debenture  into the Company's
common  stock.  The aggregate  amount of principal and any unpaid  interest is
convertible  at the per  share  price  equal to the  lesser of (a) 120% of the
closing  bid price at August 20,  2004,  or (b) 80% of the lowest  closing bid
price for the five days  immediately  preceding the conversion date. Upon such
conversion,  a pro-rata  portion of the  interest in the property is sold back
to  the  Company.  Upon  the  maturity  of  the  convertible  debenture,   the
Investor's  Option  terminates  and any  remaining  amount of the  convertible
debenture is  automatically  converted into the Company's  common stock.  Upon
such  conversion,  the  remaining  portion of the  interest in the property is
sold back to the Company.

      The Company's  reacquisition  of its interests in the property under the
terms of the rights of first offer,  as  described  above,  shall  represent a
satisfaction   of  its   obligations  at  face  value  under  the  convertible
debenture.  Upon the  Investor's  sale of the  property to a third party under
the terms of the rights of first offer,  as described  above,  all obligations
of the Company under the convertible debenture shall immediately terminate.

      In accordance  with the provisions a SFAS No. 66,  "Accounting for Sales
of  Real  Estate,"  the  Company  has  accounted  for  this  transaction  as a
financing  transaction.  Under the  provisions of SFAS No. 66, when the seller
has an obligation to repurchase the property,  or the terms of the transaction
allow the buyer to compel the seller to  repurchase  the property or interest,
then  the  transaction  shall be  accounted  for as a  financing  transaction,
rather  than a sale.  Under  the  terms of this  transaction,  the  Investor's
Option  requires the Investor to sell the property  back to the Company.  This
sale back to the  Company  will be  satisfied  through the  conversion  of the
Investor's interest under the convertible  debenture into the Company's common
stock.

        Upon the  Investor's  sale of the  property  interest to a third party
under the  terms of the  rights  of first  offer,  as  described  above,  this
financing  transaction  shall be deemed  to have  terminated  and the  Company
shall  thereupon  account for the proceeds  received as a sale of its interest
in the  property,  with  any  gain  or loss  on  such  sale  to be  recognized
accordingly at that time.

      During  November  2004,  the July 2004  Agreement of Sale and the August
2004  Convertible  Debenture  were  rescinded  and  terminated  pursuant to an
Amended and  Restated  Agreement  of Sale.  Under this  Amended  and  Restated
Agreement  of Sale,  for a  selling  price of  approximately  $1,427,000,  the
Company has sold a 20% fee simple  interest  in its land held for  development
and sale as a tenant  in common  to an  entity  which is a related  party to a
current  holder of the  Company's  convertible  debentures.  The  Company  has
applied the $1,427,000  sale amount against the proceeds from the  convertible
debenture  and has  incurred  interest  expense of $38,000 for the three month
period ended  September 30, 2004,  $30,000 of which has been paid to the buyer
through  September  30,  2004.  The Company has incurred  additional  interest
expense of $20,000  through the date of  termination.  On November  29,  2004,
NuWave paid approximately  $326,000 to the buyer,  representing  approximately
$28,000 in accrued interest and $298,000 in refunded proceeds.

      NuWave's  tentative  plans  for the land held for  development  and sale
acquired in 2003 call for the  development of  approximately  100  residential
dwelling units.  NuWave has engaged an  architectural  consultant  during 2004
for  the  purpose  of  preparing   drawings  that  support  the  approval  and
permitting  process.  Once the approvals and permits are in place, NuWave will
contract  with a developer to build out the  property.  Land  development  and
construction  costs are estimated to be  $15,000,000  to  $18,000,000.  NuWave
will have to raise  additional funds to finance  construction.  Such financing
may come  from the sale of  securities,  advances  under  our  Standby  Equity
Distribution Agreement or through bank or other debt financing.



                                      A-19
<PAGE>

Liquidity and Capital Resources

      The  Company had cash  balances  on hand of $84,000 as of  December  31,
2004.   During  August  2004,   NuWave  received   proceeds  of  approximately
$1,784,000  from  the  issuance  of a  convertible  debenture  related  to its
transfer of a 20% fee simple  interest in NuWave's  land held for  development
and sale.  During November 2004, the convertible  debenture was terminated and
rescinded in its entirety and replaced with an Amended and Restated  Agreement
of Sale dated  November  2004.  Under this Amended and  Restated  agreement of
sale, for a selling price of approximately $1,427,000,  the Company has sold a
20% fee simple  interest in its land held for development and sale as a tenant
in  common to an entity  which is a related  party to a current  holder of the
Company's  convertible  debentures.  The Company  has  applied the  $1,427,000
sale amount  against  the  proceeds  from the  convertible  debenture  and has
incurred  interest  expense  of  $38,000  for the  three  month  period  ended
September  30,  2004,  $30,000  of which has been  paid to the  buyer  through
September 30, 2004. The Company has incurred  additional  interest  expense of
$20,000  through the date of  termination.  On November 29, 2004,  NuWave paid
approximately  $326,000 to the buyer,  representing  approximately  $28,000 in
accrued interest and $298,000 in refunded proceeds.

      A portion of the proceeds from the Company's  receipt of the convertible
debenture  was applied to repay  obligations  consisting  of notes  payable to
Cornell  Capital   Partners,   LP  of  approximately   $460,000;   convertible
debentures   payable  to  Cornell  Capital   Partners,   LP  of  $200,000  and
convertible   debentures   of  four  other   debenture   holders   aggregating
approximately  $79,000.  The  remaining  funds will  provide the Company  with
current working  capital.  The Company's  future cash funding sources continue
to be  uncertain.  The  Company's  primary  cash  needs  are to  fund  ongoing
operations  and real estate  development  activities.  The Company  will defer
any  land  development  and  construction  expenditures  until  after  it  has
arranged adequate  funding.  In order to obtain funding during the next twelve
months,  the  Company  intends  to seek  financing  through a  combination  of
sources.  These  sources  might  include,  in addition  to the Standby  Equity
Distribution Agreement, funding through the sale of securities or loans.

      In seeking  sources of liquidity,  NuWave intends to continue to rely on
the sale of securities or loans for near term working  capital  needs.  NuWave
expects to satisfy most of its funding  needs in 2005  pursuant to the Standby
Equity Distribution Agreement. In addition,  NuWave will seek outside mortgage
financing for certain of the  properties  that it might acquire in the future,
as well as to finance  development  and  construction of the dwelling units on
the  undeveloped  acreage.  The cost cutting has reduced cash  requirements at
NuWave.  In their  reports on the audits of  NuWave's  consolidated  financial
statements  for the years ended  December 31, 2004,  and 2003 our  independent
registered public accounting firms included an explanatory  paragraph in their
reports  because of the  uncertainty  that we could  continue in business as a
going concern.  In the event we are unable to raise the anticipated  operating
capital  needs  through the sale of securities or some other form of financing
or receive cash from sales of our products,  there would be substantial  doubt
about our ability to continue as a going concern.

      During the year ended  December 31, 2004 and 2003, the Company had a net
decrease in cash and cash  equivalents  of $35,000 and $55,000,  respectively.
The Company's sources and uses of funds were as follows:

      Cash  Used  In  Operating   Activities.   Net  cash  used  in  operating
activities  for the year  ended  December  31,  2004 was  $661,000,  resulting
primarily from a consolidated  net loss of approximately  $336,000,  offset by
the  amortization  of debt  discount of $230,000 and the net change in the tax
credit  receivable from the sale of certain state net tax operating  losses of
$175,000,  and  the  use of  cash  is  increased  by the  effect  of the  gain
recognized  on  the  sale  of an  interest  in the  Company's  land  held  for
development  and sale of $850,000.  Net cash used in operating  activities for
the year ended  December 31, 2003 was  $858,000,  resulting  primarily  from a
consolidated  net loss of $790,000,  and by a non-cash gain on  forgiveness of
debt of $347,000, offset by decreases in inventory,  prepaids and other assets
totaling approximately $203,000.

      Cash Used in Investing  Activities.  During the year ended  December 31,
2004,  the Company  purchased  $22,000 of new computer  and office  equipment,
acquired a parcel of land for  $122,000,  purchased  marketable  securities  -
available-for-sale,  for approximately $131,000 and incurred $37,000 for legal
costs toward  development of the land held for  development  and sale.  During
the year ended  December  31,  2003,  the Company used net cash of $55,000 for
the purchase of development costs on the investment in land.

      Cash Provided by Financing  Activities.  During the year ended  December
31,  2004,  the Company  raised  $2,244,000  in funds  through the issuance of
convertible  debentures,  offset by the  repayment in September  2004 of notes


                                      A-20
<PAGE>

and  convertible  debentures to Cornell Capital  Partners,  LP of $460,000 and
$200,000,  respectively;  and  repayments of other  convertible  debentures of
approximately  $619,000.  During the year ended December 31, 2003, the Company
raised  $557,000,  $39,000 and  $395,000 in advances  under the Equity Line of
Credit,  sales of common stock under the Equity Line of Credit and through the
issuance of  convertible  debentures,  respectively,  and of which $200,000 of
the $395,000 in convertible  debentures were issued to a related party.  Also,
during the year ended  December 31, 2003, the Company issued and then redeemed
$67,000 in  preferred  stock,  which,  upon  redemption,  the  Company  paid a
dividend   of   $19,000,   and   repaid   a   note   payable   to   a   former
officer/shareholder, requiring cash of $115,000.

      At December  31, 2004 and 2003,  the  Company had  negative  net working
capital of  approximately  $36,000  and  $50,000,  respectively.  The  Company
intends  to monitor  spending  carefully  until such time that new  funding is
arranged.

      In May 2004, NuWave entered into a five-year  sublease agreement for the
rental of 3,580  square feet of  corporate  office tower space in Jersey City,
New Jersey.  This rental  agreement  is  effective  July 1, 2004 and  requires
NuWave to pay rent of approximately  $7,000 and approximately $3,000 in shared
building  operating  expenses,  each month.  NuWave subleases one half of this
space  to  a  subtenant,   for  approximately  $5,000  per  month,   including
approximately $1,750 of shared building operating expenses.

      On January 26,  2005,  NuWave  issued a  $3,481,274  promissory  note to
Cornell  Capital  Partners,  LP  and  terminated  the  outstanding  $3,300,000
convertible  debentures,  which were issued to Cornell Capital Partners, LP on
December 22, 2003.  The face amount of the  promissory  note includes  accrued
interest from the debentures,  and is secured through a first mortgage lien on
Lehigh's  (NuWave's wholly owned  subsidiary) land located in New Jersey.  The
promissory  note bears  interest at a rate of 5% per annum,  with interest due
at maturity. The maturity date is December 22, 2008.

      On January 26, 2005,  NuWave  entered into an  assignment  and amendment
agreement  of  our  $1,400,000  secured  note  payable  to  Stone  Street  and
therewith,  Stone Street has assigned its right under the agreement to Cornell
Capital  Partners,  LP. In addition,  Stone Street,  Cornell Capital Partners,
LP and Lehigh  have  agreed to defer the  beginning  of the  monthly  payments
hereunder for a period of one year to January 1, 2006.

      On January 26, 2005,  NuWave entered into a Standby Equity  Distribution
Agreement with Cornell  Capital  Partners,  LP. Pursuant to the Standby Equity
Distribution  Agreement,  we  may,  at our  discretion,  periodically  sell to
Cornell  Capital  Partners,  LP shares of  Common  Stock for a total  purchase
price of up to $30  million.  For each share of Common Stock  purchased  under
the Standby Equity Distribution  Agreement,  Cornell Capital Partners, LP will
pay NuWave 99% of the volume  weighted  average price on the  Over-the-Counter
Bulletin Board or other  principal  market on which our Common Stock is traded
for  the 5 days  immediately  following  the  notice  date.  Further,  Cornell
Capital  Partners,  LP will  retain  a fee of 10% of each  advance  under  the
Standby Equity Distribution Agreement.

ITEM 7.   FINANCIAL STATEMENTS

      The  information  required by this item is  incorporated by reference to
pages F-1 through F-40 of this Annual Report on Form 10-KSB.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

      On July 2, 2004,  NuWave  Technologies,  Inc.  engaged Weiser LLP as its
principal  accountant  to audit NuWave  Technologies's  financial  statements.
NuWave  did not  consult  Weiser LLP on any  matters  described  in  paragraph
(a)(2)(i) or (ii) of Item 304 of Regulation  S-B during the  Registrant's  two
most recent fiscal years or any  subsequent  interim  period prior to engaging
Weiser LLP.

      Effective on June 30, 2004, NuWave  Technologies,  Inc. dismissed Marcum
& Kliegman LLP as its independent registered public accounting firm.

      Marcum &  Kliegman  LLP's  report  on  NuWave's  consolidated  financial
statements  for the year ended  December  31,  2003 did not contain an adverse
opinion or a disclaimer  of opinion and was not  qualified as to  uncertainty,
audit scope,  or accounting  principles;  however,  the report was modified to
include an  explanatory  paragraph  wherein  Marcum & Kliegman  LLP  expressed
substantial doubt about NuWave's ability to continue as a going concern.



                                      A-21
<PAGE>

      Marcum & Kliegman  LLP's  dismissal  was  recommended  and  approved  by
NuWave's Board of Directors.

      During the year  ended  December  31,  2003,  as well as the  subsequent
interim  period  through June 30,  2004,  there were no  disagreements  on any
matter of accounting principles or practices,  financial statement disclosure,
or auditing scope or procedures,  which disagreements if not resolved to their
satisfaction  would have  caused them to make  reference  in  connection  with
their  opinion to the subject  matter of the  disagreement.  Marcum & Kliegman
LLP  did  not  advise  NuWave  Technologies,   Inc.  of  any  of  the  matters
identified  in  paragraph  (a)(1)(B),  (a) (1) (C),  (D) or (E) of Item 304 of
Regulation S-B.

      On October 30, 2003, NuWave  Technologies,  Inc. dismissed Eisner LLP as
its independent registered public accounting firm.

      Eisner's  report on NuWave's  financial  statements  for the years ended
December 31, 2001 and 2002,  respectively,  did not contain an adverse opinion
or a disclaimer  of opinion.  However,  the report did reflect a going concern
uncertainty.

      Eisner's  dismissal was  recommended  and approved by NuWave's  Board of
Directors.

      Since January 1, 2001, as well as any  subsequent  interim  period prior
to  dismissal,  there  were  no  disagreements  on any  matter  of  accounting
principles or practices,  financial statement disclosure, or auditing scope or
procedures,  which  disagreements if not resolved to their  satisfaction would
have caused them to make  reference in  connection  with their  opinion to the
subject matter of the disagreement.

      Since January 1, 2001, as well as any  subsequent  interim  period prior
to dismissal,  Eisner did not advise NuWave  Technologies,  Inc. of any of the
matters identified in paragraph (a)(1)(iv)(B) of Item 304 of Regulation S-B.

      On  October  30,  2003,  NuWave  Technologies,  Inc.  engaged  Marcum  &
Kleigman,  LLP as its  principal  accountant  to audit  NuWave  Technologies's
financial  statements.  NuWave did not consult  Marcum & Kleigman,  LLP on any
matters  described  in paragraph  (a)(2)(i) or (ii) of Item 304 of  Regulation
S-B from January 1, 2003 or any  subsequent  interim  period prior to engaging
Marcum & Kliegman, LLP.


