As filed with Securities and Exchange Commission on November 14, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-28606
NUWAVE TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-3387630
(State or other jurisdiction (I.R.S.Employer Identification
of incorporation or No.)
organization)
One Passaic Avenue,
Fairfield, New Jersey 07004
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number, including area code:(201)882-8810
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that registrant was required
to file such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes [ ] No [x]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 5,325,000
Transitional Small Business Disclosure Format: Yes [ ]No [x]
<PAGE>
NUWAVE TECHNOLOGIES, INC.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Balance Sheets - December 31, 1995 and September
30, 1996 (unaudited) P. 3
Statements of Operations - For the three and nine
month periods ended September 30,1996 (unaudited)
and for the periods July 17, 1995 (inception) to
September 30, 1995 (unaudited) and July 17, 1995
(inception) to September 30, 1996 (unaudited) P. 5
Statements of Stockholders' Equity for the Period
from July 17,1995 (inception) to December 31,1995
and for the nine months ended September 30,1996
(unaudited) P. 6
Statements of Cash Flows - For the three and nine
month periods ended September 30, 1996 (unaudited)
and for the periods July 17, 1995 (inception) to
September 30, 1995 (unaudited) and July 17, 1995
(inception) to September 30, 1996 (unaudited) P. 8
Notes to Condensed Financial Statements P. 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS P. 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS P. 15
ITEM 2. CHANGES IN SECURITIES P. 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES P. 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS P. 15
ITEM 5. OTHER INFORMATION P. 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K P. 15
SIGNATURES P. 16
<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Balance Sheets
ASSETS:
December 31, September 30,
1995 1996
(unaudited)
Current assets:
Cash and Cash Equivalents $ 372,800 $ 7,023,219
Prepaid Expenses and other
current assets 21,691 189,331
Total current assets 394,491 7,212,550
Property and Equipment 7,737 55,436
Other assets, including deferred
financing costs of $20,100 at
December 31, 1995 24,100 4,000
Total assets $ 426,328 $ 7,271,986
LIABILITIES AND STOCKHOLDERS' EQUITY :
Current Liabilities:
Accounts payable and accrued
liabilities $ 99,044 $ 23,953
Total current liabilities 99,044 23,953
Long-term debt 250,675
Total liabilities 349,719 23,953
Commitments and contingencies
Stockholders' equity :
Preferred Stock, $.01 par value;
authorized 2,000,000 shares:
Series A Convertible Preferred
Stock, noncumulative, $.01 par
value; authorized 1,000,000
shares; issued and outstanding
600,000 shares as of December 31,
1995 ($900,000 liquidation
preference as of December 31,1995) 6,000
Common stock, $.01 par value;
authorized 8,000,000 shares as
of December 31, 1995, and 20,000,000
shares as of September, 30, 1996
(see Note 3 of "Notes to Condensed
Financial Statements"); issued and
outstanding 2,005,000 shares and
5,325,000 shares as of December 31,
1995 and September 30, 1996,
respectively 20,050 53,250
Additional paid-in capital 999,550 11,256,778
Deferred equity costs (38,400)
Deficit accumulated during the
development stage (910,591) (4,061,995)
Total stockholders' equity 76,609 7,248,033
Total liabilities and stockholders'
equity $426,328 $7,271,986
The accompanying notes are an integral part of the
condensed financial statements.
