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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, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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: (973) 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, 2000: 10,557,497
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Transitional Small Business Disclosure Format: Yes [ ] No [X]
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NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Balance Sheet - March 31, 2000 (unaudited) P. 3
Statements of Operations - For the three month
periods ended March 31, 1999 (unaudited)
and March 31, 2000 (unaudited) and for the
period July 17, 1995 (inception) to March 31,
2000 (unaudited) P. 4
Statements of Cash Flows - For the three month
periods ended March 31, 1999 (unaudited)
and March 31, 2000 (unaudited) and for the
period from July 17, 1995 (inception) to
March 31, 2000 (unaudited) P. 5
Notes to Condensed Financial Statements P. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION P. 9
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS P. 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS P. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K P. 17
SIGNATURES P. 18
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NUWAVE TECHNOLOGIES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
ASSETS
March 31,
2000
-------------
(unaudited)
Current assets:
Cash and cash equivalents $ 6,888,526
Inventory 39,345
Prepaid expenses and other current assets 78,287
-------------
Total current assets 7,006,158
Property and equipment 135,368
Other assets 56,518
Deferred tax benefits 544,958
-------------
Total assets $ 7,743,002
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 212,771
-------------
Total liabilities 212,771
-------------
Commitments and contingencies
Stockholders' equity:
Series A Convertible Preferred Stock,
noncumulative, $.01 par value; authorized
400,000 shares; issued and outstanding - none
Preferred stock, $.01 par value; authorized
1,000,000 shares; issued and oustanding -
(such preferences and rights to be designated
by the Board of Directors)
Common stock, $.01 par value; authorized
40,000,000 shares; as of March 31, 2000;
issued and outstanding 10,557,497 shares 105,575
Additional paid in capital 24,323,301
Deficit accumulated during the development stage (16,898,645)
-------------
Total stockholders' equity 7,530,231
-------------
Total liabilties and stockholders' equity $ 7,743,002
=============
The accompanying notes are an integral part of these condensed
financial statments
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NUWAVE TECHNOLOGIES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
Cumulative from
July 17, 1995
Three Months Three Months (inception)
ended ended to
March 31, March 31, March 31,
1999 2000 2000
------------- ------------ ---------------
(unaudited) (unaudited) (unaudited)
Net Sales $ 4,994 $ 44,367
Cost of Sales (1,544) (12,864)
----------- ----------- ------------
3,450 31,503
----------- ----------- ------------
Operating expenses:
Research and development expenses $ (253,271) $ (363,370) $ (6,683,279)
General and administrative expenses (589,951) (697,286) (10,409,738)
----------- ----------- ------------
(843,222) (1,060,656) (17,093,017)
----------- ----------- ------------
Loss from operations (843,222) (1,057,206) (17,061,514)
----------- ----------- ------------
Other income (expense):
Interest income 55,002 36,760 778,825
Interest expense (337,251)
Rave settlement costs (338,895)
----------- ----------- ------------
55,002 36,760 102,679
----------- ----------- ------------
Net loss before benefit for income
taxes and extraordinary
item (788,220) (1,020,446) (16,958,835)
Benefit for income taxes 908,350
----------- ----------- ------------
Net loss before extraordinary item (788,220) (1,020,446) (16,050,485)
Extraordinary item (848,160)
----------- ----------- ------------
Net loss $ (788,220) $(1,020,446) $(16,898,645)
=========== =========== ============
Basic and diluted loss per share:
Weighted average number
of common shares outstanding 8,356,389 8,859,069
=========== ===========
Basic and diluted loss
per share $ (0.09) $ (0.12)
=========== ===========
The accompanying notes are an integral part of these condensed
financial statments
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NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
Cumulative
from
July 17, 1995
Three Months Three Months (inception)
ended ended to
March 31, March 31, March 31,
1999 2000 2000
----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $(788,220) $(1,020,446) $(16,898,645)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Extraordinary item 848,160