ITEM 8A.  CONTROLS AND PROCEDURES

      The  Company's  principal  executive  officer,  who is also  the  acting
principal financial officer,  has evaluated the effectiveness of the Company's
"disclosure  controls  and  procedures,"  as  such  term  is  defined  in Rule
13a-15(e) of the  Securities  Exchange Act of 1934, as amended,  as of the end
of the period  covered by this Annual  Report on Form 10-KSB.  The  evaluation
process,  including  the inherent  limitations  on the  effectiveness  of such
controls  and  procedures  is more  fully  discussed  below.  Based  upon  his
evaluation,  the principal executive officer, who is also the acting principal
financial officer,  has concluded that the Company's  disclosure  controls and
procedures, did contain a material weakness.

      This  material   weakness  is  the  lack  of  the  necessary   corporate
accounting  resources.  At the current time,  the,  Company's  Chief Executive
Officer,  who is one of only two of the Company's full time employees,  solely
has the responsibility  for receipts and disbursements.  The Company employs a
financial  consultant to prepare the periodic financial  statements and public
filings.  Reliance on these limited  resources  impairs our ability to provide
for a proper  segregation  of duties and the  ability  to ensure  consistently
complete and accurate financial reporting,  as well as disclosure controls and
procedures.  As the Company grows,  and as resources  permit,  we project that
the Company's  Chief  Executive  Officer will hire such  additional  competent
financial  personnel  to assist in the  segregation  of duties with respect to
financial reporting, and Sarbanes-Oxley Section 404 compliance.

      We believe that,  for the reasons  described  above,  we will be able to
improve our financial  reporting and  disclosure  controls and  procedures and
remedy  the  material  weakness  identified  above.  Because  of the  inherent


                                      A-22
<PAGE>

limitations  in all control  systems,  no  evaluation  of controls can provide
absolute  assurance  that all control  issues and instances of fraud,  if any,
will be or have been detected.

      Except as  described  above,  there were no  significant  changes in our
internal  controls over  financial  reporting  that  occurred  during the year
ended  December  31, 2004 that have  materially  affected,  or are  reasonably
likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls


      We  believe  that a control  system,  no matter  how well  designed  and
operated,  cannot  provide  absolute  assurance  that  the  objectives  of the
control  system are met, and no  evaluation  of controls can provide  absolute
assurance  that all control  issues and instances of fraud,  if any,  within a
company  have been  detected.  Our  disclosure  controls  and  procedures  are
designed to provide a reasonable  assurance of achieving their  objectives and
our Chief  Executive  Officer has concluded  that such controls and procedures
are  effective  at  the  "reasonable  assurance"  level.  However,  we do  not
currently have any operating businesses.

                                   Part III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

            Set  forth  below  are the  names  as of  April  11,  2005 and the
business experience of the directors and executive officers of the Company:

          Name             Age                   Position
          ----             ---                   --------
George D. Kanakis          32    President, Chief Executive Officer,
                                 Principal Financial Officer and Director

Gary H. Giannantonio       32    Director


      There  are  no  family  relationships  among  any of  the  directors  or
executive  officers  of the  Company.  None  of  the  Company's  directors  or
executive  officers is a director of any other company that files reports with
the SEC. None of the Company's  directors have been involved in any bankruptcy
or criminal proceeding  (excluding traffic and other minor offenses),  nor has
been enjoined from engaging in any business.

      The following information is furnished for each of the executive
officers and directors of the Company:

      GEORGE D. KANAKIS has been a Director of the Company and the  President,
Chief Executive  Officer and Principal  Financial Officer of the Company since
September  10, 2003.  From March 2002 through  August  2003,  Mr.  Kanakis had
been a Vice President of Corporate Finance for Cornell Capital  Partners,  LP,
where  he  structured  equity  and  debt  financings,   as  well  as  provided
consulting  to clients on mergers  and  acquisitions.  From 1993 to 2001,  Mr.
Kanakis  managed the Futures and Options Group at Barclays  Capital,  where he
serviced primarily  institutional  clients around the world. Mr. Kanakis holds
an MBA in Finance  and  Investments  from the  Zicklin  School of  Business at
Baruch  College  where he graduated in December 2001 and a degree in Economics
from Rutgers University where he graduated in May 1995.

      GARY H.  GIANNANTONIO  became a Director of the Company on May 17, 2004.
He is an  associate  at the law firm of Kalebic,  McDonnell & Miller,  P.C. in
Hackensack,  New Jersey. Mr. Giannantonio's primary legal  experience involves
residential   and   commercial   real   estate   transactions.  He    also has
experience handling general  civil litigation,  collections,  landlord/tenant,
matrimonial,  and bankruptcy  matters.  Mr.  Giannantonio is also an Assistant
Municipal  Prosecutor  in Palisades  Park,  New Jersey.  He received his Juris
Doctor  degree from  New York Law School in 1998 and a Bachelor of Arts Degree
in  Political  Science  from  Boston  University  in 1994.  He is  licensed to
practice  in New Jersey  State  Courts as well as the United  States  District
Court for the District of New Jersey.



                                      A-23
<PAGE>

Code of Ethics

      On March 30,  2004,  the Board of  Directors  of the  Company  adopted a
written Code of Ethics  designed to deter  wrongdoing  and promote  honest and
ethical  conduct,  full, fair and accurate  disclosure,  compliance with laws,
prompt  internal  reporting  and  accountability  to  adherence to the Code of
Ethics.


Committees

      NuWave  does not  currently  have an audit  committee,  and the Board of
Directors  serves  this  function.  The  Board  of  Directors  does not have a
"financial  expert"  due to the lack of capital  needed to attract a qualified
expert.


Section 16(a) Beneficial Ownership

      Reporting Compliance

      Section  16(a) of the  Securities  Exchange  Act of 1934  and the  rules
thereunder   require  NuWave's   officers  and  directors,   and  persons  who
beneficially  own more than ten  percent  of a  registered  class of  NuWave's
equity securities,  to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and to furnish NuWave with copies.

      Based on its reviews of the copies of the Section  16(a) forms  received
by it, or written  representations from certain reporting persons, the Company
believes  that,  during  the  last  fiscal  year,  all  Section  16(a)  filing
requirements   applicable  to  its   officers,   directors  and  greater  than
ten-percent beneficial owners were complied with and filed timely.

                                      A-24
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

                      COMPENSATION OF EXECUTIVE OFFICERS

      The  following  table sets forth the annual and  long-term  compensation
for services in all  capacities  for the fiscal years ended December 31, 2004,
2003 and 2002 paid to George D. Kanakis and Gerald Zarin.  No other  executive
officer  received  compensation  exceeding  $100,000  during  the years  ended
December 31, 2004,  2003 and 2002.  The employment of Mr. Zarin was terminated
on September 29, 2003.  Mr.  Kanakis  became our Chief  Executive  Officer and
Principal Financial Officer on September 10, 2003.

<TABLE>
<CAPTION>
                               SUMMARY COMPENSATION TABLE

                                                                         Long Term
                                   Annual Compensation              Compensation Awards
                                   -------------------              -------------------
                                                                  Securities
                                                                  Underlying
                                                        Other       Options
        Name and                                       Annual       (Number     All Other
   Principal Position      Year    Salary    Bonus   Compensation  of Shares)  Compensation
   ------------------      ----    ------    -----   ------------ -----------  ------------
<S>                        <C>    <C>                    <C>
George D. Kanakis,
President and Chief        2004   $   73,00      --      $ 7,500        --          --
Executive Officer          2003   $  12,500      --           --        --          --

Gerald Zarin               2004   $      --      --           --        --          --
Former President and       2003   $ 117,000      --           --        --          --
Chief Executive Officer    2002   $ 155,000  $ 30,000         --        --          --
</TABLE>

Note:  Effective June 1, 2004, George D. Kanakis' annual salary was
$125,000.

Note:  Gerald Zarin's employment terminated on September 29, 2003.  In
conjunction therewith, he received 100,000 warrants to purchase NuWave's
stock at $1.00 per share.  Mr. Zarin surrendered all options upon his
resignation during 2003.

     Stock Options

      For the years ended December 31, 2003 and 2004, there were no options
granted.

      On January 12,  2003,  the former  executive  officers of NuWave and all
employees voluntarily and irrevocably  surrendered all options granted to them
through that date. As such,  no options  remain  outstanding  as of this date.
All stock option plans have been terminated.

Directors' Compensation

      Directors  who are not  employees  of NuWave  are  entitled  to a fee of
$2,500 per  quarter 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.

     Employment Agreement

      Effective  June 1, 2004,  NuWave  entered  into a  five-year  employment
contract  with  George  Kanakis.  Pursuant  to the  contract,  Mr.  Kanakis is
employed  as  President  and Chief  Executive  Officer at an annual  salary of
$125,000  per  year,   subject  to  increases  at  the  Board  of   Directors'
discretion.  Mr.  Kanakis is also  entitled  to a bonus  equal to 12.5% of the
net  income   attributable  to  each  of  NuWave's  5  subsidiaries,   plus  a
discretionary  bonus as determined by the Board of Directors.  Mr.  Kanakis is
also  entitled  to 75,000  shares of common  stock  and  options  to  purchase
100,000  shares  of  common  stock at some  future  date.  NuWave  has not yet
adopted a stock option plan.  Accordingly,  no options have been issued to Mr.
Kanakis.

                                      A-25
<PAGE>

      Until  September 29, 2003,  NuWave had  employment  agreements  with its
former  President and CEO, Mr. Gerald Zarin and its Chief  Financial  Officer,
Mr. Jeremiah F. O'Brien.  These  agreements  terminated upon the September 29,
2003 resignations of these two former officers.


                                      A-26
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT,
          PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT


Beneficial Owners

      The table below is based on information  obtained from the persons named
therein  with respect to the shares of Common Stock  beneficially  owned,  and
sets forth, as of April 11, 2005,  information  with respect to the beneficial
ownership of our common stock by (i) persons  known by us to beneficially  own
more  than  five  percent  of  the  outstanding  shares,  (ii) each  director,
(iii) each  executive officer and (iv) all directors and executive officers as
a group.

                                                          Common Stock
                                                       Beneficially Owned
                                                   ---------------------------
Name/Address                                        Number         Percent(1)
------------                                       -----------   -------------

George Kanakis
1416 Morris Avenue, Suite 207
Union, NJ 07083                                     75,000(3)          3.6%

Gary H. Giannantonio
167 Main St
Hackensack, NJ 07601                                   --               --

All Officers and Directors as a group (2 persons)   75,000(3)          3.6%

Gerald Holland
22 Coult Lane
Old Lyme, CT 06371                                 226,615(2)          9.9%

David Kesselbrenner
c/o Ms. Doree Kesselbrenner, as Custodian,
10 Devenshire Road
Livingston, NJ 07039                               226,615(2)          9.9%

Sarah Kesselbrenner
c/o Ms. Doree Kesselbrenner, as Custodian,
10 Devonshire Road
Livingston, NJ 07039                               226,615(2)          9.9%

Joseph Kesselbrenner
c/o Ms. Doree Kesselbrenner, as Custodian,
10 Devonshire Road
Livingston, NJ 07039                               226,615(2)          9.9%

Louis Kesselbrenner
c/o Ms. Doree Kesselbrenner, as Custodian,
10 Devonshire Road
Livingston, NJ 07039                               226,615(2)          9.9%

Joanna Saporito
668 W. Saddle River Road
Ho-Ho-Kus, NJ 07423                                226,615(2)          9.9%



                                      A-27
<PAGE>

                                                          Common Stock
                                                       Beneficially Owned
                                                   ---------------------------
Name/Address                                        Number         Percent(1)
------------                                       -----------   -------------

Michael Kesselbrenner
10 Devonshire Road
Livingston, NJ 07039                               226,615(2)          9.9%

Mary-Ellen Viola
294 Long Hill Drive
Short Hills, NJ 07078                              226,615(2)          9.9%

Newbridge Securities Corporation
1451 Cypress Creek Road, Suite 204
Fort Lauderdale, Florida 33309                     111,111             5.4%

____________________________________

      (1)   Applicable  percentage of ownership is based on 2,062,013  shares of
            common stock outstanding as of April 11, 2005.  Beneficial ownership
            is  determined in accordance  with the rules of the  Commission  and
            generally  includes  voting or  investment  power  with  respect  to
            securities.  Shares of common  stock  subject  to  options  that are
            currently  exercisable  or  exercisable  within 60 days of April 11,
            2005 are deemed to be beneficially  owned by the person holding such
            options for the purpose of computing the  percentage of ownership of
            such person,  but are not treated as outstanding  for the purpose of
            computing the percentage  ownership of any other person.  The common
            stock is the only outstanding class of equity securities of NuWave.

      (2)   These  represent  the  approximate   number  of  shares   underlying
            convertible  debentures  at an  assumed  price of  $0.052  per share
            (i.e.,  80% of a  recent  price  $0.065  per  share),  subject  to a
            ownership   limitation   of  9.9%   contained  in  the   convertible
            debentures. Because the conversion price will fluctuate based on the
            market price of our stock,  the actual number of shares to be issued
            upon conversion of the debentures may be higher or lower.

      (3)   Includes 75,000 shares granted to Mr. Kanakis in connection with his
            employment agreement.



                                      A-28
<PAGE>

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Lehigh  acquired a parcel of land in New Jersey for  $4,950,000  that it
intends  to develop  and then  sell.  Lehigh  based its  purchase  price on an
independent  commercial  appraisal.  This land was acquired  from Stone Street
Asset  Management LLC ("Stone  Street"),  a Company under common ownership and
control as Cornell Capital  Partners,  LP. In connection with this purchase of
land, NuWave incurred debt obligations  consisting of a $3,300,000 convertible
debenture to Cornell Capital Partners,  LP., which was subsequently terminated
and  replaced  with a  $3,481,274,  including  accrued  interest of  $181,274,
non-convertible  promissory note on January 26, 2005,  $250,000 of convertible
debentures to unrelated parties and a $1,400,000 note payable,  as amended, to
Stone Street, which was subsequently  assigned to Cornell Capital Partners, LP
on January  26,  2005 (see Notes 5, 7 and 17 to the  December  31, 2004 NuWave
Consolidated   Financial   Statements).   As  a  result   of  Stone   Street's
relationship  with Cornell Capital  Partners,  LP, NuWave has recorded land at
the cost  basis  recorded  by Stone  Street of  approximately  $2,915,000.  In
November  2004,  Lehigh  sold a 20% fee simple  interest  in its land held for
development  and sale as a tenant in  common  to an entity  which is a related
party to Michael Kesselbrenner,  a current holder of the Company's convertible
debentures.

      Effective  July 2004,  NuWave  entered into a five year lease  agreement
for approximately  3,500 square feet of office tower space in Jersey City, New
Jersey.  NuWave incurs a net cost of  approximately  $5,000 per month for this
space,  when  combining the rent and other costs such as utilities,  taxes and
maintenance.   This  net  cost  reflects  the  benefit  of  NuWave  subleasing
approximately  50% of the space to a  subtenant.  NuWave's  obligations  under
this   lease  are   guaranteed   by   Yorkville   Advisors   Management,   LLC
("Yorkville").  Yorkville is the general partner of Cornell Capital  Partners,
LP,  a related party to NuWave.

      At December 31, 2004,  NuWave's  investment in  marketable  securities -
available-for-sale,  represents  an  investment  in  the  common  stock  of an
affiliate of Cornell Capital Partners, LP.

      Other than as described  above,  none of our officers or directors,  nor
any  proposed  nominee  for  election  as  a  director,  nor  any  person  who
beneficially  owns,  directly or indirectly,  shares  carrying more than 5% of
the  voting  rights  attached  to all  of  our  outstanding  shares,  nor  any
promoter,  nor any relative or spouse of any of the foregoing  persons has any
material  interest,   direct  or  indirect,   in  any  transaction  since  our
incorporation or in any presently proposed  transaction which, in either case,
has or will materially affect us.