<PAGE>
<TABLE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statements of Operations
<CAPTION>
Cumulative from
July 17, 1995 Three Nine July 17, 1995
(inception) Months Months (inception)
to Ended Ended to
September 30, September 30, September 30, September 30
1995 1996 1996 1996
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Operating expenses:
Research and development expenses $(206,895) $(475,634) $(1,117,211) $(1,608,333)
General and administrative expenses (245,099) (456,227) (951,667) (1,369,331)
(451,994) (931,861) (2,068,878) (2,977,664)
Loss from operations (451,994) (931,861) (2,068,878) (2,977,664)
Other income (expense)
Interest income 2,069 82,190 91,502 95,372
Interest expense (23,802) (325,868) (331,543)
Total other income (expense) 2,069 58,388 (234,366) (236,171)
Net loss before extraordinary item (449,925) (873,473) (2,303,244) (3,213,835)
Extraordinary item (848,160) (848,160) (848,160)
Net loss $(449,925) $(1,721,633) $(3,151,404) $(4,061,995)
Loss per share:
Weighted average number
of common shares
outstanding 1,935,000 5,212,609 3,248,956
Net loss per share before
extraordinary item $(0.23) $(0.17) $(0.70)
Net loss per share on
extraordinary item $(0.16) $(0.26)
Net loss per share $(0.23) $(0.33) $(0.96)
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
<PAGE>
<PAGE>
<TABLE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
Deficit
Series A Accumulated
Convertible Additional Deferred During the
Preferred Stock Common Stock Paid-in Equity Development
Shares Amount Shares Amount Capital Costs Stage Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common shares issued
in connec-
tion with the
formation of the
company ... 2,060,000 $20,600 $ 20,600
Common shares returned
and retired
without consideration ... (125,000) (1,250) 1,250
Sale of Series A
Convertible Pre-
ferred Stock for
cash of $1.50 per
share... 600,000 $ 6,000 894,000 900,000
Common shares issued
with initial
bridge notes payable
for cash of
$1.50 per share ... 70,000 700 104,300 105,000
Costs incurred in
connection with
equity financing ... $ (38,400) 38,400
Net loss for the
period from July
17, 1995 (inception)
to December
31, 1995 ... $ (910,591) (910,591)
Balance at
December 31, 1995 ... 600,000 6,000 2,005,000 20,050 999,550 (38,400) (910,591) 76,609
Common shares
issued in connec-
tion with the
exchange of the
initial bridge notes
for 14 bridge
units ... 70,000 700 139,300 140,000
Common shares issued
with bridge
notes payable for
cash of $2.00
per share .. 330,000 3,300 656,700 660,000
Costs incurred in
connection with
the private
placement offering
relating to the
equity financing .. (134,000) $ 13,400 (120,600)
Common shares
issued in connec-
tion with the initial
public offering
for cash of $5.00
per share (un-
audited) ... 2,300,000 23,000 11,477,000 11,500,000
2,530,000 common
stock purchase
warrants issued in
connection with
the initial public
offering for cash
of $0.10 per warrant
(unaudited) ... 253,000 253,000
220,000 common stock
purchase warrants
issued to the
underwriters in con-
nection with the
initial public offering
for cash of
$10.00 (unaudited) ... 10 10
Conversion of 600,000
preferred
shares into
600,000 common
shares in connection
with the
initial public
offering (unaudited) ... (600,000) (6,000) 600,000 6,000 0
Costs incurred in
connection with
the initial public
offering (unau-
dited) ... (2,164,582) 25,000 (2,139,582)
Common shares issued
in connection
with the exercise of
20,000 stock
options for cash of
$1.50 per
share (unaudited) ... 20,000 200 29,800 30,000
Net loss for the nine
months ended
September 30, 1996
(unaudited) ... (3,151,404) (3,151,404)
Balance at September
30, 1996 (un-
audited) ... 5,325,000 $ 53,250 $ 11,256,778 $ (4,061,995) $ 7,248,033
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
<PAGE>
<TABLE>
NUWAVE TECHNOLOGIES, INC.
