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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 June 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 June 30, 2000: 10,557,729
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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 - June 30, 2000 (unaudited) P. 3
Statements of Operations - For the three and six month periods
ended June 30, 1999 (unaudited) and June 30, 2000
(unaudited) and for the period July 17, 1995 (inception)
to June 30, 2000 (unaudited) P. 4
Statements of Cash Flows - For the three and six month periods
ended June 30, 1999 (unaudited) and June 30, 2000
(unaudited) and for the period from July 17, 1995
(inception) to June 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS P. 16
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
June 30,
2000
-------------
(unaudited)
Current assets:
Cash and cash equivalents $ 5,578,439
Inventory 43,058
Prepaid expenses and other current assets 94,454
-------------
Total current assets 5,715,951
Property and equipment 131,064
Other assets 48,906
Deferred tax benefits 544,958
-------------
Total assets $ 6,440,879
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 335,374
-------------
Total liabilities 335,374
-------------
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 June 30, 2000: issued and outstanding 10,557,729 shares. 105,577
Additional paid in capital 24,406,374
Deficit accumulated during the development stage (18,406,446)
-------------
Total stockholders' equity 6,105,505
-------------
Total liabilties and stockholders' equity $ 6,440,879
=============
The accompanying notes are an integral part of these condensed
financial statements.
3
<PAGE>
NUWAVE TECHNOLOGIES, INC
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Cumulative from
July 17, 1995
Three Months Three Months Six Months Six Months (inception)
ended ended ended ended to
June 30, June 30, June 30, June 30, June 30,
1999 2000 1999 2000 2000
------------ ------------ ------------ ------------ --------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net Sales $ 6,527 $ 11,521 $ 50,894
Cost of Sales (1,755) (3,299) (14,619)
------------ ------------ --------------
4,772 8,222 36,275
------------ ------------ --------------
Operating expenses:
Research and development expenses $ (250,565) $ (486,170) $ (503,836) $ (849,540) $ (7,169,449)
General and administrative expenses (627,152) (1,119,665) (1,217,103) (1,816,951) (11,529,403)
------------ ------------ ------------ ------------ --------------
(877,717) (1,605,835) (1,720,939) (2,666,491) (18,698,852)
------------ ------------ ------------ ------------ --------------
Loss from operations (877,717) (1,601,063) (1,720,939) (2,658,269) (18,662,577)
------------ ------------ ------------ ------------ --------------
Other income (expense):
Interest income 45,395 93,262 100,397 130,022 872,087
Interest expense (337,251)
Rave settlement costs (338,895) (338,895) (338,895)
------------ ------------ ------------ ------------ --------------
(293,500) 93,262 (238,498) 130,022 195,941
------------ ------------ ------------ ------------ --------------
Net loss before benefit for imcome taxes
and extraordinary item (1,171,217) (1,507,801) (1,959,437) (2,528,247) (18,466,636)
Benefit for income taxes 908,350
------------ ------------ ------------ ------------ --------------
Net loss before extraordinary item (1,171,217) (1,507,801) (1,959,437) (2,528,247) (17,558,286)
Extraordinary item (848,160)
------------ ------------ ------------ ------------ --------------
Net loss $(1,171,217) $(1,507,801) $(1,959,437) $(2,528,247) $ (18,406,446)
============ ============ ============ ============ ==============
Basic and diluted loss per share:
Weighted average number of
common shares outstanding 8,392,653 10,557,571 8,374,621 9,708,320
============ ============ ============ ============ ==============
Basic and diluted loss
per share $ (0.14) $ (0.14) $ (0.23) $ (0.26)
============ ============ ============ ============ ==============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
4
<PAGE>
NUWAVE TECHNOLOGIES, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Cumulative
from
July 17, 1995
Three Months Three Months Six Months Six Months (inception)
ended ended ended ended to
June 30, June 30, June 30, June 30, June 30,
1999 2000 1999 2000 2000
-------------- -------------- -------------- -------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (1,171,217) $ (1,507,801) $ (1,959,437) $ (2,528,247) $ (18,406,446)
Adjustments to reconcile net loss to net
cash used in operating activities:
Extraordinary item 848,160
Depreciation expense 11,624 17,526 23,313 32,407 199,192
Amortization of unamortized debt discount 168,778
Amortization of deferred financing costs 89,062
(Increase) Decrease in inventory (3,713) (2,169) (43,058)
(Increase) Decrease in prepaid expenses
and other current assets 43,708 (16,167) 58,544 2,531 (94,454)
(Increase) Decrease in other assets (13,637) 7,612 (12,273) 15,225 (48,906)
(Increase) Decrease in Deferred tax benefits 363,392 (544,958)
Increase (decrease) in accounts payable
and accrued liabilities 63,537 122,603 133,610 60,819 335,374
Issuance of warrants in connection with
consultant agreements 64,467 73,003 128,934 146,006 567,493
Extension of Stock Options Expiration
date at less than Current Market Price 45,134 45,134 45,134
Issuance of common stock in connection
with an arbitration settlement 146,200 146,200 146,200
Issuance of options in connection with
an arbitration settlement 17,695 17,695 17,695
Issuance of common stock for services rendered 20,600
-------------- -------------- -------------- -------------- --------------
Net cash used in operating activities (837,623) (1,261,803) (1,463,414) (1,864,902) (16,700,134)
-------------- -------------- -------------- -------------- --------------
Cash flows from investing activities:
Purchase of property and equipment (3,016) (13,222) (18,364) (62,805) (330,256)
-------------- -------------- -------------- -------------- --------------
Net cash used in investing activities (3,016) (13,222) (18,364) (62,805) (330,256)
-------------- -------------- -------------- -------------- --------------
</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 Six Months Six Months (inception)
ended ended ended ended to
June 30, June 30, June 30, June 30, June 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 (3,692) (35,936) (44,638) (1,064,020) (4,842,876)
Issuance of common stock in connection with
exercise of stock options and/or warrants 874 874 119,149
Release of restricted cash 44,738 67,108
Deferred financing costs (201,000)
-------------- -------------- -------------- -------------- --------------
Net cash provided by (used in) financing
activities 41,046 (35,062) 22,470 5,536,854 22,608,829
-------------- -------------- -------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents (799,593) (1,310,087) (1,459,308) 3,609,147 5,578,439
Cash and cash equivalents at the beginning of
the period 4,330,444 6,888,526 4,990,159 1,969,292 -
-------------- -------------- -------------- -------------- --------------
Cash and cash equivalents at the end of
the period $ 3,530,851 $ 5,578,439 $ 3,530,851 $ 5,578,439 $ 5,578,439
============== ============== ============== ============== =============
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 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 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
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<PAGE>
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, 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.
