<PAGE>
As filed with Securities and Exchange Commission on May 15, 1997
===============================================================================
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 March 31, 1997
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
One Passaic Avenue, Fairfield, New Jersey 07004
(Address of principal executive offices) (Zip Code)
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 [X] No [ ]
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 March 31, 1997: 5,348,334
Transitional Small Business Disclosure Format: Yes[] No[X]
==============================================================================
<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Balance Sheets - December 31, 1996 and March 31, 1997 (unaudited) P. 3
Statements of Operations - For the three month periods ended
March 31, 1996 (unaudited) and March 31, 1997 (unaudited)
and for the period July 17, 1995 (inception) to
March 31, 1997 (unaudited) P. 4
Statements of Cash Flows - For the three month periods ended
March 31, 1996 (unaudited) and March 31, 1997 (unaudited)
and for the period from July 17, 1995 (inception) to
March 31, 1997 (unaudited) P. 5
Notes to Condensed Financial Statements P. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION P. 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS P. 12
ITEM 2. CHANGES IN SECURITIES P. 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES P. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS P. 12
ITEM 5. OTHER INFORMATION P. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K P. 12
SIGNATURES P. 13
<PAGE>
<TABLE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Balance Sheets
ASSETS
<CAPTION>
December 31, March 31,
1996 1997
------------ ------------
(unaudited)
<C> <C> <C>
Current assets:
Cash and cash equivalents $ 6,057,941 $ 4,950,944
Prepaid expenses and other current assets 91,909 89,936
------------ ------------
Total current assets 6,149,850 5,040,880
Property and equipment 69,773 80,466
Other assets 72,275 102,750
------------ ------------
Total assets $ 6,291,898 $ 5,224,096
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 373,110 $ 241,191
------------ ------------
Total liabilities 373,110 241,191
------------ ------------
Commitments and contingencies
Stockholders' equity:
Series A Convertible Preferred Stock, noncumulative,
$.01 par value; authorized 1,000,000 shares; issued
and outstanding - none as of December 31, 1996 and
March 31, 1997
Preferred stock, $.01 par value; authorized
1,000,000 shares; issued and outstanding -
none as of December 31, 1996 and March 31, 1997,
respectively (Such preferences and rights to be
designated by the Board of the Board of Directors)
Common stock, $.01 par value; authorized
20,000,000 shares as of December 31, 1996,
and March 31, 1997; issued and outstanding
5,325,000 shares and 5,348,334 shares as of
December 31, 1996 and March 31, 1997, respectively 53,250 53,483
Additional paid in capital 11,206,778 11,253,213
Deficit accumulated during the development stage (5,341,240) (6,323,791)
------------ ------------
Total stockholders' equity 5,918,788 4,982,905
------------ ------------
Total liabilities and stockholders' equity $ 6,291,898 $ 5,224,096
============ ============
The accompanying notes are an integral part of these condensed financial statements
</TABLE>
3
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A Development Stage Enterprise)
Statements of Operations
<TABLE>
<CAPTION>
Cumulative from
July 17, 1995
Three months Three months (inception)
ended ended to
March 31, March 31, March 31,
1996 1997 1997
------------ ------------ ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Operating expenses:
Research and development expenses $ (277,033) $ (355,405) $ (2,467,121)
General and administrative expenses (218,345) (692,207) (2,918,438)
------------ ------------ ---------------
(495,378) (1,047,612) (5,385,559)
------------ ------------ ---------------
Loss from operations (495,378) (1,047,612) (5,385,559)
------------ ------------ ---------------
Other income (expense):
Interest income 3,223 65,061 241,470
Interest expense (67,361) (331,542)
------------ ------------ ---------------
(64,361) 65,061 (90,072)
------------ ------------ ---------------
Net loss before extraordinary item (559,516) (982,551) (5,475,631)
Extraordinary item (848,160)
------------- ------------- ---------------
Net loss $ (559,516) $ (982,551) $ (6,323,791)
============= ============= ===============
Loss per share:
Weighted average number of
common shares outstanding 2,096,735 5,328,111
============= =============
Net loss per share $ (0.27) $ (0.18)
============= =============
The accompanying notes are an integral part of these condensed financial statements
</TABLE>
4
<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Cumulative
from
July 17, 1995
Three Months Three Months (inception)
ended ended to
March 31, March 31, March 31,
1996 1997 1997
------------ ------------ ------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (559,516) $ (982,551) $ (6,323,791)