Depreciation expense 11,691 14,881 181,666
Amortization of unamortized debt
discount 168,778
Amortization of deferred financing
costs 89,062
(Increase) Decrease in
inventory 1,544 (39,345)
(Increase) Decrease in prepaid
expenses and other current assets 14,836 18,698 (78,287)
(Increase) Decrease in other
assets 1,364 7,613 (56,518)
(Increase) Decrease in Deferred
tax benefits 363,392 (544,958)
Increase (decrease) in accounts
payable and accrued liabilities 70,073 (61,784) 212,771
Issuance of warrants in connection
with consultant agreements 64,465 73,003 494,490
Issuance of common stock in
connection with an arbitration
settlement 146,200
Issuance of options in connection
with an arbitration settlement 17,695
Issuance of common stock for services
rendered 20,600
--------- --------- ------------
Net cash used in
operating activities (625,791) (603,099) (15,438,331)
--------- --------- ------------
Cash flows from investing activities:
Purchase of property and
equipment (15,348) (49,583) (317,034)
--------- --------- ------------
Net cash used in
investing activities (15,348) (49,583) (317,034)
--------- --------- ------------
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
Proceeds from IPO 11,753,010
The accompanying notes are an integral part of these financial statments
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Cumulative
from
July 17, 1995
Three Months Three Months (inception)
ended ended to
March 31, March 31, March 31,
1999 2000 2000
----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
Proceeds from equity offering -
February 6, 1998 1,000,000
Proceeds from equity offering May 19
to June 6, 1998 7,280,546
Proceeds from equity offering -
March 14, 2000 6,600,000 6,600,000
Repayment of notes issued in connection
with initial bridge notes (2,000,000)
Costs incurred for equity offerings
and warrants (40,946) (1,028,084) (4,806,940)
Issuance of common stock in connection
with exercise of stock options 118,275
Release of restricted cash 22,370 - -
Deferred financing costs (201,000)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (18,576) 5,571,916 22,643,891
----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents (659,715) 4,919,234 6,888,526
Cash and cash equivalents at the
beginning of the period 4,990,159 1,969,292 -
----------- ----------- -----------
Cash and cash equivalents at
the end of the period $ 4,330,444 $ 6,888,526 $ 6,888,526
=========== =========== ===========
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 for 14 bridge
units $ 140,000
===========
Deferred equity costs charged to additional
paid in capital in connection with
the PPO $ 13,400
===========
Deferred financing costs charged to
additional paid-in capital in
connection with the IPO $ 25,000
===========
600,000 Series A Convertible Preferred
Stock converted into Common Stock $ 6,000
===========
The accompanying notes are an integral part of these financial statments
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NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
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
("SEC") on March 30, 2000.
2. Capital Transactions
--------------------
On February 14, 2000 the Company entered into a placement agency
agreement with Janssen-Meyers Associates, L.P. ("JMA") to act as the Company's
placement agent in a private equity placement whereby the Company issued to
certain accredited investors, as defined under Regulation D as promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), 2,088,608 shares
of the Company's Common Stock and 1,044,304 Redeemable Common Stock Purchase
Warrants ("Common Stock Purchase Warrants") on March 14, 2000 for an aggregate
purchase price of $6,600,000. Each Common Stock Purchase Warrant entitles the
holder thereof to purchase one share of Common Stock at an exercise price per
share of $3.95, subject to adjustment upon the occurrence of certain events to
prevent dilution, at any time during the period commencing from March 14, 2000
and expiring on March 14, 2003. The Common Stock Purchase Warrants are subject
to redemption by the Company at $.01 per Warrant 12 months after the effective
date of a registration statement covering the Warrants on not less than 30 days
prior written notice to the holders of the Warrants, provided the average
closing bid price of the Common Stock has been at least 250% of the then current
exercise price of the Warrants for a period of thirty consecutive trading days
ending within five days prior to the date on which the Company gives notice of
redemption. The Common Stock Purchase Warrants will be exercisable until 5:00
P.M. on March 14, 2003 New York time.
