NUWAVE TECHNOLOGIES INC, SB-2, 2000-07-21

NUWAVE TECHNOLOGIES INC
SB-2, 2000-07-21
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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As filed with the Securities and Exchange Commission on July 21, 2000

REGISTRATION NO. 333-[ ]
-------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------------------
NUWAVE TECHNOLOGIES, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

DELAWARE 3663 22-3387630
-------- ---- ----------
(STATE OR JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)

----------------------------
ONE PASSAIC AVENUE
FAIRFIELD, NEW JERSEY 07004
(973) 882-8810
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACE OF BUSINESS)

----------------------------
GERALD ZARIN
CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT AND CHIEF EXECUTIVE OFFICER
NUWAVE TECHNOLOGIES, INC.
ONE PASSAIC AVENUE
FAIRFIELD, NEW JERSEY 07004
(973) 882-8810
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

----------------------------
COPIES TO:
BRUCE A. RICH, ESQ.
THELEN REID & PRIEST LLP
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019
(212) 603-2000

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
from time to time after the effective date of this Registration Statement as
determined by market conditions and other factors.

IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND
LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
---------------

IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
---------------

IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(D)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
---------------

IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
CHECK THE FOLLOWING BOX. [ ]
--------------

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================= ============== ================ ================= ==============
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
--------------------------------------------- -------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share (1) 2,088,608 $1.97 $4,114,558 $1,086.24

Class B Common Stock Purchase Warrants (2) 1,044,304 -- -- --

Common Stock, $.01 par value, underlying
the Class B Common Stock Purchase
Warrants (3) 1,044,304 $3.95 $4,125,001 $1,089.00

Common Stock, par value $.01 per share,
underlying Placement Agent Unit
Warrants (4) 522,159 $3.16 $1,650,022 $435.00

Class B Common Stock Purchase Warrants,
which underlie Placement Agent Unit
Warrants (5) 261,080 -- -- --

Common Stock, par value $.01 per share,
which underlie the Class B Common Stock
Purchase Warrants which underlie Placement
Agent Unit Warrants (6) 261,080 $3.95 $1,031,266 $272.25
============================================= ============== ================ ================= ==============
Total $2,882.49
============================================= ============== ================ ================= ==============
</TABLE>

(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low prices of the Common
Stock on the NASDAQ SmallCap Market on July 14, 2000.

(2) The Common Stock Purchase Warrants may be exercised to purchase shares of
Common Stock. The number of shares of Common Stock that may be acquired
upon the exercise of the Common Stock Purchase Warrants is included in the
calculation of the number of shares of Common Stock to be registered in
note (3) below. No fee is required pursuant to Rule 457(g).

(3) Issuable upon exercise of outstanding Common Stock Purchase Warrants to be
registered in Note (2) above. In accordance with Rule 457(g), the
registration fee for these shares is calculated upon a price which
represents the highest of (i) the price at which the warrants or options
may be exercised; (ii) the offering price of securities of the same class
included in this registration statement; or (iii) the price of securities
of the same class, as determined pursuant to Rule 457(c).

(4) Issuable upon exercise of Placement Agent Unit Warrants. The Placement
Agent Unit Warrants may be exercised to purchase shares of Common Stock and
Class B Common Stock Purchase Warrants. In accordance with Rule 457(g), the
registration fee for these shares is calculated upon a price which
represents the highest of (i) the price at which the warrants or options
may be exercised; (ii) the offering price of securities of the same class
included in this registration statement; or (iii) the price of securities
of the same class, as determined pursuant to Rule 457(c).

(5) Issuable upon exercise of Placement Agent Unit Warrants. The Class B Common
Stock Purchase Warrants may be exercised to purchase shares of Common
Stock. The number of shares of Common Stock that may be acquired upon the
exercise of the Class B Common Stock Purchase Warrants is included in the
calculation of the number of shares of Common Stock to be registered in
note (6) below. No fee is required pursuant to Rule 457(g).

(6) Issuable upon exercise of the Class B Common Stock Purchase Warrants to be
registered in note (5) above. In accordance with Rule 457(g), the
registration fee for these shares is calculated upon a price which
represents the highest of (i) the price at which the warrants or options
may be exercised; (ii) the offering price of securities of the same class
included in this registration statement; or (iii) the price of securities
of the same class, as determined pursuant to Rule 457(c).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

================================================================================

<PAGE>

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS

SUBJECT TO COMPLETION, DATED JULY 21, 2000

NUWAVE TECHNOLOGIES, INC.
3,916,151 SHARES OF COMMON STOCK
1,305,384 CLASS B COMMON STOCK PURCHASE WARRANTS

The stockholders of NUWAVE Technologies, Inc. listed elsewhere in this
prospectus are offering:

o up to 2,088,608 presently outstanding shares of Common Stock held
by them;
o up to 1,044,304 presently outstanding shares of Class B Common
Stock Purchase Warrants held by them;
o up to 1,044,304 shares of Common Stock underlying the Class B
Common Stock Purchase Warrants;
o up to 522,159 shares of Class B Common Stock underlying presently
outstanding Placement Agent Unit Warrants held by them;
o up to 261,080 Class B Common Stock Purchase Warrants underlying
the Placement Agent Unit Warrants; and
o up to 261,080 shares of Common Stock underlying the Class B
Common Stock Purchase Warrants which underlie the Placement Agent
Unit Warrants.

We will not receive any proceeds from the sale of the common stock,
and we have agreed to pay for all expenses of this offering. However, we will
receive proceeds in the amount of approximately $6,806,289 upon the exercise of
warrants by the selling stockholders.

The selling stockholders may offer their shares and warrants at
prevailing market prices in public transaction on the NASDAQ SmallCap Market or
in privately negotiated transactions. No period of time has been fixed within
which the shares may be offered or sold.

Our common stock is traded on the NASDAQ SmallCap Market under the
symbol "WAVE." On July 14, 2000, the closing price of our common stock was
$2.00. There is no public market for the Class B Warrants covered by this
prospectus.

The selling stockholders and any participating broker-dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions or discounts given to any such broker-dealer may be regarded
as underwriting commissions or discounts under the Securities Act of 1933.

Brokers or dealers effecting transactions in the shares or warrants
should confirm the registration of these securities under the securities laws of
the states in which transactions occur or the existence of an exemption from
registration.

INVESTING IN THE COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS INVOLVES
SUBSTANTIAL RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS

Page
----

PROSPECTUS SUMMARY.............................................................3

SUMMARY FINANCIAL AND OPERATING INFORMATION....................................6

RISK FACTORS...................................................................7

USE OF PROCEEDS...............................................................13

MARKET PRICE INFORMATION......................................................13

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....................14

BUSINESS......................................................................16

MANAGEMENT....................................................................25

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................32

DESCRIPTION OF SECURITIES.....................................................33

SELLING STOCKHOLDERS..........................................................37

PLAN OF DISTRIBUTION..........................................................41

LEGAL MATTERS.................................................................42

EXPERTS.......................................................................42

WHERE YOU CAN FIND MORE INFORMATION ABOUT US..................................43

YOUR RELIANCE ON INFORMATION CONTAINED IN THIS PROSPECTUS

In deciding whether to invest in our securities, you should rely on
the information contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in this prospectus.
The selling stockholders are offering to sell, and seeking offers to buy, shares
of common stock and Class B Warrants only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of the securities. You must not consider that the
delivery of this prospectus or any sale of the securities covered by this
prospectus implies that there has been no change in our affairs since the date
of this prospectus or that the information contained in this prospectus is
current or complete as of any time after the date of this prospectus.

<PAGE>

PROSPECTUS SUMMARY

The following summary information is qualified in its entirety by the
information contained elsewhere in this prospectus. You should read the entire
prospectus, including "Risk Factors" and the financial statements before making
an investment decision.

NUWAVE

GENERAL

Until recently we were 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 our company. The first technologies we are
commercializing are in the fields of photo and video-enhancement. 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 ASICs (Application Specific Integrated Circuit)
chips through third parties and to directly market these products to OEMs who by
incorporating this enabling technology would improve picture quality in their
set-top boxes, televisions, VCR's, DVD's, camcorders and other video output
devices.

In addition to the NVP Video Processor technology, during 1999, we
completed the initial development of our first proprietary digital photo and
video software technology. The technology was introduced as PictureWizard in
September 1999 and test marketed directly to consumers through our exclusive
e-commerce Web site store at picturewizard.com for the primary purpose of system
and product evaluation in a live setting, and to garner 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 us, in
April 2000 we launched the PicturePrepSuite2000 product line offering the
additional features, benefits and options customers desired. 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 addition to direct on-line consumer sales (B to C
sales), we have begun marketing this technology directly to businesses (B to B)
in order to expand our OEM customer base by either embedding or bundling our
technology into OEM 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.

In March 2000, we received the OEM version of our NVP ASIC chip from
the semiconductor-manufacturing foundry. Subsequent to the completion of full
quality assurance testing, we have built test fixtures utilizing this ASIC chip
which are being used for sales demonstration purposes and to allow prospective
OEM to test the functionality of the chip in their own labs. We expect to be
ready for production during the third quarter of 2000. Although we are unable to
predict whether our marketing efforts will be successful, we believe that our
products have been well received.

We recently completed development of a set-top box utilizing the NVP
ASIC chip for use with existing television sets and video output devices. We had
previously entered into an exclusive five-year manufacturing and marketing
agreement with Terk Technologies Corp. to manufacture and market under the Terk
brand name a line-up of these set-top boxes. 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

<PAGE>

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.

We are concentrating our activities primarily on the marketing and
sales of our ASIC line of chips, our digital software technology and our
Internet presence to the OEM, professional video and retail markets and on the
continuing development of our digital and analog video enhancement technology.
We are also conducting investigation and research and development activities
with respect to additional new technologies/products to address the digital, PC
and Internet markets. These activities may give rise to additional products that
may be commercialized by our company.

We have formed a strategic alliance with MemoryLink Corp. for the
commercialization of certain of MemoryLink's proprietary wireless digital video
technology, which we and MemoryLink introduced 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. These products using the wireless digital video technology
are expected to be available within the next twelve to eighteen months.

We believe this focused digital and analog image enhancement product
strategy will provide our company with an expanded technology base, product line
and services we can offer to potential customers. This positions NUWAVE to allow
us to take full advantage of the significant video and photo growth opportunity
presented by the converging PC, Internet, television, HDTV and telecommunication
markets. We believe that the capacity of our administrative and support systems
is sufficient to allow us to expand our business without significant additional
capital expenditures.

On March 14, 2000, we completed a private placement with Roan-Meyers
whereby we issued to certain accredited investors, as defined under Regulation D
as promulgated under the Securities Act, 2,088,608 shares of our Common Stock
and 1,044,304 Class B Common Stock Purchase Warrants for an aggregate purchase
price of $6,600,000. The securities sold in this placement are included by the
purchasers thereof for resale by them in this prospectus.

Although we anticipate deriving some revenue from the sale of our
proprietary software and the NVP products during 2000, no assurance can be given
that these products will be successfully marketed during such period. Even if
revenues are produced from the sale of such products, we expect to continue to
incur losses for at least the next twelve months.

PRINCIPAL EXECUTIVE OFFICES

Our principal executive offices are located at One Passaic Avenue,
Fairfield, New Jersey 07004. You can reach our principal executive offices by
telephone at (973) 882-8810.

THE OFFERING

SECURITIES OFFERED

This prospectus relates to the offer and sale by certain stockholders
listed elsewhere in this prospectus of:

o up to 2,088,608 presently outstanding shares of Common Stock held
by them;
o up to 1,044,304 presently outstanding Class B Common Stock
Purchase Warrants held by them;

4
<PAGE>

o up to 1,044,304 shares of Common Stock underlying the Class B
Common Stock Purchase Warrants;
o up to 522,159 shares of Common Stock underlying presently
outstanding Placement Agent Unit Warrants held by them;
o up to 261,080 Class B Common Stock Purchase Warrants underlying
the Placement Agent Unit Warrants; and
o up to 261,080 shares of Common Stock underlying the Class B
Common Stock Purchase Warrants which underlie the Placement Agent
Unit Warrants.

SECURITIES OUTSTANDING

At June 30, 2000, we had the following securities outstanding other
than stock options:

Common Stock........................................ 10,557,729
Public Warrants, including Class A Warrants......... 5,543,309
Class B Warrants.................................... 1,044,304

Our common stock is traded on the NASDAQ SmallCap Market under the
symbol "WAVE." Our public warrants are traded on the NASDAQ SmallCap Market
under the symbols "WAVEW" and "WAVEZ."

USE OF PROCEEDS

We will not receive any proceeds from the sale of the common stock or
the common stock purchase warrants sold by the selling stockholders listed
elsewhere in this prospectus.

Some of the shares of common stock covered by this prospectus underlie
Class B Warrants, which are exercisable until March 14, 2003. We will receive
proceeds upon the exercise of the common stock purchase warrants and the unit
warrants. In order to receive one share of common stock, the holders of the
common stock purchase warrants must pay us $3.95 and surrender one warrant,
subject to anti-dilution rights therein. In order to receive one share of common
stock and one Class B Warrant, the holders of the unit warrants must pay us
$3.16 and surrender a portion of the unit warrant. We anticipate that we will
receive approximately $6,806,289 if all of these warrants are exercised. We will
use the proceeds for general working capital purposes.

RISK FACTORS

Investing in our securities involves a high degree of risk. You should
read the disclosures we make beginning on page 7 under the heading "Risk
Factors" in considering whether to invest in our common stock and common stock
purchase warrants.

5
<PAGE>

SUMMARY FINANCIAL AND OPERATING INFORMATION

This summary information below is from and should be read with the
financial statements, and the notes to the financial statements, elsewhere in
this prospectus.

<TABLE>
<CAPTION>
--------------------------------------------- THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------- --------------------------
STATEMENT OF
INCOME DATA 1997 1998 1999 1999 2000
--------------------- --------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales less cost... $ 6,061 $ 7,639 $ 14,353 $ -- $ 3,450
------------ ------------ ------------ ----------- ------------
Operating Expenses:
Research and
development....... $(1,697,084) $(1,572,364) $ (938,745) $ (253,271) $ (363,370)
------------ ------------ ------------ ----------- ------------
General and
administration
expenses.......... $(2,336,000) $(2,646,409) $(2,503,812) $ (589,951) $ (697,286)
------------ ------------ ------------ ----------- ------------
Other Income
(Expense) .......... $ 178,707 $ 212,863 $ (170,518) $ 55,002 $ 36,760
------------ ------------ ------------ ----------- ------------
Benefit for income
tax............... $ 908,350
------------

Net (Loss).......... $(3,848,316) $(3,998,271) $(2,690,372) $ (788,220) $(1,020,446)
============ ============ ============ =========== ============

Net Loss Per Share.. $ (0.72) $ (0.55) $ (0.32) $ (0.09) $ (0.12)
============ ============ ============ =========== ============
Weighted average
number of common
shares
outstanding....... 5,343,348 7,259,896 8,419,644 8,356,389 8,859,069
============ ============ ============ =========== ============
</TABLE>

YEAR ENDED DECEMBER 31, THREE MONTHS
--------------------------- ENDED
BALANCE SHEET DATA 1998 1999 MARCH 31, 2000
---------------------------------- ------------- ------------- ----------------
Cash and cash equivalents...... $4,990,159 $1,969,292 $6,888,526
Total Assets................... $5,515,352 $3,180,313 $7,743,002
Total Current Liabilities...... $ 261,201 $ 274,555 $ 212,771
Total Stockholders' Equity..... $5,254,151 $2,905,758 $7,530,231

6
<PAGE>

RISK FACTORS

You should consider the following factors and other information in
this prospectus relating to out business and prospects before deciding to invest
in the securities. This investment involves a high degree of risk, and you
should purchase the securities only if you can afford to lose the entire sum
invested in these securities. If any of the following risks actually occurs, our
business, financial condition or operating results could be materially adversely
affected. In such case, the trading price of our common stock and warrants could
decline, and you may lose all or part of your investment.

FINANCIAL RISKS

WE HAVE BEEN A DEVELOPMENT STAGE ENTERPRISE WITH ONLY A LIMITED OPERATING
HISTORY.

We have been a development stage enterprise with only a limited
operating history. Since our inception in July 1995, we have been engaged
primarily in: directing, supervising, and coordinating the activities of our
Advanced Engineering Group, made up of our own employees and third-party
consultants who work with us on a project-by-project basis, in the continuing
development of the NUWAVE Video Processor (NVP) Technology and our
PicturePrepSuite2000 line of photo and video enhancement software and
pre-marketing. Recently, we produced our first NVP Video Processor in an ASIC
(Application Specific Integrated Chip) format for the OEM market.