( A Development Stage Enterprise)
Statements of Cash Flows
Increase (decrease) in cash and cash equivalents
Cumulative
from
July 17, 1995 Three Nine July 17, 1995
(inception) Months Months (inception)
to Ended Ended to
September 30, September 30, September 30, September 30,
1995 1996 1996 1996
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash Flows from operating activities:
Net loss $ (449,925) $ (1,721,633) $ (3,151,404) $ (4,061,995)
Adjustments to reconcile net loss to net cash used
in operating activities:
Extraordinary Loss 848,160 848,160 848,160
Depreciation expense 2,000 4,400 5,260
Amortization of unamortized debt discount 12,334 163,103 168,778
Amortization of deferred financing costs 6,329 89,062 89,062
Issuance of common stock for services rendered 20,600 20,600
Increase in prepaid expenses and other
current assets (23,666) (179,118) (167,640) (189,331)
Increase (decrease) in accounts payable and
accrued liabilities 28,487 (441,370) (75,091) 23,953
Increase in other assets (5,268) (4,000)
Net cash used in operating activities (429,772) (1,473,298) (2,289,410) (3,099,513)
Cash flows from investing activities:
Purchase of computers and equipment (4,470) (38,161) (52,099) (60,696)
Net cash used in investing activities (4,470) (38,161) (52,099) (60,696)
Cash flows from financing activities:
Proceeds from sales of Series A Convertible
Preferred Stock 900,000 900,000
Proceeds from issuance of initial bridge units 350,000
Proceeds from issuance of bridge units, net of
exchange of initial bridge notes and costs of the
Private Placement Offering ("PPO") 1,348,500 1,315,000
Proceeds from IPO, net of costs 10,243,472 9,613,428 9,588,428
Repayment of notes issued in connection with
initial bridge notes (2,000,000) (2,000,000) (2,000,000)
Issuance of common stock in connection with
exercise of stock options 30,000 30,000 30,000
Net cash provided by financing activities 900,000 8,273,472 8,991,928 10,183,428
Net increase in cash and cash equivalents 465,758 6,762,013 6,650,419 7,023,219
Cash and cash equivalents at the beginning of the period 261,206 372,800
Cash and cash equivalents at the end of the period $ 465,758 $ 7,023,219 $ 7,023,219 $ 7,023,219
Supplemental disclosure of non cash investing and
financing activities:
Deferred financing costs incurred in connection with the $ 140,000 $ 140,000
exchange of the initial bridge notes for 14 bridge units
Deferred equity costs charged to additional paid in
capital in connection with the PPO $ 13,400 $ 13,400
Deferred financing costs charged to additional paid-in capital in
connection with the IPO $ 25,000 $ 25,000
600,000 Series A Convertible Preferred Stock converted
into Common Stock $ 6,000 6,000
</TABLE)
<PAGE>
</TABLE>
NUWAVE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim information. Accordingly they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The results of operations for the interim periods shown in this report
are not necessarily indicative of expected results for any future
interim period or for the entire fiscal year. NUWAVE Technologies, Inc.
(the "Company" or "NUWAVE") believes that the quarterly information
presented includes all adjustments (consisting only of normal, recurring
adjustments) necessary for a fair presentation in accordance with
generally accepted accounting principles. The accompanying condensed
financial statements and notes should be read in conjunction with
the Company's financial statements included in the Company's
Registration Statement on Form SB-2 as filed with the Securities and
Exchange Commission on July 3, 1996 (Registration No. 333-3110).
2. Per share data
The per share data included in the statement of operations has been
computed in accordance with Accounting Principles Board Number 5
("Earnings Per Share"). Historic per share data has been computed on
the basis of the loss for the period divided by the historic weighted
average number of shares outstanding. The historic weighted average
number of shares outstanding excludes the number of common shares
issuable upon the exercise of outstanding stock options and Series A
Convertible Preferred Stock, for the period ended September 30, 1995,
since such inclusion would be anti-dilutive.
The per share data shown below has been computed in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 64
("SAB 64"). SAB 64 requires that the historic weighted average number
of shares of common stock outstanding during the period prior to the
effective date be increased for certain shares or stock options,
including shares of Series A Convertible Preferred Stock, issued
within one year or in contemplation of the Company's filing of its
registration statement, and that such shares be treated as if
outstanding for all periods presented. Accordingly, the historic
weighted average number of shares outstanding for the period from
July 17, 1995 (inception) to September 30, 1995 (unaudited) has been
increased by 853,500 for the application of SAB 64. Such shares include
253,500 stock options issued in July, September and November 1995 and
March 1996 and 600,000 shares of Series A Convertible Preferred Stock
issued in July and August, 1995.
July 17, 1995
(inception)
to
September 30,
1995
SAB 64 per share data:
SAB 64 weighted average number of
common shares outstanding 2,788,50
SAB 64 net loss per share ($.17)
3. Equity Transactions
A. Common and Preferred Stock
As of April 30, 1996, the board of directors unanimously approved and
the Company's stockholders authorized by the written consent of the
holders of 2,213,333 out of the 2,530,000 then outstanding shares of
Common Stock and 600,000 of the then outstanding 600,000 shares of the
Series A Convertible Preferred Stock the increase in the shares of
common stock to 20,000,000 common shares, par value $.01 per share.
The related Amendment to the Company's Articles of Incorporation was
filed May 3, 1996. Upon completion of an Initial Public Offering
(" IPO") of the Company's securities on July 3, 1996, all 600,000
shares of the Company's outstanding Series A Preferred Stock were
automatically converted into 600,000 shares of Common Stock.