                                      A-29
<PAGE>

ITEM 13.  EXHIBITS

      (a) Documents Filed As Part Of This Report:

            See Index to Consolidated Financial Statements attached, which
are filed as part of this report.

      (b) Description of exhibits:

Exhibit No.    Description                            Location
-----------    -----------                            --------

3.1     Articles of Incorporation of NuWave    Incorporated by reference to
        (Delaware)                             Exhibit 3.1(a) to Registration
                                               Statement on Form SB-2 filed
                                               with the Securities and
                                               Exchange Commission on April 2,
                                               1996

3.2     Certificate of Amendment to Articles   Incorporated by reference to
        of Incorporation of NuWave (Delaware)  Exhibit 3.1(b) to Registration
                                               Statement on Form SB-2 filed
                                               with the Securities and
                                               Exchange Commission on April 2,
                                               1996

3.3     Certificate of Authority (New Jersey)  Incorporated by reference to
                                               Exhibit 3.1(c) to Registration
                                               Statement on Form SB-2 filed
                                               with the Securities and
                                               Exchange Commission on April 2,
                                               1996

3.4     Amended Certificate of Authority (New  Incorporated by reference to
        Jersey)                                Exhibit 3.1(d) to Registration
                                               Statement on Form SB-2 filed
                                               with the Securities and
                                               Exchange Commission on April 2,
                                               1996

3.5     Certificate of Amendment to Articles   Incorporated by reference to
        of Incorporation of NuWave (Delaware)  Exhibit 3.1(e) to Registration
                                               Statement on Form SB-2 filed
                                               with the Securities and
                                               Exchange Commission on April 2,
                                               1996

3.6     By-Laws of NuWave                      Incorporated by reference to
                                               Exhibit 3.2 to Registration
                                               Statement on Form SB-2 filed
                                               with the Securities and
                                               Exchange Commission on April 2,
                                               1996

4.1     Form of Common Stock Certificate       Incorporated by reference to
                                               Exhibit 4.1 to Amendment No. 2
                                               to Registration Statement on
                                               Form SB-2 filed with the
                                               Securities and Exchange
                                               Commission on July 3, 1996

4.2     Form of Public Warrant Agreement       Incorporated by reference to
        between NuWave, American Stock         Exhibit 4.2 to Amendment No. 1
        Transfer & Trust Company and Rickel &  to Registration Statement on
        Associates, Inc.                       Form SB-2 filed with the
                                               Securities and Exchange
                                               Commission on May 22, 1996

4.3     Form of Public Warrant Certificate     (See Exhibit 4.3 to Amendment
                                               No. 2 to Registration Statement
                                               on Form SB-2 filed with the
                                               Commission on July 3, 1996

4.4     Form of Underwriter's Warrant          Incorporated by reference to
        Agreement (including Warrant           Exhibit 4.4 to Amendment No. 1
        Certificate) between NuWave and        to Registration Statement on
        Rickel & Associates                    Form SB-2 filed with the
                                               Securities and Exchange
                                               Commission on May 22, 1996

10.1    Form of Stock Purchase Agreement,      Incorporated by reference to
        dated as of June 2002, between NuWave  Exhibit 10.45 to Registration
        Technologies, Inc. and certain         Statement on Form SB-2, filed
        investors                              with the Securities and
                                               Exchange Commission on July 11,
                                               2002



                                      A-30
<PAGE>

Exhibit No.    Description                            Location
-----------    -----------                            --------

10.2    Form of Selling Stockholders           Incorporated by reference to
        Agreement, dated as of July 2002       Exhibit 10.46 to Registration
        among NuWave and the Purchasers.       Statement on Form SB-2, filed
                                               with the Securities and
                                               Exchange Commission on July 11,
                                               2002

10.3    Revolving Line of Credit Secured       Incorporated by reference to
        Demand Promissory Note, dated          Exhibit 10.47 to Registration
        December 10, 2002, to Gerald Zarin by  Statement on SB-2 filed with
        NuWave Technologies, Inc.              the Securities and Exchange
                                               Commission on December 27, 2002

10.4    Agreement with Cornell Capital         Incorporated by reference to
        Partners LP, dated September 10, 2003  Exhibit 10.1 to Form 8-K, filed
                                               with the Securities and
                                               Exchange Commission on
                                               September 10, 2003

10.5    Convertible Debenture dated as of      Incorporated by reference to
        December 22, 2003 issued to Cornell    Form 10-KSB filed with the
        Capital Partners, LP                   Securities and Exchange
                                               Commission on April 13, 2004

10.6    Termination Agreement related to the   Incorporated by reference to
        Convertible Debenture dated as of      Form 8-K filed with the
        December 22, 2003 issued to Cornell    Securities and Exchange
        Capital Partners, LP                   Commission on January 26, 2005

10.7    Promissory Note dated January 26,      Incorporated by reference to
        2005, between Cornell Capital          Form 8-K filed with the
        Partners, LP and NuWave                Securities and Exchange
                                               Commission on January 26, 2005

10.8    Secured Note Payable Agreement dated   Incorporated by reference to
        December 22, 2003, between Stone       Form 10-KSB filed with the
        Street Asset Management, LLC and       Securities and Exchange
        NuWave                                 Commission on April 15, 2004

10.9    Form of convertible debenture, dated   Incorporated by reference to
        as of December 2003, between NuWave    Form 10-KSB filed with the
        and certain investors                  Securities and Exchange
                                               Commission on April 15, 2004

10.10   Independent Sales Agent Agreement      Incorporated by reference to
        between Nextgen Associates, Inc. and   Form 10-KSB filed with the
        NuWave dated October 31, 2003          Securities and Exchange
                                               Commission on April 15, 2004

10.111  Termination Agreement related to the   Incorporated by reference to
        Standby Equity Distribution Agreement  Form 8-K filed with the
        dated as of May 2004 between NuWave    Securities and Exchange
        and Cornell Capital Partners, LP       Commission on January 27, 2005

10.12   Standby Equity Distribution Agreement  Incorporated by reference to
        dated January 26, 2005 between NuWave  Form 8-K filed with the
        and Cornell Capital Partners, LP       Securities and Exchange
                                               Commission on January 27, 2005

10.13   Placement Agent Agreement dated        Incorporated by reference to
        January 26, 2005 between NuWave,       Form 8-K filed with the
        Newbridge and Cornell Capital          Securities and Exchange
        Partners, LP.                          Commission on January 27, 2005

10.14   Registration Rights Agreement dated    Incorporated by reference to
        January 26, 2005 between NuWave and    Form 8-K filed with the
        Cornell Capital Partners, LP           Securities and Exchange
                                               Commission on January 27, 2005

10.15   Employment Agreement dated June 1,     Incorporated by reference to
        2004 between NuWave and George Kanakis Form SB-2 filed with the
                                               Securities and Exchange
                                               Commission on February 4, 2005

10.16   Agreement of sale between 24 West      Incorporated by reference to
        96th Street Realty Corp. and Lehigh    Form 10-QSB filed with the
        Acquisition Corp dated July 1, 2004    Securities and Exchange
                                               Commission on November 22, 2004

10.17   Convertible Debenture agreement        Incorporated by reference to
        between 24 West 96th Street Realty     Form 10-QSB filed with the
        Corp. and NuWave dated August 20, 2004 Securities and Exchange
                                               Commission on November 22, 2004

                                      A-31
<PAGE>

Exhibit No.    Description                            Location
-----------    -----------                            --------

10.18   Amended and restated Agreement of      Incorporated by reference to
        sale between 24 West 96th Street       Form 10-QSB filed with the
        Realty Corp. and Lehigh Acquisition    Securities and Exchange
        Corp dated November 10, 2004           Commission on November 22, 2004

10.19   Assignment and Amendment Agreement     Incorporated by reference to
        related to the Secured Note Payable    Form 8-K filed with the
        Agreement dated December 22, 2003,     Securities and Exchange
        between Stone Street Asset             Commission on January 27, 2005
        Management, LLC and NuWave

14.1    Code of Ethics                         Incorporated by reference to
                                               Form 10-KSB filed with the
                                               Securities and Exchange
                                               Commission on April 15, 2004

31.1    Certification of Chief Executive       Provided herewith
        Officer Pursuant to Rule 13a-14(a)

32.1    Certification of the Company's         Provided herewith
        principal financial officer pursuant
        to 18 U.S.C. Section 1350 as adopted
        pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002


                                      A-32
<PAGE>


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Audit Fees. The aggregate fees for  professional  services  rendered was
approximately   $70,000  and   $53,500   for  the  audits  of  the   Company's
consolidated  annual  financial  statements  for the years ended  December 31,
2004 and 2003,  respectively,  and the reviews of the  consolidated  financial
statements included in the Company's Forms 10-QSB for those years.

      Audit-Related  Fees.  The  aggregate  fees  billed was $0 in each of the
last two years for assurance and related services by the principal  accountant
that are reasonably  related to the  performance of the audit or review of the
Company's  consolidated  financial  statements  and  not  reported  under  the
caption "Audit Fee."

      Tax Fees.  The  aggregate  fees billed by the principal  accountant  for
tax  compliance  was $5,000 and $3,000 for the fiscal years ended December 31,
2004 and 2003, respectively.

      All Other Fees.  Other than the services  described above, the aggregate
fees for  services  rendered by the  principal  accountant  was  approximately
$39,000 for the fiscal years ended  December  31, 2004.  These fees related to
the review of the Company's Registration Statement.

      Audit  Committee  Policies  and  Procedures.   The  Board  of  Directors
performs  the  duties  of an audit  committee.  The  Board of  Directors  must
pre-approve all auditing services and permitted  non-audit services (including
the  fees  and  terms  thereof)  to  be  performed  for  the  Company  by  its
independent  auditors,  subject to the de  minimus  exceptions  for  non-audit
services described in Section  10A(i)(1)(B) of the Securities  Exchange Act of
1934,  which should be nonetheless be approved by the Board of Directors prior
to  the  completion  of  the  audit.  Each  year  the  independent   auditor's
retention  to audit  our  consolidated  financial  statements,  including  the
associated  fee,  is  approved  by the  committee  before  the  filing  of the
previous  year's annual report on Form 10-KSB.  At the beginning of the fiscal
year, the Board of Directors will evaluate other known  potential  engagements
of the  independent  auditor,  including  the  scope  of work  proposed  to be
performed and the proposed  fees,  and approve or reject each service,  taking
into account  whether the services are  permissible  under  applicable law and
the possible  impact of each non-audit  service on the  independent  auditor's
independence  from management.  At each such subsequent  meeting,  the auditor
and  management  may present  subsequent  services  for  approval.  Typically,
these would be services such as due diligence for an  acquisition,  that would
not have been known at the beginning of the year.

      Since May 6, 2003,  the effective  date of the  Securities  and Exchange
Commission  rules  stating  that an  auditor  is not  independent  of an audit
client  if the  services  it  provides  to the  client  are not  appropriately
approved,  each new  engagement  of  Weiser  LLP (and  Marcum &  Kliegman  LLP
through  June 30, 2004,  the date of their  dismissal),  has been  approved in
advance by the Board of Directors,  and none of those  engagements made use of
the  de  minimus   exception   to  the   pre-approval   contained  in  Section
10A(i)(1)(B) of the Securities Exchange Act of 1934.


                                      A-33
<PAGE>

                                  SIGNATURES


            Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

                                        NUWAVE TECHNOLOGIES, INC.
                                        (Registrant)



Date: April 13, 2005                      By: /s/ George Kanakis
                                          --------------------------------------
                                          George Kanakis,
                                          President, Chief Executive Officer and
                                          Principal Financial Officer



SIGNATURE                     TITLE                         DATE

/s/ George Kanakis               Director                   April 13, 2005
-----------------------
George Kanakis


/s/ Gary Giannantonio            Director                   April 13, 2005
-----------------------
Gary Giannantonio


                                      A-34
<PAGE>


                   NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

                   Index to Consolidated Financial Statements
<TABLE>
<CAPTION>

                                                                                          Page(s)
                                                                                          -------
<S>                                                                                           <C>
Report of Independent Registered Public Accounting Firm - Weiser LLP                        F-2

Report of Independent Registered Public Accounting Firm - Marcum & Kliegman LLP             F-3

Consolidated Balance Sheet as of December 31, 2004                                          F-4

Consolidated Statements of Operations  and Comprehensive Loss
  for the years ended December 31, 2004 and 2003                                            F-5

Consolidated Statements of Stockholders' Deficiency
  for the years ended December 31, 2004 and 2003                                            F-6

Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003     F-7 - F-9

Notes to Consolidated Financial Statements                                              F-10 - F-40
</TABLE>


                                      F-1
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
NuWave Technologies, Inc.


We  have  audited  the  accompanying   consolidated   balance  sheet  of  NuWave
Technologies,  Inc. and Subsidiaries (the "Company") as of December 31, 2004 and
the related  consolidated  statements  of  operations  and  comprehensive  loss,
stockholders'  deficiency,  and  cash  flows  for the  year  then  ended.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of NuWave
Technologies, Inc. and Subsidiaries as of December 31, 2004 and the consolidated
results of their  operations  and their cash flows for the year then  ended,  in
conformity with U.S. generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial  statements,  the Company has experienced  recurring net
losses,  negative cash flows from operations,  a net working capital  deficiency
and  a  stockholders'  deficiency,  which  raise  substantial  doubt  about  the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 2. The financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.


/s/ Weiser LLP
--------------
Weiser LLP

New York, New York
February 28, 2005


                                      F-2
<PAGE>

              REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors
NuWave Technologies, Inc.



We have audited the  accompanying  consolidated  statements  of  operations  and
comprehensive   loss,   stockholders'   deficiency  and  cash  flows  of  NuWave
Technologies,  Inc. and Subsidiaries (the "Company") for the year ended December
31, 2003. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audit.

We  conducted  our audit in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the 2003 consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of NuWave Technologies,  Inc. and Subsidiaries for the year ended
December  31,  2003,  in  conformity  with U.S.  generally  accepted  accounting
principles.