Janssen-Meyers Associates for acting as placement agent
received a commission of 10% ($660,000) of the gross proceeds from the sale of
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the Units, as well as a 3% non-accountable expense allowance ($198,000) and
reimbursement of other costs, including legal expenses relating to the offering
($54,399). In addition, JMA received as part of its compensation, warrants
exercisable until March 14, 2005 to purchase up to 522,152 shares of the
Company's Common Stock at a price per share of $3.16 and warrants to purchase up
to 261,076 Common Shares at $3.95 per share exercisable until March 14, 2005.
As a result of the above capital transactions and in
accordance with the provisions of that certain Warrant Agreement dated as of
July 3, 1996 (the "Public Warrant Agreement"), between the Company, Rickel &
Associates, Inc. and American Stock Transfer & Trust Company, adjustments have
been made to the exercise price (the "Public Warrant Price") for the warrants
issued pursuant to such Warrant Agreement (the "Public Warrants") and to the
number of shares of Common Stock issuable on exercise of the Public Warrants.
The Public Warrant Price has been reduced from the previously diluted price of
$4.15 (original issue price $5.50) to $3.99. In addition, for every share of
Common Stock the Public Warrant holders were entitled to prior to the dilutive
transactions (2,530,000 shares), the Public Warrant holders are now entitled to
1.378 shares of Common stock (3,486,340 shares). Also, pursuant to the Public
Warrant Agreement, the Company can redeem the Public Warrants in the event that
the average closing price of the Company's Common Stock is at least 150% of the
then current Public Warrant Price for a period of 20 consecutive trading days:
consequently, the average closing price now required is $5.985 versus the
previously diluted price of $6.225 and the original price of $8.25.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
This Report on Form 10-QSB contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
statements other than statements of historical facts included in this Report,
including without limitation, the statements under "General," "Marketing and
Sales," "Research and Development," "Liquidity and Capital Resources," and
"Plan of Operation" are forward-looking statements. The Company cautions that
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward-looking statements, due to several important factors herein identified.
Important factors that could cause actual results to differ materially from
those indicated in the forward-looking statements ("Cautionary Statements")
include delays in product development, competitive products and pricing,
general economic conditions, risks of intellectual property litigation, product
demand and industry capacity, new product development, commercialization
of new technologies, the Company's ability to raise additional capital when
required, and the risk factors detailed from time to time in the Company's
annual report on Form 10-KSB and other materials filed with the SEC.
All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
GENERAL
The Company is a development stage enterprise organized in
July 1995. Our mission is to identify and commercialize high margin, proprietary
technologies suited for high-volume, high-growth markets and, in turn achieve
attractive long-term growth for the Company. The first technologies being
commercialized are in the field of photo and video-enhancement. In this regard
we have developed proprietary video-enhancement technology designed to
significantly enhance video output devices with clearer, sharper details and
more vibrant colors when viewed on the display screen. This is known as the
NUWAVE Video Processor ("NVP") technology. We intend to license this technology
and/or have it manufactured in the form of Application Specific Integrated
Circuit ("ASICs") chips through third parties and to directly market these
products to OEMs which would incorporate this enabling technology to improve
picture quality in set-top boxes, televisions, VCR's, DVD's, camcorders and
other video output devices. In addition to the NVP technology, we recently
completed development of our proprietary digital photo and video software
technology. The technology was introduced as PictureWizard in September 1999 and
sold directly to consumers through our exclusive E-commerce Web site store at
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picturewizard.com. In April 2000 we launched the PicturePrepSuite2000 product
line offering additional features, benefits and options. These products are the
first downloadable software products with the ability to enhance both pictures
and streaming video from virtually any PC program or while surfing the internet
using a PC.