The Company is also authorized to issue 1,000,000 additional shares of
Preferred Stock, which may have such preferences and rights as the
board of directors may designate.
B. Initial Public Offering ("IPO")
In July 1996, the Company completed an IPO in which it sold 2,300,000
common shares and 2,530,000 Redeemable Common Stock Purchase Warrants
(the "Warrants") to purchase an additional 2,530,000 common shares.
The Warrants are exercisable at $5.50 per share commencing on July 3,
1997. The Company received net proceeds of $9,588,428 from the IPO.
Also in connection with the IPO issued 220,000 Redeemable Common Stock
Purchase Warrants (the " Underwriter's Warrants") to the underwriter
for $10.
C. Exercise of Stock Options
In August 1996, a member of the Board of Directors of the Company
exercised his rights to purchase 20,000 shares of common stock for
$30,000 ($1.50 per share).
4. Repayment of Debt/Extraordinary Loss
On July 9, 1996 the Company repaid from the proceeds of the IPO
outstanding Bridge Notes in the aggregate principal amount of $2,000,000
and related accrued interest of $73,652. The Bridge Notes were issued
in connection with the private placement in March 1996 and
had an expiration date of June 30, 1997. Due to the
early extinguishment of this debt the Company recognized an
extraordinary loss in the period of $848,160 consisting of $251,938
in unamortized financing costs and $596,222 in unamortized debt discount.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Since its inception in July 1995, the Company, a development stage
company, has been engaged primarily in raising capital to fund its operations
and directing, supervising and coordinating the activities of Rave Engineering
Corp. ("Rave") pursuant to an exclusive world wide licensing agreement
(the "License Agreement") and development agreement (the "Development
Agreement"). It completed its initial capital raising in July 1996 , upon
completion of its IPO. In order to compliment Rave's activities pursuant to
the Development Agreement, in the last quarter it has established an internal
advanced engineering group (the" Advanced Engineering Group"). The Advanced
Engineering Group includes employees and outside consultants in support of the
continuing development of its products and related technology, the
identification of additional sources of new technology, the recruitment of
key technical personnel, and the preparation of patent applications with
respect to certain of its Initial Products and technology. The Company has
produced and tested fully operational working prototypes of the Analog Video
Processor ("AVP"), a video enhancement device based on analog wave mapping,
the Magic Card, a digitally based video enhancement device, and the NUWAVE
Dual TBC, a time base corrector used for video editing, (collectively, the
"Initial Products"). It has produced and tested initial prototypes of the
NUWAVE Ministudio (a video editing system). The Dual TBC, TBC Module and
Magic Card have moved from the prototype stage into specific product
development while software development continues on the Ministudio.
The Company has recently added additional features to the AVP to further
enhance its performance. These enhancements are currently being incorporated
into the AVP in the form of an "ASIC" chip (Application Specific Integrated
Circuit) which is the form in which the Company intends to market the AVP. As a
result of the Company's initial marketing experiences, it has modified its
plans with regard to the production of the AVP ASIC chip. The Company now
expects to produce these chips in accordance with the customer's specific
application requirements supported by firm commitments rather than producing
and inventorying ASIC chips and endeavoring to anticipate applications required
by customers in the future. The Company has not licensed or sold any of its
products or technologies. In July 1996, the Company completed an IPO in
which it sold 2,300,000 shares of common stock and 2,530,000 warrants to
purchase an additional 2,530,000 shares of common stock. In return for
the sale of such stock and warrants, the Company received net proceeds of
$9,588,428. The Company is using a portion of the proceeds of the IPO to
continue to develop its Initial Products as outlined above and (in the event
the Company is able to successfully complete certain additional research and
development, prototypes and product testing relating thereto) to commence
the commercialization of its products.
As of September 30, 1996, the Company had a deficit accumulated during
the development stage of $4,061,995, which includes the net loss for the
nine months ended September 30, 1996 of $3,151,404. Additional losses have
been incurred since such date. The Company will continue to have a high
level of operating expenses and will be required to make significant
expenditures in connection with its research and development activities
and the production and marketing of its proposed products and technologies.
