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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 September 30, 2000
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: (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 September 30, 2000: 10,557,729
------------------
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Balance Sheet - September 30, 2000 (unaudited) P. 3
Statements of Operations - For the three and nine month
periods ended September 30, 1999 (unaudited) and
September 30, 2000 (unaudited) and for the period
July 17, 1995 (inception) to September 30, 2000
(unaudited) P. 4
Statements of Cash Flows - For the three and nine month
periods ended September 30, 1999 (unaudited) and
September 30, 2000 (unaudited) and for the period
from July 17, 1995 (inception) to September 30, 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 6. EXHIBITS AND REPORTS ON FORM 8-K P. 16
SIGNATURES P. 17
2
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A Development Stage Enterprise)
BALANCE SHEET
ASSETS
Sept 30,
2000
-----------
(unaudited)
Current assets:
Cash and cash equivalents $ 4,464,989
Inventory 43,930
Prepaid expenses and other current assets 111,096
-----------
Total current assets 4,620,015
Property and equipment 115,448
Other assets 66,293
Deferred tax benefits 544,958
-----------
Total assets $ 5,346,714
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 189,871
-----------
Total liabilities 189,871
-----------
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 September 30, 2000: issued and outstanding 10,557,729
shares 105,577
Additional paid in capital 24,413,135
Deficit accumulated during the development stage (19,361,869)
-----------
Total stockholders' equity 5,156,843
-----------
Total liabilties and stockholders' equity $ 5,346,714
===========
The accompanying notes are an integral part of these condensed
financial statements.
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<PAGE>
NUWAVE TECHNOLOGIES, INC
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative from
July 17, 1995
Three months Three months Nine months Nine months (inception)
ended ended ended ended to
September 30, September 30, September 30, September 30, September 30,
1999 2000 1999 2000 2000
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net Sales $ 1,440 $ 12,961 $ 152,334
Cost of Sales (829) (4,128) (15,448)
------------ ------------ ------------ ------------ ------------
611 8,833 36,886
------------ ------------ ------------ ------------ ------------
Operating expenses:
Research and development expense $ (187,425) $ (338,835) $ (691,261) $ (1,188,375) $ (7,508,284)
General and administrative expense (510,716) (696,430) (1,727,819) (2,513,381) (12,225,833)
------------ ------------ ------------ ------------ ------------
(698,141) (1,035,265) (2,419,080) (3,701,756) (19,734,117)
------------ ------------ ------------ ------------ ------------
Loss from operations (698,141) (1,034,654) (2,419,080) (3,692,923) (19,697,231)
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income 40,380 79,231 140,777 209,253 951,318
Interest expense (337,251)
Rave settlement costs (338,895) (338,895)
------------ ------------ ------------ ------------ ------------
40,380 79,231 (198,118) 209,253 275,172
------------ ------------ ------------ ------------ ------------
Net loss before benefit for income taxes
and extraordinary item (657,761) (955,423) (2,617,198) (3,483,670) (19,422,059)
Benefit for income taxes 908,350
------------ ------------ ------------ ------------ ------------
Net loss before extraordinary item (657,761) (955,423) (2,617,198) (3,483,670) (18,513,709)
Extraordinary item (848,160)
------------ ------------ ------------ ------------ ------------
Net loss $ (657,761) $ (955,423) $ (2,617,198) $ (3,483,670) $(19,361,869)
============ ============ ============ ============ ============
Basic and diluted loss per share:
Weighted average number of
common shares outstanding 8,458,291 10,557,729 8,457,030 9,993,523
============ ============ ============ ============
Basic and diluted loss
per share $ (0.08) $ (0.09) $ (0.31) $ (0.35)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
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<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from
July 17, 1995
Three Months Three Months Nine Months Nine Months (inception)
ended ended ended ended to
September 30, September 30, September 30, September 30, September 30,
1999 2000 1999 2000 2000
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net loss $ (657,761) $ (955,423) $ (2,617,198) $ (3,483,670) $(19,361,869)
Adjustments to reconcile net loss to net cash used
in operating activities:
Extraordinary item 848,160
Depreciation expense 12,703 16,455 36,016 48,862 215,647
Amortization of unamortized debt discount 168,778
Amortization of deferred financing costs 89,062
(Increase) in inventory (872) (3,041) (43,930)
(Increase) Decrease in prepaid expenses and other
current assets (47,830) (16,642) 10,714 (14,111) (111,096)
(Increase) Decrease in other assets 101,376 (17,387) 89,103 (2,162) (66,293)
(Increase) Decrease in Deferred tax benefits 363,392 (544,958)
Increase (Decrease) in accounts payable and
accrued liabilities (174,588) (145,503) (40,979) (84,684) 189,871
Issuance of warrants in connection with
consultant agreements 40,830 44,110 169,765 190,116 611,603
Extension of Stock Options Expiration date at less
than Current Market Price 45,134 45,134
Issuance of common stock in connection with
an arbitration settlement 146,200 146,200
Issuance of options in connection with
an arbitration settlement 17,695 17,695
Issuance of common stock for services rendered 20,600
------------ ------------ ------------ ------------ ------------