The Company has formed a strategic alliance with MemoryLink
Corp. for the commercialization of certain of MemoryLink's propriety Wireless
Digital Video Technology, which was recently introduced by NUWAVE and MemoryLink
at the January 2000 International Consumer Electronics Show, where prototypes of
the initial products using the technology were demonstrated to selected major
OEM companies based in Asia, Europe and the U.S. The products using the Wireless
Digital Video Technology are expected to be available within the next twelve to
eighteen months.
On March 14, 2000, we completed a private placement with
Janssen-Meyers whereby the Company issued 2,088,608 shares of the Company's
Common Stock and 1,044,304 Redeemable Common Stock Purchase Warrants for an
aggregate purchase price of $6,600,000.
As of March 31, 2000 we had an accumulated a deficit during
the development stage of $16,898,645, which includes a net loss for the three
months ended March 31, 2000 of $1,020,446. The loss for the three months ended
March 31, 2000 included $697,286 in general and administrative expenses,
representing an increase of $107,335 compared to the three-month period ended
March 31, 1999. Such increase was primarily the result of sales and marketing
efforts ($146,370) discussed more fully below combined with increased personnel
and payroll costs ($67,809), investor relations ($60,422), travel ($9,290) and
other ($13,649). These increases were partially offset by decreases in financial
consulting $86,711, legal fees $70,616 and China office expenses $32,878.
Although the Company anticipates deriving some revenue from
the sale of its proprietary software (Softsets) and the NVP products during
2000, no assurance can be given that these products will be successfully
marketed during such period. See "Liquidity and Capital Resources."
MARKETING AND SALES
In September 1999, the Company completed the initial
development of its first proprietary digital photo and video software
technology. This technology was introduced as Picture Wizard for the primary
purpose of limited test marketing, system and product evaluation in a live
setting, and to garnish customer feedback on both the product and the Web site.
Based on this initial test marketing, customer feedback and the results of an
independent survey sponsored by the Company, in April we launched, the
PicturePrepSuite2000 product line offering additional features, benefits and
options. These products are the first downloadable software products with the
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ability enhance both pictures and streaming video from virtually any PC program
or while surfing the Internet using a PC.
The PicturePrepSuite2000 product line is currently being sold
directly to consumers through our exclusive Web site at pictureprep.com. In
addition, on May 11, 2000 we announced our plan to officially open
Shutterbugclub.com in July 2000. Shutterbugclub.com, digital portal will serve
not only as NUWAVE's E-commerce hub to launch sales of the PicturePrepSuite2000
line of products but also to provide members with an unlimited gallery space to
exhibit photos as well as an array of products including on-line print services
and gifts such as pictures on T-shirts, mugs, mouse pads, etc. In addition to
direct on-line consumer sales (B to C sales), in late April we began a campaign
to market and advertise this technology directly to businesses (B to B)
expanding our potential OEM customer base by either embedding or bundling our
technology into products such as PC's, printers, scanners, camcorders and DVD's
among other imaging devices and by providing our software products to retailers
for sale in their camera, film and film processing departments. This digital
technology not only complements our analog ASIC chip technology but can also
work in conjunction to further improve the resulting image quality.
The Company has recently completed development of our first
retail product for consumers who do not have NUWAVE enabled products for their
TV's but want to improve the picture quality of their home viewing. We believe
that the most effective way to introduce this product into the retail
marketplace is to work through distributors who will manufacture and sell to
retailers, including those with whom they are currently doing business. In this
regard, the Company has entered into a five-year manufacturing and marketing
agreement with Terk Technologies Corp. to manufacture and market under the Terk
brand name, a line of set-top boxes incorporating NUWAVE's technology for
existing televisions and video output products. Terk products are currently
marketed to all major consumer electronics retailers in the U.S. At present,
there are three hundred million non-enhanced televisions in the United States
alone.