Our prospects must be considered in light of the risks associated with
the establishment of a new and small capitalized business in the evolving
electronic video industry. In our case this is particularly so, as further risks
will be encountered in our shift from the development to the commercialization
of new products based on innovative technology. There can be no assurance that
we will be able to generate revenues or achieve profitable operations.

WE HAVE A HISTORY OF INCURRING LOSSES AND WE ANTICIPATE THAT WE WILL CONTINUE TO
INCUR LOSSES.

To date, we have received only limited revenue from the sale of our
products (primarily from sales made for demonstration purposes). We do not
anticipate significant operating revenue until our relevant technology and one
or more of our products is completely developed, manufactured in commercial
quantities and made available for commercial delivery. There can be no assurance
that our technology and products, if developed and manufactured, will be able to
compete successfully in the marketplace and/or generate significant revenue. We
have incurred significant costs in connection with the development of our
technologies and proposed products and there is no assurance that it will
achieve sufficient revenues to offset anticipated operating costs. As of March
31, 2000, we had an accumulated deficit of $16,898,645. Although we anticipate
deriving some revenue from the sale of our NVP (Video Processor) and related
products and Softsets within the next twelve months, no assurance can be given
that these products will be successfully marketed or even completely developed
and tested for commercial use during such period. Management anticipates that we
will continue to incur substantial losses for at least the next twelve months.
Included in such former and future losses are research and development expenses,
marketing costs, manufacture and assembly, and general and administrative
expenses. We anticipate that we will continue to have high levels of operating
expenses and will be required to make significant expenditures in connection
with our continued research and development activities. We anticipate that our
losses will continue until we are able to generate sufficient revenues to
support our operations.

7
<PAGE>

OUR CONTINUED DEVELOPMENT EFFORTS AND FUTURE GROWTH DEPEND UPON OUR ABILITY TO
RAISE ADDITIONAL CAPITAL WHICH MAY NOT BE AVAILABLE TO US WHEN NEEDED OR ON
ACCEPTABLE TERMS.

Our capital requirements in connection with our development activities
have been and will continue to be significant. We have been dependent upon the
proceeds of sales of our securities to private investors to fund our initial
development activities. Since our initial public offering in July 1996, we have
obtained needed capital through private placements of our securities.

We anticipate, based on our current proposed plans and assumptions
relating to our operations, that we have sufficient cash to satisfy all of our
estimated cash requirements for the next twelve months. In the event of
unanticipated expenses, delays or other problems, we might be required to seek
additional funding elsewhere. Also, if we were to receive a larger than
anticipated number of initial purchase orders upon introduction of our Softsets
or the NVP Video Processor products, we might require additional capital. No
assurance can be given that we will be able to obtain such additional capital on
commercially reasonable terms or at all. An inability to obtain additional
financing, when needed, would have a material adverse effect on us, and possibly
require it to curtail or cease operations. To the extent that any future
financing involves the sale of our equity securities, our existing stockholders
could be substantially diluted.

BUSINESS AND REGULATORY RISKS

WE DEVELOP TECHNOLOGY AND PRODUCTS USING NEW CONCEPTS, SO THERE IS UNCERTAINTY
ABOUT MARKET ACCEPTANCE OF OUR PRODUCTS, AND WE HAVE LIMITED MARKETING
EXPERIENCE.

We develop technology and products using new concepts and designs in
video imagery and processing. Our prospects for success will depend on our
ability to successfully sell our products to key manufacturers and distributors
who may be inhibited from doing business with us because of their commitment to
their own technologies and products. As a result, demand and market acceptance
for our technology and products are subject to a high level of uncertainty. We
currently have limited financial, personnel and other resources to undertake the
extensive marketing activities that will be necessary to market our technology
and products once their development is completed. No assurance can be given that
any of our potential customers will enter into any arrangements with us.
Further, there is no assurance that our marketing efforts will be successful.

WE DEPEND ON THE MANUFACTURERS OF PRODUCTS WHO WISH TO INCLUDE OUR NVP VIDEO
PROCESSOR TO MAKE DESIGN MODIFICATIONS NECESSARY TO INCORPORATE OUR TECHNOLOGY
INTO THEIR PRODUCTS.

Commercialization of the NVP Video Processor and sale to manufacturers
of the relevant video equipment will require such manufacturers to adopt new
circuit configurations to accommodate the relevant chip in their products. We
anticipate that manufacturers wishing to use the NVP Video Processor will make
such modifications because of the benefits derived from the improved performance
of their products and the relative simplicity of such modifications. However,
there is no assurance that such modifications will be made. Also, the cost of
such modifications may inhibit or prevent their adoption. Our ability to sell
and/or license our products would be adversely affected if designers and
manufacturers fail to make such modifications.

DEVELOPMENT OF OUR PRODUCTS IS SUBJECT TO ALL THE RISKS INHERENT IN THE
DEVELOPMENT OF NEW TECHNOLOGY, THERE WILL NEED TO BE PRODUCT TESTING AND OTHER
TECHNOLOGICAL FACTORS THAT MAY AFFECT THE SUCCESSFUL DEVELOPMENT OF OUR
PRODUCTS.

Development of our products is subject to all of the risks inherent in
the development of new technology and products including the following risks:
unanticipated delays; expenses; technical problems or difficulties; and possible

8
<PAGE>

insufficiency of funding to complete development. There is no assurance as to
when, or whether, we can successfully complete these developments. Further,
there is no assurance that we can develop products in commercially salable form
within its projected development schedule. If we are unable to complete our
development activities for our proposed products, we would have to complete
development through third parties. Management believes that we have sufficient
resources to complete development of our products. However, there is no
assurance that we will be able to complete such development in a timely manner,
or at all. There is also no assurance that we can enter into economically
reasonable arrangements for the completion of such products by third parties.

In connection with the development of commercially salable prototypes,
we must successfully complete a testing program for our products before
marketing them. Unforeseen technical problems arising out of such testing could
significantly and adversely affect our ability to manufacture a commercially
acceptable version. In addition, our success will depend upon our technology and
proposed products meeting acceptable cost and performance criteria and upon
their timely introduction into the marketplace. There can be no assurance that
our technology and proposed products will satisfactorily perform the functions
for which they are designed, that they will meet applicable price or performance
objectives or that unanticipated technical or other problems will not occur.
Should any such problems arise, the result would be increased costs and/or
material delays in the development of the proposed products.

WE WILL RELY ON OTHERS TO MANUFACTURE OUR DEVICES, AND WE MAY NOT BE ABLE TO
MEET CUSTOMER DEMAND IF OUR SUPPLIERS CANNOT MEET OUR QUANTITY AND QUALITY
REQUIREMENTS.

We do not plan to directly manufacture any of our products. We intend
to contract with third parties to manufacture our proposed NVP Video Processor
and our digital software technology, and related retail products. We may also
license to third parties the rights to manufacture our proposed products, either
through direct licensing, original equipment manufacturer arrangements or
otherwise.

We will be dependent on third parties to manufacture our application
specific integrated circuit ("ASIC")-based NVP Video Processor and related
products as well as future products we may choose to commercialize. Although we
have entered into an agreement with a potential manufacturer of our NVP Video
Processor ASIC chip, there can be no assurance that the manufacturer will
dedicate sufficient production capacity to satisfy our requirements within
scheduled delivery times, or at all. Failure or delay by our suppliers in
fulfilling our anticipated needs would have an adverse effect on our ability to
develop and market our products. In addition, we will be dependent on third
party vendors for many of the components necessary for the final assembly of our
products. We may have difficulty in obtaining contractual agreements with
suppliers of these materials due to, among other things, possible material
shortages or possible lack of adequate purchasing power. While our management
believes that these components are available from multiple sources, it is
anticipated that we will obtain certain of them from a single source, or limited
number of sources, of supply. In the event that certain of these suppliers are
unable or unwilling to provide us with these components on commercially
reasonable terms, or at all, delays in securing alternative sources of supply
would result and could have a material adverse effect on our operations.

COMPETITION

Intense competition exists in the markets that we intend to enter.
Further, with respect to the market for video editing, video production and
video processing products, significant price erosion over the life of a product
exists. Our products will directly compete with those of numerous
well-established companies, such as the following companies, which design,
manufacture and/or market video technology and other products: Sony Electronics,
Inc., Panasonic Division of Matsushita Electric Industrial Co., Motorola, Inc.,
Mitsubishi International Corp., and Royal Philips Electronics, NV.

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All of the above companies have substantially greater financial,
technical, personnel and other resources than we do. Further, each has
established a reputation for success in the development, licensing, sale and
service of its products and technology. In addition, certain of these
competitors dominate their industries and have the necessary financial resources
to enable them to withstand substantial price competition or downturns in the
market for video products.

OUR INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGES AND AGGRESSIVE
COMPETITION.

Rapid changes characterize the markets for our technology and
products. Further, evolving industry standards often result in product
obsolescence or short product life cycles. Certain companies may be developing
technologies or products which may be functionally similar, or superior, to some
or all of our proposed products. As a result, our ability to compete will depend
on our ability to, among other things: complete development and introduce to the
marketplace in a timely and cost-competitive manner our proposed products and
technology; continually enhance and improve our proposed products and
technology; adapt our proposed products to be compatible with specific products
manufactured by others; and successfully develop and market new products and
technology.

There is no assurance that we will be able to compete successfully or
that our competitors will not develop technologies or products that render our
products and technology obsolete or less marketable. Further, there is no
assurance that we will be able to successfully enhance our proposed products or
technology or adapt them satisfactorily.

TO THE EXTENT PRACTICABLE, WE HAVE FILED U.S. PATENTS AND/OR COPYRIGHT
APPLICATIONS, BUT THERE IS NO ASSURANCE THAT ANY PATENT OR COPYRIGHT WILL AFFORD
US COMMERCIALLY SIGNIFICANT PROTECTION.

To the extent practicable, we have filed and intend to file U.S.
patents and/or copyright applications for certain of our proposed products and
technology. We have also filed and intend to file corresponding applications in
key industrial countries worldwide.

In April 1998, we filed three patent applications for certain of our
independently developed products: one for our NUWAVE Video Processor and two for
our Softsets. In August 1999 we filed a patent application for our noise
reduction algorithms. We were notified in June 2000 that one of our Softset
applications has been approved for patent protection. Although we believe that
each of the remaining applications contains patentable claims, there is no
assurance that we will be granted patents. Also, even if granted, there is no
assurance that any patent will afford us with commercially significant
protection of our technology or that we will have adequate resources to enforce
our patents.

We also intend to license and/or sell our technology and products in
foreign markets. As such, we intend to seek foreign patent protection. The
patent laws of other countries may differ significantly from those of the United
States as to the patentability of our products and technology. Moreover, the
degree of protection afforded by foreign patents may be different from that in
the United States. Patent applications in the United States are maintained in
secrecy until patents issue and publication of discoveries in scientific or
patent literature tends to lag behind actual discoveries by several months. As a
result, we cannot be certain that we will be the first creator of inventions
covered by any patent applications we make or the first to file patent
applications on such inventions.

We believe that the products we intend to market and sell do not
infringe the patents or other proprietary rights of third parties. Further, we
are not aware of any patents held by our competitors that will prevent, limit or
otherwise interfere with our ability to make and sell our products. However, it
is possible that competitors may have applied for, or may in the future apply
for and obtain, patents which have an adverse impact on our ability to make and
sell our products. In addition, because we are a relatively new company in the
development stage, claims that our products infringe on the proprietary rights

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of others are more likely to be asserted after commencement of commercial sales
of our products. There is no assurance that competitors will not infringe our
patents. Defense and prosecution of patent suits, even if successful, are both
costly and time consuming. An adverse outcome in the defense of a patent suit
could subject us to significant liabilities to third parties, require disputed
rights to be licensed from third parties or require us to cease selling our
products.

We also rely on unpatented proprietary technology. There is no
assurance that others may not independently develop the same or similar
technology or otherwise obtain access to our unpatented technology. To protect
our trade secrets and other proprietary information, we require employees,
advisors and collaborators to enter into confidentiality agreements. We could be
adversely effected in the event that these agreements fail to provide meaningful
protection for our trade secrets, know-how or other proprietary information.

NO DIVIDENDS

We have not paid any cash dividends to date. Payment of dividends on
our common stock is within the discretion of our board of directors and will
depend upon our earnings, capital requirements and financial condition, and
other relevant factors. We do not intend to declare any dividends on our common
stock in the foreseeable future. Instead, we plan to retain any earnings we
receive for development of our business operations.

LIMITATION ON TAX LOSS CARRYFORWARDS

As of December 31, 1999, we had available unused net operating loss
carryforwards aggregating approximately $12,460,000 to offset future federal
taxable income. The unused net operating loss carryforwards expire in various
years from 2010 to 2019. Under Section 382 of the Internal Revenue Code of 1986,
utilization of prior net operating loss carryforwards is limited after an
ownership change. We may be subject to limitations on the use of our net
operating loss carryforwards as provided under Section 382. Accordingly, there
can be no assurance that a significant amount of the existing net operating loss
carryforwards will be available to use. In the event that we achieve
profitability, as to which there can be no assurance, such limitation would have
the effect of increasing our tax liability and reducing our net income and
available cash resources in the future.

LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS

Our company's certificate of incorporation provides that we will
indemnify any of our directors, officers, employees or agents against actions,
suits or proceedings relating to our company and, subject to certain
limitations, a director shall not be personally liable for monetary damages for
breach of his fiduciary duty. In addition, we have entered into an
indemnification agreement with each of our directors. Such indemnification
agreement provides that a director is entitled to indemnification to the fullest
extent permitted by law.

WE MUST ATTRACT AND RETAIN KEY PERSONNEL IN ORDER TO REMAIN COMPETITIVE WHICH
MAY BE DIFFICULT GIVEN OUR SMALL SIZE AND LIMITED RESOURCES COMPARED TO MANY OF
OUR COMPETITORS.

Our operations depend largely on the continued employment of Mr.
Gerald Zarin, Chairman of the Board, President and Chief Executive Officer. If
Mr. Zarin or other members of management or key personnel resign or otherwise
leave our company, our business and financial condition could be materially
adversely affected.

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PROVISIONS IN OUR COMPANY'S CERTIFICATE OF INCORPORATION COULD DISCOURAGE
UNSOLICITED TAKEOVER ATTEMPTS WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON
STOCK.

Provisions of our company's certificate of incorporation and by-laws
and of Delaware law could discourage potential acquisition proposals and could
delay or prevent a change in control. Such provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of the common
stock. Such provisions may also inhibit fluctuations in the market price of the
common stock that could result from takeover attempts. In addition, our board of
directors, without further stockholder approval, may issue preferred stock that
could have the effect of delaying or preventing a change in control. The
issuance of preferred stock could also adversely affect the voting power of the
holders of common stock, including the loss of voting control to others.

MARKET RISKS

MARKET PRICE FLUCTUATIONS

The trading price of our common stock may be subject to wide
fluctuations in response to quarter-to-quarter variations in operating results,
general conditions in the computer, video and telecommunications industries,
changes in earnings estimates, recommendations by analysts and other events.

OUR COMMON STOCK COULD BECOME SUBJECT TO "PENNY STOCK" RESTRICTIONS UNDER
FEDERAL SECURITIES LAWS, WHICH COULD REDUCE THE LIQUIDITY OF OUR COMMON STOCK.

The SEC has adopted regulations, which generally define Penny Stocks
to be an equity security that has a market price less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exemptions. On
July 14, 2000, the closing bid and asked prices for our common stock, as quoted
on the NASDAQ SmallCap Market, was $2.00 and $2.06 per share and therefore, our
common stock is designated a "Penny Stock." As a Penny Stock, our common stock
may become subject to Rule 15g-9 under the Exchange Act or the Penny Stock Rule.
This rule imposes additional sales practice requirements on broker-dealers that
sell such securities to persons other than established customers and "accredited
investors" (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. As a result, this rule may
affect the ability of broker-dealers to sell our securities and may affect the
ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules
require delivery, prior to any transaction in a penny stock, of a disclosure
schedule prepared by the SEC relating to the penny stock market. Disclosure is
also required to be made about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.

The penny stock restrictions will not apply to our common stock if we
continue to meet a $2,000,000 minimum net tangible assets or a $1.00 market
price. There can be no assurance that our common stock will continue to qualify
for exemption from the penny stock restrictions. In any event, even if our
common stock were exempt from the Penny Stock restrictions, we would remain
subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the

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authority to restrict any person from participating in a distribution of penny
stock, if the SEC finds that such a restriction would be in the public interest.

OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET IF WE DO NOT
CONTINUE TO MEET THE MINIMUM REQUIREMENTS FOR CONTINUED LISTING.

The National Association of Securities Dealers maintains requirements
for the continued listing on the NASDAQ SmallCap Market that include the
following: the listed shares of common stock have a minimum bid price of $1.00
per share; companies with listed shares have net tangible assets of $2,000,000
or market capitalization of $35,000,000 or net income (in the latest fiscal year
or in two of the last three fiscal years) of $500,000; and that the market value
of the public float of our common stock be at least $4,000,000. Although, at
present, we satisfy all of these requirements, it is possible that if our
minimum bid price goes below $1.00 per share we could be delisted.

THE MARKET PRICE FOR OUR COMMON STOCK COULD DECLINE AS A RESULT OF SHARES THAT
WILL BE ELIGIBLE FOR SALE IN THE FUTURE.

At July 14, 2000, 10,557,729 shares of our common stock were
outstanding. In addition:

o 9,181,562 shares of common stock, including some of the shares of
common stock offered hereby, are issuable upon the exercise of
warrants, and
o 2,264,500 shares of common stock are issuable upon the exercise
of outstanding stock options.

The sale, or availability for sale, of substantial amounts of common stock in
the public market could adversely affect the prevailing market price of the
common stock and could impair our ability to raise additional capital when
needed through the sale of its equity securities.

If our common stock becomes subject to the rules on penny stocks, the
market liquidity for our common stock could be materially adversely affected.

USE OF PROCEEDS

The stockholders listed elsewhere in this prospectus will sell the
common stock or Class B Warrants being offered hereby, and we will not receive
any of the proceeds from their sales. However, some of the shares of common
stock covered by this prospectus underlie Class B Warrants and the unit
warrants. We anticipate that we will receive approximately $6,806,289 if all of
these warrants are exercised. There is no assurance that any or all of the
common stock purchase warrants or the unit warrants will be exercised. We will
use the proceeds, if any, for general working capital.

We have never declared dividends or paid any cash dividends. We intend
to retain and use any future earnings for the development and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future.

MARKET PRICE INFORMATION

Our common stock is included on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) SmallCap Market under the symbol
"WAVE." The following table sets forth the quarterly high and low closing bid
prices for the common stock as reported by NASDAQ for the periods indicated.
These prices are based on quotations between dealers, and do not reflect retail
mark-up, mark-down or commissions, and may not necessarily represent actual
transactions.

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High Low
---- ---
FISCAL 1998
First Quarter $6.63 $3.88
Second Quarter $4.50 $2.94
Third Quarter $3.50 $1.38
Fourth Quarter $4.19 $0.66

FISCAL 1999
First Quarter $3.50 $1.50
Second Quarter $2.41 $1.31
Third Quarter $3.63 $1.94
Fourth Quarter $3.50 $2.00

FISCAL 2000
First Quarter $5.75 $2.19
Second Quarter $4.13 $1.66
Third Quarter (through July 14, 2000) $2.06 $1.81

See the cover page of this prospectus for the last sales price of the
common stock reported on the NASDAQ SmallCap Market as of a recent date.

There is no market for the Class B Warrants offered under this
prospectus, therefore, prices of the warrants will be determined through
privately negotiated sales. We will seek to list the Class B Warrants on the
NASDAQ SmallCap Market, but there is no assurance that we will be successful.

On July 14, 2000, there were approximately 259 holders of record of
our common stock. This number does not include beneficial owners of the common
stock whose shares are held in the names of various dealers, clearing agencies,
banks, brokers and other fiduciaries.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion should be read in conjunction with our
financial statements and the notes thereto and the other financial information
appearing elsewhere in this prospectus. This prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
include statements concerning underlying assumptions and other statements which
are other that statements of historical facts. Forward-looking statements
involve risks and uncertainties which could cause actual results or outcomes to
differ materially. Our expectations and beliefs are expressed in good faith and
are believed by us to have a reasonable basis but there can be no assurance that
management's expectations, beliefs or projections will be achieved or
accomplished. Our actual results could differ materially from those discussed in
the forward-looking statements due to factors discussed under "Risk Factors," as
well as factors discussed elsewhere in this prospectus. The cautionary
statements made in this prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this prospectus.

GENERAL

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commercializing are in the fields of photo and video-enhancement. 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 who by
incorporating this enabling technology improve picture quality in set-top boxes,
televisions, VCR's, DVD's, camcorders and other video output devices. In
addition to the NVP Video Processor technology, we recently completed
development of our proprietary digital photo and video software technology. The
technology was introduced as PictureWizard in September 1999 and test marketed
directly to consumers through our exclusive e-commerce web site store at
picturewizard.com. Based on this initial test marketing, customer feedback and
the results of an independent survey sponsored by us, in April 2000, we launched
the PicturePrepSuite2000 product line offering the additional features, benefits
and options customers desired. 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.

We have 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 our company 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. These products using the wireless
digital video technology are expected to be available within the next twelve to
eighteen months.

As of March 31, 2000 we had an accumulated 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 we anticipate deriving some revenue from the sale of our
proprietary software (Softsets) and the NVP Video Processor products during
2000, no assurance can be given that these products will be successfully
marketed during such period. See "Liquidity and Capital Resources."

LIQUIDITY AND CAPITAL RESOURCES

From inception until the initial public offering, our company relied
for all of our funding ($2,900,000 in cash plus the cancellation of the notes in
the principal amount of $350,000) on private sales of our debt and equity
securities. In July 1996, we completed our initial public offering and received
net proceeds of $9,538,428. We used $2,073,652 of the net proceeds of the
initial public offering 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 our common stock were issued for an aggregate
purchase price of $1,000,000 to a Private Limited Partnership. On May 11, 1998,
we entered into a placement agency agreement with Janssen-Meyers to act as our
placement agent in a private equity placement whereby we issued 2,742,904 shares
of our common stock and 2,057,207 Class A Warrants between May 19, 1998 and June
9, 1998 for an aggregate purchase price of $7,280,546.

On March 14, 2000, we completed a private placement of 2,088,608
shares of our common stock and 1,044,304 Class B Warrants for an aggregate
purchase price of $6,600,000.

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On March 31, 2000 we had cash and cash equivalents of approximately
$6,800,000 and no long-term liabilities. We anticipate, based on current
proposed plans and assumptions relating to our operations, that we have
sufficient cash to satisfy the estimated cash requirements of the Company for at
least the next twelve months. In the event of unanticipated expenses, delays or
other problems beyond this period, we might be required to seek additional
funding. In addition, in the event that we receive a larger than anticipated
number of initial purchase orders upon introduction of our NVP Video Processor
products, we may require resources greater than our available cash or than are
otherwise available to us. In such event, we may be required to raise additional
capital. There can be no assurance that such additional capital will be
available to us if needed, on commercially reasonable terms or at all.

PLAN OF OPERATION

Our plan of operation over the next twelve months focuses primarily on
transitioning from a development stage organization to an operating company.
This transition includes the marketing and sales of our ASIC line of chips, our
digital software technology and our Internet presence to the OEM, professional
video and retail markets and on the continuing development of our digital and
analog video enhancement technology. In addition, through our strategic alliance
with MemoryLink Corp., we plan to market wireless video technology, as the
products become available, to the same OEM customer base that we are currently
marketing our analog and digital technology. Also, we plan, through our Advanced
Engineering Group and agreements 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
us. However, there can be no assurance that our efforts will result in
marketable products or products that can be produced at commercially acceptable
costs.

Our future performance will be subject to a number of business
factors, including those beyond our control, such as economic downturns and
evolving industry needs and preferences, as well as the level of competition and
the ability of our company to successfully market our products and technology.
There can be no assurance that we will be able to successfully implement a
marketing strategy, generate significant revenues or achieve profitable
operations. In addition, because our company has had only limited operations to
date, there can be no assurance that our estimates will prove to be accurate or
that unforeseen events will not occur.

BUSINESS

GENERAL

Until recently we were 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 our company. The first technologies we are
commercializing are in the fields of photo and video-enhancement. 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 ASICs (Application Specific Integrated Circuit)
chips through third parties and to directly market these products to OEMs who by
incorporating this enabling technology would improve picture quality in set-top
boxes, televisions, VCR's, DVD's, camcorders and other video output devices.

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<PAGE>

e-commerce Web site store at picturewizard.com for the primary purpose of system
and product evaluation in a live setting, and to garner 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 us, in
April 2000 we launched the PicturePrepSuite2000 product line offering the
additional features, benefits and options customers desired. 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 addition to direct on-line consumer sales (B to C
sales), we have begun marketing this technology directly to businesses (B to B)
in order to expand our 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.

In March 2000, we received the OEM version of our NVP ASIC chip from
the semiconductor-manufacturing foundry. Subsequent to the completion of full
quality assurance testing, we have built test fixtures utilizing this ASIC chip
which are being used for sales demonstration purposes and to allow prospective
OEMs to test the functionality of the chip in their own labs. We expect to be
ready for production during the third quarter of 2000. Although we are unable to
predict whether our marketing efforts will be successful, we believe that our
products have been well received.

We recently completed development of a set top box utilizing the NVP
ASIC chip for use with existing television sets and video output devices. We had
previously entered into an exclusive five-year manufacturing and marketing
agreement with Terk Technologies Corp. to manufacture and market under the Terk
brand name a line-up of these set-top boxes. 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 their minimum purchase requirements.

We have formed a strategic alliance with MemoryLink Corp. for the
commercialization of MemoryLink's propriety wireless digital video technology,
which we and MemoryLink recently introduced 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. These products using the wireless digital video technology
are expected to be available within the next twelve to eighteen months.

We believe this focused digital and analog image enhancement product
strategy will provide our company with an expanded technology base, product line
and services we can offer potential customers. This positions NUWAVE to allow us
to take full advantage of the significant video growth opportunity presented by
the converging PC, Internet, television, HDTV and telecommunication markets. We
believe that the capacity of our existing administrative and support systems is
sufficient to allow us to expand our business without significant additional
capital expenditures.

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HISTORY

Our company was conceived of by Mr. Ernest Chu in June 1994 when he
met with Mr. Ted Wong, the President of Prime Technology, Inc. as a result of an
introduction by employees of a high-technology company for which Mr. Chu was
then rendering consulting services in his individual capacity. At that time,
Prime Technology, Inc. was the exclusive licensee of Rave Engineering Corp.'s
technology. Mr. Chu believed that the technology had the potential to be
commercialized on a mass basis for use in the video broadcast industry. In the
Fall of 1994, Mr. Chu and Mr. Wong determined that the Rave technology could be
most effectively exploited if a new company were organized to license the
technology and related products and directly commercialize and manufacture them,
rather than relying on sublicensing. They agreed that Prime Technology, Inc. and
Mr. Chu would directly participate in the equity of the new entity, and Rave
Engineering Corp. would participate through its approximately 20% equity
ownership in Prime Technology, Inc. and through royalty and development payments
from the new company. Prime Technology, Inc. would continue to be responsible
for sublicensing through an agency agreement with the new company. The parties
recognized the need for an experienced president to operate the new company and
to commercialize the products, and began negotiations with Mr. Gerald Zarin,
whom Mr. Wong had recently met, to accept that position and participate in our
company's equity.

Negotiations commenced in December 1994 and continued among Mr. Zarin,
Mr. Chu, Mr. Wong on behalf of Prime Technology, Inc. and Mr. Randy Burnworth on
behalf of Rave Engineering Corp. through early July 1995. As a result of these
negotiations, our company was organized in July 1995, at which time Prime
terminated its exclusive license arrangement with Rave Engineering Corp. and we
entered into the license agreement. In addition, Rave Engineering Corp. agreed
to continue the development of the technology and our initial products pursuant
to a development agreement and Prime Technologies, Inc. became our exclusive
agent to sublicense the products covered by the license agreement to third
parties (subject in all cases to our approval) under the terms of the Agency
Agreement. Mr. Zarin became our President and Mr. Chu became the Chairman of our
Board of Directors and acting Chief Financial Officer. Mr. Wong became a
director of our company.

We believed that Rave Engineering Corp. had not performed the services
required under the development agreement. In November 1998, we commenced an
arbitration proceeding against Rave Engineering Corp. and Randy Burnworth. On
May 28, 1999, pursuant to a settlement agreement, the arbitration was resolved
and the License Agreement was terminated. As a result of the settlement
agreement, we continue to maintain exclusive worldwide license rights to make,
market and license our video enhancement technology free of any claims of
ownership or inventorship by Rave Engineering Corp.; in return, Rave Engineering
Corp. and certain individuals associated with Rave Engineering Corp. received
$175,000 in cash as well as 100,000 shares of our common stock and options to
purchase 50,000 shares of our common stock at an exercise price of $1.46 per
share, exercisable until May 28, 2002.

BACKGROUND--VIDEO IMAGES

The human eye perceives all images as a result of its ability to
recognize light. Light travels as continuous electromagnetic waves, or analog
light waves that are either emitted by the object being observed or reflected
from it. Analog light waves vary in frequency and amplitude, and can be directly
captured as images. For example, in photography, light waves strike film treated
with certain chemicals and the energy from the light wave causes chemical
reactions that change the translucency of the film. As a result, the image can
be recreated by again passing light through the film. In computers, visual

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images can be stored and manipulated after analog light waves have been broken
down into smaller constituent parts expressed as digital signals. These digital
signals are transmitted as bits and then reconstituted into analog light waves
visible to the human eye.

Broadcast television technology is based on analog light wave
transmissions. Analog light waves are captured by an electronic television
camera and turned into usable electrical energy in the form of lower frequency
waves in the form of electrical currents in an electric circuit, or analog video
waves. That wave is transmitted to a receiver, where it is projected at the
standard broadcast rate of 30 frames per second ("fps") against a phosphorescent
screen. The screen then emits analog light waves, making the image visible to
the human eye.

Modern video telecommunications, such as satellite broadcasting and
cable television, generally combine both analog and digital processes in order
to capture and transmit images. For example, in digital satellite video
telecommunication the image is digitized by a computer processor and then
broadcast to a satellite. The digital information is received and rebroadcast by
the satellite directly to a receiver, and then reconstituted into energy in the
form of an analog wave and displayed at 30 fps to create a visible image.

Band widths available for satellite video transmission are limited by
the Federal Communications Commission. These limitations significantly restrict
the amount of information that can be transmitted in any time interval and
require most information to be transmitted in a compressed digitized format.

Internet telecommunication is subject to greater limitations. All
sites on the Internet are computers that process data on a digital basis linked
by telephone lines. Information is typically transmitted over these lines from
computers through modems. Currently, the fastest modems available for general
use can transmit only a fraction of the digital information necessary to create
real time images at 30 fps. Even if the speed of a modem was increased, the
limitations of currently available personal computers for general use make it
unlikely that a user would be able to retrieve and display data at a rate
greater than 15 fps. One result is that real time teleconferences are generally
accomplished by using special high speed modems and dedicated telephone lines
rather than using the Internet. These telephone lines are usually provided by a
national carrier having the equivalent band width of approximately 24 standard
telephone lines, which is then able to transmit the video images at 30 fps.
Charges for these dedicated lines are substantially the same as for 24 standard
lines, making real time teleconferences expensive. The ability to use the
Internet or otherwise use standard telephone lines for teleconferencing would
substantially reduce costs of teleconferencing.

Given the physical limitations of satellite, cable and telephone
systems, and their increasing interactivity, ever more emphasis is being placed
on compression technology as a means to allow more data to be transmitted in any
time interval. Using a variety of techniques, portions of a digital description
of an image are omitted in the transmission of information, and, by mathematical
formula or inference, most of the omitted data is then replaced after reception.
The result of this compression technology has been to increase the number of
channels available for digital satellite broadcasting from 50 to 150, and to
significantly improve the quality of images transmitted over the Internet. We
believe that improvements in the amount of compression possible will continue.
However, as the amount of compression increases, more data will likely be lost,
and the quality of the image will deteriorate.

Image information may be lost in the process of compression or
distorted during recording, transmission or playback because of various factors,
including signal interference or deterioration of original film quality and
camera focus. Some of the problems from this loss or distortion of image
information include lack of clarity, a "washed out" look and excessive or
inadequate black level.

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One of the methods used to compress digitized video information for
storage and transmission (other than television transmission) is to eliminate
frames. A phenomenon causing analogous results occurs when the hard drive of a
computer, or some other component, cannot retrieve or present data at
sufficiently high fps. In either case, image movement is erratic and
unrealistic. Regardless of whether the signal is compressed, the image may be
subject to random salt and pepper patterns.