Net cash used in operating activities (725,270) (1,075,262) (2,188,684) (2,940,164) (17,775,396)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (3,276) (839) (21,640) (63,644) (331,095)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities (3,276) (839) (21,640) (63,644) (331,095)
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
5
<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from
July 17, 1995
Three Months Three Months Nine Months Nine Months (inception)
ended ended ended ended to
September 30, September 30, September 30, September 30, September 30,
1999 2000 1999 2000 2000
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
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
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 (37,349) (44,638) (1,101,369) (4,880,225)
Issuance of common stock in connection with
exercise of stock options and/or warrants 18,275 18,275 874 119,149
Release of restricted cash 8,970 76,078
Deferred financing costs (201,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities 27,245 (37,349) 49,715 5,499,505 22,571,480
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (701,301) (1,113,450) (2,160,609) 2,495,697 4,464,989
Cash and cash equivalents at the beginning of
the period 3,530,851 5,578,439 4,990,159 1,969,292 -
Cash and cash equivalents at the end of
the period $ 2,829,550 $ 4,464,989 $ 2,829,550 $ 4,464,989 $ 4,464,989
============ ============ ============ ============ ============
Supplemental disclosure of cash flow information:
Interest paid during the period $ 79,411
============
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
============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
6
<PAGE>
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 March 14, 2000, 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"), units of the Company's securities (the
"Units") which consist of an aggregate of 2,088,608 shares of the Company's
Common Stock and 1,044,304 Redeemable Series B 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., New York time, on March 14, 2003.
Janssen-Meyers Associates L.P. ("JMA"), for acting as placement agent
for the March 2000 Placement, received a commission of 10% ($660,000) of the
gross proceeds from the sale of 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
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<PAGE>
of its compensation, warrants exercisable until March 14, 2005 to purchase up to
522,159 shares of the Company's Common Stock at a price per share of $3.16 and
warrants to purchase up to 261,080 Common Shares at $3.95 per share exercisable
until March 14, 2003.
As a result of the above capital transactions and in accordance with
the provisions of the 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 was
$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.
8
<PAGE>
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
NUWAVE Technologies, Inc. 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. Technologies being
commercialized are in the fields of photo and video-enhancement. In this regard,
the first technology we have developed is a 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") hardware 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. We are
currently marketing this product to OEMs who, by incorporating this enabling
technology, will improve picture quality in their set-top boxes, televisions,
VCR's, DVD's, camcorders and other video output devices.
In addition to the NVP hardware technology, we have also developed the
only proprietary digital high speed filtering technology that removes noise and
graininess in both pictures and video images and complements the clarity
technology used in the NVP. The result of this development is a set of
algorithms, patent pending, that remove 70% of the picture noise while retaining
9
<PAGE>
correct focus (the image and text in the image does not blur). In addition, this
algorithm process is three times faster than any other known algorithm or
filter, thus allowing use in and during real time streaming video. Based on the
power of these proprietary noise reduction algorithms a software product,
PicturePrepTM2000, has been developed for users to correct, improve and enhance
digital streaming video and digital photography and which is the first retail
and downloadable software product with the ability to enhance both pictures and
streaming video from virtually any computer program or while surfing the
Internet using a computer.
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 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 fifteen
months.
On March 14, 2000, we completed a private placement through
Janssen-Meyers whereby the Company issued 2,088,608 shares of the Company's
Common Stock and 1,044,304 Redeemable Series B Common Stock Purchase Warrants
for an aggregate purchase price of $6,600,000.
As of September 30, 2000, we had accumulated a deficit during the
development stage of $19,361,869, which includes a net loss for the nine months
ended September 30, 2000 of $3,483,670. The loss for the nine months ended
September 30, 2000 included $2,513,381 in general and administrative expenses,
representing an increase of $785,562 compared to the nine-month period ended
September 30, 1999. Such increase was primarily the result of sales and
marketing efforts ($618,795), discussed more fully below, combined with
increased personnel and payroll costs ($244,144), investor relations ($157,716),
travel ($37,615), insurance ($21,081) and other ($106,943). These increases were
partially offset by decreases in financial consulting $227,765, legal fees
$104,307 and China office expenses $68,660.
Although the Company anticipates deriving some revenue from the sale
of its 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 2000 we launched on-line via PicturePrep.com,
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 computer
program or while surfing the Internet using a computer.