The Company continues to market our NVP technology to
manufacturers of video products including TV's, VCR's, DVD's, set-top boxes,
satellite distribution systems, digital cameras and camcorders. We have also
introduced our technology to companies that manufacture component parts and
semiconductors used in the manufacture of such video products. We believe that
the inclusion of the NVP technology in such video products will allow them to
produce significantly better images and allow for product differentiation, and
the low cost to the user will make it an attractive product. The Company's goal
is to position itself to take advantage of the converging television,
telecommunication and computer markets by developing multiple products from its
unique video enhancement technology.
In March 2000 we received the OEM version of our NVP ASIC chip
from the semiconductor-manufacturing foundry. In-house testing of this ASIC chip
was completed in April and test fixtures have been built which will allow
NUWAVE, for the first time, to use an actual ASIC chip for sales demonstration
and customer evaluation purposes. We expect to be ready for full scale
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production by September, 2000. Prior to the availability of the NVP ASIC chip,
we had been conducting sales presentations of the NVP technology in printed
circuit board ("PCB") layout format to prospective OEM customers world wide
(i.e., manufacturers of set-top boxes, televisions, VCR's, DVD's and other video
output devices). Our sales program is aimed at obtaining orders initially from
those customers who had previously evaluated the Company's technology in PCB
format and now wish to test the ASIC chips in their products. We have marketing
and sales organizations in place in the U.S., Japan and China, to implement this
program, Although we are unable to predict whether our marketing efforts will be
successful, we believe that our products have been well received.
The Company has formed a strategic alliance with MemoryLink
Corp. for the commercialization of certain of MemoryLink's propriety Wireless
Digital Video Technologies, which was introduced in January, 2000 by NUWAVE and
MemoryLink at the 2000 International Consumer Electronics Show, where prototypes
of the initial products using the technology were demonstrated to selected major
OEM companies based in Asia, Europe and the U.S. The products using the Wireless
Digital Video Technology are expected to be available within the next twelve to
eighteen months.
We intend to support the above sales efforts through
comprehensive sales and marketing program and activities including trade
advertising which began in April 2000, attendance at industry trade shows,
attendance at participating dealer shows, attendance at end-user events,
literature mailers and co-op dealer advertising. During the last quarter of
1999, we contracted with a professional marketing communications firms to assist
us in the development and implementation of a program to develop market
awareness and commercialization of its products. This program included
development of Company and product brochures and press kits, product
specification sheets, attendance at key trade shows, mailers, the production of
corporate CD-ROMs for use at sales and media presentations, development of and
placement of advertisements in key industry journals and consumer magazines,
etc.
The developmental costs relating to these programs are and
will be substantially incurred during 2000. As a result, such expenditures for
the first quarter of 2000 were increased by approximately $146,370 compared to
the first quarter of 1999. During the three-month period ended March 31, 2000
such costs included $32,024 for professional sales and marketing consultants
compared to $19,000 for the three-month period ended March 31, 1999; $110,665
for advertising and public relations compared to $4,845 for the three months
ended March 31, 2000; $7,245 for trade shows compared to $0 for the three months
ended March 31, 1999; and $23,629 for professional printing services compared to
$3,348 for the three months ended March 31, 1999. The Company is continually
reviewing its needs with a view to maximizing efficiency while conserving its
resources.
RESEARCH AND DEVELOPMENT
NUWAVE's research and development activity is conducted by our
"Advanced Engineering Group". As of March 31, 2000, the Advanced Engineering
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Group consisted of 5 of the Company's employees and outside consultant
organizations who have on their respective staffs engineers, technicians and
support personnel (totaling more than 30 personnel) who devote time to the
Company on an as-needed project-by-project basis. The Company anticipates that
the make-up of its Advanced Engineering Group will change from time to time
depending on its current and anticipated development and commercialization
plans. The Company's strategy with respect to new products and technologies is
to continue to utilize the Advanced Engineering Group as well as other
independent third party sources and to increase its internal technical and
engineering staff as appropriate.