The  accompanying  2003  consolidated  financial  statements  have been prepared
assuming the Company will continue as a going concern. As discussed in Note 2 to
the consolidated  financial  statements,  the Company incurred a loss during the
year ended December 31, 2003 of  approximately  $790,000 and had, as of December
31,  2003,  stockholders'  and working  capital  deficiencies  of  approximately
$1,705,000 and $50,000,  respectively,  which raises substantial doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also described in Note 2. The consolidated  financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/s/ Marcum & Kliegman LLP
-------------------------
Marcum & Kliegman LLP

April 9, 2004
New York, New York


                                      F-3
<PAGE>

                   NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheet
                 (In thousands, except share and per share data)


                                               ASSETS
<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                            2004
                                                                                        --------

Current assets:

<S>                                                                                     <C>
     Cash and cash equivalents                                                          $     84
     Marketable securities - available-for-sale                                              256
     Inventory                                                                                 1
     Other current receivables                                                                30
     Deferred tax asset                                                                       50
                                                                                        --------

                     Total current assets                                                    421

Property and equipment, net                                                                   21

Land held for development and sale                                                         2,761
                                                                                        --------

                     Total assets                                                       $  3,203
                                                                                        ========


                     LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:

     Accounts payable, accrued interest and accrued liabilities                         $    122
     Current portion of convertible debentures, net of unamortized
       discount of $50                                                                       335
                                                                                        --------
                     Total current liabilities                                               457

Non-current liabilities:

     Note payable - related party                                                          1,400

     Convertible debentures - related party,
       net of unamortized discount of $694                                                 2,607

     Convertible debentures, net of unamortized discount of $37                              163

     Accrued interest - non-current                                                          247
                                                                                        --------
                     Total non-current liabilities                                         4,417
                                                                                        --------

                     Total liabilities                                                     4,874
                                                                                        --------

Stockholders' deficiency:

     Series A Convertible Preferred Stock, noncumulative,
       $.01 par value; authorized 400,000 shares; none issued                                  -

     Preferred stock, $.01 par value; authorized 1,600,000
       shares; none issued - (preferences and
       rights to be designated by the Board of Directors)                                      -

     Common stock, $.001 par value; authorized 140,000,000 shares;
       2,062,013 shares issued and outstanding                                                 2

     Additional paid-in capital                                                           26,461

     Accumulated other comprehensive income                                                  125

     Accumulated deficit                                                                 (28,259)
                                                                                        --------

                     Total stockholders' deficiency                                       (1,671)
                                                                                        --------

                     Total liabilties and stockholders' deficiency                      $  3,203
                                                                                        ========

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

</TABLE>


                                      F-4
<PAGE>

                   NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

          Consolidated Statements of Operations and Comprehensive Loss
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>

                                                            For the Years Ended December 31,
                                                              --------------------------
                                                                 2004           2003
                                                              -----------    -----------
<S>                                                           <C>            <C>
Net sales                                                     $         -    $        20

Cost of sales                                                           -              5
                                                              -----------    -----------
         Gross profit                                                   -             15
                                                              -----------    -----------

Operating expenses:

     General and administrative                                       741            958

     Research and development                                           -            134
                                                              -----------    -----------

         Total operating expenses                                     741          1,092
                                                              -----------    -----------

Loss from operations                                                 (741)        (1,077)
                                                              -----------    -----------

Other income (expense):

    Gain on forgiveness of debt                                        20            347
    Gain on sale of interest in undeveloped land,
      net of expenses of sale of $27                                  850              -
    Interest income                                                     3              -
    Interest expense (including related party interest
        expense $267 in 2004 and $52 in 2003)                        (518)           (55)
                                                              -----------    -----------

Other income, net                                                     355            292
                                                              -----------    -----------

Loss before benefit from (provision for) income taxes                (386)          (785)

Benefit from (provision for) income taxes                              50             (5)
                                                              -----------    -----------

Net loss                                                             (336)          (790)

Deemed dividend - Redemption premium on
convertible preferred stock                                             -            (19)
                                                              -----------    -----------

Net loss applicable to common stockholders                    $      (336)   $      (809)
                                                              ===========    ===========

Basic and diluted net loss per common share:
Weighted average number of
    common shares outstanding                                   1,986,640      1,455,365
                                                              ===========    ===========

         Basic and diluted net loss per common share          $     (0.17)   $     (0.56)
                                                              ===========    ===========

Comprehensive loss:

Net loss                                                      $      (336)   $      (809)

Other comprehensive income net of income taxes:

Unrealized gain on marketable securities                              125              -
                                                              -----------    -----------
Comprehensive loss                                            $      (211)   $      (809)
                                                              ===========    ===========

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

</TABLE>

                                      F-5
<PAGE>

                   NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

               Consolidated Statements of Stockholders' Deficiency
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>

                                                        Convertible
                                   Common stock      preferred stock  Additional                 Accumulated         Total
                             ---------------------- -----------------   paid-in  Accumulated other comprehensive  stockholders'
                                 Shares     Amount   Shares    Amount   capital    deficit         income          deficiency
                             ------------- -------- --------  -------- ---------  ---------  --------------------  -----------

<S>                                <C>     <C>                <C>      <C>        <C>        <C>                   <C>
Balance, January 1, 2003           507,734 $      1        -  $      - $  26,927  $ (27,114) $                  -  $      (186)

Common shares issued under the
   equity line of credit for
   repayment of notes payable,
   net of costs                  1,151,490        1        -         -       272          -                     -          273

Proceeds from issuance of
   common stock under Equity
   Line of Credit                  191,678        -        -         -        39          -                     -           39

Common shares issued for
   services                         25,000        -        -         -         5          -                     -            5

Proceeds from issuance of
   convertible preferred stock           -        -   67,000         1        66          -                     -           67

Warrants issued for services             -        -        -         -        22          -                     -           22

Redemption of convertible
   preferred stock                       -        -  (67,000)       (1)      (66)       (19)                    -          (86)

Recording of convertible debt
   discount                              -        -        -         -       986          -                     -          986


Adjustment to record acquired land
   at the seller's historical cost
   basis (Note 5)                        -        -        -         -    (2,035)         -                     -       (2,035)

Net loss                                 -        -        -         -         -       (790)                    -         (790)
                             ------------- -------- --------  -------- ---------  ---------  --------------------  -----------
Balance, December 31, 2003       1,875,902 $      2        -  $      - $  26,216  $ (27,923) $                  -  $    (1,705)

Recording of convertible debt
   discount                              -        -        -         -       630          -                     -          630

Reacquisition of beneficial
   conversion feature on
   convertible debentures                -        -        -         -      (529)         -                     -         (529)

Common shares issued for
   services                        111,111        -        -         -        10          -                     -           10

Common shares issued for
   compensation                     75,000        -        -         -         8          -                     -            8

Forgiveness of debt - related party      -        -        -         -       126          -                     -          126

Net unrealized gain on                                                                                                   -
   marketable securities                 -        -        -         -         -          -                   125          125

Net loss                                 -        -        -         -         -       (336)                    -         (336)
                             ------------- -------- --------  -------- ---------  ---------  --------------------  -----------
Balance , December 31, 2004      2,062,013 $      2        -  $      - $  26,461  $ (28,259) $                125  $    (1,671)
                             ============= ======== ========  ======== =========  =========  ====================  ===========

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

</TABLE>

                                      F-6
<PAGE>

            NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

              Consolidated Statements of Cash Flows
                (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                     For the Years Ended December 31,
                                                                     -------------------------------
                                                                         2004           2003
                                                                     -------------  --------------

Cash flows from operating activities:

<S>                                                                  <C>            <C>
      Net loss                                                       $       (336)  $        (790)
                                                                     -------------  --------------

          Adjustments to reconcile net loss to net cash used
              in operating activities:

              Provision for bad debt expense                                    -              11

              Provision for deferred income taxes                               -               5

              Depreciation                                                      5              42

              Gain on sale of interest in land held for
                development and sale                                         (850)              -

              Amortization of debt discount, including
                 related party amounts of $102 in 2004 and $9 in 2003         230              11

              Issuance of stock and warrants for consulting services
                and compensation                                               18              27

              Gain on forgiveness of debt                                     (20)           (347)

          (Increase) decrease in operating assets:

              Inventory                                                         -              24

              Other current receivables                                       (30)              -

              Prepaid expenses and other current assets                         -             159

              Other assets                                                      -              20

              Deferred tax asset                                              175               -

          Increase (decrease) in operating liabilities:

              Accounts payable, accrued interest and accrued liabilities
                  including related party accrued interest of $66 in
                  2004 and $29 in 2003                                        147             (20)
                                                                     -------------  --------------

                  Total adjustments                                          (325)            (68)
                                                                     -------------  --------------

                  Net cash used in operating activities                      (661)           (858)
                                                                     -------------  --------------

Cash flows from investing activities:

      Purchase of marketable securities                                      (131)              -

      Purchase of property and equipment                                      (22)              -

      Land acquisition and land development costs                            (159)            (55)

      Proceeds from sale of land, net of $27 of expenses                      (27)              -

      Proceeds from sale of equipment                                           -               1
                                                                     -------------  --------------

                  Net cash used in investing activities              $       (339)  $         (54)
                                                                     -------------  --------------
                                   (continued)

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                      F-7
<PAGE>

                   NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, continued
                        (In thousands except share data)
<TABLE>
<CAPTION>

                                                                 For the Years Ended December 31,
                                                               ---------------------------------
                                                                   2004               2003
                                                               --------------    ---------------
Cash flows from financing activities:

<S>                                                                        <C>              <C>
      Proceeds from issuance of notes payable - related party              -                557

      Proceeds from issuance of common stock
        under Equity Line of Credit                                        -                 39

      Proceeds from issuance of convertible debentures                 2,244                395

      Proceeds from issuance of convertible preferred stock                -                 67

      Repayment of note payable to officer/stockholder                     -               (115)

      Repayment of notes payable - related party                        (460)                 -

      Repayment of convertible debentures                               (619)                 -

      Repayment of convertible debenture - related party                (200)

      Redemption of convertible preferred stock (inclusive of
          redemption premium of $19)                                       -                (86)
                                                               --------------    ---------------

          Net cash provided by financing activities                      965                857
                                                               --------------    ---------------

Net decrease in cash and cash equivalents                                (35)               (55)

Cash and cash equivalents - beginning of the year                        119                174
                                                               --------------    ---------------


Cash and cash equivalents - end of the year                    $          84     $          119
                                                               ==============    ===============

                                   (continued)

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-8
<PAGE>

                   NUWAVE TECHNOLOGIES, INC. AND SUBSIDIARIES

                Consolidated Statements of Cash Flows, continued
                        (In thousands except share data)

<TABLE>
<CAPTION>
                                                                 For the Years Ended December 31,
                                                               ---------------------------------
                                                                   2004               2003
                                                               --------------    ---------------

Supplemental disclosure of cash flow information:

<S>                                                            <C>               <C>
      Cash paid during the year for interest                   $          105    $            25
                                                               ==============    ===============

Supplemental disclosures of non-cash investing and
      financing activities:

      Recording of debt discount                               $          630    $           986
                                                               ==============    ===============

      Issuance of 1,151,490 shares of common stock
      during 2003 in settlement of notes payable               $            -    $           273
                                                               ==============    ===============

      On December 22, 2003, the Company
      acquired a parcel of land through the
      assumption of debt as follows:
          Land held for development and sale                   $            -    $         2,915
          Note payable - Related party - Stone Street
              Asset Management , LLC                                        -             (1,400)
          Convertible debenture - Related party - Cornell
              Capital Partners, LP                                          -             (3,300)
          Convertible debentures                                            -               (250)
                                                               --------------    ---------------
          Additional paid-in capital - adjustment
            to record acquired land at the seller's historical
            cost basis                                         $            -    $        (2,035)
                                                               ==============    ===============

      Recording of interest payable and amortization of
         debt discount that is capitalized as an addition to
         the cost of the land held for development and sale    $          273    $             -
                                                               ==============    ===============

      Gain on related party forgiveness of debt credited
         to additional paid-in capital                         $          126    $             -
                                                               ==============    ===============

      Sale of a 20% interest in its
         land held for development and sale
         through the partial redemption of a convertible
         debenture                                             $        1,427    $             -
                                                               ==============    ===============


      Reacquisition of beneficial conversion
        feature upon early extinguishment of debt              $         (529)   $             -
                                                               ==============    ===============

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

</TABLE>

                                      F-9
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Organization and Nature of Operations

         NuWave  Technologies,  Inc.  ("NuWave") was incorporated in Delaware on
July 17, 1995.  On October 20,  2003,  NuWave  formed  Lehigh  Acquisition  Corp
("Lehigh")  and  during   January  and  February  2004,   NuWave  formed  NuWave
Acquisition Corp. ("NuWave Acquisition"), Harwood Acquisition Corp. ("Harwood"),
WH  Acquisition   Corp.  ("WH   Acquisition")  and  JK  Acquisition  Corp.  ("JK
Acquisition")  (collectively,  the "Company").  Since its inception,  NuWave has
operated as a technology  company,  focusing on technology  related to enhancing
image  and  video   output.   NuWave   continues   to  market  its   proprietary
video-enhancement  technology.  During November,  2003,  through Lehigh,  NuWave
entered the land development  business. On December 22, 2003, Lehigh purchased a
parcel of land from a related entity and intends to develop and sell residential
units. Through WH Acquisition,  in April 2004, NuWave acquired land and building
that it intends to develop and then sell.  In  November  2004,  through  Lehigh,
NuWave sold a 20% interest in its parcel of land held for development and sale.

2.       Going Concern and Management's Plans

         Over the last two years,  the Company's annual sales have declined from
approximately  $20,000 to $0 for each of the years 2003 and 2004,  respectively,
as the Company has had difficulty securing buyers for its technology products in
a very  competitive  environment and that there have yet to be revenues from the
sale of developed real estate  properties.  The Company has incurred  annual net
losses of  approximately  $790,000 and $336,000 in 2003 and 2004,  respectively,
resulting in a stockholders  deficiency of approximately  $1,671,000 at December
31, 2004, which raise  substantial doubt about the Company's ability to continue
as a going concern.





                                      F-10
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.       Going Concern and Management's Plans - continued

         Management  has taken a number of actions to lower costs and to improve
the Company's  liquidity.  The Company has  substantially  reduced its cash flow
requirements  through  significant  reductions  in  payroll  and  various  other
operating  expenses.  During August 2004,  the Company has raised  approximately
$1,784,000  through  the  issuance  of a  convertible  debenture  related to the
Company's land held for development and sale. In November 2004, this convertible
debenture was  terminated  and rescinded  and  approximately  $1,427,000 of this
amount  was  retained  by the  Company  and was  applied  toward  the sale of an
interest in the Company's  land held for  development  and sale (see Note 5). In
November  2004,  approximately  $298,000  from the  proceeds of this  terminated
convertible  debenture  were refunded to the holder.  The net proceeds from this
convertible  debenture of  $1,129,000  have  provided  cash flows for  operating
expenses and for the repayment of certain obligations. During September 2004 the
Company applied approximately $460,000 of these funds to pay off in full certain
obligations to a related  party,  Cornell  Capital  Partners,  L.P.  ("Cornell")
totaling  $484,000.  In  addition,  during  September  2004 the Company paid off
convertible  debenture  obligations  to Cornell  and others with a face value of
$200,000 and $320,000, respectively.  Although it continues to find it difficult
to generate revenues, the Company intends to remain in the technology business.

         In addition, management's plans include the raising of cash through the
issuance of debt or equity  although  there are no  assurances  that the Company
will  be  successful.  The  Company  continues  to  require  funding  by and the
financial  support of  Cornell.  In January  2005,  the Company  entered  into a
Standby Equity Distribution Agreement ("SEDA") with Cornell (see Note 9).

         On  February 14,  2005,   the  Company   filed  an  amended  Form  SB-2
Registration Statement, with the Securities and Exchange Commission,  seeking to
register 130,690,033 shares of its common stock, including 120,122,191 shares of
common stock to be sold by Cornell  pursuant to the SEDA.  On February 14, 2005,
the  Securities  and Exchange  Commission  declared the  registration  statement
effective.

         Management  does not intend to expend any  additional  funds toward the
development  of the land held for  development  and sale  until such time as new
funding is secured.

         The accompanying  consolidated  financial statements have been prepared
on a going concern  basis,  which  contemplates  the  realization  of assets and
satisfaction of liabilities in the normal course of business. These consolidated
financial  statements do not include any adjustments relating to the recovery of
the  recorded  assets or the  classification  of the  liabilities  that might be
necessary  should  the  Company  be  unable  to  continue  as a  going  concern.
Accordingly,  there is substantial doubt about the Company's ability to continue
as a  going  concern.  There  can be no  assurance  that  the  Company  will  be
successful  in  these  endeavors  and  therefore  may  have  to  consider  other
alternatives.



                                      F-11
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Summary of Significant Accounting Policies

         Principles of Consolidation

         The consolidated  financial  statements  include the accounts of NuWave
and its  wholly-owned  subsidiaries  Lehigh,  NuWave  Acquisition,  Harwood,  WH
Acquisition  and JK  Acquisition.  All  significant  intercompany  accounts  and
transactions have been eliminated in consolidation.