Adjustments to reconcile net loss to net
cash used in operating activities:
Extraordinary item 848,160
Depreciation expense 1,090 10,013 29,729
Amortization of unamortized debt discount 30,950 168,778
Amortization of deferred financing costs 17,895 89,062
Issuance of common stock for services
rendered 20,600
Decrease (increase) in prepaid expenses
and other current assets (29,261) 1,973 (89,936)
Increase (decrease) in accounts payable
and accrued liabilities 117,925 (131,919) 241,191
Increase in other assets (30,475) (102,750)
------------ ------------ ------------
Net cash used in operating activities (420,917) (1,132,959) (5,118,957)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (8,041) (20,706) (110,195)
------------ ------------ ------------
Net cash used in investing activities (8,041) (20,706) (110,195)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from sales of Series A
Convertible Preferred Stock 900,000
Proceeds from issuance of initial bridge
units 350,000
Proceeds from issuance of bridge units,
net of exchange of initial bridge notes 1,650,000 1,650,000
Proceeds from IPO 11,753,010
Repayment of bridge notes issued in
connection with bridge units (2,000,000)
Costs incurred for equity offerings (413,520) (2,348,582)
Issuance of common stock in connection with 76,668
exercise of stock options 46,668
Deferred financing costs (180,900) (201,000)
------------ ------------ ------------
Net cash provided by financing activities (594,420) 46,668 10,180,096
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 626,622 (1,106,997) 4,950,944
Cash and cash equivalents at the beginning of
the period 372,800 6,057,941
------------ ------------ ------------
Cash and cash equivalents at the end
of the period $ 999,422 $ 4,950,944 $ 4,950,944
============ ============ ============
Supplemental disclosure of cash flow information:
Interest paid during the period $ 73,702
============
Supplemental disclosure of non cash investing
and financing activities:
Deferred financing costs incurred in connection
with the exchange of the initial bridge notes
14 bridge units $ 140,000 $ 140,000
============ ============
Deferred equity costs charged to additional
paid in capital in connection with the PPO $ 13,400 $ 13,400
============ ============
Deferred equity costs charged to additional
paid-in capital in connection with the IPO $ 25,0000
============
The accompanying notes are an integral part of these condensed financial statements
</TABLE>
5
<PAGE>
NUWAVE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis Of Interim Financial Statement Preparation
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"), a development
stage enterprise, 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 should be read in
conjunction with the Company's Annual Report on Form 10-KSB as
filed with the Securities and Exchange Commission on March 31,
1997.
2. Capital Transactions
On March 19, 1997, a director exercised options with respect to
23,334 shares of common stock at $2.00 per share.
3. Subsequent Event
On April 22, 1997, the Company deposited $300,000 into a
certificate of deposit maturing July 22, 1997. The certificate of
deposit has been pledged as collateral for an irrevocable standby
letter of credit in the amount of $300,000 opened by the Company
to guarantee monthly equipment lease payments to be made by the
Company on behalf of Rave Engineering pursuant to the Development
Agreement. The standby letter of credit will be reduced by any
payments made in support of the equipment lease. Any cash
restriction on the certificate of deposit is limited to the
balance of the standby letter of credit.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The Company, a development stage enterprise organized in
July 1995, was formed to develop, manufacture and market
products which improve picture quality image in set top boxes,
televisions, VCR's, camcorders and other video devices by
enhancing and manipulating video signals, and facilitate the
production of sophisticated consumer and professional videos.
Since its inception the Company has been engaged primarily in
raising funds, directing, supervising and coordinating the
activities of Rave Engineering Corporation and its Advanced
Engineering Group (see below) in the continuing development of
the NUWAVE Video Processor, the Softsets, the NUWAVE Dual Time
Base Corrector, the NUWAVE Ministudio and the Magic Card (see
product descriptions below), pre-marketing and more recently
the commencement of a comprehensive marketing of the NUWAVE
Video Processor and the recruitment of management and
technical personnel, including members of the Advanced
Engineering Group. In July 1996 the Company completed an
Initial Public Offering (the "IPO") of its common stock and
warrants from which it received net proceeds of $9,538,428 and
repaid $2,000,000 principal amount of promissory notes issued
in a previous financing. The Company is using the proceeds of
the IPO to develop, commercialize and market its products. The
Company has not licensed or sold any of its products or
technologies.