OUR VIDEO ENHANCEMENT PRODUCTS

The NVP Video Processor and Softsets

The NVP Video Processor controls, corrects and improves analog video
signals' use of digital control (software). The NVP Video Processor first
detects and replaces all important picture synchronization and stability
attributes. It then separates and corrects the color and black and white
information. The NVP Video Processor enhances fine details of an image and
reduces distortions incurred in the course of transmitting the image, corrects
the pure black content of images and adjusts perceived light on projected
images. Fine detail enhancement is achieved by a proprietary circuit that
analyzes the form of the analog waves at the point of origin or display, and
processes the wave to significantly increase the clarity of the image.

The NVP Video Processor achieves "blackness" correction by
establishing a "reference to true black" and adjusting the rest of the color
spectrum to that reference, making a "washed out" image appear more vivid.
Similar referencing currently is available only in expensive video display
units, TV monitors and projection systems; the NVP Video Processor's proprietary
circuits enable the process to be performed inexpensively on a printed circuit
board, ASIC or a small portion of a integrated circuit chip.

The NVP Video Processor also contains circuits that provide for the
adjustment of light in images and brightness of the colors presented, similar to
circuits traditionally included in televisions.

The NVP Video Processor can be used prior to further processing of the
analog video wave at the source of the video signal and/or at the other end of
the process prior to the display of the video image. In the form of a chip, it
can be included in a television set, video projector or in a video conference
display or in the decoder or routing box that connects a typical television to a
cable broadcasting company or a multichannel satellite provider. The NVP Video
Processor also can be included in any personal computer that has a capture
board, a device enabling the computer to convert standard broadcast video
signals into a digitized form. This enables the image to be enhanced prior to
digitization.

Through our Advanced Engineering Group, we have developed the Softsets
to control the functions of the NVP Video Processor. The Softsets give both
end-users and manufacturers who use the NVP Video Processor in their products
the ability to manipulate the attributes of video images to their own taste or
standards. For example, the manufacturer of a set-top box which includes the NVP
Video Processor and Softsets in its product could offer viewers the ability to
select predetermined optimum video parameters for "Sports," "Movies," "Drama" or
other predesignated programming from their remote control. Additionally, program
providers or other transmitters can encode their signal so that a receiving
device containing the Softsets and enhanced NVP Video Processor will
automatically adjust its video parameters to a predetermined value when the
signal is received. The encoded signal can also be included in the actual
programming.

Digital Video and Photo Software Video Enhancement Technology

During 1998, our company, using internal resources, developed a
proprietary technology to remove noise, graininess in pictures, to complement
our Clarity technology used in the NVP-103 ASIC. The result of this development
is a set of algorithms, patent pending, that remove 70% of the picture noise

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while retaining correct focus (the image does not blur). In addition our
algorithm process is three times faster than any other known algorithm or filter
thus allowing use in and during real time streaming video.

In 1999, our company wanted to offer digital technology solutions and
to create and enter into an e-commerce environment. Based upon the power of our
propriety noise reduction algorithms a software program, PictureWizard, was
developed for users to correct, improve and enhance digital streaming video and
digital photography. PictureWizard, the product, and www.PictureWizard.com were
introduced in late 1999. This became the first downloadable software product
with the ability enhance both pictures and streaming video from virtually any PC
program or while surfing the internet using a PC. Based on initial test
marketing, customer feedback and the results of an independent survey, we
launched in April 2000 PicturePrepSuite2000 product line offering additional
features, benefits and options. The PictureWizard movie and picture enhancement
product is sold at the www.PictureWizard.com web store. The PicturePrep Suite
2000 website store at www.PicturePrep.com launched in April.

The evolution of the noise reduction algorithms results in six
products for our company to sell or license to the OEM, the retailer and the
consumer:

1. PicturePrep software product sold via the Internet to consumers.

2. PicturePrep custom software sold bundled with an OEM product such
as a scanner, digital camera or computer printer.

3. PicturePrep software in "blister packs" sold via retail stores
such as drug stores that sell photo processing.

4. NUWAVE algorithms licensed in software form to OEM of consumer
electronics products.

5. NUWAVE algorithms licensed in hardware chip form to OEM of
consumer electronics products.

6. NUWAVE algorithms bundled with our ASIC video enhancement chip
sales to OEM of consumer electronic products.

Management believes we now have proprietary solutions for sale in both
analog and digital form to meet the evolution and convergence of the PC to
television markets and the worldwide trend away from analog devices toward
digital devices.

MARKETING AND SALES

In September 1999, we completed the initial development of our first
proprietary digital photo and video software technology. This technology was
introduced as PictureWizard 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 our PictureWizard web site. Based on this
initial test marketing, customer feedback and the results of an independent
survey sponsored by us, 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 to 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
June 27, 2000 we officially opened PicturePrepClub.com.PicturePrepClub.com,
NUWAVE's digital portal will serve not only as our company's e-commerce hub to
launch sales of the PicturePrepSuite2000 line of products but also to provide

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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.

We recently completed development of a set-top box utilizing the NVP
ASIC chip for use with existing television sets and video output devices. We had
previously entered into an exclusive five-year manufacturing and marketing
agreement with Terk Technologies Corp. to manufacture and market under the Terk
brand name a line-up of these set-top boxes. The agreement with Terk 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 their minimum purchase requirements.

We are marketing our NVP Video Processor 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 Video Processor 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. Our goal is to
position ourselves 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 us, 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 production by
September 2000. Prior to the availability of the NVP Video Processor ASIC chip,
we had been conducting sales presentations of the NVP Video Processor technology
in printed circuit board 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 our 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 have 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 us 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. These 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 programs 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

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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 our 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. We are continually reviewing
our needs with a view to maximizing efficiency while conserving our resources.

RESEARCH AND DEVELOPMENT

Our research and development activity is conducted by our Advanced
Engineering Group. As of March 31, 2000, the Advanced Engineering Group
consisted of five of our 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 us on an as-needed
project-by-project basis. We anticipate that the make-up of our Advanced
Engineering Group will change from time to time depending on our current and
anticipated development and commercialization plans. Our 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 our internal technical and engineering staff as appropriate.

To date the Advanced Engineering Group has been responsible for the
development of the NVP Video Processor technology, our digital software
development and the design of our 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
Video Processor ASIC chips.

From July 17, 1995 to March 31, 2000, we 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 twelve months, we estimate that we will spend
approximately $800,000 on research and development costs in support of the
commercialization of its products. In the event we are able to generate
sufficient revenues from sales of our NVP Video Processor and digital software
products during such 12-month period, we anticipate that an increase in
estimated expenditures on research and development and the identification of new
sources of technology.

MANUFACTURING

We do not contemplate that we will directly manufacture any of our
products. Our intent is to contract with third parties to manufacture our
proposed NVP and Softsets. We will be dependent on third parties to manufacture
the NVP Video Processor ASIC and related products as well as future products we

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may choose to commercialize. We also may license to third parties the rights to
manufacture our products, through direct licensing, OEM arrangements or
otherwise.

We intend to produce the NVP Video Processor ASIC chip in accordance
with a customer's specific application requirements supported by firm
commitments rather than producing and storing in inventory ASIC chips in
anticipation of applications required by customers in the future. We contracted
with Adaptive MicroWare to provide necessary technical support and manage this
process under our direction, contracted with The Engineering Consortium and with
Innotech Systems Inc. to complete the design work necessary to convert our
current NVP Video Processor PC board design to ASIC specifications and
contracted with Zentrum Mikroelektronik Dresden GMBH and GlobalCad Inc. for
production of the ASIC.

Although we have entered into agreements with potential manufacturers
of the NVP Video Processor ASIC chip, there can be no assurance that these
manufacturers will dedicate sufficient production capacity to satisfy our
requirements within scheduled delivery times, or at all. Failure or delay by our
suppliers in fulfilling our anticipated needs would have an adverse effect on
our ability to develop and market our products. In addition, we will be
dependent on third party vendors for many of the components necessary for the
final assembly of its products. We may have difficulty in obtaining contractual
agreements with suppliers of such materials due to, among other things, possible
material shortages or possible lack of adequate purchasing power. While
management believes that these components are available from multiple sources,
we anticipate that we will obtain certain of them from a single source, or
limited number of sources, of supply. In the event that certain of our suppliers
are unable or unwilling to provide us with such components on commercially
reasonable terms, or at all, delays in securing alternative sources of supply
would result and could have a material adverse effect on our operations.

PATENTS; PROPRIETARY INFORMATION; TRADENAMES; COPYRIGHT

In April 1996, we filed two patent applications on behalf of Rave
Engineering Corp. for our Randall connector system. One patent was received in
November 1997 and the second one in January 1998. Under the terms of the
settlement agreement with Rave Engineering Corp., we retain the exclusive
license rights to these patents.

In April 1998, we filed three patent applications for certain of our
independently developed products: one for the NVP Video Processor and two for
the Softsets. In August 1999, we filed a patent application for our noise
reduction algorithms. We were notified in June 2000 that one of our Softset
applications has been approved for patent protection. Although management
believes that each of the remaining applications contains patentable claims,
there is no assurance that we will be granted patents. Also, even if granted,
there is no assurance that any patent will afford us with commercially
significant protection of our technology or that we will have adequate resources
to enforce these patents.

TRADENAMES

The Softset patent was issued in the U.S. in June 2000. We will
continue to file for patent protection within the United States and abroad with
respect to patents for new tests where economic protection for the test is
needed and such patents can be obtained. We also hold a trademark for our NUWAVE
logo and have applied for trademarks for the names PicturePrep and
PicturePrepClub.

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COMPETITION

The markets that we intend to enter are characterized by intense
competition, and, particularly with respect to the market for video editing,
video production and video processing products, and face significant price
erosion over the life of a product. Our products will directly compete with
those of numerous well-established companies, such as Sony Electronics, Inc.,
Panasonic Division of Matsushita Electric Industrial Co., Motorola, Inc.,
Mitsubishi International Corp. and Royal Philips Electronics, NV, which design,
manufacture and/or market video technology and other products. All of these
companies have substantially greater financial, technical, personnel and other
resources than our company and have established reputations for success in the
development, licensing, sale and service of their products and technology.
Certain of these competitors dominate their industries and have the necessary
financial resources to enable them to withstand substantial price competition or
downturns in the market for video products.

EMPLOYEES

At July 14, 2000, we had fourteen full-time employees, of whom eight
were executives or administrative and six were in the Advanced Engineering
Group. Depending on our level of business activity, we expect to hire additional
employees in the next twelve months, as needed, to support marketing and sales,
manufacturing and research and development.

PROPERTIES

We have established our headquarters in Fairfield, New Jersey.
Pursuant to the sublease relating to such facility, we are obligated to make
monthly rental payments of $6,600. The sublease is on a month-to-month basis.
Our subleased portion of the facility is approximately 2,500 square feet and the
sublease entitles us to share certain common areas.

LEGAL PROCEEDINGS

There are no current material legal proceedings involving our company.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages as of June 30, 2000,
and business experience of the directors and executive officers of our company.
Our directors hold their offices for a term of one year or until their
successors are elected and qualified. Our officers serve at the discretion of
the Board of Directors.

Name Age Position
--------------------------- --------- -----------------------------------------

Gerald Zarin 59 Chairman of the Board of Directors,
Chief Executive Officer and President

Jeremiah F. O'Brien 53 Vice President, Secretary and Chief
Financial Officer

Robert Webb 64 Vice President - Marketing/Technical
Development

Don Legato 55 Vice President - Sales

Edward Bohn 55 Director

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<PAGE>

Name Age Position
--------------------------- --------- -----------------------------------------

Richard E. Ekstract 69 Director

Lyle E. Gramley 73 Director

Joseph A. Sarubbi 71 Director

GERALD ZARIN has been a director, and our President and Chief
Executive Officer since July 1995, and he has been Chairman of the Board of
Directors since January 1996. From June 1991 until January 1993, Mr. Zarin was
the Chairman, President and Chief Executive Officer of Emerson Radio
Corporation, which designs and sells consumer electronics products. From June
1993 to July 1995, he was President and Chief Executive Officer at AMD
Consulting, Inc., a business consulting firm. From November 1990 to June 1991,
he was President and Chief Executive Officer of JEM, Inc., an importer of fine
furnishings. From August 1987 to October 1990, he was Senior Vice President and
Chief Financial Officer of Horn & Hardart, Inc., the parent company for Hanover
House and various other hotels and fast food chains. From 1976 to 1986, he was
President and Chief Executive Officer of Morse Electro, Inc., which designed and
sold consumer electronics products.

JEREMIAH F. O'BRIEN has been our Vice President and Secretary since
July 1995 and Chief Financial Officer since January 1996. During the period of
July 1991 through July 1995, he functioned as an independent consultant in
financial matters to various private corporations. From June 1993 through March
1994, Mr. O'Brien was Corporate Controller for Andin International, a jewelry
manufacturing company. From September 1989 through June 1991, he served as
Senior Vice President of Finance for Emerson Computer Corporation and Emerson
Technologies, Inc. (both of which manufacture and sell electronic components and
products). From 1983 to 1989, he served as CFO and Executive Vice President for
Cardiac Resuscitator Corporation, a medical electronics manufacturer.

ROBERT WEBB has been the Vice President-Marketing/Technical
Development since September 1995. From June 1995 to September 1995 Mr. Webb
acted as an independent consultant to various private corporations. From July
1994 until March 1995 he was Vice President of New Product Development for
Studio Magic, Inc., a company involved in the design and manufacture of computer
video equipment, and served as a consultant for such company from October 1993
to July 1994 and in April 1995. From October 1973 until October 1993 he was
employed by Grass Valley Tektronix, which produces broadcast television
equipment. He served as a special advisor to the President of Grass Valley
Tektronix from February 1993 to September 1993; he was Division General
Manager-Graphics Systems from November 1990 to February 1993 and held various
executive positions prior to that time.

DON LEGATO has been our Vice President-Sales since February 1997. From
April 1994 to February 1997, he was the President of Gale Group Ltd., Inc., a
management consulting firm. From May 1993 to April 1994, he served as Vice
President Sales and Marketing and also as a Director for Applied Safety Inc.,
(makers of the "World's First" Retrofit Driver's Side Airbag System in the US).
From June 1992 to May 1993 he was President of Technology Solutions Distributing
Inc., a computer products distribution company. From November 1972 to June 1992,
he was President and CEO of T.L.D. Limited, Inc., a manufacturer's
representative company representing major electronics and computer consumer
products firm such as Sanyo, Sharp, Sony and Apple Computer. He also served on
Manufacturer's Advisory Councils for several of these companies.

EDWARD BOHN has been a director of our company since July 1995. From
February 1995 to the present, he has been a Director and Consultant of Jennifer
Convertibles, a furniture distributor. From September 1994 to the present, he
has operated as an independent consultant in financial and operational matters.
From January 1983 to March 1994, Mr. Bohn was employed in various capacities by
Emerson Radio Corporation, which designs and sells consumer electronics
products. From March 1993 to March 1994, he was Senior Vice President-Special
Projects; from March 1991 to March 1993, he was Chief Financial Officer and

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<PAGE>

Treasurer/Vice President of Finance. Emerson Radio Corporation filed in the
United States Bankruptcy Court, District of New Jersey, for protection under
Chapter 11 of the Federal Bankruptcy Act on September 29, 1993 and was
discharged on March 31, 1994.

RICHARD E. EKSTRACT has been a director of our company since September
1999. Since 1959, Mr. Ekstract has created, financed and launched more than
twenty periodicals about the consumer electronics industry, including Audio
Times, Consumer Electronics Show Daily, Autosound and Communications, Satellite
Retailing and Video Business, Video Review, TWICE, CARS, and License! Mr.
Ekstract is also the founder and Chairman of Home Office Association of America
and the creator of the Audio Hall of Fame and Video Hall of Fame.

LYLE E. GRAMLEY has been a director of our company since December
1995. He has been employed by the Mortgage Bankers Association in Washington,
D.C. since 1985, as Senior Staff Vice President and Chief Economist from 1985 to
1992, and as a Consulting Economist since 1992. From 1980 to 1985, Mr. Gramley
was a member of the Board of Governors of the Federal Reserve Board.

JOSEPH A. SARUBBI has been a director of our company since March 1996.
From October 1993 to June 6, 1996, he was a director of The Panda Project, Inc.,
a manufacturer of computers and semiconductor packages. Since April 1988, Mr.
Sarubbi has been a self-employed management and technical consultant to various
technology companies. From February 1986 to April 1988, he was Senior Vice
President of Manufacturing Operations for Tandon Corporation, a computer
manufacturer. From December 1952 to January 1986, Mr. Sarubbi was employed by
IBM in various senior engineering positions.