         Use of Estimates

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

         Cash and Cash Equivalents

         The Company considers all highly liquid  investments with a maturity of
three months or less when purchased to be cash equivalents.


                                      F-12
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Marketable Securities

         The Company  evaluates  its  investment  policies  and the  appropriate
classification  of securities at the time of purchase  consistent with Statement
of Financial  Accounting  Standards  ("SFAS") No. 115,  "Accounting  for Certain
Investments in Debt and Equity  Securities," at each consolidated  balance sheet
date and determined  that all of its investment  securities are to be classified
as available-for-sale.  Available-for-sale securities are carried at fair value,
with the  unrealized  gains and losses,  net of tax,  reported in  stockholders'
deficiency under the caption "Accumulated Other Comprehensive  Income." Realized
gains and losses and  declines  in value  judged to be  other-than-temporary  on
available-for-sale  securities are included in investment income (expense).  The
cost of securities sold is based on the specific identification method. Interest
and dividends on securities  classified  as  available-for-sale  are included in
interest and dividend income.

<TABLE>
<CAPTION>
         The following is a summary of marketable securities at December 31, 2004:

                                                         Gross
                                                       Unrealized       Estimated
                                         Cost             Gains         Fair Value
                                         ----             -----         ----------
         Available-for-sale equity
<S>                                     <C>              <C>             <C>
         securities                     $131,000         $125,000        $256,000
                                        ========        =========        ========
</TABLE>

         Proceeds from sales of  available-for-sale  securities were $0 in 2004.
Purchases of available-for-sale  securities were $131,000 in 2004. There were no
sales of available-for-sale  securities during the year ended December 31, 2004.
The  available-for-sale  securities  consist  of shares  of  common  stock of an
affiliate of Cornell.

         Inventory

         Inventory consists of purchased components and supplies,  and is stated
at the lower of cost determined on the first-in, first-out method or market.




                                      F-13
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Summary of Significant Accounting Policies - continued

         Property and Equipment

         Property   and   equipment   is  stated  at  cost,   less   accumulated
depreciation.  Depreciation  of property and equipment is  determined  using the
straight-line method over their estimated useful lives, generally three to seven
years.  Upon  retirement  or other  disposition  of these  assets,  the cost and
related  accumulated  depreciation of these assets are removed from the accounts
and the resulting gains or losses are reflected in the  consolidated  results of
operations. Expenditures for maintenance and repairs are charged to operations.

         Land Held for Development and Sale

         Land held for development and sale is stated at the seller's historical
cost basis (see Note 5), plus the costs of improvements.

         Interest Capitalization

         The Company follows SFAS No. 34,  "Capitalization  of Interest  Costs",
which provides for the capitalization of interest as part of the historical cost
of acquiring  certain  assets.  Interest is capitalized on assets that require a
period of time to get them ready for their  intended  use,  such as real  estate
development projects.  Interest is capitalized from the period activities begin,
such as planning  and  permitting,  until such time as the project is  complete.
Interest costs include interest recognized on obligations having explicit rates,
as well as the  amortization of discounts that result from imputing  interest on
convertible debentures over the life of the obligation.  Interest is capitalized
on only the net book  value of the land and  improvements,  net of the  discount
recorded  on the  acquisition  of the  land.  Interest  on  specific  borrowings
associated  with the land, that are in excess of its net book value are expensed
as incurred.

         Impairment of Long-Lived Assets

         The Company  periodically  assesses the  recoverability  of  long-lived
assets, including property and equipment and land held for development and sale,
when there are  indications  of  potential  impairment,  based on  estimates  of
undiscounted  future cash  flows.  The amount of  impairment  is  calculated  by
comparing  anticipated  discounted  future cash flows with the carrying value of
the related  asset.  In performing  this  analysis,  management  considers  such
factors as current results,  trends, and future prospects,  in addition to other
economic factors.

         Revenue Recognition

         Revenues  from sales of real estate are recorded when title is conveyed
to the buyer,  adequate cash payment has been received and there is no continued
involvement.  Revenue  from  technology  products  is  recorded  when orders are
shipped and the Company has no further involvement with the product.


                                      F-14
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Summary of Significant Accounting Policies, continued

         Research and Development Costs

         Research  and  development  costs are  charged to expense as  incurred.
There were no research  and  development  costs  incurred  during the year ended
December 31, 2004. During the year ended December 31, 2003, the Company incurred
approximately $134,000 in research and development costs.

         Income Taxes

         The Company recognizes deferred tax assets and liabilities based on the
difference  between the financial  statement  carrying  amounts and tax bases of
assets and  liabilities,  using the  enacted tax rates in effect in the years in
which the  differences  are  expected  to  reverse.  A  valuation  allowance  is
established  when necessary to reduce deferred tax assets to the amount expected
to be realized.

         Stock-Based Compensation

         On December  31,  2003,  the  Company  terminated  its two  stock-based
employee  compensation  plans  (see Note 9). As  permitted  under  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 148,  "Accounting for Stock-Based
Compensation  -  Transition  and   Disclosure",   which  amended  SFAS  No.  123
"Accounting for Stock-Based  Compensation,"  the Company has elected to continue
to follow the intrinsic value method in accounting for its stock-based  employee
compensation  arrangements  as defined by  Accounting  Principles  Board Opinion
("APB")  No.  25,  "Accounting  for Stock  Issued  to  Employees",  and  related
interpretations   including  Financial   Accounting   Standards  Board  ("FASB")
Interpretation  No. 44,  "Accounting  for Certain  Transactions  Involving Stock
Compensation",  an  interpretation  of  APB  No.  25.  No  stock-based  employee
compensation  cost is reflected in net loss, as all options  granted under those
plans had an exercise price equal to the market value of the  underlying  common
stock on the date of grant.  For the years ended  December 31, 2004 and 2003 the
effect on net loss had the Company applied the fair value recognition provisions
of  SFAS  No.  123  to  stock-based  employee  compensation  was  not  material.
Accordingly,  there are no  differences  between  basic and diluted net loss per
share as reported and pro forma net loss.

         On June 1, 2004,  the  Company  granted  75,000  shares of stock to its
President and Chief Executive Officer ("CEO") under his employment agreement and
recorded an earnings charge of $7,500 (see Note 9).


                                      F-15
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Summary of Significant Accounting Policies, continued

         Loss per Share

         The Company follows SFAS No. 128, "Earnings Per Share",  which provides
for the calculation of "basic" and "diluted"  earnings  (loss) per share.  Basic
loss per share  includes no dilution and is computed by dividing loss  available
to  common  stockholders  by  the  weighted-average   number  of  common  shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution that could occur through the effect of common shares  issuable upon the
exercise of stock options and warrants and convertible securities. For the years
ended   December  31,  2004  and  2003,   potential   common  shares  amount  to
approximately  76,988,651  and  35,441,444,  respectively,  and  have  not  been
included in the  computation of diluted loss per share since the effect would be
antidilutive.  Conversion  of  all  convertible  debentures  was  based  upon  a
conversion  price of $0.052 and $0.112 per share at December  31, 2004 and 2003,
respectively.

         Concentration of Credit Risk - Cash

         The  Company  maintains  its  cash and cash  equivalents  with  various
financial   institutions,   which  exceed  federally  insured  limits  at  times
throughout  the year. At December 31, 2004, the Company had cash on deposit that
was within federally insured limits.


                                      F-16
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Summary of Significant Accounting Policies, continued

         Fair Value of Financial Instruments

         The consolidated  financial  statements  include various estimated fair
value  information  at December 31, 2004 and 2003,  as required by SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments". Such information, which
pertains to the Company's  financial  instruments,  is based on the requirements
set forth in that  statement and does not purport to represent the aggregate net
fair value to the Company.

         The following  methods and  assumptions  were used to estimate the fair
value of each class of  financial  instruments  for which it is  practicable  to
estimate that value:

                  Cash and cash  equivalents:  The carrying amount  approximates
         fair value because of the short-term maturity of those instruments.

                  Marketable securities - available-for-sale:  The fair value is
         estimated based upon quoted market prices for these investments.

                  Other receivables: The carrying amount approximates fair value
         because of the short-term maturity of those instruments.

                  Accounts  payable,  accrued interest and accrued  liabilities:
         The  carrying  amounts  approximate  fair  value  because  of the short
         maturity of those instruments.

                  Notes payable and convertible debentures: The carrying amounts
         of notes payable and convertible  debentures approximate fair value due
         to the length of the  maturities,  and/or due to the interest rates not
         being  significantly  different from the current market rates available
         to the Company.

         Effect of Recent Accounting Pronouncements

         In December 2003, the Financial  Accounting Standards Board issued FASB
Interpretation  Number 46R  "Consolidation of Variable  Interest  Entities." FIN
46R, which sets forth  criteria to be used in determining  whether an investment
in a variable interest entity should be consolidated. These provisions are based
on the  general  premise  that if a  company  controls  another  entity  through
interests  other than voting  interests,  that company  should  consolidate  the
controlled  entity.  The Company  believes that currently,  it does not have any
material  arrangements  that meet the definition of a variable  interest entity,
which would require consolidation.



                                      F-17
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.       Summary of Significant Accounting Policies, continued

         Effect of Recent Accounting Pronouncements, continued

         In November 2004, the FASB issued SFAS No. 151,  "Inventory  Costs - An
Amendment of ARB No. 43,  Chapter 4" (SFAS No.  151).  SFAS No. 151 requires all
companies to  recognize a  current-period  charge for  abnormal  amounts of idle
facility expense,  freight,  handling costs and wasted materials. This statement
also requires that the allocation of fixed  production  overhead to the costs of
conversion be based on the normal  capacity of the production  facilities.  SFAS
No. 151 will be effective for fiscal years  beginning  after June 15, 2005.  The
Company does not expect the adoption of this statement to have a material effect
on its consolidated financial statements.

         In December 2004, the FASB issued SFAS No.123R,  "Share-Based  Payment"
(SFAS No. 123R).  This  statement  replaces SFAS No. 123 and  supersedes APB 25.
SFAS 123R requires all  stock-based  compensation to be recognized as an expense
in the financial statements and that such cost be measured according to the fair
value of stock  options.  SFAS  123R will be  effective  for  quarterly  periods
beginning  after  December 15, 2005.  The Company is  currently  evaluating  the
impact this statement will have on its consolidated financial statements.

         In  December  2004,  the  FASB  issued  SFAS  No.  153,  "Exchanges  on
Nonmonetary  Assets  - An  Amendment  of  APB  Option  No.  29,  Accounting  for
Nonmonetary  Transactions"  (SFAS 153).  SFAS 153  eliminates the exception from
fair value measurement for nonmonetary exchanges of similar productive assets in
paragraph   21(b)  of  APB  Opinion   No.  29,   "Accounting   for   Nonmonetary
Transactions,"  and replaces it with an exception for exchanges that do not have
commercial  substance.  SFAS  153  specifies  that a  nonmonetary  exchange  has
commercial  substance  if the future  cash flows of the entity are  expected  to
change  significantly  as a result of an  exchange.  SFAS 153 is  effective  for
fiscal  periods  beginning  after June 15, 2005. The Company does not expect the
adoption  of  this  statement  to have a  material  effect  on its  consolidated
financial statements.

4.       Property and Equipment

         Property and equipment consist of the following:

                                           Estimated          December 31,
                                       -----------------          2004
                                        Useful Lives in       ------------
                                             Years
Furniture and fixtures                         7              $   14,000
Computer equipment                             5                 234,000
Equipment                                      5                 100,000
                                                              ------------
                                                              $  348,000
   Less: accumulated depreciation                                327,000
                                                              ------------
                                                              $   21,000
                                                              ============

         Depreciation  expense on  property  and  equipment  for the years ended
December  31,  2004 and 2003  amounted  to  approximately  $5,000  and  $42,000,
respectively.

                                      F-18
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.       Land Held for Development and Sale

         During April 2004, WH Acquisition Corp.  purchased real estate property
consisting of land and a residential  building in Jersey City,  New Jersey for a
total  purchase  price of $122,000.  The purchase was paid with $113,000 in cash
and $9,000 in the application of a deposit. The Company intends to redevelop and
then sell this property

         On December  22, 2003,  Lehigh  acquired a parcel of land in New Jersey
for $4,950,000  that it intends to develop and then sell. This land was acquired
from Stone Street Asset Management LLC ("Stone Street"),  a company under common
control with  Cornell.  In connection  with this  purchase of land,  the Company
incurred debt obligations  consisting of a $3,300,000  convertible  debenture to
Cornell,  which was  subsequently  terminated  and replaced  with a  $3,481,274,
non-convertible promissory note, which includes accrued interest of $181,274, on
January 26, 2005, $250,000 of convertible  debentures to unrelated parties and a
$1,400,000  secured  note  payable to Stone  Street (see Note 7). As a result of
Stone Street's  relationship with Cornell,  and Cornell's  relationship with the
Company (see Note 7), the Company has recorded the land at the  historical  cost
basis as recorded by Stone Street of approximately $2,915,000 in accordance with
accounting rules regarding  transfer of non-monetary  assets.  The difference of
$2,035,000  between the fair value of the land as determined  by an  independent
appraiser  and the  carryover  cost  basis of land from  Stone  Street  has been
recorded as an adjustment to additional paid-in capital.

         During  the  years  ended  December  31,  2004 and  2003,  the  Company
capitalized  approximately $273,000 and $0 of interest relating to the financing
costs  incurred for the portion of Lehigh land that was  capitalized in December
2003 and $37,000 and $12,000 in legal fees, respectively.

         Termination  and  Rescission of July 2004  Agreement of Sale and August
         2004  Convertible  Debenture and Recognition of the Sale of an Interest
         in Land Held for Development and Sale

         During July 2004 and August 2004, the Company entered into an Agreement
of Sale and a Convertible Debenture,  respectively, related to its transfer of a
20% fee simple interest in its land held for development and sale as a tenant in
common.  During  November  2004,  the  Agreement  of Sale  and  the  Convertible
Debenture  were  terminated and rescinded in their entirety and replaced with an
Amended and Restated Agreement of Sale issued in November 2004.

         The  terms  of  the  July 2004  Agreement of  Sale  and the August 2004
Convertible Debenture are outlined below.

         The  Company  sold a 20% fee  simple  interest  in its  land  held  for
development and sale as a tenant in common to an entity which is a related party
to  Michael  Kesselbrenner,  a  current  holder  of  the  Company's  convertible
debentures ("Investor") and received cash proceeds of approximately $1,784,000.

         The Company may  reacquire  an  interest  in the  property  ("Company's
Option"). At any time after closing and upon 15 days advance written notice, the
Company may repurchase all or a portion of the interest sold at a purchase price
computed at 120% of the price, or portion  thereof,  paid by the Investor on the
effective date.

                                      F-19
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.       Land Held for Development and Sale, continued

         Termination  and  Rescission of July 2004  Agreement of Sale and August
         2004  Convertible  Debenture and Recognition of the Sale of an Interest
         in Land Held for Development and Sale, continued

         The  Investor,  at any time  after  closing  and  upon 15 days  advance
written notice,  may sell back to the Company all or any portion of its interest
in the property ("Investor's  Option"). The Investor may sell this property back
to the Company through exercise rights under a convertible  debenture agreement,
discussed  below.  The  Investor's  Option  expired on August 1, 2007, and shall
thereupon be exercised  automatically  for any portion of the property  interest
not already reacquired by the Company.

         In  addition,  the  Investor  has  provided the Company with a right of
first offer to reacquire the Company's interest in the property. If, at any time
prior to August 1, 2007,  the  Investor  wished to sell its  interest to a third
party,  it must first  notify the Company.  Upon such  notice,  the Company may,
within 30 days,  repurchase all of the remaining  property  interest for a price
equal to a pro-rata  portion of the  original  price paid by the Investor at the
effective date ($1,784,000).  If the Company fails to exercise this offer within
the 30 day period,  then the Investor  shall be allowed 90 days in which to sell
all of its interests in the property to a third party.