Although the Company anticipates deriving some revenue from the sale of its
AVP and Magic Card within the next 12 months, no assurance can be given
that these products will be successfully brought to market or even
completely developed and tested for commercial use during such period,
and the Company has projected its expenses based on the assumption that it
will receive no revenues from the sale of its products during the next 12
months. Even if revenues are produced from the sale of such Initial Products,
the Company expects to continue to incur substantial losses for at least the
next 12 months. See "Liquidity and Capital Resources."
Research and Development
From July 17, 1995 through September 30, 1996, the Company spent
$1,608,333 on research and development, of which approximately 75% was
paid to Rave pursuant to the Development Agreement. During the next 12
months, the Company intends to spend approximately $2,909,000 on research and
development and in support of the commercialization of its products. Of that
amount the Company estimates that at least 40% will be paid to Rave pursuant
to the Development Agreement, 38% will be spent by the Company's Advanced
Engineering Group for software development, ASIC chip development, and
supervising and directing production engineering undertaken by third parties,
and the balance will be spent on internal research and development. In the
event the Company is able to generate revenues from sales of its Initial
Products during such 12-month period, it anticipates it will increase its
expenditures on research and development and the identification of additional
sources of technology.
Research and development activity with respect to the Company's Initial
Products was carried out by Rave prior to July 21, 1995, the date upon which
the Company and Rave entered into the License Agreement and the Development
Agreement. Pursuant to the Development Agreement, the Company has retained
Rave to continue the development of the Initial Products by utilizing Rave's
proprietary Analog Video Wave mapping techniques and processes through
which Analog Video Waves may, among other things, be digitized, compressed,
transmitted, manipulated and processed. Rave, pursuant to the Development
Agreement, is continuing to provide to the Company and the Company continues
to evaluate their development plans outlining costs, schedules and timetables
for development of working prototypes of products described in such
development plans.
In addition to utilizing the services of Rave pursuant to the terms of
the Development Agreement, the Company's Advanced Engineering Group has also
utilized the services of third party contractors in connection with its
research and development activities. The Company intends to continue to
use outside consultants to assure exposure to new ideas and technology and
its Advanced Engineering Group to direct, supervise and coordinate the
efforts of Rave and its outside consultants.
Marketing and Distribution
Achieving significant market acceptance and commercialization of the
Company's Initial Products will require substantial marketing efforts and
the expenditure of significant funds to establish market awareness of the
Company and the Initial Products. The Company anticipates spending
approximately $374,700 over the next 12 months to develop and implement a
formal advertising and marketing communications program. During the past
quarter, the Company has recruited a Director of Marketing Communications in
addition to hiring a professional marketing communications firm to assist in
the development and implementation of this program. The Company initially
intends to market the Initial Products to manufacturers of set top boxes,
televisions, multimedia computers and teleconferencing equipment as well as
broadcasting and video production professionals. It also may license to third
parties the rights to manufacture the products, either through direct
licensing, OEM arrangements or otherwise.
During the past quarter the Company has recruited a Vice President of
Sales, a Director of Marketing Communications and a professional sales
consultant to establish and manage the development of the Company's sales
organization. The Company intends to rely principally on independent and
national sales representative organizations to represent its products. In
this regard, the Company is continually reviewing its needs and will employ
additional internal sales staff as necessary.
Manufacturing
The Company does not contemplate that it will directly manufacture any
of its products. It intends to contract with third parties to manufacture
its proposed AVP ASIC chip, Magic Card ASIC chip set, and related retail
products, and its NUWave Dual TBC, and NUWave Ministudio.
Employees
The Company currently has seven employees and, depending on its level of
business activity, expects to hire additional employees in the next 12
months, including marketing and sales, manufacturing and technical personnel,
and has allocated $976,000 for the recruitment and related payroll expenses
for additional employees as necessary over the next 12-month period.
Liquidity and Capital Resources
From its inception through completion of its IPO, the Company relied for
all of its funding ($2,900,000 in cash plus the cancellation of the notes in
the principal amount of $350,000) on private sales of its debt and equity
securities (the "Private Financings"). In July 1996, the company completed
an IPO and received net proceeds of $9,588,428. The Company used $2,073,652
of the net proceeds of the IPO to repay the principal and interest on the
outstanding notes issued to investors in connection with the Private
Financings.
Pursuant to the terms of the License Agreement and the Development
Agreement, the Company is paying pay Rave minimum aggregate royalties and
development fees of $65,000 per month for the term of the License Agreement.