To date the Advanced Engineering Group has been responsible
for the development of the NVP technology, our digital software development and
the design of the Company's exclusive Web sites. Our current development efforts
are geared towards completion of the PicturePrepSuite2000 line of Products,
final development of Shutterbugclub.com and our product line of NVP ASIC chips.
From July 17, 1995 to March 31, 2000, the Company incurred
expenses of $6,683,279 on research and development, of which approximately 52%
was paid to Rave Engineering Corp. pursuant to a License and Development
Agreement which was terminated in October, 1998 and subject of an arbitration
settlement reached in May, 1999. During the first quarter of 2000 and 1999,
$363,370 and $253,271, respectively, was spent on research and development
activities. The increase in 2000 was solely due to development costs pertaining
to the digital software products and the Web site development costs, as they did
not exist in the first quarter of 1999. During the next 12 months, we estimate
that the Company will spend approximately $800,000 on research and development
costs in support of the commercialization of its products. In the event the
Company is able to generate sufficient revenues from sales of its NVP and
digital software products during such 12-month period, we anticipates that an
increase in estimated expenditures on research and development and the
identification of new sources of technology.
LIQUIDITY AND CAPITAL RESOURCES
From its inception until the 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
("Private Financings"). In July 1996, the Company completed its 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. On February 6, 1998,
253,485 shares of the Company's Common Stock were issued for an aggregate
purchase price of $1,000,000 to a Private Limited Partnership. On May 11, 1998,
the Company entered into a placement agency agreement with Janssen-Meyers to act
as the Company's placement agent in a private equity placement whereby the
Company issued 2,742,904 shares of the Company's Common Stock and 2,057,207
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Class A Redeemable Warrants between May 19, 1998 and June 9, 1998 for an
aggregate purchase price of $7,280,546.
On March 14, 2000, the Company completed a private placement
of 2,088,608 shares of the Company's Common Stock and 1,044,304 Redeemable
Common Stock Purchase Warrants for an aggregate purchase price of $6,600,000.
On March 31, 2000 the Company had cash and cash equivalents
of approximately $6,800,000 and no long-term liabilities. We anticipate that
the Company's available cash will be sufficient to satisfy its contemplated
cash requirements for at least through the next twelve months.
PLAN OF OPERATION
The Company's plan of operation over the next 12 months
focuses primarily on transitioning from a development stage organization to an
operating Company. This transition includes the final phase of the development
of our ASIC line of chips and continued development of our digital software
technology and Internet presence and the marketing and sales of these two lines
of analog and digital picture and video enhancement products to the OEM,
professional video and retail markets and the sustained effort necessary to
support the sales and marketing of these products. In addition, the Company
through its strategic alliance with Memory Link Corp., plans to market wireless
video technology, as the products become available, to the same OEM customer
base that it is currently marketing its analog and digital technology. Also, we
plan, through our Advanced Engineering Group and agreement with third parties,
to continue to conduct investigation and research and development activities
with respect to other new technologies/products to address the digital, PC and
Internet markets. These activities may give rise to additional products that may
be commercialized by the Company. However, there can be no assurance that its
efforts will result in marketable products or products that can be produced at
commercially acceptable costs.
The Company anticipates, based on its current proposed plans
and assumptions relating to its operations, that it has sufficient cash to
satisfy the estimated cash requirements of the Company for at least the next 12
months. In the event of unanticipated expenses, delays or other problems beyond
this period, the Company might be required to seek additional funding. In
addition, in the event that the Company receives a larger than anticipated
number of initial purchase orders upon introduction of its NVP products, it may
require resources 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. There can be no assurance that such additional capital will
be available to the Company if needed, on commercially reasonable terms or at
all.
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
14
<PAGE>
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.