         In conjunction with this transaction,  the Company issued a convertible
debenture  in  favor  of  the  Investor  for  approximately   $1,784,000.   This
convertible  debenture was to bear interest from July 14, 2004 at 10% per annum,
with the interest payable monthly,  starting September 1, 2004. This convertible
debenture was to mature on August 1, 2007.

         Under  the  terms of the  convertible  debenture,  an  exercise  of the
Company's  Option to reacquire its former interest in the property is treated as
a  redemption  of all or a portion  of its  obligations  under  the  convertible
debenture. The Company's purchase price in this case is a premium of 120% of the
price,  or portion  thereof,  paid by the  Investor on the  effective  date,  as
discussed above.

         An exercise of the  Investor's  Option to sell its interest in the land
back to the Company is accomplished  through the Investor's right to convert the
amount  outstanding  under the convertible  debenture into the Company's  common
stock.  The aggregate amount of principal and any unpaid interest is convertible
at the per share  price equal to the lesser of (a) 120% of the closing bid price
at August 20, 2004, or (b) 80% of the lowest closing bid price for the five days
immediately  preceding the conversion  date.  Upon such  conversion,  a pro-rata
portion of the interest in the  property is sold back to the  Company.  Upon the
maturity of the convertible debenture,  the Investor's Option terminates and any
remaining amount of the convertible  debenture is  automatically  converted into
the Company's common stock.  Upon such conversion,  the remaining portion of the
interest in the property is sold back to the Company.


                                      F-20
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.       Land Held for Development and Sale, continued

         Termination  and  Rescission of July 2004  Agreement of Sale and August
         2004  Convertible  Debenture and Recognition of the Sale of an Interest
         in Land Held for Development and Sale, continued

         The Company's  reacquisition of its interests in the property under the
terms  of  the  rights  of  first  offer,  as  described  above,  represented  a
satisfaction of its obligations at face value under the convertible debenture.

         Upon the  Investor's  sale of the  property  to a third party under the
terms of the rights of first offer, as described  above,  all obligations of the
Company under the convertible debenture shall immediately terminate.

         In accordance with the provisions a SFAS No. 66,  "Accounting for Sales
of Real Estate," the Company has accounted for this  transaction  as a financing
transaction.  Under  the  provisions  of SFAS No.  66,  when the  seller  has an
obligation to repurchase the property, or the terms of the transaction allow the
buyer to compel the seller to  repurchase  the  property or  interest,  then the
transaction  shall be accounted  for as a financing  transaction,  rather than a
sale. Under the terms of this  transaction,  the Investor's  Option required the
Investor to sell the property back to the Company. This sale back to the Company
would have been  satisfied  through the  conversion of the  Investor's  interest
under the convertible debenture into the Company's common stock.

         Upon the  Investor's  sale of the  property  interest  to a third party
under the terms of the rights of first offer, as described above, this financing
transaction  shall be deemed to have  terminated and the Company shall thereupon
account for the  proceeds  received as a sale of its  interest in the  property,
with any gain or loss on such sale to be recognized accordingly at that time.

         During  November  2004,  the July 2004 Agreement of Sale and the August
2004 Convertible  Debenture were rescinded and terminated pursuant to an Amended
and  Restated  Agreement of Sale.  Under this Amended and Restated  Agreement of
Sale, for a selling price of  approximately  $1,427,000,  the Company has sold a
20% fee simple  interest in certain of its land held for development and sale as
a  tenant  in  common  to  an  entity  which  is  a  related  party  to  Michael
Kesselbrenner,  a current holder of the Company's  convertible  debentures.  The
Company has applied the  $1,427,000  sale amount  against the proceeds  from the
convertible  debenture.  On November  29, 2004,  the Company paid  approximately
$326,000 to the buyer,  representing  approximately  $28,000 in accrued interest
and $298,000 in refunded proceeds.

         During November 2004, the Company recorded a total net gain of $850,000
on the sale of the 20% interest in the land held for  development and sale, with
such gain having been offset by approximately $27,000 representing the legal and
filing expenses of the sale.


                                      F-21
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.       Accounts Payable, Accrued Interest and Accrued Liabilities

         Accounts payable,  accrued interest and accrued  liabilities consist of
         the following:

                                                             December 31,
                                                                 2004
                                                             -------------
Accounting and legal fees                                    $     76,000
Accrued interest - related parties                                241,000
Accrued interest                                                   26,000
Consulting fees                                                    11,000
Miscellaneous                                                      15,000
                                                             ------------
   Total                                                     $    369,000
Less - current portion                                            122,000
                                                             ------------
Accrued interest - non-current portion                       $    247,000
                                                             ============

7.       Notes Payable and Convertible Debentures

         Note Payable Officer/Stockholder

         On December 10, 2002, the Company  entered into a 60 day Revolving Line
of  Credit  and  Secured  Promissory  Note  with the  Company's  former  CEO and
stockholder. Under the terms of the agreement, the former CEO agreed to lend the
Company, as needed for working capital requirements, up to $230,000. At December
31, 2002,  there was an  outstanding  balance of  $115,000,  which was repaid on
January 2, 2003.

         Notes Payable - Related Party

         Effective upon September 29, 2003,  Cornell became a related party (see
         below).

         The Company  received loans ("Loans")  aggregating  $357,000 during the
year ended  December 31, 2003.  The Company repaid certain of these Loans in the
amount of $273,000  during the year ended  December  31, 2003 from the  proceeds
received  under the Equity  Line of Credit  through the  issuance  of  1,151,490
shares of the  Company's  common  stock (see Note 9). The common stock issued to
repay these notes were issued at a 3%  discount.  These Loans were  non-interest
bearing during their terms, which ranged from 90 days to 180 days.


                                      F-22
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       Notes Payable and Convertible Debentures, continued

         Notes Payable - Related Party, continued

         The balance of these Equity Line Loans as of September  2003,  totaling
$284,000,  were  not  repaid  within  their  term and  were in  default.  During
September 2003, the Company entered into an Agreement with Cornell to settle the
default on these loans. The Agreement provided for the following:

         o        Cornell   agreed   not  to   foreclose   on  its   outstanding
                  indebtedness of $284,000 owed by the Company. In addition,  on
                  September 29, 2003,  Cornell entered into a new loan agreement
                  with the Company for  $200,000 to be deposited in escrow to be
                  used  to  satisfy  certain  outstanding   obligations  of  the
                  Company,   including   trade  payables,   unpaid  wages,   and
                  settlement of employment agreements. The loan was non-interest
                  bearing for its original term of 180 days.

         o        Cornell  would provide  additional  capital to the Company and
                  assist in identifying new businesses for the Company's growth.
                  Cornell  agreed to maintain the Company's  public  filings and
                  status.  The  Company's  CEO  and  Chairman  of the  Board  of
                  Directors,  and Chief  Financial  Officer  ("CFO"),  agreed to
                  resign their  positions with the Company,  and as such,  their
                  employment agreements terminated at the same time. The CEO and
                  CFO received a settlement  consisting  of cash and warrants to
                  purchase  shares of the Company's  common stock at an exercise
                  price of $1.00 per share (see Note 9). The Company's  Board of
                  Directors  appointed  a  nominee  to its  Board of  Directors,
                  selected  by Cornell.  Upon such  appointment,  the  Company's
                  existing Board members resigned.  As of December 31, 2004, the
                  Company's Board of Directors consists of two directors, one of
                  which is the director nominee appointed by Cornell.

         o        The  Agreement  was  consummated  on  September  29,  2003 and
                  effective with the closing and the  resignations  of the Board
                  members.  As a  result  of  reaching  settlements  to  satisfy
                  certain  outstanding  obligations  of the  Company,  including
                  trade  payables,  unpaid wages,  and  settlement of employment
                  agreements, the Company realized a gain on forgiveness of debt
                  of  approximately  $347,000 during the year ended December 31,
                  2003.

         On March  27,  2004,  the  $200,000  loan  matured  and was not  repaid
according to its terms. On April 5, 2004, Cornell agreed to extend the due dates
of the $284,000 of Equity Line Loans and the $200,000 loan to April 15, 2005.

         While in default and through the extended  maturity  date, the $284,000
of Equity Line Loans and the  $200,000  loan accrued  interest  from the default
dates at a rate of 24% per annum.  Interest  expense on these loans from Cornell
for the years ended  December  31, 2004 and 2003 was  approximately  $69,000 and
$46,000, respectively.

         At December  31, 2003,  accrued  interest on these loans due to Cornell
included in accounts  payable,  accrued interest and accrued  liabilities on the
accompanying consolidated balance sheet was approximately $23,000.



                                      F-23
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       Notes Payable and Convertible Debentures

         Notes Payable - Related Party

         On September 10, 2004, the Company repaid in full the $484,000  balance
of  the  notes  payable  -  related  party,  and  related  accrued  interest  of
approximately   $93,000,  for  the  net  sum  of  $460,000.   Such  forgiveness,
aggregating   approximately  $117,000  has  been  recorded  as  an  addition  to
additional  paid-in capital.  Funds for this repayment were provided through the
proceeds  received from the convertible  debenture  related to the land held for
development and sale (see Note 5).


         Convertible Debentures

         During November 2004,  NuWave  redeemed a convertible  debenture with a
face amount of  $250,000  for  approximately  $287,000,  including a  redemption
premium of $25,000 and accrued  interest  through  redemption  of  approximately
$12,000. Upon early redemption, the Company incurred a charge to additional paid
in  capital  of  approximately  $83,000  to  reacquire  the  related  beneficial
convertible feature of the convertible  debenture instrument and a gain on early
extinguishment  of debt of approximately  $20,000  representing the amortization
from inception of the beneficial conversion feature.

         During October 2004,  NuWave issued a $100,000  convertible  debenture.
This debenture  bears  interest at a rate of 5% per annum,  with interest due at
maturity or upon conversion.  This debenture matures in October 2006. NuWave has
recorded a debt discount of $25,000 at issuance of this convertible debenture to
reflect  the  value  of  the  beneficial   conversion  feature  related  to  the
convertible  debenture.  Accordingly,  NuWave  has  recorded  the  value  of the
beneficial  conversion  feature as a  reduction  to the  carrying  amount of the
convertible  debt and as an addition to additional  paid-in  capital.  This debt
discount is being amortized over the term of the related debenture,  which is 24
months,   and  such   amortization  is  recorded  as  interest  expense  on  the
consolidated statement of operations. At the option of NuWave, upon the maturity
date,  this  convertible  debenture and accrued  interest may be converted  into
NuWave's  Common  Stock.  At the  option  of the  holder,  at any time  prior to
maturity, any portion of this convertible debenture may be converted into Common
Stock.  The value of principal and accrued  interest is  convertible  at the per
share price equal to the lesser of (a) 120% of the closing bid price, or (b) 80%
of the lowest  closing  bid price for the five days  immediately  preceding  the
conversion date. In addition,  NuWave may redeem, with 15 days advance notice, a
portion or all of this outstanding  debenture at 110% of the dollar value of the
amount redeemed plus accrued interest.


         During August 2004, the Company raised approximately $1,784,000 through
the  issuance  of a  convertible  debenture  to a  party  related  to a  current
convertible  debenture  holder.  This debenture bears interest at 10% per annum,
with  interest  payable  monthly and is secured  through an interest in the land
held for development and sale. This debenture was to mature in August 2007.



                                      F-24
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       Notes Payable and Convertible Debentures, continued

         Convertible Debentures, continued

         For the convertible  debenture  issued in August 2004, at the option of
the holder or the Company,  at any time, this  convertible  debenture could have
been  converted  into the  Company's  Common  Stock.  The value of principal and
accrued  interest was  convertible at the per share price equal to the lesser of
(a) 120% of the closing bid price at August 20,  2004,  or (b) 80% of the lowest
closing bid price for the five days  immediately  preceding the conversion date.
In  connection  with the  issuance  of this  convertible  debenture  the Company
transferred a 20% fee simple interest in its land held for development and sale.
In addition,  the Company and the transferee  each had the option to effectively
void all or a portion  of the  transfer.  In the event that  neither  option was
exercised  within three years,  the 20% fee simple  interest would revert to the
Company upon settlement of the convertible debenture. This convertible debenture
was terminated and rescinded during November 2004.

         Upon the issuance of the convertible  debenture  issued in August 2004,
the Company has  recorded a debt  discount of $446,000.  This debt  discount was
recorded to reflect the value of the beneficial  conversion  feature  related to
the convertible  debenture.  Accordingly,  the Company has recorded the value of
the beneficial  conversion  feature as a reduction to the carrying amount of the
convertible  debt and as an addition to additional  paid-in  capital.  This debt
discount was being amortized over the term of the related  debenture,  which was
36 months, and amortization of such discount was recorded as interest expense on
the accompanying consolidated statement of operations.

         During  November  2004,  the Company sold a 20% fee simple  interest in
certain  of its  land  held  for  development  and  sale to the  holder  of this
convertible  debenture and has applied $1,427,000 of the sale amount against the
proceeds from the convertible debenture.  On November 29, 2004, the Company paid
approximately  $326,000  to the  buyer,  representing  approximately  $28,000 in
accrued interest and $298,000 in refunded proceeds.

         During November 2004, the Company recorded a total net gain of $850,000
on the sale of the 20% interest in the land held for  development and sale, with
such gain having been offset by approximately $27,000 representing the legal and
filing expenses of the sale (see Note 5).

         On September 14, 2004, the Company redeemed convertible debentures with
a face amount of $70,000 for approximately $80,000, including the 10% redemption
fee and  accrued  interest  through  the  date of  redemption.  The  unamortized
discount  aggregating  approximately  $11,000  at  September  14,  2004 has been
recorded as interest  expense.  On September  10, 2004,  the Company  redeemed a
convertible  debenture - related  party with a balance of  $200,000  and accrued
interest of approximately $9,000 at redemption for the net sum of $200,000.  The
lender waived receipt of the accrued  interest.  Such  forgiveness,  aggregating
approximately  $9,000 has been  recorded as an addition  to  additional  paid-in
capital. The unamortized discount of approximately $28,000 at September 10, 2004
has been recorded as interest expense.



                                      F-25
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       Notes Payable and Convertible Debentures, continued

         Convertible Debentures, continued

         During June 2004, the Company raised $250,000 through the issuance of a
convertible  debenture to an unrelated  party.  This debenture bears interest at
10% per annum, with interest due at maturity or upon conversion.  This debenture
matures in June 2006 and  during  November  2004 was  redeemed  in full.  During
January 2004,  the Company raised  $110,000  through the issuance of convertible
debentures to two unrelated parties. These debentures bear interest at a rate of
5% per annum, with interest due at maturity or upon conversion. These debentures
mature in January 2006.

         For the convertible debenture issued in June 2004, at the option of the
Company, upon the maturity date, this convertible debenture and accrued interest
may be converted into the Company's  common stock.  At the option of the holder,
at any time prior to maturity,  any portion of this convertible debenture may be
converted  into the Company's  common stock.  The value of principal and accrued
interest is  convertible  at the per share price equal to the lesser of (a) 120%
of the closing bid price at April 26, 2004, or (b) 75% of the lowest closing bid
price for the five days immediately  preceding the conversion date. In addition,
the Company may redeem,  with 15 days advance notice,  a portion or all of these
outstanding  debentures at 125% of the dollar value of the amount  redeemed plus
accrued interest.