The License Agreement also provides for additional payments of $60,000 per
year to be made to Rave for consulting services to be rendered to the
Company. The Company is making these payments at the rate of $5,000 per month.
The Development Agreement also provides for Rave to receive additional
payments aggregating $850,000 to purchase or lease equipment for use
in developing the Licensed Products and Technology. The payments are to be
made in monthly installments of $23,611 commencing upon the submission of
appropriate development schedules to the Company with a lump sum payment
of $283,336 due in March 1998. Through September 1996 the Company had made
payments of $79,200 against the $850,000 additional equipment purchases.
Substantially all of the Company's technology has been licensed from
Rave pursuant to the License Agreement. Pursuant to the terms of the License
Agreement, the Company is obligated to pay Rave royalties ("Royalties") of
(i) 2 1/2% of net sales of products utilizing Rave's technology ("Sales
Royalties"), and (ii) 25% of any sublicensing fees received by the Company
from sublicenses of the products and technology covered by the License
Agreement ("Licensed Products and Technology"). Payments of Sales Royalties
will commence upon the earlier of (i) accumulated net sales of Licensed
Products and Technology sold by the Company or its future affiliates reaching
an aggregate of $50,000,000, or (ii) the Company's aggregate net profits from
sales of Licensed Products and Technology equaling $5,000,000.
Pursuant to the terms of an agency agreement with Prime Technology, Inc.
("Prime") dated July 21, 1995 (the "Agency Agreement"), Prime will receive
35% of net sublicensing fees received by the Company with respect to the
first $50,000,000 of aggregate net sales made by the Company's sublicensees,
after subtracting the payments to Rave and licensing expenses, and
thereafter 45%. Prime will also receive up to an additional $1,500,000 of
which (i) $400,000 is payable regardless of the receipt of sublicense fees
in installments of $15,000 per month which began January 1, 1996 and
increased in accordance with the terms of the agreement to installments of
$40,000 per month after the completion of the IPO, (ii) $400,000 is payable
out of the Company's first sublicensing royalties, and (iii) $700,000 is
payable out of the Company's portion of sublicensing fees when net
sublicensing sales exceed $200,000,000.
The Company intends to use a portion of the net proceeds of the IPO to
pay its obligations of approximately $1,291,000 and $325,000, respectively,
to Rave under the License Agreement and Development Agreement and to Prime
under the Agency Agreement during the 12 month period ending
September 30, 1997.
Plan of Operation
The Company's plan of operation over the next 12 months focuses
primarily on the continued design, development and patent protection of its
proposed products and in particular, the production of additional prototypes,
testing and the marketing and/or licensing of the AVP and Magic Card. The
Company anticipates, based on its current proposed plans and assumptions
relating to its operations, that the proceeds of the IPO will be sufficient
to satisfy the contemplated cash requirements of the Company for at least 12
months. In the event that the Company's plans change or its assumptions
prove to be inaccurate or the proceeds of the IPO prove to be insufficient
to fund operations (due to unanticipated expenses, delays, problems, or
otherwise), the Company would be required to seek additional funding sooner
than anticipated. Depending upon the Company's progress in the development
of its products and technology, their acceptance by third parties, and the state
of the capital markets, the Company may also determine that it is advisable
to raise additional equity capital, possibly within the next 12 months.
In addition, in the event that the Company receives a larger than anticipated
number of initial purchase orders upon introduction of its AVP and Magic
Card, it may require resources substantially greater than the proceeds of
the IPO or than are otherwise available to the Company. In such event the
Company may be required to raise additional capital. The Company has no
current arrangements with respect to, or sources of, any such capital, and
there can be no assurance that such additional capital will be available to
the Company when needed, on commercially reasonable terms or at all. The
inability of the Company to obtain additional capital would have a material
adverse effect on the Company and could cause the Company to be unable to
implement its business strategy, to postpone or cancel the development of
certain of its proposed products, or to otherwise significantly curtail or
cease its operations. Additional equity financing may involve substantial
dilution to the interests of the Company's then existing stockholders. The
Company's future performance will be subject to a number of business factors,
including those beyond the Company's control, such as economic downturns and
evolving industry needs and preferences, as well as the level of competition
and the ability of the Company to successfully market its products and
technology and to effectively monitor and control its costs. There can be no
assurance that the Company will be able to successfully implement a marketing
strategy, generate significant revenues or ever achieve profitable operations.