At the time of the IPO, the Company had produced and
tested fully operational working prototypes of (1) an analog
video processor which significantly enhances video picture
quality ("AVP"), (2) another video enhancement device which
combined the AVP with digitally based frame extrapolation and
video noise reduction circuits for use in NTSC or PAL standard
devices (the "Magic Card"), and (3) a time base corrector
providing for analog to digital conversion and the
synchronization of up to three video sources used for video
editing (the "NUWAVE Dual TBC"). It had also produced an
initial prototype of a video editing "studio" mounted on PCBs
(the "NUWAVE Ministudio"). The AVP, the NUWAVE Dual TBC, the
Magic Card and the NUWAVE Ministudio are called the "Initial
Products."
During the last nine months, the Company has established
an Advanced Engineering Group (the "Advanced Engineering
Group"). The Advanced Engineering Group is made up of
employees and third party consultants who work with the
Company on a project by project basis to support the
continuing development of its products and related technology
and the identification of additional sources of new
technology. The Company, through its Advanced Engineering
Group, has significantly enhanced the performance of the
original AVP to create the "NUWAVE Video Processor." The
Advanced Engineering Group also has developed a separate
proprietary software product ("Softsets") which provides end
users and manufacturers who use the NUWAVE Video Processor in
their products with an option to manipulate the attributes of
video images to their own taste or standards. In late January
1997, the Company began marketing the NUWAVE Video Processor
and Softsets. It has also concluded commercial development of
the first version of its NUWAVE Dual TBC and certain related
products. The Company anticipates marketing the TBC products
in the second half of 1997.
The Company intends to produce the NUWAVE Video
Processor in the form of an "ASIC" chip (Application Specific
Integrated Circuit) 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 originally anticipated devoting significant
resources to the final development of its Magic Card with a
goal of introducing it to the market in the second half of
1997. However with the introduction of the NUWAVE Video Processor
and the Softsets in January and February and the favorable market
feedback from its initial marketing and sales calls, the Company
has determined to devote the majority of the personnel, economic
resources and research and development efforts that it would
have devoted to the Magic Card to the support of the sales and
marketing of the NUWAVE Video Processor and Softsets. The Company
believes this will give it the opportunity to further refine the
Magic Card based on its experience with the NUWAVE Video
Processor and market reaction. Because the final commercial
7
<PAGE>
development of the Magic Card will be based in large part on the
Company's experience in marketing the NUWAVE Video Processor,
the Company cannot predict when, if at all, it will finalize
commercial development of the product or commence marketing it.
As of March 31, 1997, the Company had a deficit
accumulated during the development stage of $6,323,791, which
includes the net loss for the three months ended March 31,
1997 of $982,551. The loss for the quarter included $692,207
in general and administrative expenses, representing an
increase of $473,862 compared to the three month period ended
March 31, 1996. Such increase was primarily a result of sales
and marketing efforts ($286,467) discussed more fully below
and general operating expenses as a result of the Company's planned
growth and expansion following the IPO, including increased
personnel and payroll costs ($70,600), professional and legal
services costs ($33,500) and insurance costs ($36,300). The Company
will continue to have a high level of operating expenses and will be
required to make significant contractual 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
the NUWAVE Video Processor and the NUWAVE TBC products within
the next 12 months, no assurance can be given that these products
will be successfully marketed 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 or license
of products, the Company expects to continue to incur substantial
losses for at least the next 12 months. See "Liquidity and Capital
Resources."