         For the convertible debentures issued in January 2004, at the option of
the Company,  upon the maturity date, these  convertible  debentures and accrued
interest may be converted into the Company's  common stock. At the option of the
holder,  at any time  prior  to  maturity,  any  portion  of  these  convertible
debentures  may be  converted  into the  Company's  common  stock.  The value of
principal and accrued  interest is  convertible  at the per share price equal to
the lesser of (a) 120% of the closing bid price,  or (b) 80% of the lowest daily
volume  weighted  average  price for the five  days  immediately  preceding  the
conversion  date.  In  addition,  the Company may redeem,  with 15 days  advance
notice, a portion or all of these  outstanding  debentures at 110% of the dollar
value of the amount redeemed plus accrued interest.

         Upon the issuance of the convertible debentures issued in June 2004 and
January 2004,  the Company has recorded  debt  discounts of $83,000 and $27,000,
respectively.  These debt  discounts  are  recorded  to reflect the value of the
beneficial   conversion   feature   related  to  the   convertible   debentures.
Accordingly,  the Company has  recorded the value of the  beneficial  conversion
features as a reduction to the carrying amount of the convertible debt and as an
addition to additional  paid-in  capital.  This debt discount is being amortized
over the term of the related debentures, which is 24 months, and amortization of
such   discounts  were  recorded  as  interest   expense  on  the   accompanying
consolidated statement of operations.


                                      F-26
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       Notes Payable and Convertible Debentures, continued

         Convertible Debentures, continued

         During October 2003, the Company raised  $200,000  through the issuance
of a convertible  debenture to Cornell.  In addition,  during December 2003, the
Company  raised  $195,000  through the  issuance of  convertible  debentures  to
various  unrelated  parties.   On  December  22,  2003,  the  Company  issued  a
convertible  debenture  for  $3,300,000  to Cornell and  $250,000  to  unrelated
parties in connection with the acquisition of land held for development and sale
(see Note 5) which is secured  through a first mortgage lien on the land. All of
these  debentures bear interest at a rate of 5% per annum,  with interest due at
maturity or upon conversion.  These  debentures  mature at various dates ranging
from October 2005 through December 2008.

         At the option of the Company, upon the maturity date, these convertible
debentures  may be converted into the Company's  common stock.  At the option of
the holder,  at any time prior to  maturity,  any  portion of these  convertible
debentures  may be  converted  into the  Company's  common  stock.  The value of
principal and accrued  interest is  convertible  at the per share price equal to
the lesser of (a) 120% of the closing bid price,  or (b) 80% of the lowest daily
volume  weighted  average  price for the five  days  immediately  preceding  the
conversion  date.  In  addition,  the Company may redeem,  with 30 days  advance
notice, a portion or all of these  outstanding  debentures at 120% of the dollar
value of the  amount  redeemed  plus  accrued  interest.  Under  the  conversion
limitation  for the  debentures  held by Cornell,  the Company may issue  shares
under conversion only so long as, at conversion,  the Cornell holds no more than
9.9% of the Company's outstanding shares.

         For all of its  convertible  debentures,  the Company has recorded debt
discounts  of  $581,000  and  $986,000,  with  amounts  related  to  convertible
debentures issued to Cornell of $0 and $875,000, during the years ended December
31, 2004 and 2003, respectively,  at issuance of these convertible debentures to
reflect  the  value  of  the  beneficial   conversion  feature  related  to  the
convertible debentures. In addition, the Company has recorded a debt discount of
approximately  $49,000  related  to the  accrual  of the  beneficial  conversion
feature of accrued  interest paid in kind,  eligible for conversion,  during the
year ended  December  31,  2004,  with an amount of $42,000  related to interest
accrued related to Cornell.  Accordingly,  the Company has recorded the value of
the beneficial  conversion features as a reduction to the carrying amount of the
convertible debt and as an addition to additional paid-in capital.

         The  Company  is  amortizing  the  debt  discount  over the term of the
related  debentures  which  range from 24 months to 60 months.  The  Company has
recorded as  interest  expense on the  accompanying  consolidated  statement  of
operations  the  amortization  of debt discounts of  approximately  $230,000 and
$11,000,  of which  approximately  $104,000  and  $9,000  relate to  convertible
debentures issued to Cornell,  during the year ended December 31, 2004 and 2003,
respectively.


                                      F-27
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.       Notes Payable and Convertible Debentures, continued

         Note Payable - Related Party

         On December 22, 2003,  Lehigh  issued a secured note for  $1,400,000 to
Stone  Street in  conjunction  with its purchase of land in New Jersey (see Note
5).  As  issued,  the note  provided  for the  payment  of sixty  equal  monthly
installments of principal and interest of $27,741  beginning on January 1, 2005,
maturing on January 10, 2010 and secured  through a second mortgage on the land.
The note bears  interest at a rate of 5% per annum.  On January 26, 2005,  Stone
Street  assigned  its  rights  under  this note to  Cornell  (see  Note 17).  In
addition,  interest  and  principal  payments  have been  deferred for one year.
Accordingly, as amended, monthly payments of approximately $36,000 will begin on
January 1, 2006, while  maintaining the same maturity date. The accrued interest
of  approximately  $70,000 and the full principal  balance for this  obligation,
accordingly,  are  classified as  non-current  obligations  on the  consolidated
balance sheet at December 31, 2004.

         Aggregate  annual  maturities  of notes  payable  -  related  party and
convertible  debentures - related  party and other,  at December 31, 2004 are as
follows:

        Year Ending December 31,                                        Amount
        ------------------------                                        ------

                2005                                                 $ 385,000
                2006                                                   524,000
                2007                                                   341,000
                2008                                                 3,658,000
                2009                                                   378,000
                                                                     ---------

        Total note payable - related  party -
        and convertible  debentures - related
        party and other
                                                                     5,286,000
        Less: unamortized debt discount                                781,000
                                                                     ---------
        Total notes  payable - related  party
        and convertible  debentures - related
        party and other, net                                        $4,505,000
                                                                    ==========


                                      F-28
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.       Accrued Interest

         The Company accrues  interest  payable on all of its debt  obligations.
For the  convertible  debentures  -  related  party  and the  other  convertible
debentures,  the interest is payable at maturity or redemption,  if earlier, and
such  interest  may be  converted  into  the  Company's  common  stock  upon the
conversion  of the  convertible  debentures.  Accrued  interest  on  convertible
debentures due before December 31, 2005 of approximately  $20,000 are classified
as  current,  with  the  accrued  interest  on  the  remaining  obligations,  of
approximately  $175,000,  classified as non-current on the consolidated  balance
sheet at December 31, 2004.

         Under the terms of the  amended  note  payable  -  related  party,  the
Company  accrues  interest  from the date of issue,  December 22, 2003,  through
December 31, 2005.  Pursuant to the terms of the amended note, the interest that
accrues through December 31, 2005 will be capitalized to the balance of the note
and then will be repaid in 48 equal installments of $35,546 per month, including
interest  at 5% per annum,  which will fully repay the  outstanding  obligations
under the note by January 2010 (see Note 7).

9.       Stockholders' Deficiency

         Convertible Preferred Stock

         During  May  2003,  the  Company  entered  into a  Securities  Purchase
Agreement with several independent buyers whereby the Company issued and sold to
the buyers  67,000  shares of Series A Preferred  Stock at $1.00 per share.  The
buyers were entitled,  at their option,  to convert the Series A Preferred Stock
into shares of the Company's  Common Stock at any time  commencing  after May 1,
2004 at an adjusted  conversion price of $0.05 per share. Any unconverted shares
as of May 1, 2005  would  automatically  convert  into  shares of the  Company's
Common Stock at an adjusted conversion price of $0.05 per share. The Company had
the right to redeem the outstanding  Preferred Stock upon 30 days written notice
at a redemption  price of 150% of the  subscription  amount plus interest on the
purchase  price of 24%. If the Company  chose to redeem a part,  but not all, of
the Series A Preferred  Stock,  the Company  could redeem a pro rata amount from
each holder of the Series A Preferred Stock. The preferred stock was redeemed by
the Company in October 2003 for a total redemption price of $86,400. The $19,400
excess of the amount of the redemption over the amount of the original issue has
been recorded as a deemed dividend - redemption premium on convertible preferred
stock.


                                      F-29
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       Stockholders' Deficiency, continued

         Common Stock and Warrants

         In  May  2004,  NuWave  entered  into  a  Standby  Equity  Distribution
Agreement  (the "2004  Agreement")  with  Cornell  which was  terminated  during
January 2005 and the Company entered into a new SEDA with Cornell on January 26,
2005 with  substantially  the same terms as the 2004 Agreement.  Pursuant to the
new SEDA,  the Company  may,  at its  discretion,  periodically  sell to Cornell
registered shares of the Company's common stock for a total purchase price of up
to $30 million. For each share of common stock purchased under the SEDA, Cornell
will pay NuWave 99% of the volume weighted average price on the Over-the-Counter
Bulletin Board or other principal market on which its common stock is traded for
the 5 days immediately following the notice date. Further, Cornell will retain a
fee of 10% of each advance  under the SEDA.  Pursuant to the terms of this SEDA,
the Company is restricted  from raising capital from the sale of securities at a
price less than the market  price of the  Company's  common stock on the date of
issuance or granting  additional  security interests in the Company's assets. On
February 14, 2005, the Company completed its registration of 120,122,191  shares
of common stock in  conjunction  with this SEDA.  On May 25,  2004,  the Company
issued  111,111 shares to the placement  agent engaged in association  with this
agreement,  and recorded an earnings charge of $10,000.  During August 2004, the
Company paid  Yorkville  Advisors,  an  affiliate of Cornell,  a fee of $14,000,
recorded  as  a  general  and   administrative   expense  in  the   accompanying
Consolidated  Statements of Operations and Comprehensive Loss for the year ended
December 31, 2004, for advisory services in connection with NuWave's preparation
of its Form SB-2 Registration Statement.

         The  amount  of each  advance  is  limited  to a  maximum  draw down of
$1,000,000  every 7 trading  days up to a maximum  of  $4,000,000  in any 30-day
period.  The amount  available  under the SEDA is not  dependent on the price or
volume of the Company's common stock. The Company's  ability to request advances
is conditioned  upon the Company having enough shares of common stock registered
pursuant  to  the   Securities  and  Exchange   Commission   ("SEC")  rules  and
regulations.  In addition, the Company may not request advances if the shares to
be issued in connection  with such advances  would result in Cornell owning more
than 9.9% of the Company's outstanding common stock.

         On June 1, 2004,  the Company  issued  75,000 shares of common stock to
Mr.  Kanakis,  its  President  and CEO,  in  accordance  with  the  terms of his
employment agreement. Compensation costs related to issuance of these shares for
the year ended  December  31, 2004  included in the  consolidated  statement  of
operations amounted to $7,500 (see Note 13).

         On July 21, 2003, the Company's Board of Directors declared effective a
reverse split of the Company's common shares in the ratio of 1-to-50 as voted on
and approved by the stockholders at the Company's Annual  Stockholders'  meeting
held on December 20,  2002,  and  effective on July 21, 2003.  All share and per
share amounts have been retroactively restated for the stock split.


                                      F-30
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       Stockholders' Deficiency, continued

         Common Stock and Warrants, continued

         On April 15, 2002, the Company entered into a $3,000,000 Equity Line of
Credit Agreement (the "Agreement") with Cornell (the "Purchaser").  Provided the
Company was in compliance with the terms of the Agreement, the Company could, at
its option, periodically require the Purchaser to purchase up to $100,000 in any
seven day  period of the  Company's  common  stock  (the  "put"  shares) up to a
maximum of $3,000,000  over the next two years,  commencing on May 31, 2002 (the
effective date of a Securities Act of 1933  registration  statement on Form SB-2
for the  registration  of  100,000  shares of common  stock to be sold under the
Agreement,  plus  4,762  shares of common  stock  mentioned  below).  Additional
registration  statements  added 280,000 shares on November 1, 2002 and 1,200,000
on January 10, 2003, bringing the total registered shares to 1,580,000 under the
Agreement. The Company issued to the Purchaser 4,362 shares of common stock as a
commitment fee for entering into the Agreement.  In addition, the Company issued
to the placement agent 400 shares of the Company's  common stock. For each share
of common stock  purchased  under the Equity Line of Credit,  the Purchaser paid
97% of the then Market Price (as defined in the  Agreement),  and was paid a fee
of 4% of each advance.  The Company has issued 1,343,168 common shares (of which
1,151,490  represented  shares  utilized for the  repayment of notes  payable to
Cornell - see Note 7) under the Agreement for the year ended December 31, 2003.

         The  Agreement was  non-exclusive;  thereby  permitting  the Company to
offer and sell its  securities  to third parties while the Equity Line of Credit
was in effect. The Company had the option to terminate the Equity Line of Credit
Agreement at any time, provided there is no pending advance  thereunder.  During
July 2003,  the Company  reached the limit of 1,580,000  registered  shares that
were issuable under the Agreement.

         On June 30,  2003,  the Company  issued  25,000  shares of common stock
valued at approximately $5,000 in exchange for services provided to the Company.

         On September 24, 2003, the Company issued 200,000  warrants to purchase
the Company's common stock at $1.00 per share. These warrants were issued to two
former  officers for prior  services  provided to the Company.  The warrants are
exercisable  over a five-year  period which expires in September  2008. The fair
value of the warrants was estimated at $0.09 per warrant on the date of issuance
using the  Black-Scholes  pricing  model.  Compensation  costs  related to these
warrants  for the year ended  December  31, 2003  included  in the  consolidated
statement of operations amounted to $18,000.


                                      F-31
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       Stockholders' Deficiency, continued

         Common Stock and Warrants, continued

         During the years ended December 31, 2004 and 2003, a total of 3,130 and
94,879 warrants expired, respectively.

         At  December  31,  2004  there were  215,100  warrants  outstanding  as
         follows:

<TABLE>
<CAPTION>
                 Number of                                  Weighted
               Common Shares                                 Average
                 Underlying           Exercise Price        Exercise            Expiration
                  Warrants           Range per Share          Price                Dates
                  --------           ---------------          -----                -----
<S>                 <C>              <C>      <C>            <C>                      <C>
                    12,000           $37.50 - $100.00        $68.79          February 2005 to
                                                                               November 2005
                     3,100            $5.00 - $50.00         $38.39           January 2007 to
                                                                               October 2007
                   200,000                $1.00               $1.00           September 2008
                  --------
                   215,100
                  ========
</TABLE>


         Stock Options

         On January 12, 2003,  the Company's  employees and directors  rescinded
their interest in 23,780 of the Company's options that had been granted to them.
During 2003, all other outstanding options expired.

         The Company  accounted for stock options in accordance  with Accounting
Principles Board Opinion No. 25,  Accounting for Stock Issued to Employees ("APB
No.  25")  and  related  interpretations.   Under  APB  No.  25,  generally,  no
compensation  expense is recognized in the consolidated  financial statements in
connection with the awarding of stock option grants to employees  provided that,
as of the  grant  date,  all terms  associated  with the award are fixed and the
quoted  market price of the Company's  stock,  as of the grant date, is not more
than the amount an employee  must pay to acquire the stock as defined;  however,
to the extent  that stock  options are  granted to non  employees,  for goods or
services, the fair value of these options is included in operating results as an
expense.