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth the annual and long-term compensation
paid by the Company for services performed on the Company's behalf for the three
fiscal years ended December 31, 1999, with respect to those persons who were, as
of December 31, 1999, our Chief Executive Officer and our executive officers who
received more than $100,000 in compensation for fiscal 1999.

<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE

LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- --------------------------------------
SECURITIES
UNDERLYING
OPTIONS
(NUMBER
NAME AND OTHER ANNUAL OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION SHARES) COMPENSATION
----------------------------- ------ ---------- ---------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gerald Zarin, President and 1999 $120,000 $25,000 $0 50,000 $0
Chief Executive Officer 1998 120,000 25,000 0 385,000 0
1997 120,000 0 0 0 0

Don Legato, 1999 150,000 5,000 0 10,000 0
Vice President, Sales 1998 150,000 12,500 0 50,000 0
1997 129,800 0 0 60,000 0

Jeremiah F. O'Brien, Chief 1999 100,000 10,000 0 20,000 0
Financial Officer and Vice 1998 103,800 15,000 0 75,000 0
President 1997 100,000 0 0 0 0

Robert Webb, Vice President, 1999 108,000 10,000 0 20,000 0
Marketing/Technical 1998 108,000 12,500 0 40,000 0
Development 1997 108,000 0 0 0 0
</TABLE>

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<PAGE>

At the Meeting of the Board of Directors, held on May 11 2000, based
upon Compensation Committee recommendation, the Board adopted resolutions
authorizing bonuses for 2000 as follows: Mr. Zarin: $50,000; Mr. Webb: $25,000;
Mr. O'Brien: $10,000; and Mr. Legato: $7,500.

EMPLOYMENT AGREEMENTS

As of April 1, 2000, we entered into a new employment agreement with
Gerald Zarin, employing him as our President and Chief Executive Officer through
December 31, 2005, with automatic one-year renewals, subject to either party
giving notice of termination as of an anniversary date. His employment agreement
of July 20, 1995 was then terminated. The annual base compensation is $150,000,
with an annual performance bonus equal to (i) 50% of the base compensation if
our net profits before taxes are equal to projections approved by the Board of
Directors, (ii) 75% of the base compensation if the net profits are equal to
105% of the projections, and (iii) 100% of the base compensation if the net
profits are equal to 115% of the projections, and with discretionary bonuses as
determined by the Board of Directors. If we terminate the employment agreement
at the end of any term or without good cause, or if we materially breach the
employment agreement, Mr. Zarin would receive from 150% of his then annual base
compensation and average bonus for the prior two calendar years to an amount
equal to the balance of the base compensation plus an additional amount related
to his base compensation and prior bonuses, dependent upon the reason for the
termination and the date of termination. In addition to these termination
payments, we would continue to pay the health insurance premiums for Mr. Zarin
and his spouse, but not to exceed $15,000 per year, subject to Mr. Zarin being
offered similar coverage by a subsequent employer, and automobile expenses for
five years, and any unvested options would vest. For a period of eight months,
commencing thirty days after a change of control of our company, Mr. Zarin could
terminate his employment agreement and receive a lump sum payment equal to three
times his highest annual base salary and average annual bonus, continuation of
health insurance premiums and automobile as described above, plus accelerated
vesting of his options, provided that the payment would be reduced to the
largest amount which would not be considered a "parachute payment" under Section
280G of the Internal Revenue Code of 1986. A change of control of our company
would include persons becoming the beneficial owners of more than 25% of the
outstanding shares of our common stock or a merger in which our stockholders own
less than 50% of the surviving corporation, in transactions not approved by the
incumbent directors of our Board.

On September 11, 1995, we entered into an employment agreement with
Robert Webb, pursuant to which Mr. Webb was appointed Vice President-Marketing.
In March 1997, his title was changed to Vice President-Marketing/Technical
Development in order to more accurately reflect his duties. The employment
agreement continued until March 31, 1996 and thereafter has been continuing for
successive 3-month periods. Mr. Webb's base salary for 2000 is $125,000. In
connection with his employment agreement, Mr. Webb received options to purchase
70,000 shares of our common stock at $1.50 per share.

On February 11, 1997, we entered into an employment agreement with Don
Legato, pursuant to which Mr. Legato was appointed our Vice President-Sales. The
employment agreement continued until March 31, 1996 and thereafter has been
continuing for successive 3-month periods. Mr. Legato's base salary for 2000 is
$150,000. In connection with his employment agreement, Mr. Legato received
options to purchase 60,000 shares of our common stock at $6.875 per share.

In connection with services performed by Mr. O'Brien, on July 17,
1995, he received 5,000 shares of our common stock valued at $.01 per share and
has been granted options to purchase 25,000 shares of our common stock at $1.50
per share and 5,000 shares of our common stock at $2.00 per share. Mr. O'Brien's
base salary for 2000 is $120,000.

28
<PAGE>

DIRECTORS' COMPENSATION

Directors who are not employees of the Company are entitled to a fee
of $2,500 per year and $500 per meeting attended (other than telephonic
meetings) for serving on the Board of Directors. Each director is also
reimbursed for expenses incurred in connection with attendance at meetings of
the Board of Directors. For the fiscal year ended December 31, 1999, Messrs.
Bohn, Gramley and Sarubbi received compensation of $1,500, $1,500 and $1,000
for attendance at non-telephonic board meetings. Richard Ekstract who was
elected to the Board on September 28, 1999 did not receive compensation from the
Company during the fiscal year ended December 31, 1999.

The 1996 Non-Employee Director Stock Option Plan (the "Director Stock
Option Plan") provides for the automatic grant to each individual elected,
re-elected or continuing as a non-employee director of the Company of a stock
option for 5,000 shares of Common Stock at an option exercise price equal to the
fair market value of the Common Stock on the date of grant. 235,000 shares have
been reserved for issuance under the Director Stock Option Plan. Richard
Ekstract was granted 45,000 options under the Plan upon his election to the
Board. At December 31, 1999, options for an aggregate of 202,000 shares of
Common Stock exercisable at prices ranging from $2.56 to $ 6.75 per share
expiring from November 26, 2001 to September 28, 2009 were outstanding under the
Director Stock Option Plan.

For a description of consulting fees paid to Messrs. Bohn, Ekstract
and Sarubbi, see "Certain Relationships and Related Transactions."

BOARD AND COMMITTEE MEETINGS

Our Board of Directors held four meetings during the fiscal year ended
December 31, 1999. During 1999, no member of the Board of Directors attended
fewer than 75% of the aggregate of (i) the total number of meetings of the Board
of Directors held during the period for which he has been a director and (ii)
the total number of meetings held by all committees on which he served.

The Board of Directors has a standing Audit Committee and a standing
Compensation Committee. The Audit Committee met two times and the Compensation
Committee met one time during the fiscal year ended December 31, 1999.

Messrs. Bohn, Gramley and Sarubbi comprise the Audit Committee. This
Committee makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the results of the
audit engagement, approves professional services provided by the independent
accountants, reviews the independence of the independent public accountants,
considers the range of audit and non-audit fees, and reviews the adequacy of our
internal accounting controls.

Messrs. Bohn, Ekstract and Gramley comprise the Compensation
Committee. The Compensation Committee makes recommendations to the Board
regarding the executive and employee compensation programs of the Company.

1996 STOCK INCENTIVE PLAN FOR EMPLOYEES AND CONSULTANTS

As of January 31, 1996, we adopted the Employee Stock Incentive Plan,
pursuant to which stock options (both Nonqualified Stock Options and Incentive
Stock Options), stock appreciation rights and restricted stock may be granted to
key employees and consultants. The purpose of the Employee Stock Incentive Plan
is to provide our employees and consultants with an increased incentive to make
significant and extraordinary contributions to the long-term performance and
growth of our company, to align the interest of employees and consultants with
the interests of the stockholders of our company, and to attract and retain
employees and consultants of exceptional ability.

29
<PAGE>

As of July 14, 2000, we have granted options to purchase a total of
905,000 shares of our common stock at prices ranging from $1.50 to $6.75 per
share under the Employee Stock Incentive Plan.

OPTION GRANTS IN LAST FISCAL YEAR

The number of shares available for grant under our company's 1996
Stock Incentive Plan for Employees and Consultants is 305,000. Options for an
aggregate of 900,000 shares have been granted under the Employee Stock Option
Plan. During our 1999 fiscal year, options covering an aggregate of 145,000
shares of our common stock were granted under our Employee Stock Option Plan to
eight persons at exercise prices our from $1.97 to $2.50 per share. During the
first five months of 2000, options covering an aggregate of 2,500 shares of our
common stock were granted under the plan to one person at an exercise price of
$2.125.

In May 2000, the Board of Directors agreed to extend certain options,
exercisable for our common stock at $1.50 per share, due to expire during 2000.
The Board voted that the options to purchase 200,000 shares of our common stock
held by Gerald Zarin, due to expire on December 31, 2000, should be extended
until December 31, 2005, and the options to purchase 10,714 shares of our common
stock held by Jeremiah F. O'Brien, due to expire on July 17, 2000, be extended
until July 15, 2005, and that the options to purchase 30,000 shares of our
common stock, held by Robert Webb, due to expire on September 11, 2000, be
extended until September 11, 2005. All other terms of the options remain
unchanged. On the date the board acted the closing price of our common stock as
quoted on the NASDAQ SmallCap Market was $1.69.

The following table sets forth certain information regarding options
granted under the Employee Stock Option Plan during the fiscal year ended
December 31, 1999 to the executive officers named below:

OPTION GRANTS FOR YEAR ENDED DECEMBER 31, 1999
(INDIVIDUAL GRANTS IN FISCAL YEAR)

NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE PER
NAME OPTIONS EMPLOYEES SHARE (1) EXPIRATION DATE
-------------------- ------------- -------------- ------------ -----------------
Gerald Zarin 50,000 28.9 $1.97 June 30, 2009

Don Legato 10,000 6.9 $1.97 June 30, 2009

Jeremiah F. O'Brien 20,000 13.8 $1.97 June 30, 2009

Robert Webb 20,000 13.8 $1.97 June 30, 2009
-------- ----

TOTAL 100,000 66.6

(1) All grants of options have been made with exercise prices equal to fair
market value at date of grant.

OPTION EXERCISES AND YEAR-END OPTION VALUES

No options were exercised in fiscal year 1999 by any of the executive
officers listed below. The following table sets forth, as of December 31, 1999,
the number of stock options and the value of unexercised in-the-money stock
options held by these executive officers.

30
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS(1)
NAME OPTIONS AT DECEMBER 31, 1999 AT DECEMBER 31, 1999

EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gerald Zarin 473,334 161,666 $168,317 $11,433
Robert Webb 103,334 26,666 $ 59,197 $ 4,573
Don Legato 96,668 23,332 $ 1,143 $ 2,286
Jeremiah F. O'Brien 86,667 38,333 $ 24,177 $ 4,573
-------- -------- ------- -------
TOTAL 760,003 249,997 $252,834 $55,865
</TABLE>

(1) The dollar value of the unexercised options has been calculated by
determining the difference between the fair market value of the securities
underlying the options and the exercise price of the option at fiscal year-end.

EXECUTIVE COMPENSATION PROGRAM

Our executive compensation program consists of base salary, periodic
incentive compensation and long-term equity incentives in the form of stock
options. Executive officers also are eligible to participate in certain benefit
programs which are generally available to all of our employees, such as medical
insurance programs. In addition to the basic medical insurance program, the
executive officers are eligible to participate in an enhanced medical insurance
program which is available only to our executive officers.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since 1996, Mr. Edward Bohn, a director of our company, has been
acting as a consultant to us from time to time on matters specified by our
President. In March 1997, Mr. Bohn entered into a consulting agreement with us
pursuant to which he agreed to act as our consultant at a rate of $1,000 per day
with a maximum of $2,750 per week regardless of the actual time spent on our
behalf. For the years ended December 31, 1999 and 1998, Mr. Bohn received
$22,008 and $35,025, respectively on account of such consulting services.

Since 1996, Mr. Joseph A. Sarubbi, a director of our company, has been
acting as a consultant to us from time to time on matters specified by our
President. In that connection he has received compensation on a per diem basis
of $1,000 per day. For the years ended December 31, 1999 and 1999, Mr. Sarubbi
received $2,000 and $20,000, respectively, on account of such consulting
services.

On September 28, 1999, we granted Mr. Richard Ekstract, who then
became a director of our company, an option to purchase 100,000 shares of our
common stock at an exercise price of $2.56 per share, subject to certain
performance-based vesting rules, in consideration for certain advisory and
referral services to be rendered by him to our company. The option vests to the
extent of 15,000 option shares (A) for each (i) OEM order obtained or (ii)
alliance or partnership entered into between us and a third party as a result of
the Mr. Ekstract's efforts, up to a maximum of five such orders, alliances or
partnerships or an aggregate of 75,000 option shares, and (B) for which a
majority of the non-employee directors of our company then in office (excluding
Mr. Ekstract if he is then a non-employee director) have approved in advance
each such order, partnership or alliance and also have agreed that such order,
partnership or alliance would give rise to vesting of the option. The option
vests for 25,000 option shares after five OEM orders have been placed with us or
five alliances or partnerships with us have been created, or an aggregate of
five orders, alliances or partnerships have occurred as a result of Mr.
Ekstract's efforts, provided that at least two of the five vesting transactions
are OEM orders. No portion of this option has yet vested.

31
<PAGE>

On May 11, 1998, we entered into a placement agency agreement with
Janssen-Meyers Associates, L.P., now Roan-Meyers Associates, L.P., to act as our
placement agent in a private equity placement whereby we issued 2,742,904 shares
of our 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. For acting
as placement agent, Janssen-Meyers received a commission of $728,055, as well as
a non-accountable expense allowance of $218,416 and reimbursement of other
costs. In addition, Janssen-Meyers received as part of its compensation warrants
exercisable until May 11, 2003, to purchase up to (i) 688,084 shares of our
common stock at prices per share ranging from $2.50 to $3.06 and (ii) 516,068
Class A Redeemable Warrants to purchase up to 516,068 shares of our common stock
at a price per share of $3.24. Bruce Meyers, who purchased 270,270 shares and
Peter Janssen, who purchased 154,440 shares of our common stock in the private
placement, were principals of Janssen-Meyers at the time of the private
placement.