Marketing and Distribution
In late January 1997, the Company began a comprehensive
marketing program of the NUWAVE Video Processor and Softsets
through sales presentations to prospective customers. Although
the Company is unable to predict whether its marketing efforts
will be successful, it believes that the products have been
well received, and several potential customers have indicated
their desire to continue discussions. The Company believes
that achieving significant market acceptance and
commercialization of the Company's products will require
substantial marketing efforts and the expenditure of
significant funds to establish market awareness of the Company
and its products. The Company anticipates spending
approximately $1,000,000 over the next 12 months to continue
the development and implementation of a formal advertising and
marketing communications program for this purpose. During the
past nine months, 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 NUWAVE Video
Processor to manufacturers of set top boxes, televisions,
multimedia computers and teleconferencing equipment as well as
broadcasting and video production professionals. The Company
has also created a separate sales and marketing group under
the ProWAVE banner to market and distribute a line of products
to the professional and commercial video markets(e.g. medical
imaging and security systems). In addition to direct sales,
the Company may license the manufacture of its products and
use of its technology in situations where such arrangements
are to the Company's economic advantage. However, because its
emphasis has been on direct sales and OEM manufacturing, the
Company has not yet developed a licensing program, established
proposed royalties or otherwise determined the terms or
conditions of the arrangements it may want to make with
proposed licensees or others. These programs will be
developed and considered in conjunction with and pursuant to
the terms of an agency agreement dated July 21, 1995 ("Agency
Agreement") with Prime Technology, Inc. ("Prime") (see
Liquidity and Capital Resources), in light of its product
research and development activities, and prevailing market
conditions.
The Company has concluded commercial development of the
first version of its NUWAVE Dual TBC which provides analog-
to-digital conversion and the synchronization of up to three
video sources. It also is completing commercial development
of a TBC chip (module) which is being used in a desk top TBC
which synchronizes two video sources and operates
independently of a host computer and finalizing development of
a TBC which will synchronize up to 5 video sources utilizing
four of such modules. Both products are derivatives of the
NUWAVE Dual TBC. It anticipates introducing both of such
products to market in 1997.
8
<PAGE>
During the past nine months the Company has recruited a
Vice President of Sales, a Director of Marketing
Communications and professional sales consultants to
establish and manage the development of the Company's sales
organization. In this regard, the Company is continually
reviewing its needs and will employ additional internal sales
staff as necessary. The Company also has contracts with
several individuals and organizations who will act in a
commissioned sales representation capacity regarding the
Company's products. During the quarter ended March 31, 1997,
the Company's sales and marketing costs included $137,382 for
professional sales and marketing consultants, $74,332 for
advertising and public relations and $63,576 for internal
sales and marketing personnel. Such costs were generally in line
with the Company's plans for operations.
Research and Development
Research and development activity with respect to the
Company's Initial Products was carried out by Rave Engineering
Corp. ("Rave") prior to July 21, 1995, the date upon which the
Company and Rave entered into a License Agreement and the
Development Agreement. Substantially all of the technology on
which the Company's Initial Products were based was originated
by Rave prior to the Company's organization. This technology is
licensed to the Company pursuant to the License Agreement.
Pursuant to the Development Agreement, the Company has utilized
Rave to continue the development of the Initial Products. The
Company anticipates that Rave's role in the development of the
initial products will be substantially completed in the first
half of 1997, and the Company and Rave have agreed that Rave
will thereafter be responsible for the development of additional
products for evaluation by the Company pursuant to the Development
Agreement.
The Development Agreement terminates on October 2, 1998,
unless the parties agree to additional services to be
performed by Rave and related compensation by October 2, 1997,
in which event it may be extended on a year to year basis. As
of the date of this quarterly report, there have been no
discussions with Rave regarding such an extension, and the
Company is unable to predict whether such discussions, if
commenced, will be successfully concluded. Because the
development of the Initial Products has been substantially
completed, and because of its increased ability to take
advantage of the expertise of its Advanced Engineering Group,
the Company does not believe that the failure to extend the
Development Agreement would have a materially adverse effect
on its operations or ability to develop new technology.
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 such efforts. The Company has used
its Advanced Engineering Group to develop a significant amount
of the software included in each of its products and to
reconfigure certain circuitry to allow certain of the products
to be developed as ASICs. The Advanced Engineering Group also
developed the Softsets for the NUWAVE Video Processor and
certain of the enhancements to it. The Company intends to use
the Advanced Engineering Group to finish the commercialization
process with respect to the additional NUWAVE TBC products
described above, and the NUWAVE Ministudio.
From July 17, 1995 through March 31, 1997, the Company
spent $2,467,121 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 $2,089,000 on research and development and
in support of the commercialization of its products. Of that
amount the Company estimates that approximately 55% will be
paid to Rave pursuant to the Development Agreement and
approximately 45% 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 on internal
research and development. In the event the Company is able to
generate revenues from sales of its NUWAVE Video Processor and
NUWAVE TBC products during such 12-month period, it anticipates
it will increase its expenditures on research and development and
the identification of new sources of technology.
