September 26, 2005

NeWave Inc. (OTCBB:NWWV)
Financial Data (as of 9/20/05)

Strong Growth Through Consumer Direct Marketing Approach and Liquidation of Capital Intensive Business Segments

Key Points

• We Are Initiating Coverage of NeWave Inc. Our revenue estimates are $12,473,921 million for 2005 and $14,550,828 million and for 2006.
• Liquidation of Capital Intensive Business Segments Should Lead To Increased Profitability and Improved Margins.  NeWave Inc. is now focusing 100% on the expansion of its core business, OnlineSupplier.com business and has recently discontinued its Discount Online Warehouse and AuctionLiquidator.com subsidiaries. Success of the company’s key business segment is driven by a number of factors including the recent strong growth in US retail e-commerce revenues and the expanding availability and usage of high-speed internet connections by American consumers.
• Shift To Consumer-Direct Marketing Approach Provides Enormous Opportunity For Future Growth. The company’s recent decision to target consumers rather than focusing on meeting the needs of small business’ only,  allows it to target a virtually endless community of potential members and should  result in increased revenues and decreased costs.
• Recent Launch of New Media and Internet Marketing Campaigns Will Boost Brand Recognition, Increase Membership Base. OnlineSupplier.com has serviced more than 235,000 customers since its inception in August of 2003, and online membership activations grew at a staggering rate of 900% from July 2005 to August 2005. The company is targeting a launch date of January 2006 for nationwide broadcast of its first infomercial. NeWave’s optimal mix of television, internet, email, and affiliate marketing strategies will allow the company to reach out to a continuously growing demographic, resulting in increased revenues and membership growth.
   

Corporate Overview

NeWave, Inc, is a leading provider of turnkey ecommerce driven business solutions that meet the needs of large organizations, small stand-alone businesses, and the average consumer. The company, through its onlinesupplier.com subsidiary provides members with an extensive selection of products at wholesale prices, in addition to the complete infrastructure required to effectively establish, manage and market an online business

NeWave is able to effectively differentiate itself from competitors in the e-commerce marketplace through its ability to provide and effectively market a complete e- commerce solution to the entire US consumer population.  Through an optimal combination of online advertising, direct email, and affiliate marketing strategies the company has the capabilities to increase brand awareness in virtually all US consumer markets in a very cost effective manner.

The success of the OnlineSupplier.com subsidiary is resulting in increased revenues for NeWave Inc., which recently reported record gross revenue of $2,673,365 for the quarter ended June 30, 2005 vs. $1,862,476 for the quarter ended June 30, 2004 an increase of 43.5%, as compared to and industry average growth rate of 16.5%.  At this point in time, there are six main revenue streams that contribute to the growth of the company.

Sales of customer lead information generated from potential customers 

who decide not to use the company’s services

Market Trends/Key Investment Highlights

The company’s ability to provide a complete e-commerce solution for web-based business uniquely positions NeWave to capitalize on opportunities in a number of key markets.

The more prevalent trends and issues impacting NeWave Inc.’s future growth include the following:

E-Commerce Growth

Due to the web-based nature of NeWave’s business model, the growth of e-commerce in the United States is essential to the future expansion of the company, both in terms of membership and revenue growth. Recent research from government agencies and industry experts indicate explosive growth over the next five years for e-commerce transactions and retail e-commerce sales in the United States.

United States Census information indicates that retail e-commerce sales are accounting for an increasing portion of the country’s overall retail sales (see Figure 1). E-commerce sales are defined as goods and services sold over the Internet, an extranet, Electronic Data Interchange (EDI), or any other online system.

(Note: Online travel services, financial brokers and dealers, and ticket sales agencies are not classified as retail and are not included in either the total retail or retail e-commerce sales estimates)

Figure-1

Source: United States Department of Commerce, February 24, 2005.

In addition to United States Government studies, a recent study by Forrester Research shows e-commerce transactions in 2005 growing to $168 billion compared to $145 billion in 2004. By year 2010, e-commerce sales are projected to reach $316 billion..