On February 14, 2000, we entered into a placement agency agreement
with Janssen-Meyers, to act as our placement agent in a private equity placement
whereby we issued 2,088,608 shares of our common stock and 1,044,304 common
stock purchase warrants for an aggregate purchase price of $6,600,000. For
acting as placement agent, Janssen-Meyers received a commission of $660,000, as
well as a non-accountable expense allowance of $198,000 and reimbursement of
other costs, including legal expenses relating to the offering. In addition,
Janssen-Meyers received as part of its compensation warrants exercisable until
March 14, 2005, to purchase up to (i) 522,159 shares of our common stock at a
price per share of $3.16 and (ii) 261,080 Class B Warrants to purchase up to
261,080 shares of our common stock at a price per share of $3.95. In addition,
Janssen-Meyers has been retained to perform consulting services related to
corporate finance and other financial services at a fee of $5,000 a month
through May 31, 2001.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below is based on information obtained from the persons
named therein with respect to the shares of our common stock beneficially owned,
as of May 31, 2000 (except as noted below), by (i) each person known by us to be
the owner of more than 5% of the outstanding shares of our common stock, (ii)
each director of our company, (iii) executive officers of our company, and (iv)
all executive officers and directors of our company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OWNED
---------------------------------------- ------------------------ ------------------
<S> <C> <C>
Gerald Zarin 1,054,667(3) 9.5%
Edward Bohn 85,668(4) *
Lyle Gramley 55,334(5) *
Richard E. Ekstract 23,000(6) *
Joseph A. Sarubbi 70,334(7) *
Jeremiah F. O'Brien 119,167(8) 1.1
Robert Webb 116,667(9) 1.1
Don Legato 115,834(10) 1.1
Roan-Meyers Associates, L.P. 1,232,155(11) 11.6
17 State Street
New York, NY 10004
Bruce Meyers 1,147,080(12) 10.8
c/o Roan-Meyers Associates, L.P.
17 State Street
New York, NY 10004
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OWNED
---------------------------------------- ------------------------ ------------------
<S> <C> <C>
Peter Janssen 634,414(13) 5.7
c/o Janssen Partners
1345 Old Northern Blvd.
Roslyn, NY 11576
Helen Burgess 577,854 5.7
40 E. 30th St., 10th Fl.
New York, NY 10016
All executive officers and directors as a 1,645,671(14) 14.1
group (8 persons)
</TABLE>
------------------------
* less than 1%

(1) Unless otherwise noted, the address of the beneficial owner is: c/o NUWAVE
Technologies, Inc., One Passaic Ave., Fairfield, NJ 07004.
(2) The number of shares of Common Stock beneficially owned by each person is
determined in accordance with the rules of the SEC, and the information is
not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also any
shares of Common Stock which the individual has the right to acquire within
60 days after the Record Date through the exercise of any stock option,
warrant or other right. The inclusion herein of any shares of Common Stock
deemed beneficially owned does not constitute an admission of beneficial
ownership of those shares. Unless otherwise indicated, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
(3) Includes 601,667 shares subject to exercisable options.
(4) Includes 85,668 shares subject to exercisable options.
(5) Includes 35,334 shares subject to exercisable options.
(6) Includes 15,000 shares subject to exercisable options.
(7) Includes 35,334 shares subject to exercisable options.
(8) Includes (i) 111,167 shares subject to exercisable options and (ii) 2,500
shares subject to exercisable warrants held by Mr. O'Brien's wife, as to
which Mr. O'Brien disclaims beneficial interest.
(9) Includes 103,334 shares subject to exercisable options.
(10) Includes (i) 113,334 shares subject to exercisable options; (ii) 500 shares
subject to exercisable Class A Redeemable Warrants, and (iii) 2,000 shares
owned by Mr. Legato's wife, as to which Mr. Legato disclaims beneficial
interest.
(11) Includes (i) 180,900 shares subject to exercisable public warrants, (ii)
444,253 shares subject to exercisable Class A Redeemable Warrants, (iii)
404,668 shares subject to exercisable Unit Warrants and (iv) 203,102 shares
subject to exercisable Class B Warrants which underlie the Unit Warrants.
Does not include shares owned directly by Mr. Meyers.
(12) Includes (i) 27,546 shares subject to exercisable Consultant's Warrants,
(ii) 193,432 shares subject to exercisable Underwriter's warrants, (iii)
12,700 shares subject to exercisable public warrants, (iv) 275,807 shares
subject to exercisable Class A Warrants, (v) 117,483 shares
subject to exercisable Unit Warrants and (vi) 58,742 shares subject to
exercisable Class B Warrants which underlie the Unit Warrants,
as reported on Schedule 13D, as filed with the SEC on June 27, 2000; and
excludes shares of the Company's Common Stock beneficially owned by
Roan-Meyers, as to which Mr. Meyers disclaims beneficial interest.
(13) Includes (i) 234,231 shares subject to exercisable Class A Warrants, (ii)
233,818 shares subject to exercisable Unit Warrants, and (iii) 175,365
shares subject to exercisable Class A Warrants which underlie the Unit
Warrants.
(14) See footnotes (1) through (10) above.

DESCRIPTION OF SECURITIES

GENERAL

At a Special Meeting of Stockholders, held on February 9, 2000, our
stockholders approved an amendment to our certificate of incorporation to
increase the amount of shares of common stock that we are authorized to issue
from 20,000,000 to 40,000,000 shares, $0.01 par value, of which 10,557,729
shares were issued and outstanding as of July 14, 2000.

33
<PAGE>

COMMON STOCK

The holders of common stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of our directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
common stock are entitled to receive ratably such dividends when, as and if
declared by the Board of Directors out of funds legally available for that
purpose. In the event of liquidation, dissolution or winding up of our company,
the holders of our common stock are entitled to share ratably in all assets
remaining which are available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the common stock. Holders our of common stock have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to our common stock. All of the outstanding shares of our
common stock are validly issued, fully paid and nonassessable.

PREFERRED STOCK

Of the 2,000,000 shares of Preferred Stock authorized, 1,000,000
shares have been designated as Series A Convertible Preferred Shares. In 1995,
we sold 600,000 shares of our Series A Convertible Preferred Shares, which
shares were converted into 600,000 shares of our common stock in 1996. The
Series A Convertible Preferred Shares are convertible into common stock on a
one-to-one basis. The remaining 1,000,000 shares of Preferred Stock not
designated may have such preferences and rights as the Board of Directors may
designate.

PUBLIC WARRANTS

The following discussion is a summary of certain terms and conditions
of the public warrants contained in the warrant agreement by and among our
company, American Stock Transfer & Trust Company, as warrant agent, and Rickel &
Associates, as underwriters to the initial public offering of our company's
securities. As such, it is qualified in its entirety by reference to the warrant
agreement.

Currently, each public warrant entitles its registered holder to
purchase 1.378 shares of our common stock at a price of $3.99 per share, subject
to further adjustment in certain circumstances. Unless exercised, the public
warrants will automatically expire on July 3, 2001. The public warrants are
separately transferable and are listed on the NASDAQ SmallCap Market under the
symbol "WAVEW."

The public warrants are redeemable by us at any time after July 3,
1997, upon notice of not less than 30 days, at a price of $.10 per public
warrant, provided that the closing bid quotation of our common stock on all
twenty trading days ending on the third day prior to the day on which we give
notice has been at least 150% (currently $5.99, subject to certain adjustments)
of the then effective exercise price of the public warrants. The holders of the
public warrants have the right to exercise their warrants until the close of
business on the date fixed for redemption. The public warrants were issued in
registered form under a warrant agreement by and among us, American Stock
Transfer & Trust Company, as warrant agent, and Rickel & Associates, as
underwriters to the initial public offering of our company's securities. The
exercise price and number of shares of our common stock or other securities
issuable upon exercise of the public warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation of our company. The
public warrants are subject to adjustment for issuances of our common stock at
prices below the exercise price of the public warrants.

The public warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant certificate

34
<PAGE>

completed and executed as indicated, accompanied by full payment of the exercise
price, by certified check or bank draft payable to our company, to the warrant
agent for the number of public warrants being exercised. The warrant holders do
not have the rights or privileges of holders of our common stock.

No fractional shares will be issued upon exercise of the public
warrants. However, if a warrant holder exercises all public warrants then owned
of record by him, we will pay that warrant holder, in lieu of the issuance of
any fractional share which is otherwise issuable, an amount in cash based on the
market value of our common stock on the last trading day prior to the exercise
date.

CLASS A REDEEMABLE WARRANTS

The following discussion is a summary of certain terms and provisions
of the Class A Redeemable Warrants contained in the Warrant Agreement, dated May
15, 1998, between the Company and American Stock Transfer & Trust Company (the
"Warrant Agreement"). As such, it is qualified in its entirety by reference to
the Warrant Agreement.

Each Class A Warrant entitles the holder to purchase one share of
Common Stock at any time until May 11, 2003 at an exercise price of $3.24 (the
"Exercise Price"), subject to adjustment in certain circumstances to prevent
dilution. The Class A Warrants may be exercised in whole or in part, at any time
and from time to time until May 11, 2003 through a cash or cashless exercise.
Unless exercised, the Class A Warrants will automatically expire on May 11,
2003.

Under the Warrant Agreement, the Company agreed to use its best effort
to file a registration statement under the Securities Act, registering the Class
A Warrants and the shares of Common Stock underlying the Class A Warrants, upon
demand, after December 9, 1998, and use its best efforts to have the
registration statement declared effective by the Commission as soon as possible
thereafter (the "Effective Date"). In the event the registration statement is
not declared effective within 60 days after a demand for registration, the then
number of Class A Warrants shall be increased by two percent (2%), effective as
of the end of such 60 day period and by an additional two percent (2%) on each
one month anniversary thereafter, until such time that the number of Class A
Warrants should equal 120% of the original number of Class A Warrants. The
Company agrees to keep the registration statement effective until expiration of
the Class A Warrants.

The Class A Warrants are subject to redemption by the Company at $.01
per Class A Redeemable Warrant at any time commencing 12 months after the
Effective Date, or earlier with the prior written consent of Janssen-Meyers, on
not less than 30 days prior written notice to the holders of the Class A
Warrants, provided the average closing bid quotation of the Common Stock as
reported on the Nasdaq SmallCap Market, if traded thereon, or, if not traded
thereon, the average closing bid quotation of the Common Stock if listed on a
national securities exchange (or other reporting system that provides last sale
prices), has been at least 250% of the then current Exercise Price of the Class
A Warrants, for a period of 30 consecutive trading days ending on the day prior
to the date on which the Company gives notice of redemption. The Class A
Warrants will be exercisable until the close of business on the day immediately
preceding the date fixed for redemption.

The Class A Warrants were originally issued between May 19, 1998 and
June 9, 1998 in connection with a private equity placement by the Company in
which Janssen-Meyers acted as the Company's placement agent. See "Management's
Discussion and Analysis or Plan of Operation--Liquidity and Capital Resources."

35
<PAGE>

CLASS B COMMON STOCK PURCHASE WARRANTS

The following discussion is a summary of certain terms and provisions
of the Class B Common Stock Purchase Warrants contained in the Warrant
Agreement, dated March 10, 2000, between us and American Stock Transfer & Trust
Company. As such, it is qualified in its entirety by reference to the Warrant
Agreement.

Each Class B Warrant entitles the holder to purchase one share of our
common stock at any time until March 14, 2003 at an exercise price of $3.95 (the
"Exercise Price"), subject to adjustment in certain circumstances to prevent
dilution. The Class B Warrants may be exercised in whole or in part, at any time
and from time to time until March 14, 2003 through a cash exercise. Unless
exercised, the Class B Warrants will automatically expire on March 14, 2003.

Under the Warrant Agreement, we agreed to use our best effort to file
a registration statement under the Securities Act, registering the Class B
Warrants and the shares of our common stock underlying the Class B Warrants,
upon demand, after 90 days following the closing of the private placement, and
use our best efforts to have the registration statement declared effective by
the Commission as soon as possible thereafter. In the event the registration
statement is not declared effective within 90 days after a demand for
registration, the then number of Class B Warrants shall be increased by two
percent (2%), effective as of the end of such 90 day period and by an additional
two percent (2%) on each one month anniversary thereafter, until such time that
the number of Class B Warrants should equal 120% of the original number of Class
B Warrants. We agree to keep the registration statement effective until
expiration of the Class B Warrants. This registration statement is being filed
at the demand of the warrantholders.

The Class B Warrants are subject to redemption by us at $.01 per Class
B Warrant at any time commencing 12 months after the effective date of the
registration statement, or earlier with the prior written consent of
Roan-Meyers, on not less than 30 days prior written notice to the holders of the
Class B Warrants, provided the average closing bid quotation of our common stock
as reported on the NASDAQ SmallCap Market, if traded thereon, or, if not traded
thereon, the average closing bid quotation of our common stock if listed on a
national securities exchange (or other reporting system that provides last sale
prices), has been at least 250% of the then current exercise price of the Class
B Warrants, for a period of 30 consecutive trading days ending on the day prior
to the date on which we give notice of redemption. The Class B Warrants will be
exercisable until the close of business on the day immediately preceding the
date fixed for redemption.

The Class B Warrants were originally issued as of March 14, 2000 in
connection with a private equity placement by the Company in which Roan-Meyers
acted as our placement agent. See "Management's Discussion and Analysis or Plan
of Operation--Liquidity and Capital Resources."

DIVIDENDS

To date, we have not declared or paid any dividends on our common
stock. The payment by us of dividends, if any, is within the discretion of the
Board of Directors and will depend on our earnings, if any, our capital
requirements and financial condition, as well as other relevant factors. The
Board of Directors does not intend to declare any dividends in the foreseeable
future, but instead intends to retain earnings for use in our business
operations.

36
<PAGE>

TRANSFER AGENT AND WARRANT AGENT

The transfer agent for the common stock is, and the warrant agent for
the common stock purchase warrants is, American Stock Transfer & Trust Company,
40 Wall Street, New York, New York.

SELLING STOCKHOLDERS

We have agreed with the selling stockholders to register the shares of
common stock, the shares of common stock underlying Class B Warrants, and the
Class B Warrants that we had issued. We also agreed to use our best efforts to
keep the registration statement effective until the Warrants expire. If the
registration statement is not declared effective within 90 days after a demand
for registration, the then number of Warrants will be increased by two percent
(2%), effective as of the end of that 90 day period and by an additional two
percent (2%) on each one month anniversary thereafter, until the number of
warrants should equal 120% of the original number of Warrants issued in the
private placement. Our registration of the shares and warrants does not
necessarily mean that the selling stockholder will sell all or any of the shares
or Warrants.

The shares and Warrants offered by this prospectus may be offered from
time to time by the stockholders listed in the following table. Each selling
stockholder will determine the number of shares or Warrants he may sell and the
timing of his sales. The information provided in the following table relates to
the selling stockholders who acquired an aggregate of 2,088,608 shares of common
stock and an aggregate of 1,044,304 Class B Warrants in the March 14, 2000
private equity placement and includes the placement agent, who received unit
warrants exercisable for common stock and Class B Warrants in the March 14, 2000
private placement. The balance of 1,827,543 shares of common stock covered by
this prospectus will be acquired upon the exercise of Class B Warrants and
Placement Agent Unit Warrants, and the balance of 261,080 Class B Warrants
covered by this prospectus will be acquired upon the exercise of Placement Agent
Unit Warrants.

37
<PAGE>

<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------------------ -----------------------
TOTAL
NUMBER NUMBER NUMBER
OF OF OF
SHARES SHARES SHARES
OF OF NUMBER OF OF NUMBER OF
COMMON COMMON CLASS B COMMON CLASS B
STOCK STOCK WARRANTS STOCK WARRANTS
NAME OF BENEFICIAL OWNER(1) HELD* OFFERED** OFFERED HELD* HELD
------------------------------- --------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Carlos Neves & Mario Neves 3,784 3,784 1,261 0 0
Jacob Majnemer 10,465 7,569 2,523 2,896 0
Lea Adar 4,949 4,730 1,577 219 0
Ed Miller Trust 29,365 4,635 1,545 24,730 0
The Arnold & Esther Fischer
Family Trust 75,683 75,683 25,228 0 0
Douglas M. Colbert 12,023 7,569 2,523 4,454 0
Robert Seguso 145,015 94,603 31,534 50,412 0
Richard N. Houlding 18,921 18,921 6,307 0 0
Orlando Cartaya 6,680 3,784 1,261 2,896 0
William H. Fullerton Trust 100,374 40,374 13,458 60,000 0
Highland Properties Inc 18,920 18,920 6,306 0 0
James Rhodes 44,414 25,732 8,577 18,682 0
Michael F. Merollis 12,109 12,109 4,036 0 0
Howard C. Chiten & Charlote D. Chiten 20,121 18,921 6,307 1,200 0
Ben Iorio & Perla Maisonette 7,077 7,077 2,359 0 0
Michael Deluca & Debbie Deluca 12,852 11,352 3,784 1,500 0
Michael L. McClung 37,842 37,842 12,614 0 0
Douglas R. Feurring 37,483 15,894 5,298 21,589 0
Robert Schmier 19,031 18,921 6,307 110 0
Melvyn Weiss 135,079 75,683 25,228 59,396 0
Daniel Huntley 56,406 9,460 3,153 46,946 0
Michael Rosner 20,485 13,245 4,415 7,240 0
Jesse Grossman Acct'y Corp.
Retirement Trust 33,244 9,460 3,153 23,784 0
Andrew R. Stillman 25,935 22,705 7,568 3,230 0
Robert Cohen & Nanette Koryn 19,037 13,245 4,415 5,792 0
Solomon Smith Barney C/B/O
Bonnie M. Pensenstadler IRA 3,784 3,784 1,261 0 0
Wayne J. Pensenstadler and
Bonnie M. Pensenstadler 22,048 7,569 2,523 14,479 0
Travis L. Pensenstadler 3,784 3,784 1,261 0 0
Gerald Cohen 16,865 13,245 4,415 3,620 0
Patrick Bertagna & Mary Cesario 7,569 7,569 2,523 0 0
Irwin Zalcberg 56,762 56,762 18,921 0 0
H.A.A. Inc. (3) 113,524 113,524 37,841 0 0
Magsi Partners (4) 37,842 37,842 12,614 0 0
Peter Rettman 18,921 18,921 6,307 0 0
Arthur Cohen 37,842 37,842 12,614 0 0
Raymond Anton 18,921 18,921 6,307 0 0
Jonathan Spanier 56,762 56,762 18,921 0 0
Scott M. Cable 37,842 37,842 12,614 0 0
Elias T. Danho & Mary Danho 4,920 4,920 1,640 0 0
James J. Binns Jr. 35,949 35,949 11,983 0 0
Amy Binns Ives 17,028 17,028 5,676 0 0
James J. Binns 45,986 17,028 5,676 28,958 0
Merrill Lynch C/B/O James J. Binns
IRA 11,352 11,352 3,784 0 0
</TABLE>