9
<PAGE>
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 NUWAVE Video
Processor ASIC chip, NUWAVE TBC, Magic Card ASIC chip set, and
related retail products, and NUWAVE Ministudio.
Employees
The Company currently has eight employees and, depending
on its level of business activity, expects to hire additional
employees in the next 12 months, as needed, to support
marketing, sales and research and development.
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 $9,538,428. 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 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
through July 22, 1998 to be made to Rave for consulting
services to be rendered to the Company. 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 (as
defined below). The payments are to be based upon the
submission of appropriate development schedules to the Company
and will be made in monthly installments not to exceed $23,611
with a lump sum payment of $283,336 due in March 1998. In
this regard, on April 22, 1997, the Company deposited $300,000
into a certificate of deposit maturing July 22, 1997. The
certificate of deposit has been pledged as collateral for an
irrevocable standby letter of credit opened by the Company to
guarantee monthly equipment lease payments (not to exceed
$23,611 per month) to be made by the Company on behalf of Rave
Engineering pursuant to the Development Agreement. The
balance of the standby letter of credit will be reduced by any
payments made and any cash restriction on the certificate of
deposit is limited to the balance of the standby letter of
credit. Through March 31, 1997, the Company had made payments
of $262,821 against the $850,000 additional equipment
purchases.
A substantial portion 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 the Agency Agreement with Prime ,
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 has been paid in accordance
with the terms of the agreement, (ii) $400,000 is payable out
of the Company's first sublicensing fees, and (iii) $700,000
is payable out of the Company's portion of sublicensing
royalties when net sublicensing sales exceed $200,000,000.
10
<PAGE>
The Company anticipates that its available cash will be
sufficient to satisfy its contemplated cash requirements for
at least the next 12 months.
Plan of Operation
The Company's plan of operation over the next 12 months
focuses primarily on the marketing and/or licensing of the
NUWAVE Video Processor and Softsets and the NUWAVE TBC
products, the production of additional prototypes and
continued effort necessary to support the sales and marketing
of the NUWAVE Video Processor and Softsets and the NUWAVE TBC
products. The Company originally anticipated devoting
significant resources to the final development of its Magic
Card with a goal of introducing it to the market in the second
half of 1997. However with the introduction of the NUWAVE
Video Processor and Softsets in January and February and the
apparent favorable market feedback from its initial marketing
and sales calls, the Company has determined to devote the
majority of the personnel, economic resources and research and
development efforts that it would have devoted to the Magic
Card to the support of the sales and marketing of the NUWAVE
Video Processor and Softsets. The Company believes this will
give it the opportunity to further refine the Magic Card based
on its experience with the NUWAVE Video Processor and market
reaction. Because the final commercial development of the
Magic Card will be based in large part on the Company's
experience in marketing the NUWAVE Video Processor, the
Company cannot predict when, if at all, it will finalize
commercial development of the product or commence marketing it.
The Company anticipates, based on its current proposed
plans and assumptions relating to its operations, that it has
sufficient cash 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 and its available cash proves 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 the NUWAVE Video
Processor, it may require resources substantially greater than
its available cash 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. There can be no assurance
that the Company will be able to successfully implement a
marketing strategy, generate significant revenues or 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.
This Quarterly Report on Form 10-QSB contains forward-
looking statements that involve a number of risks and uncertainties.
Among the important factors that could cause actual results to
differ materially from those indicated by such forward-looking
statements are delays in product development, competitive
pressures, general economic conditions, risks of intellectual
property litigation, and the risk factors detailed from time
to time in the Company's annual report on form 10KSB and other
material filed with the Securities and Exchange Commission.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial data schedule
(b) Reports of Form 8-K
None
12
<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 May 15, 1997.
NUWAVE TECHNOLOGIES, INC.
---------------------------
(Registrant)
DATE: May 15, 1997 By: /s/ Gerald Zarin
---------------------------
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: May 15, 1997 By: /s/ Jeremiah F. O'Brien
---------------------------
Jeremiah F. O'Brien
Chief Financial Officer
(Principal Financial Officer)
13
<PAGE>
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