On June 27, 2000, PicturePrepClub.com, an internet photo portal, was
launched to serve not only as NUWAVE's e-commerce hub for the sale of the
PicturePrepSuite2000TM line of products but also to provide club members with
unlimited gallery space to exhibit photos, as well as an array of products
including online print services and gifts such as imprinted T-shirts, mugs,
mouse pads, etc. PicturePrepClub.com revenue sources are expected to include
membership sales, product sales, on-line print services and advertising. In
connection with the PicturePrepClub.com web site, the Company has entered into
an agreement with Eastman Kodak Company whereby Print@KODAK becomes NUWAVE's
-----------
exclusive on-line fulfillment service to deliver prints and photo products
directly to consumers' homes. This service became available to PicturePrepClub
members on August 17, 2000.
In addition to direct on-line consumer sales (B to C sales), we have
begun marketing and advertising this technology directly to businesses (B to B),
expanding our potential OEM customer base to include embedding or bundling our
technology into products such as PC's, printers, scanners, camcorders and DVD's,
digital cameras, among other imaging devices, and also by providing our software
products to retailers for sale in their camera, film and film processing
departments. This digital technology can work independently or can complement
our analog ASIC chip technology by working in conjunction with it to further
improve the resulting image quality.
The Company has completed development of its 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 had
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. The agreement with Terk provided, among other things,
exclusivity for Terk in the United States and Canada provided Terk purchased
certain minimum quantities by October 31, 2000. Terk failed to purchase the
required minimum purchases and has been notified of the loss of their exclusive
arrangement. We are currently exploring an expansion of the product line as well
as additional manufacturing opportunities and distribution channels for the
United States and Canada, South America and the European markets.
The Company continues to market its NVP chip 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 our low cost NVP hardware 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
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<PAGE>
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 is
completed and and it is now production-ready pending customer orders. In
addition, test fixtures have been built which now allow NUWAVE, for the first
time, to use an actual ASIC chip for sales demonstration and customer evaluation
purposes. Prior to the availability of the NVP ASIC chip, we had been conducting
sales presentations of the NVP hardware 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.
We intend to support our 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 firm to assist us in the development and implementation
of a program to develop market awareness and commercialization of our 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 creative and development costs relating to these marketing
programs are and will be substantially incurred during 2000. As a result, such
expenditures for the first nine-month period of 2000 were increased by
approximately $618,795, compared to the first nine-month period of 1999. During
the nine-month period ended September 30, 2000 such costs included $116,885 for
professional sales and marketing consultants, compared to $64,832 for the
nine-month period ended September 30, 1999; $544,894 for advertising and public
relations, compared to $14,810 for the nine months ended September 30, 2000;
$31,550 for trade shows, compared to $1,580 for the nine months ended September
30, 1999; and $29,178 for professional printing services, compared to $22,490
for the nine months ended September 30, 1999. The Company is continually
reviewing its operating needs with a view to maximizing efficiency while
conserving its resources.
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RESEARCH AND DEVELOPMENT
NUWAVE's research and development activity is conducted by our
Engineering Group. As of September 30, 2000, the Engineering Group consisted of
six Company employees as well as outside consultant organizations who have on
their respective staffs experienced 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
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 its
Engineering Group as well as other independent third party sources and to
increase its internal technical and engineering staff as appropriate.
To date the Engineering Group has been responsible for the development
of the NVP hardware 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 PicturePrepClub.com and our product line of NVP ASIC chips.
From July 17, 1995 to September 30, 2000, the Company incurred
expenses of $7,508,284 on research and development, of which approximately 46%
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 nine-month periods of 2000 and
1999, $1,188,375 and $691,261, 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 three quarters 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 hardware and digital software products during such 12-month
period, it anticipates an increase in its currently 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
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Company issued 2,742,904 shares of the Company's Common Stock and 2,057,207
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 Series B
Common Stock Purchase Warrants for an aggregate purchase price of $6,600,000.
On September 30, 2000 the Company had cash and cash equivalents of
approximately $4,500,000 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 NVP
ASIC line of chips, continued development of our digital software technology,
growing our Internet presence (including the PicturePrepClub.com model and the
Print@Kodak model), the marketing and sales of our hardware and software 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
MemoryLink 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 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 hardware 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 to
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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.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27. Financial data schedule
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NUWAVE TECHNOLOGIES, INC.
-------------------------
(Registrant)
DATE: November 14, 2000 By: /s/ Gerald Zarin
------------------------------------
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: November 14, 2000 By: /s/ Jeremiah F. O'Brien
------------------------------------
Jeremiah F. O'Brien
Chief Financial Officer
(Principal Financial Officer)
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