During the Quarter ended June 30, 2000 the Company issued 232 shares
of Common stock pursuant to the exercise of its publicly traded warrants.
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," "Manufacturing," "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. (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") 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 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 hardware 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 picturewizard.com. In April
2000, we replaced PictureWizard and PictureWizard.com by launching the
PicturePrepSuite2000 product line offering additional features, benefits and
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<PAGE>
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. In May 2000, we entered the
retail marketplace with a boxed CD version of the PicturePrepSuite2000 software
and in June 2000, we introduced PicturePrepClub.com.
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 June 30, 2000 we had accumulated a deficit during the
development stage of $18,406,446, which includes a net loss for the six months
ended June 30, 2000 of $2,528,247. The loss for the six months ended June 30,
2000 included $1,816,951 in general and administrative expenses, representing an
increase of $599,848 compared to the six-month period ended June 30, 1999. Such
increase was primarily the result of sales and marketing efforts ($514,052),
discussed more fully below, combined with increased personnel and payroll costs
($223,778), investor relations ($100,329), travel ($9,904), insurance ($15,350)
and other ($89,126). These increases were partially offset by decreases in
financial consulting $184,753, legal fees $101,002 and China office expenses
$66,936.
Although the Company anticipates deriving some revenue from the sale
of its proprietary software (Softsets) and the NVP hardware 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 ability enhance both pictures and
streaming video from virtually any PC program or while surfing the Internet
using a PC.
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The PicturePrepSuite2000 product line is currently being sold directly
to consumers through our exclusive Web site at pictureprep.com. In May 2000, we
entered the retail marketplace with a boxed CD version of the
PicturePrepSuite2000 software. On June 27, 2000, the Company launched
PicturePrepClub.com, a digital portal that 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. 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 the Eastman Kodak Company whereby Print@KODAK
-----------
will be its exclusive online fulfillment service to deliver prints and photo
products directly to consumers' homes. We expect this service to be available to
PicturePrepClub members beginning in August 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 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. The Terk Agreement provides, among other things, that the
exclusive territory is limited to the United States and Canada and if Terk does
not purchase certain quantities by October 31, 2000, it may lose its
exclusivity. We are exploring manufacturing and distribution channels for South
America and the European markets and will also consider additional channels for
the United States and Canada in the event Terk does not meet its minimum
purchase requirements.
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
11
<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 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. We expect to be ready for full production by September
2000. 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 six-month period of 2000 were increased by
approximately $514,052 compared to the first six-month period of 1999. During
the six-month period ended June 30, 2000 such costs included $87,735 for
professional sales and marketing consultants compared to $37,384 for the
six-month period ended June 30, 1999; $452,939 for advertising and public
relations compared to $9,860 for the six months ended June 30, 2000; $15,245 for
trade shows compared to $0 for the six months ended June 30, 1999; and $27,420
for professional printing services compared to $22,043 for the six months ended
June 30, 1999. The Company is continually reviewing its operating 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 June 30, 2000, the Advanced Engineering
Group consisted of six Company employees as well as outside consultant
12
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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 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 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 June 30, 2000, the Company incurred expenses of
$7,169,449 on research and development, of which approximately 48% 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 six-month periods of 2000 and 1999, $849,540 and
$503,836, 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 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
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.
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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 June 30, 2000 the Company had cash and cash equivalents of
approximately $5,600,000 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 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 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
successfully implement a marketing strategy, generate significant revenues or
achieve profitable operations. In addition, because the Company has had only
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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
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 11, 2000 the Company held its annual meeting of stockholders to
elect five directors.
The following table sets forth information regarding the number of
votes cast for and against, with respect to the matter presented at the meeting.
Election of Directors
Against or
Nominee For Withheld
Gerald Zarin 6,969,859 28,504
Edward Bohn 6,969,859 28,504
Richard E. Ekstract 6,969,859 28,504
Lyle Gramley 6,969,859 28,504
Joseph Sarubbi 6,969,859 28,504
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 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 August 11, 2000.
NUWAVE TECHNOLOGIES, INC.
-------------------------
(Registrant)
DATE: August 11, 2000 By: /s/ Gerald Zarin
------------------------------------
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: August 11, 2000 By: /s/ Jeremiah F. O'Brien
------------------------------------
Jeremiah F. O'Brien
Chief Financial Officer
(Principal Financial Officer)
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