In addition, because the Company has had only limited operations to date,
there can be no assurance that its estimates will prove to be accurate or that
unforeseen events will not occur.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
See Note 3 of "Notes to Condensed Financial Statements" included
in Part I of this report.
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
See Note 3 of "Notes to Condensed Financial Statements"
included in Part I of this report.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.01. Historic computation of earning per share under
APB #15
11.02. Computation of loss per share under SAB #64
27. Financial data schedule
(b) Reports of Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
certifies that it has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Fairfield in the State
of New Jersey on November 14, 1996.
NUWAVE TECHNOLOGIES, INC.
(Registrant)
DATE: November 14, 1996 By: /s/ Gerald Zarin
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: November 14, 1996 By: /s/ Jeremiah F. O'Brien
Jeremia F. O'Brien
Vice President,
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT 11.01
<TABLE>
Nuwave Technologies, Inc.
Historic computation of earnings (loss) per share under APB #15
<CAPTION>
<C> <C> <C>
July 17, 1995 Three Months Nine Months
(inception) to ended ended
September 30, 1995 September 30, 1996 September 30, 1996
(unaudited) (unaudited) (unaudited)
Net Loss $ (449,925) $ (1,721,633) $ (3,151,404)
Computation of the weighted average shares outstanding
from inception to September 30, 1995.
No. of shares Date # of days CSE
Issued Issued Outstanding % CSE
2,060,000 07/17/95 75 100.00% 2,060,000
(125,000) 07/17/95 75 100.00% (125,000)
1,935,000 1,935,000
Computation of the weighted average shares outstanding
for the three months ended September 30, 1996.
No. of shares Date # of days CSE
Issued Issued Outstanding % CSE
2,060,000 07/17/95 92 100.00% 2,060,000
(125,000) 07/17/95 92 100.00% (125,000)
70,000 12/15/95 92 100.00% 70,000
250,000 03/01/96 92 100.00% 250,000
150,000 03/27/96 92 100.00% 150,000
2,800,000 07/03/96 89 96.74% 2,708,696
100,000 07/09/96 83 90.22% 90,217
20,000 08/21/96 40 43.48% 8,696
5,325,000 5,212,609
Computation of the weighted average shares outstanding
for the nine months ended September 30, 1996.
No. of shares Date # of days CSE
Issued Issued Outstanding % CSE
2,060,000 07/17/95 273 100.00% 2,060,000
(125,000) 07/17/95 273 100.00% (125,000)
70,000 12/15/95 273 100.00% 70,000
250,000 03/01/96 213 78.02% 195,055
150,000 03/27/96 187 68.50% 102,747
2,800,000 07/03/96 89 32.60% 912,821
100,000 07/09/96 83 30.40% 30,403
20,000 08/21/96 40 14.65% 2,930
5,325,000 3,248,956
Weighted average number of shares 1,935,000 5,212,609 3,248,956
Net loss per share $ (0.23) $ (0.33) $ (0.96)
</TABLE>
<PAGE>
EXHIBIT 11.02
Nuwave Technologies, Inc.
Computation of earnings (loss) per share under SAB #64
July 17, 1995
(inception)
to
September 30, 1995
(unaudited)
Net Loss $ (449,925)
Computation of the weighted average shares
outstanding for the three months and nine
months ended September 30, 1995
Common stock outstanding at September 30, 1995 1,935,000
Add:
Stock options issued in July, September, and
November 1995, and March 1996 253,500
Series A Convertible Preferred Stock issued in
July and August, 1995 600,000
Weighted average number of shares 2,788,500
Net loss per share (0.17)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001009802
<NAME> NUWAVE TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,023
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,213
<PP&E> 61
<DEPRECIATION> 5
<TOTAL-ASSETS> 7,272
<CURRENT-LIABILITIES> 24
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 7,195
<TOTAL-LIABILITY-AND-EQUITY> 7,272
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,069
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,303)
<DISCONTINUED> 0
<EXTRAORDINARY> 848
<CHANGES> 0
<NET-INCOME> (3,151)
<EPS-PRIMARY> (0.96)
<EPS-DILUTED> 0
</TABLE>