Expanding Use of High Speed Internet

Increasing availability and usage of high speed internet connections in the United States are contributing to the growth of e-commerce revenues. In recent years, broadband Internet connections have become essential to the optimal performance of e-commerce solutions and the transfer of real time information.

According to a report released by the Federal Communications Commission (FCC) in 2004, broadband internet subscribers approached 38 million, roughly 17% of total U.S. population. With ninety-nine percent of the U.S. population now able to subscribe to and receive broadband internet connections, growth rates are sure to continue.

Further adoption of high speed internet connections will result in an increase of American consumers equipped with the technological capabilities needed to optimally utilize solutions provided by NeWave Inc.

Growth of US Small Business and Home Business

With the United States economy in a prolonged economic slump, an ever increasing percentage of the population is pursuing alternative entrepreneurial opportunities in order to supplement their regular income and/or avoid unemployment. At this point in time, many small and home based business startups could greatly benefit by conducting business over the internet but do not have the capital or technological know-how needed to do so.

Results of a recent study conducted by Yahoo! and Harris Interactive reveal that

72 percent of American adults have considered starting their own businesses and 75 percent believe the Internet has greatly simplified the task.

NeWave’s relatively low cost products and services ideally position the company to capitalize on this opportunity. The ability to meet the needs of entrepreneurs not equipped with the technological and financial resources necessary to develop and efficiently manage a retail e-commerce solution is a key factor in the company’s success.

Consumer-Direct Marketing Approach

The company’s recent shift towards a consumer-direct marketing approach greatly expands NeWave’s target market to include US internet users of nearly all ages, backgrounds and business types of varying sizes. By adopting a new outlook in regards to customer acquisition the company has created a situation in which its potential customer base is virtually limitless.

Costs associated with NeWave’s new customer acquisition strategy will significantly decrease in the near term. With the streamlined, more efficient plan implemented, it becomes much easier for the company to relay its message to the entire country simultaneously, rather than identifying and qualifying leads based on a number of key criteria such as age, business type, and business size.

As the adoption rate of high speed internet connections continues to grow rapidly, consumers of both young and old are increasingly using the web for e-commerce activities. In addition to the teenage and young adult demographic, internet users ranging from ages 50-64 account for 20% of internet users. This represents a key target demographic due to their knowledge of the internet and enormous spending power.

Due to the ease of use and flexibility of NeWave Inc.’s e-commerce solution it can be utilized by members offering products and services ranging from consumer electronics to financial planning. This creates an exciting opportunity for the company and allows it to take advantage of current and future trends in online business such as the recent surge in online travel sales

Recent research conducted by eMarketer states that the online travel sales will climb to $58 billion this year, up 19.7 percent from the $48.5 billion in sales recorded in 2004. In addition to traditional retail sales, a growing number of online entrepreneurs are beginning to bring their travel and real estate businesses to the web.

Liquidation of Capital Intensive Business Segments 

In effort to reach profitability and reduce overhead costs NeWave has recently made the decision to close its AuctionLiquidator subsidiary and halt the establishment of additional subsidiaries at this point in time. Currently, the company is placing strict focus on its core business, OnlineSupplier.com, due to its recent success and potential for enormous future growth. Although the AuctionLiquidator business was experiencing initial success, company officials felt that the subsidiary was too capital intensive and would take an extended period of time to turn profitable.

Conclusion and Investment Thesis

Based solely upon the modest figures provided by the United States Department of Commerce, and not taking into consideration NeWave’s aggressive marketing, increased membership, and corporate restructuring, it is our estimation that Newave's annual revenues should easily increase to $12,473,921 over the next twelve months, $14,550,828 in fiscal year 2006 and $23,096,274 by 2010.

Year over year growth in e-commerce has averaged 16.65% per year from 2000 through 2004. With revenue growth calculated using only 16.65% per year, and with the elimination of unprofitable subsidiaries, we see no reason why NeWave's stock price could not reach the $2-3.00 range over the next twelve months and as high as $10.00 in the next three years.

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