15
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities
---------------------
Pursuant to a placement agency agreement with Janssen-Meyers
Associates, L.P. ("JMA") to act as the Company's placement agent in a private
equity placement, the Company issued to certain accredited investors, as
defined under Regulation D as promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), 2,088,608 shares of the Company's Common
Stock and 1,044,304 Redeemable Common Stock Purchase Warrants ("Common Stock
Purchase Warrants") for an aggregate purchase price of $6,600,000. Each
Common Stock Purchase Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price per share of $3.95, subject to
adjustment upon the occurrence of certain events to prevent dilution, at any
time during the period commencing from March 14, 2000 and expiring on March 14,
2003. The Common Stock Purchase Warrants are subject to redemption by the
Company at $.01 per Warrant 12 months after the effective date of a
registration statement covering the Warrants on not less than 30 days
prior written notice to the holders of the Warrants, provided the average
closing bid price of the Common Stock has been at least 250% of the then
current exercise price of the Warrants for a period of thirty consecutive
trading days ending within five days prior to the date on which the Company
gives notice of redemption. The Common Stock Purchase Warrants will be
exercisable until 5:00 P.M. on March 14, 2003 New York time.
Janssen-Meyers Associates received as part of its compensation for
acting as placement agent, warrants exercisable until March 14, 2005 to
purchase up to 522,152 shares of the Company's Common Stock at a price per
share of $3.16 and warrants to purchase up to 261,076 Common Shares at $3.95
per share exercisable until March 14, 2005.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On February 9, 2000 the Company held a Special Meeting of Stockholders
to (i) approve the issuance of shares of the Company's common stock and related
warrants aggregating a minimum of $3,000,000 and a maximum of $6,000,000 in a
private offering, to fulfill Nasdaq Stock Market Rule 4310 (C) (25) (H) and
(ii) approve a proposed amendment to the Company's Certificate of Incorporation
to increase the authorized shares of common stock by 20,000,000 shares to
40,000,000 shares. Both matters were approved by a majority of the
stockholders.
The following tables set forth information regarding the number of
votes cast for, against, abstentions and unvoted with respect to each matter
presented at the meeting.
16
<PAGE>
(i) To approve the issuance of shares of the Company's common stock and
related warrants aggregating a minimum of $3,000,000 and a
maximum of $6,000,000 in a private offering, to fulfill Nasdaq Stock
Market Rule 4310(C)(25)(H)
AGAINST OR
FOR WITHHELD ABSTENTIONS UNVOTED
4,557,717 136,005 30,938 62,000
(ii) To approve a proposed amendment to the Company's Certificate of
Incorporation to increase the authorized shares of common stock by
20,000,000 shares to 40,000,000 shares
AGAINST OR
FOR WITHHELD ABSTENTIONS UNVOTED
4,508,492 259,580 18,588 0
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
During the quarter ended March 31, 2000, the Company filed
the following reports on Form 8-K:
(i) On January 3, 2000, reported the Company's termination
of the Profutures Special Equities Fund, L.P. financing
agreement and to announce the proposed financing arrangement
with Janssen-Meyers Associates, L.P. in Item 5 therein.
(ii) On February 22, 2000, reported the results of the
February 9, 2000 Special Meeting of Stockholders as described
in Items 5 and 7 therein.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this Quarterly 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, 2000.
NUWAVE TECHNOLOGIES, INC.
-------------------------
(Registrant)
DATE: May 15, 2000 By: /s/ Gerald Zarin
----------------
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: May 15, 2000 By: /s/ Jeremiah F. O'Brien
-----------------------
Jeremiah F. O'Brien
Chief Financial Officer
(Principal Financial Officer)
18
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001009802
<NAME> NUWAVE TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,889
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 39
<CURRENT-ASSETS> 7,006
<PP&E> 317
<DEPRECIATION> 182
<TOTAL-ASSETS> 7,743
<CURRENT-LIABILITIES> 213
<BONDS> 0
0
0
<COMMON> 106
<OTHER-SE> 7,425
<TOTAL-LIABILITY-AND-EQUITY> 7,743
<SALES> 5
<TOTAL-REVENUES> 5
<CGS> 2
<TOTAL-COSTS> 1,062
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (37)
<INCOME-PRETAX> (1,020)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,020)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