38
<PAGE>

<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
------------------------------ -----------------------
TOTAL
NUMBER NUMBER NUMBER
OF OF OF
SHARES SHARES SHARES
OF OF NUMBER OF OF NUMBER OF
COMMON COMMON CLASS B COMMON CLASS B
STOCK STOCK WARRANTS STOCK WARRANTS
NAME OF BENEFICIAL OWNER(1) HELD* OFFERED** OFFERED HELD* HELD
------------------------------- --------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
CIBC Oppenheimer C/B/O James J.
Binns PC, Basic Pension Plans 11,352 11,352 3,784 0 0
Leonid Khutorsky 9,798 5,298 1,766 4,500 0
David Jaroslawicz 33,400 18,921 6,307 14,479 0
Robert Baron 9,460 9,460 3,153 0 0
Congregation Khal Minchas
Chinuch (5) 37,842 37,842 12,614 0 0
Dean V. Altman 18,921 18,921 6,307 0 0
Arthur L. Ulene & Priscilla Ulene,
Trustees U/T/D F/B/O Arthur &
Priscilla Ulene Rev. Trust 18,921 18,921 6,307 0 0
Scott Richardson 3,784 3,784 1,261 0 0
John G. Garell 57,262 56,762 18,921 500 0
R.L. Capital Management (6) 18,921 18,921 6,307 0 0
RL Capital Partners (7) 56,762 56,762 18,921 0 0
Anthony G. Polak "S" (8) 9,460 9,460 3,153 0 0
S. Edmond Farber 9,460 9,460 3,153 0 0
Domaco Venture Capital Fund (10) 9,460 9,460 3,153 0 0
Ronald Suster 87,558 80,058 26,686 7,500 0
Philip A. Merdinger 21,352 11,352 3,784 10,000 0
Thomas R. Severns 17,852 11,352 3,784 6,500 0
Azriel Nagar 16,352 11,352 3,784 5,000 0
Yvonne Schell 10,521 5,676 1,892 4,845 0
Dale Bearden 45,653 44,653 14,884 1,000 0
Robert Coar 9,284 3,784 1,261 5,500 0
Michael P. Carr Revocable Trust 22,799 7,569 2,523 15,230 0
Mark Alloy 31,839 18,921 6,307 12,918 0
Bay Shore Trading Co. (10) 193,371 193,371 64,457 0 0
Tyman Services Inc. (11) 37,842 37,842 12,614 0 0
Steven Tirrell 8,581 8,581 2,860 0 0
Verne Rainey 6,357 6,357 2,119 0 0
Jack Threadgill 11,867 11,867 3,956 0 0
Larry Lynch 11,867 11,867 3,956 0 0
Raymond S. Bregante, Trustee of the
Raymond S. Brigante Rev. Liv. Trust
U/A/D dated 2/12/89 23,734 23,734 7,911 0 0
Sam Mushnikow 11,867 11,867 3,956 0 0
Paul R. Alter 11,867 11,867 3,956 0 0
Aaron J. Fischer 47,469 47,469 15,823 0 0
Stewart A. Shiman 47,469 47,469 15,823 0 0
Edwin K. Dimes 23,734 23,734 7,911 0 0
Craig Bruck 3,784 3,784 1,261 0 0
County Communications (12) 37,842 37,842 12,614 0 0
Sumida Corp. (13) 13,009 12,009 4,036 1,000 0
Spags Investment Group (14) 37,842 37,842 12,614 0 0
David Banker 18,921 18,921 6,307 0 0
Frank E. Weitzman IRA 9,460 9,460 3,153 0 0
Jerome Ash 3,784 3,784 1,261 0 0
</TABLE>

39
<PAGE>

* Includes shares underlying presently exercisable public warrants, Class A
warrants and Class B warrants.
** Includes shares underlying presently exercisable warrants.

(1) Unless otherwise indicated, the persons and entities named in the table
have sole voting and sole investment power with respect to all shares
beneficially owned.
(2) Highland Properties Inc. is an entity controlled by Michael Jischee.
(3) H.A.A. Inc. is an entity controlled by Aron Langsam.
(4) Magsi Partners is an entity controlled by Charles Schwartz.
(5) Congregation Khal Minchas Chiruch is an entity controlled by Chaim Babad.
(6) R.L. Capital Management is an entity controlled by Ronald Lazar.
(7) R.L. Capital Partners is an entity controlled by Ronald Lazar.
(8) Anthony G. Polak "S" is an entity controlled by Anthony G. Polak.
(9) Domaco Venture Capital Fund is an entity controlled by Jack Polak.
(10) Bay Shore Trading Co. is an entity controlled by Avi Dan.
(11) Tyman Services Inc. is an entity controlled by Zohar Tyman.
(12) County Communications is an entity controlled by Joel Haggin.
(13) Sumida Corp. is an entity controlled by Izzy Heinflina.
(14) Spags Investment Group is an entity controlled by Yosev Kuzoush.
(15) D.H. Blair Investment Banking Corp. is an entity controlled by David
Machamie.
(16) AIG Soundshore Holdings Ltd. is an entity controlled by Anthony Giordano.
(17) Roan-Meyers Associates, L.P., is an entity controlled by Bruce Meyers.
(18) Includes shares underlying presently exercisable Unit Warrants.

Except as noted above, none of the selling stockholders has had a
material relationship with our company or any of our affiliates within the past
three years other than as a result of the ownership of the securities offered or
as a result of entering into those agreements in connection with our private
equity placement on March 14, 2000, pursuant to which the selling stockholders
acquired the common stock, the Class B Warrants and the Placement Agent Unit

40
<PAGE>

Warrants. In connection with the private equity placement, each of the selling
stockholders has represented to us in writing that he, she or it is an
accredited investor within the meaning of the Securities Act.

The securities offered hereby by the selling stockholders have been
acquired or will be acquired pursuant to the Private Placement Agreement, the
Placement Agent's Agreement and/or upon exercise of the Class B Warrants or the
Placement Agent Unit Warrants. In accordance with the private placement
agreements, we agreed to register the securities for resale by the selling
stockholders to permit such resales from time to time in the market or in
privately-negotiated transactions.

We have agreed to bear certain expenses (other than broker discounts
and commissions, if any) in connection with the registration of the securities.

PLAN OF DISTRIBUTION

The selling stockholders have advised us that, prior to the date of
this prospectus, they have not made any agreement or arrangement with any
underwriters, brokers or dealers regarding the distribution and resale of the
securities. If we are notified by a selling stockholder that any material
arrangement has been entered into with an underwriter for the sale of the
securities, a supplemental prospectus will be filed to disclose such of the
following information as we believe appropriate:

o the name of the participating underwriter;

o the number of the securities involved;

o the price at which the securities are sold, the commissions paid
or discounts or concessions allowed to such underwriter; and

o other facts material to the transaction.

We expect that the selling stockholders will sell their securities
covered by this prospectus through customary brokerage channels, either through
broker-dealers acting as agents or brokers for the seller, or through
broker-dealers acting as principals, who may then resell the securities in the
over-the-counter market, or at private sale or otherwise, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. We expect the selling stockholders to sell their
warrants, if at all, through private sales. The selling stockholders may effect
such transactions by selling the securities to or through broker-dealers, and
such broker-dealers may receive compensation in the form of concessions or
commissions from the selling stockholders and/or the purchasers of the shares
for whom they may act as agent (which compensation may be in excess of customary
commissions). The selling stockholders and any broker-dealers that participate
with the selling stockholders in the distribution of the securities may be
deemed to be underwriters and commissions received by them and any profit on the
resale of the securities positioned by them might be deemed to be underwriting
discounts and commissions under the Securities Act. There can be no assurance
that any of the selling stockholders will sell any or all of the securities
offered by them hereunder.

Sales of the shares of common stock on the NASDAQ SmallCap Market or
other trading system may be made by means of one or more of the following:

41
<PAGE>

o a block trade in which a broker or dealer will attempt to sell
the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;

o purchases by a dealer as principal and resale by such dealer for
its account pursuant to this prospectus; and

o ordinary brokerage transactions and transactions and transactions
in which the broker solicits purchasers.

In effecting sales, brokers or dealers engaged by the selling stockholders may
arrange for other brokers or dealers to participate.

The selling stockholders are not restricted as to the price or prices
at which they may sell their shares. Sales of shares at less than market prices
may depress the market price of our common stock. Moreover, the selling
stockholders are not restricted as to the number of shares which may be sold at
any one time.

We have agreed to pay all of the expenses incident to the offer and
sale of the shares to the public by the selling stockholders other than
commissions and discounts of underwriters, dealers or agents. In addition, we
and the selling stockholders have agreed to indemnify each other and certain
persons, including broker-dealers or others, against certain liabilities in
connection with the offering of the common stock, including liabilities arising
under the Securities Act.

We have advised the selling stockholders that the anti-manipulative
rules under the Exchange Act, including Regulation M, may apply to sales in the
market of the shares offered hereby, and we have furnished the selling
stockholders with a copy of such rules. We have also advised the selling
stockholders of the requirement for the delivery of this prospectus in
connection with resales of the shares offered hereby.

We have been advised by each selling stockholder that it will comply
with Regulation M promulgated under the Exchange Act in connection with all
resales of the securities offered hereby. We have also been advised by the
selling stockholders that none of them has, as of , 2000, entered into any
------
arrangement with a broker-dealer for the sale of the securities through block
trade, special offering, exchange distribution or secondary distribution of a
purchase by a broker-dealer.

LEGAL MATTERS

Legal matters in connection with the validity of the shares of common
stock and Class B Warrants offered hereby will be passed upon for us by Thelen
Reid & Priest LLP, New York, New York.

EXPERTS

The balance sheet of the Company as of December 31, 1999, and the
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 1999 and the cumulative amounts
for the period from July 17, 1995 (inception) to December 31, 1999, included in
this Prospectus and in the related Registration Statement, have been audited by
Richard A. Eisner & Company, LLP, independent accountants, as stated in their
report appearing herein, and are included in reliance on the report of such firm
given on their authority as experts in accounting and auditing. The Richard A.
Eisner & Company, LLP opinion in part relies on the report of
PricewaterhouseCoopers LLP.

The statements of operations and cash flows of the Company for the
period from July 17, 1995 (inception) to December 31, 1995 and for the year
ended December 31, 1996 (not presented separately herein), included in the

42
<PAGE>

cumulative amounts for the period from July 17, 1995 (inception) to December 31,
1999, and the related statement of stockholders' equity for the period from July
17, 1995 (inception) to December 31, 1995 and for the year ended December 31,
1996 have been included in this prospectus and in the related Registration
Statement, in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of such firm as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION ABOUT US

We have filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 under the Securities Act of 1933 with
respect to the common stock and the warrants offered hereby. This Prospectus,
which constitutes part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedule thereto, certain parts of which are omitted in accordance with the
rules and regulations of the SEC. For further information regarding our common
stock, our Class B Warrants and us, please review the Registration Statement,
including exhibits, schedule and reports filed as a part thereof. Statements in
this Prospectus as to the contents of any contract or other document filed as an
exhibit to the Registration Statement, set forth the material terms of such
contract or other document but are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. The Registration Statement, including the exhibits and
schedule thereto, may be inspected without charge at the principal office of the
public reference facilities maintained by the SEC at Room 1024 at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; or at its offices at
Northwest Atrium Center, 500 West Madison Street, 14th Floor, Chicago, IL 60661;
or Seven World Trade Center, 13th Floor, New York, NY 10048. Copies of this
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the SEC at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. The SEC maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding registrants that file electronically with the SEC,
including the Company. The common stock of the Company is quoted on the NASDAQ
SmallCap Market.

43
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Reports of Independent Accountants.................................... F-2 - F-3

Balance Sheet as of December 31, 1999................................. F-4

Statements of Operations for the years ended December 31, 1998 and
December 31, 1999 and for the cumulative period from July 17, 1995
(inception) to December 31, 1999.................................... F-5

Statement of Stockholders' Equity for cumulative period from
July 17, 1995 (inception) to December 31, 1999...................... F-6

Statements of Cash Flows for the years ended December 31, 1998 and
December 31, 1999 and for the cumulative period from July 17, 1995
(inception) to December 31, 1999.................................... F-9

Notes to Financial Statements......................................... F-10

Balance Sheet as of March 31, 2000 (unaudited)........................ F-22

Statement of operations -
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)............. F-23

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)............. F-24

Notes to Condensed Financial Statements............................... F-26

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Stockholders
NUWAVE Technologies, Inc.
Fairfield, New Jersey

We have audited the accompanying balance sheet of NUWAVE Technologies, Inc. (a
development stage enterprise) as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 1999 and the cumulative amounts
for the period from July 17, 1995 (inception) to December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The amounts for the period from July 17, 1995 (inception) to
December 31, 1996, included in the cumulative amounts for the period from July
17, 1995 (inception) to December 31, 1999, were audited by other accountants
whose report dated March 26, 1997, expressed an unqualified opinion on such
amounts.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other accountants provide a
reasonable basis for our opinion.

In our opinion based upon our audits and the report of the other accountants,
the financial statements referred above present fairly, in all material
respects, the financial position of NUWAVE Technologies, Inc. as of December 31,
1999, and the results of its operations and its cash flows for each of the years
in the two-year period ended December 31, 1999 and the cumulative amounts for
the period from July 17, 1995 (inception) to December 31, 1999, in conformity
with generally accepted accounting principles.

Richard A. Eisner & Company, LLP

Florham Park, New Jersey
March 1, 2000
With respect to Note 11
March 17, 2000

F-2
<PAGE>

--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
NUWAVE Technologies, Inc.

We have audited the statement of operations, cash flows of NUWAVE
Technologies, Inc. (a development stage enterprise) for the period from July 17,
1995 (inception) to December 31, 1995 and for the year ended December 31, 1996
(not presented separately herein), included in the cumulative amounts for the
period from July 17, 1995 (inception) to December 31, 1999, and the related
statement of stockholders' equity for the period from July 17, 1995 (inception)
to December 31, 1995 and the year ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts or disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above (not
presented separately herein) present fairly, in all material respects, the
results of operations and cash flows of NUWAVE Technologies, Inc. for the period
from July 17, 1995 (inception) to December 31, 1995 and for the year ended
December 31, 1996, included in the cumulative amounts for the period from July
17, 1995 (inception) to December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

PricewaterhouseCoopers LLP

New York, New York
March 26, 1997

F-3
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

BALANCE SHEET

December 31,
1999
------------
ASSETS

Current assets:
Cash and cash equivalents..................................... $ 1,969,292
Inventory..................................................... 40,889
Prepaid expenses and other current assets..................... 96,985
------------
Total current assets........................................ 2,107,166

Property and equipment.......................................... 100,666
Other Assets.................................................... 64,131
Deferred tax benefits........................................... 908,350
------------
Total assets................................................ $ 3,180,313
============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued liabilities...................... $ 274,555
------------
Total liabilities........................................... 274,555
------------
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 outstanding - (such preferences and
rights to be designated by the Board of Directors)...........
Common stock, $.01 par value; authorized 20,000,000
shares; as of December 31, 1999; issued and
outstanding 8,468,889 shares................................. 84,689
Additional paid in capital.................................... 18,699,268
Deficit accumulated during the development stage.............. (15,878,199)
------------
Total stockholders' equity.................................. 2,905,758
------------
Total liabilities and stockholders' equity.................. $ 3,180,313
============