                                      F-32
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       Stockholders' Deficiency, continued

         Stock Options, continued

         A summary of the Company's stock option  activity under its plans,  and
related  information,  is as follows.  All amounts have been restated to reflect
the impact of the reverse stock split:

<TABLE>
<CAPTION>
                                                                                   Weighted
                                             Number of                             Average        Number of
                                              Common          Exercise Price       Exercise        Shares
                                              Shares         Range per Share        Price        Exercisable
                                              ------         ---------------        -----        -----------
<S>                     <C> <C>                 <C>          <C>      <C>          <C>             <C>
Outstanding at December 31, 2002                27,357       $30.50 - $337.50      $114.50         26,991

Forfeited   during   the   year   ended
December 31, 2003                               27,357       $30.50 - $337.50      $114.50
                                              -------
Outstanding  at  December  31, 2004 and
2003                                                -                                                   -
                                              =======                                             =======
</TABLE>


         Performance Incentive Stock Option Plan

         On January 31, 1996, the Company adopted its 1996 Performance Incentive
Stock Option Plan (the "Plan"). Under the Plan, incentive and nonqualified stock
options,  stock appreciation rights and restricted stock could be granted to key
employees  and  consultants  (the   "Participants")  by  certain   disinterested
directors of the Board of Directors. Any incentive option granted under the Plan
would have an exercise  price of not less than 100% of the fair market  value of
the  shares on the date on which  such  option is  granted.  With  respect to an
incentive  option  granted to a Participant  who owns more than 10% of the total
combined  voting  stock of the  Company  or of any parent or  subsidiary  of the
Company,  the exercise  price for such option would be at least 110% of the fair
market value of the shares subject to the option on the date on which the option
is granted.  A nonqualified  option  granted under the Plan (i.e.,  an option to
purchase  the  common  stock  that  does not meet the  Internal  Revenue  Code's
requirements for incentive options) would have an exercise price of at least the
par value of the common  stock.  Stock  appreciation  rights could be granted in
conjunction with the grant of an incentive or nonqualified option under the Plan
or independently of any such stock option. The directors  determined the vesting
of the options under the Plan at the date of grant.  A maximum of 24,100 options
could be awarded  under the Plan (as  amended  May 26,  1998).  No options  were
issued during the year ended December 31, 2003 under the  Performance  Incentive
Stock Option Plan. This plan was terminated by the Company on December 31, 2003.


                                      F-33
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.       Stockholders' Deficiency, continued

         Non-Employee Director Stock Option Plan

         On November 25, 1996, the Company  established a Non-Employee  Director
Stock Option Plan (the  "Director's  Plan").  The Director's  Plan provided that
each member of the Board of Directors (an "Eligible Director") who otherwise (1)
was not currently an employee of the Company,  or (2) was not a former  employee
still  receiving  compensation  for prior services  (other than benefits under a
tax-qualified  pension  plan) would be eligible  for the grant of stock  options
under the Director's Plan. Each Eligible Director at the time of his election to
the Board of Directors,  would be granted an option to purchase 60 shares of the
Company's  common  stock at an  exercise  price  equal to closing  price of such
common stock at close of business at the date of such grant, such option to vest
immediately and to expire five years from the date of such grant.

         Beginning  with the annual meeting of the  stockholders  of the Company
held on May 29, 1997 and provided  that a sufficient  number of shares  remained
available under the Director's Plan, each year immediately following the date of
the annual meeting of the Company there  automatically  would be granted to each
Eligible  Director  who was then  serving on the Board an option to purchase 100
shares of the Company's common stock.  The first 20 options vested  immediately,
the remainder vested equally over the next four years from the date of grant and
were exercisable at the closing price of such shares of common stock at the date
of grant.  Such options expired five years from the date of vesting.  No options
were issued during the year ended December 31, 2003 under the Director's Plan.

         The  maximum  number of shares of Common  Stock  with  respect to which
options could be granted under the Director's Plan (as amended May 26, 1998) was
4,700 shares.

         This plan was terminated by the Company on December 31, 2003.


10.      Employee Benefit Plan

         The  Company  maintained  a  noncontributory   Employee  Savings  Plan,
operated in accordance  with the  provisions  of Section  401(k) of the Internal
Revenue  Code that was  terminated  during the year  ended  December  31,  2003.
Pursuant to the terms of the plan,  participants  could defer a portion of their
income  through  contributions  to the plan.  During the year ended December 31,
2003, the Company did not make any discretionary additional contributions to the
plan. The  termination of the Plan had no effect on the  consolidated  financial
statements.


                                      F-34
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.      Income Taxes

         The benefit  (provision  for) income taxes for the years ended December
31, 2004 and 2003 consist  entirely of state  deferred taxes and is comprised of
the following:

<TABLE>
<CAPTION>
                                                                                  2004           2003
                                                                                  ----           ----

<S>                                                                         <C>             <C>
                  State deferred                                            $     50,000    $      (5,000)


         The  difference  between the statutory  federal income tax rate and the
effective rate for the Company's  income tax benefit for each of the years ended
December 31, 2004 and 2003, respectively, is summarized as follows:

                                                                                  2004           2003
                                                                                  ----           ----

       Tax at federal statutory rate                                                  34.0%         34.0%
                                                                                       4.4%        (0.2)%

         State income tax benefit (expense) net of federal tax effect
         Increase in valuation allowance  aaallowance                               (20.9)%       (37.0)%
                                                                                     (4.5)%         2.6 %

         Miscellaneous
         Effective income tax rate                                                   13.0 %        (0.6)%


         The tax effect of temporary differences consists of the following:

                                                                                   December,
                                                                                   31, 2004
                                                                                ---------------
                 Deferred tax assets:
                      Net operating loss carryforward                           $   10,078,000
                      Land held for development and sale                               642,000
                      Research and development credits                                 201,000
                      Property and equipment                                            22,000
                                                                                ---------------
                                                                                    10,943,000
                      Valuation allowance                                          (10,893,000)
                                                                                ---------------
                                                                                $       50,000
                                                                                ==============
</TABLE>

                                      F-35
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11       Income Taxes, continued

         In accordance  with New Jersey  statutes,  the Company  entered into an
agreement to sell certain New Jersey net operating  losses  ("NOL") and research
and development credits. The deferred tax asset at December 31, 2004 and 2003 of
$50,000 and  $225,000  respectively,  is related to the sale of a portion of the
New Jersey NOL recorded in 2004 and 2002, respectively, that was received by the
Company in January  2005 and 2004,  respectively.  The Company has not  recorded
additional  state  deferred  tax assets at December 31, 2004 and 2003 related to
the sale of the remaining New Jersey NOL (see below).

         A  (decrease)  increase in the  valuation  allowance  of  approximately
$(145,000) and $1,477,000,  respectively,  for the years ended December 31, 2004
and 2003 was recorded  because it was more likely than not that the deferred tax
assets would not be realized.

         As of December 31, 2004,  the Company has unused  federal net operating
loss  carryforwards  ("NOL") of $27,763,000,  with  $3,760,000,  $23,080,000 and
$923,000 in NOL's expiring in years 2010 to 2012, 2018 to 2022 and 2023 to 2024,
respectively.  The Company has unused state NOL's of $9,914,000, which expire in
various years from 2007 to 2011.  The Company may be subject to  limitations  on
the use of its NOL's as provided under Section 382 of the Internal Revenue Code.
In addition,  the Company has research and development tax credit  carryforwards
for  federal  and  state  purposes  of   approximately   $146,000  and  $55,000,
respectively that expire in various years from 2010 to 2024.

12.      Segment Data

         The  Company  presents  segment  information  in  accordance  with  the
provisions of SFAS No.  131,"Disclosures  About  Segments of an  Enterprise  and
Related  Information"  ("SFAS No. 131"). SFAS No. 131 establishes  standards for
the way public enterprises report information about operating segments in annual
financial   statements  and  requires  those   enterprises  to  report  selected
information  about  operating  segments in interim  financial  reports issued to
stockholders.

         Commencing  with the  acquisition of land held for development and sale
(see Note 5) in December 2003, the Company  operates in two industry  segments -
video and image  technology  and real estate  development  and sale. The Company
evaluates segment performance based on loss from operations.




                                      F-36
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.      Segment Data, continued

Summarized financial information concerning the Company's reportable segments is
shown in the following tables for the years ended December 31, 2004 and 2003:

<TABLE>
<CAPTION>

                                                         Year Ended December 31, 2004
                                                                (In thousands)
                                                                  Real Estate
                                             Video & Image      Development and
                                              Technology              Sale               Total
                                          -------------------- ------------------- -------------------
<S>                                       <C>                  <C>                 <C>
        Net revenues from customers       $                  - $                 - $                 -
                                          -------------------- ------------------- -------------------
            Loss from operations          $               (256)$              (485)$              (741)
                                          -------------------- ------------------- -------------------
        Gain on sale of interest in
              undeveloped land            $                  - $               850 $               850
                                          -------------------- ------------------- -------------------
              Interest income             $                  - $                 3 $                 3
                                          -------------------- ------------------- -------------------
              Interest expense            $                206 $               312 $               518
                                          -------------------- ------------------- -------------------
         Total identifiable assets        $                 55 $             3,148 $             3,203
                                          -------------------- ------------------- -------------------
      Capital expenditures, including
            capitalized interest          $                  - $               455 $               455
                                          -------------------- ------------------- -------------------
                Depreciation              $                  - $                 5 $                 5
                                          -------------------- ------------------- -------------------

                                                         Year Ended December 31, 2003
                                                                (In thousands)
                                                                  Real Estate
                                             Video & Image      Development and
                                              Technology              Sale               Total
                                          -------------------- ------------------- -------------------
Net revenues from customers               $                 20 $                 - $                20
                                          -------------------- ------------------- -------------------
Loss from operations                      $             (1,062)$               (15)$            (1,077)
                                          -------------------- ------------------- -------------------
Gain on forgiveness of debt               $                347 $                 - $               347
                                          -------------------- ------------------- -------------------
Interest income                           $                  - $                 - $                 -
                                          -------------------- ------------------- -------------------
Interest expense                          $                 53 $                 2 $                55
                                          -------------------- ------------------- -------------------
Total identifiable assets                 $                349 $             2,970 $             3,319
                                          -------------------- ------------------- -------------------
Capital expenditures                      $                  - $             2,970 $             2,970
                                          -------------------- ------------------- -------------------
Depreciation                              $                 42 $                 - $                42
                                          -------------------- ------------------- -------------------
</TABLE>


                                      F-37
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.      Employment Agreement

         Effective  June 1, 2004,  NuWave  entered  into a five-year  employment
contract  with its  President and CEO,  George  Kanakis,  at an annual salary of
$125,000 per year,  subject to increases at the Board of Directors'  discretion.
Mr.  Kanakis  is also  entitled  to a bonus  equal to  12.5%  of the net  income
attributable to each NuWave subsidiary, plus a discretionary bonus as determined
by the Board of Directors.  In addition, Mr. Kanakis was issued 75,000 shares of
common  stock.  Under the  contract,  at some future date,  Mr.  Kanakis will be
entitled to receive  options to purchase  100,000  shares of common  stock.  The
Company has not yet adopted a stock option plan and as such, no options have yet
been issued to Mr. Kanakis. The Company recorded an earnings charge of $7,500 in
connection with the issuance of the 75,000 shares of common stock.

14.      Lease Commitment

Effective July 2004, the Company entered into a five year sublease agreement for
the rental of 3,580 square feet of corporate  office tower space in Jersey City,
New  Jersey.  This  rental  agreement  requires  the  Company  to  pay  rent  of
approximately  $7,000  and  approximately  $3,000 in shared  building  operating
expenses,  each  month.  The  Company  subleases  one  half of this  space  to a
subtenant,  for approximately $5,000 per month,  including  approximately $1,750
per  month  in  shared  monthly  building  operating  expenses.   The  Company's
obligations  under this lease are guaranteed by Yorkville  Advisors  Management,
LLC  ("Yorkville").  Yorkville  is related to  Cornell,  a related  party to the
Company.  At  December  31,  2004,  the  Company has  recorded a  receivable  of
approximately  $15,000 for rents in arrears due from the subtenant.  The Company
believes  that it will collect these rents in full within the next three months.
The   approximate   future   minimum   lease   payments   under  the   Company's
non-cancellable  operating  lease in  effect at  December  31,  2004,  offset by
projected proceeds to be received for subtenant rentals, are as follows:


                    Minimum Lease     Projected Proceeds        Minimum Lease
                   Payments Under    To Be Received Under     Payments, Net of
          Year:    Operating Lease    Sub-tenant Rentals     Sub-tenant Rentals
          -----    ---------------    ------------------     ------------------

          2005             78,000               39,000                 39,000
          2006             78,000               39,000                 39,000
          2007             78,000               39,000                 39,000
          2008             78,000               39,000                 39,000
          2009             40,000               20,000                 20,000
                   ---------------    ------------------     ------------------
          Total    $      352,000     $        176,000       $        176,000
                   ===============    ==================     ==================


                                      F-38
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.      Major Customers

         There were no sales for the year ended  December 31, 2004. For the year
ended December 31, 2003, two customers  accounted for sales of $12,720 (65%) and
$4,375 (22%), respectively.

16.      Sales and Marketing Agreement

         In October 2003, the Company entered into a non-exclusive contract with
a sales and  marketing  agent,  who is the  Company's  former  chief  technology
officer.  The agent will market,  promote,  sell and  distribute  the  Company's
technology, in exchange for a commission equal to 90% of the net profits derived
from such efforts. This agreement expired in October 2004.

17.      Subsequent Events

         Termination of the May 2004 Standby Equity  Distribution  Agreement and
         Entry into a new Standby Equity Distribution Agreement in January 2005

         During January 2005, the Company  entered into a Termination  Agreement
with Cornell, whereby that certain 2004 Agreement,  dated as of May of 2004, and
related  Registration  Rights  Agreement,  Placement  Agent Agreement and Escrow
Agreement of even date therewith were terminated.

         Upon execution of the Termination Agreement, the Company entered into a
new SEDA with Cornell on January 26, 2005 with  substantially  the same terms as
the terminated  2004 Agreement.  Cornell's  obligation to purchase shares of the
Company's  common  stock  under  the  SEDA is  subject  to  certain  conditions,
including the Company obtaining an effective  registration  statement for shares
of common stock sold under the SEDA (see Note 9).

         Termination of the December 2003  Convertible  Debenture,  with Cornell
         and Reissuance in January 2005 of a Promissory Note to Cornell

         During January 2005, the Company and Cornell  terminated the $3,300,000
convertible  debenture - related  party,  that was issued to Cornell on December
22, 2003. Upon the termination of the Convertible Debenture - related party, the
Company  issued a $3,481,274  promissory  note - related party (the  "Promissory
Note") to Cornell,  representing the sum of the unpaid balance of $3,300,000 and
accrued interest of $181,274 through the date of the termination. The Promissory
Note bears  interest at a rate of 5% per annum,  with  interest due at maturity.
The Promissory Note matures on December 22, 2008 and is secured by the Company's
investment in its land held for  development  and sale located in Cranford,  New
Jersey.  In order to  record  the  reacquisition  of the  beneficial  conversion
feature related to the extinguishment of the convertible debenture,  the Company
will record a net charge of $644,000 to additional paid in capital.



                                      F-39
<PAGE>
                            NUWAVE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.      Subsequent Events, continued

         Assignment  and  Amendment of the Note Payable - related party to Stone
         Street

         During January 2005,  the Company's  wholly-owned  subsidiary,  Lehigh,
entered into an Assignment and Amendment Agreement (the "Assignment  Agreement")
related to that certain $1,400,000 Note Payable - related party issued by Lehigh
on December  22, 2003 to Stone  Street.  Pursuant to the  Assignment  Agreement,
Stone Street assigned its rights under the note to Cornell.  In addition,  Stone
Street,  Cornell and Lehigh agreed to defer the begining of the monthly payments
due under the note of $35,546 per month for the period of one year, from January
1, 2005 to January 1, 2006.



                                      F-40