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JULY 17, 1995
YEAR YEAR (INCEPTION)
ENDED ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1999
------------- ------------- --------------
<S> <C> <C> <C>
Net Sales................................ $ 12,545 $ 16,553 $ 39,373
Cost of Sales............................ (4,906) (2,200) (11,320)
------------- ------------- --------------
7,639 14,353 28,053
------------- ------------- --------------
Operating expenses:
Research and development expenses........ $(1,572,364) $ (938,745) $ (6,319,909)
General and administrative expenses...... (2,646,409) (2,503,812) (9,712,452)
------------- ------------- --------------
(4,218,773) (3,442,557) (16,032,361)
------------- ------------- --------------
Loss from operations................... (4,211,134) (3,428,204) (16,004,308)
------------- ------------- --------------
Other income (expense):
Interest income........................ 212,863 174,086 742,065
Interest expense....................... (5,709) (337,251)
Rave settlement costs.................. (338,895) (338,895)
------------- ------------- --------------
212,863 (170,518) 65,919
------------- ------------- --------------
Net loss before benefit for income taxes
and extraordinary item................. (3,998,271) (3,598,722) (15,938,389)
Benefit for income taxes............... 908,350 908,350
------------- ------------- --------------
Net loss before extraordinary item....... (3,998,271) (2,690,372) (15,030,039)
Extraordinary item..................... (848,160)
------------- ------------- --------------
Net loss............................... $(3,998,271) $(2,690,372) $(15,878,199)
============= ============= ==============
Basic and diluted loss per share:
Weighted average number of
common shares outstanding............. 7,259,896 8,419,644
============= =============
Basic and diluted loss per share....... $ (0.55) $ (0.32)
============= =============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED DURING THE
-------------------- ----------------------- PAID-IN EQUITY DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COSTS STAGE TOTAL
--------- ---------- ------------ ---------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common shares issued in
connection with the
formation of the company..... 2,060,000 $20,600 $ 20,600
Common shares returned
and retired without
consideration................ (125,000) (1,250) $ 1,250
Sale of Series A
convertible preferred
stock for cash of $1.50
per share.................... 600,000 $ 6,000 894,000 900,000
Common shares issued with
initial bridge notes
payable for cash of
$1.50 per share.............. 70,000 700 104,300 105,000
Costs incurred in
connection with equity
financing.................... $ (38,400) (38,400)
Net loss for the period
from July 17, 1995
(inception) to
December 31, 1995............ $(910,591) (910,591)
--------- ---------- ------------ ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1995... 600,000 6,000 2,005,000 20,050 999,550 (38,400) (910,591) 76,609
Common shares issued in
connection with the
exchange of the initial
bridge notes for 14
bridge units................. 70,000 700 139,300 140,000
Common shares issued with
bridge notes payable
for cash of $2.00 per share.. 330,000 3,300 656,700 660,000
Costs incurred in
connection with the
private placement
offering relating to
the equity financing......... (134,000) 13,400 (120,600)
Common shares issued in
connection with the
initial public offering
for cash of $5.00 per share.. 2,300,000 23,000 11,477,000 11,500,000
2,530,000 common stock
purchase warrants
issued in connection
with the initial public
offering for cash of
$0.10 per warrant............ 253,000 253,000
220,000 common stock
purchase warrants and
220,000 redeemable
warrants issued to the
underwriter in
connection with the
initial public offering
for cash of $10.00........... 10 10
Conversion of 600,000
preferred shares into
600,000 common shares
in connection with the
initial public offering...... (600,000) (6,000) 600,000 6,000 --
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS' EQUITY

Common shares issued in
connection with the
exercise of 23,334
stock options for cash
of $2.00 per share............ 23,334 233 46,435 46,668
Net loss for the year
ended December 31, 1997....... (3,848,316) (3,848,316)
--------- ---------- ------------ ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1997.... -- 5,348,334 $53,483 $11,253,213 -- $(9,189,556) $2,117,140

Common shares issued in connec-
tion with a private placement
for cash of $3.95 per share
with 50,000 warrants and
50,000 supplemental
warrants...................... 253,485 2,535 997,465 1,000,000
Costs incurred in connection
with private placement........ (140,652) (140,652)
Common shares issued in
connection with the
exercise of 11,666
stock options for cash
of $2.00 per share............ 11,666 117 23,215 23,332
Warrants to purchase
common stock issued in
connection with a
consulting agreement.......... 217,040 217,040
2,742,904 common shares
issued with 2,057,207 class
A warrants to purchase common
shares in connection with a
private placement for a cash
price ranging from $2.50 to
$3.06 per share............... 2,742,904 27,429 7,253,117 7,280,546
18.2 Unit Warrants issued
in connection with
private placement............. 6 6
Costs incurred in
connection with private
placement..................... (1,244,990) (1,244,990)
Net loss for the year
ended December 31, 1998....... (3,998,271) (3,998,271)
--------- ---------- ------------ ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1998.... -- -- 8,356,389 83,564 18,358,414 -- (13,187,827) 5,254,151
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SERIES A DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED DURING THE
-------------------- ----------------------- PAID-IN EQUITY DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL COSTS STAGE TOTAL
--------- ---------- ------------ ---------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
in connection with an
arbitration settlement....... 100,000 1,000 145,200 146,200
Issuance of options in
connection with an
arbitration settlement....... 17,695 17,695
Common shares issued in
connection with the
exercise of 12,500
stock options for cash
of $1.462 per share.......... 12,500 125 18,150 18,275
Costs incurred in connection
with private placement....... (44,638) (44,638)
Warrants to purchase common
stock issued in connection
with a consulting agreement.. 204,447 204,447
Net loss for the year ended
December 31, 1999............ (2,690,372) (2,690,372)
--------- ---------- ------------ ---------- ------------ ------------ ----------- -----------
Balance at December 31, 1999... -- $ -- 8,468,889 $84,689 $18,699,268 $ -- $(15,878,199) $2,905,758
========= ========== ============ ========== ============ ============ =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-8
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE
FROM
JULY 17, 1995
YEAR YEAR (INCEPTION)
ENDED ENDED TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 1999
--------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $ (3,998,271) $ (2,690,372) $(15,878,199)
Adjustments to reconcile net loss to net cash used
in operating activities:..............................
Extraordinary item..................................... 848,160
Depreciation expense................................... 52,690 52,026 166,786
Amortization of unamortized debt discount.............. 168,778
Amortization of deferred financing costs............... 89,062
(Increase) Decrease in inventory....................... 10,745 8,184 (40,889)
(Increase) Decrease in prepaid expenses and other
current assets........................................ (15,730) 29,749 (96,986)
(Increase) Decrease in other assets.................... (80,079) 98,148 (64,131)
(Increase) in deferred tax benefits.................... (908,350) (908,350)
Increase in accounts payable and accrued liabilities... 107,578 13,354 274,555
Issuance of warrants in connection with consultant
agreements............................................ 217,040 204,447 421,487
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................ (3,706,027) (3,028,919) (14,835,232)
--------------- -------------- --------------
Cash flows from investing activities:
Purchase of property and equipment..................... (60,247) (41,663) (267,451)
--------------- -------------- --------------
Net cash used in investing activities................ (60,247) (41,663) (267,451)
--------------- -------------- --------------
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 1,000,000
Proceeds from equity offering May 19 to June 6, 1998... 7,280,546 7,280,546
Repayment of notes issued in connection with initial
bridge notes.......................................... (2,000,000)
Costs incurred for equity offerings and warrants....... (1,385,636) (44,638) (3,778,856)
Issuance of common stock in connection with exercise
of stock options...................................... 23,332 18,275 118,275
Release of restricted cash............................. 145,403 76,078 --
Deferred financing costs............................... (201,000)
--------------- -------------- --------------
Net cash provided by financing activities.............. 7,063,645 49,715 17,071,975
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents... 3,297,371 (3,020,867) 1,969,292
Cash and cash equivalents at the beginning of the period. 1,692,788 4,990,159 --
Cash and cash equivalents at the end of the period..... $ 4,990,159 $ 1,969,292 $ 1,969,292
=============== ============== ==============
Supplemental disclosure of cash flow information:
Interest paid during the period........................ $ 5,709 $ 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 financial statements.

F-9
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

NUWAVE Technologies, Inc. (the "Company"), a development stage
enterprise, was incorporated in Delaware on July 17, 1995. It has had only a
limited operating history and has had only limited sales of its products to
date. Since its inception in July 1995, the Company has been engaged primarily
in the research and development of 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
technology is known as the NUWAVE Video Processor ("NVP") technology. The
Company intends to license this technology or have it manufactured in the form
of Application Specific Integrated Circuits ("ASIC") through third parties and
to directly market products which use this technology to improve picture quality
in set-top boxes, televisions, VCR's, DVD's, camcorders and other video devices.
In addition to the NVP technology the Company has recently completed development
of proprietary software technology with the ability to digitally enhance both
pictures and videos on PC's while the user is surfing the Internet or working
offline. The Company conducts its operations primarily in the United States.

There is no assurance that the Company's research and development and
marketing efforts will be successful, that the Company will ever have
commercially accepted products, or that the Company will achieve significant
sales of any such products. The Company has incurred net losses and negative
cash flows from operations since its inception. In addition, the Company
operates in an environment of rapid change in technology and is dependent upon
the services of its employees and its consultants. If the Company is unable to
successfully market its NUWAVE Video Processor and related products it is
unlikely that the Company could continue its business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. The
most significant estimates relate to the valuation allowance in connection with
deferred tax assets. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash balances, money market
instruments, and other highly liquid investments with insignificant interest
rate risk and original maturities of three months or less. At December 31, 1999,
$1,969,292 of money market accounts and commercial checking accounts, the fair
value of which approximate cost, are included in cash and cash equivalents.

INVENTORY

Inventory is stated at the lower of cost (first-in, first-out method)
or market.

F-10
<PAGE>

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost less accumulated
depreciation. The cost of maintenance and repairs is charged against results of
operations as incurred.

Depreciation is charged against results of operations by an
accelerated method over the estimated useful lives of the related assets.

Sales and retirements of depreciable property are recorded by removing
the related cost and accumulated depreciation from the accounts. Gains or losses
on sales and retirements of property and equipment are reflected in the results
of operations.

RESEARCH AND DEVELOPMENT EXPENSES

Expenditures for research and development are expensed as incurred.

ADVERTISING EXPENSES

The Company expenses advertising costs which consist primarily of
promotional items and print media. Advertising and promotional expenses charged
to operations for the cumulative period from July 17, 1995 (inception) to
December 31, 1999 amounted to $570,983 and for the years ended December 31, 1999
and December 31, 1998 amounted to $33,083 and $116,776, respectively.

CONCENTRATION OF CREDIT RISK

The Company's financial instruments that are exposed to concentrations
of credit risk consist of cash and cash equivalents. The Company places its cash
and cash equivalents in high quality institutions with three types of accounts,
1) an operating account where the cash balance is in excess of the FDIC
insurance limit, 2) a money market fund which invests only in U.S. Government
securities and 3) certificates of deposit.

PER SHARE DATA

The basic per share data has been computed on the basis of the loss
for the period divided by the historic weighted average number of shares of
common stock outstanding. All potentially dilutive securities have been excluded
from the computations since they would be antidilutive (see note 5).

INCOME TAXES

The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined on the basis of the differences between the tax basis
of assets and liabilities and their respective financial reporting amounts
("temporary differences") at enacted tax rates in effect for the years in which
the differences are expected to reverse.

F-11
<PAGE>

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

USEFUL LIVES DECEMBER 31,
IN YEARS 1999
------------- -------------
Furniture and Fixtures.................... 10 $ 5,523
Computers................................. 5 170,918
Equipment................................. 5 91,010
----------
$267,451
Less, accumulated depreciation.......... 166,785
----------
$100,666
==========

4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of the following:

DECEMBER 31,
1999
------------
Accounts payable.......................... $202,281
Legal and accounting fees................. 72,274
----------
$274,555

5. CAPITAL TRANSACTIONS

COMMON STOCK

On July 17, 1995, the Company issued 2,060,000 shares of common stock
for a fair market value of $.01 per share as consideration for services rendered
in connection with the formation of the Company, as follows:

o 1,090,000 shares to Prime Technologies, Inc. ("Prime"). Rave
Engineering Corp. ("Rave") and two members of the Company's Board of Directors
have ownership interests in Prime of 22%, 22% and 16%, respectively;

o 450,000 shares to the Company's President;

o 450,000 shares to three entities affiliated with an individual
who was a member of the Company's Board of Directors (125,000 of such shares
were subsequently returned and retired without consideration); and

o 70,000 shares to individuals who were either employees of, or
consultants to, the Company.

On April 30, 1996, the board of directors and the Company's
stockholders authorized the increase in the shares of common stock to 20,000,000
common shares, par value $.01 per share.

In July 1996 the Company completed an IPO in which it sold 2,300,000
common shares and 2,530,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") to purchase an additional 2,530,000 common shares. The Warrants
became exercisable at $5.50 per share on July 3, 1997, and have an expiration
date of July 3, 2001. The Warrants are redeemable by the Company at any time on
not less than 30 days prior written notice to the holders of the Warrants,
provided the average closing bid quotation of the Common Stock as reported on
the NASDAQ Stock Market, if traded thereon, or if not traded thereon, the

F-12
<PAGE>

average closing sale price of the Common Stock if listed on a national
securities exchange (or other reporting system that provides last sale prices),
has been at least 150% of the then current exercise price of the Warrants
(currently $6.225) for a period of 20 consecutive trading days ending on the
third day prior to the date on which the Company gives notice of redemption. The
Warrants will be exercisable until the close of business on the day immediately
preceding the date fixed for redemption. The Underwriter will receive from the
Company a Warrant Solicitation fee of five percent (5%) of the aggregate
exercise price of the Warrants if the market price of the Common Stock is
greater than the exercise price of the Warrants on the date of exercise.

Also in connection with the IPO, the Company issued to the
Underwriter, for an aggregate purchase price of $10.00, warrants to purchase
220,000 Common Stock and Redeemable Warrants to purchase 220,000 Redeemable
Warrants (the "Underwriter's Warrants"). The Underwriter's Warrants are at
$8.25. The warrants expire July, 2001.

On February 6, 1998, the Company entered into a two-year agreement
with an investor whereby the Company issued 253,485 shares of the Company's
common stock, par value $0.01 per share ("Common Stock"), for an aggregate
purchase price of $1,000,000. In addition, subject to certain conditions, the
agreement provided that, from time to time over the life of the agreement the
Company could put shares of the Company's Common Stock for a minimum of $250,000
and a maximum of $750,000. The agreement required that a total aggregate value
of Puts over the life of the agreement must be a minimum of $1,000,000. In
connection with the agreement the Company issued to the investor warrants to
purchase an aggregate of 50,000 shares of Common Stock at a purchase price of
$6.41 per share and additional warrants (the "supplemental warrants") to
purchase an aggregate of 50,000 shares of Common Stock at a purchase price of
$3.95 per share. On December 20, 1999, the agreement, along with any remaining
obligations of either party was terminated by mutual consent. In connection with
the termination the investor returned the 100,000 warrants and the warrants were
cancelled.

On March 3, 1998, the Company entered into a consulting agreement with
an organization (the "Consultant") whereby the Consultant will perform
consulting services relating to corporate finance and other financial services
matters. As compensation for such services, the Company paid the consultant
$5,000 per month during an initial term ending September 3, 1999 subject to
automatic one-year renewal terms unless either the Company or the Consultant
gave written notice of termination at least 30 days prior to the end of the
initial or subsequent terms. On November 2, 1999 the consulting agreement was
extended to May 31, 2001.

In connection with such consultant agreement, the Company issued to
the Consultant warrants to purchase 400,000 shares of common stock. The warrants
have an exercise price of $4 per share, became exercisable September 3, 1999,
and expire on March 3, 2003. The fair value of these warrants was estimated at
$386,805 and has been charged to operations over the life of the initial term of
the consulting agreement, $169,765 and $217,040 was charged against operations
for the years ended December 31, 1999 and 1998, respectively.

On May 11, 1998 the Company entered into a placement agency agreement
with the Consultant 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"), 2,742,904 shares of the Company's Common Stock and
2,057,207 Class A Redeemable Warrants ("Class A Warrants") between May 19, 1998
and June 6, 1998 for an aggregate purchase price of $7,280,546. Each Class A
Warrant entitles the holder thereof to purchase one share of Common Stock at an
exercise price per share of $3.24, subject to adjustment upon the occurrence of
certain events to prevent dilution, at any time during the period commencing
from June 6, 1998 and expiring on May 11, 2003. The Class A 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

F-13
<PAGE>

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 on the day prior to the day on which the Company gives notice of
redemption. The Class A Warrants will be exercisable until the close of business
on the day immediately preceding the date fixed for redemption.

The Consultant, for acting as placement agent, received a commission
of 10% ($728,055) of the gross proceeds from the sale of the Units, as well as a
3% non-accountable expense allowance ($218,416) and reimbursement of other
costs, including legal expenses relating to the offering ($77,171). In addition,
the Consultant, as part of its compensation, received warrants exercisable until
May 11, 2003 to purchase up to (i) 688,084 shares of the Company's Common Stock
at a price per share ranging from $2.50 to $3.06 and (ii) warrants to purchase
up to 516,068 shares of the Company's common stock at a price per share of
$3.24.

As a result of the above capital transactions and in accordance with
the provisions of the Warrant Agreement dated as of July 3, 1996, between the
Company, Rickel & Associates, Inc. and American Stock Transfer & Trust Company,
adjustments have been made to the exercise price (the "Warrant Price") for the
warrants issued pursuant to such Agreement (the "Public Warrants") and to the
number of shares of Common Stock issuable on exercise of the Public Warrants.
The Warrant Price has been reduced from $5.50 to $4.15. In addition, for every
share of Common Stock the warrant holders were entitled to prior to the dilutive
transactions (2,530,000 shares), the warrant holders are now entitled to 1.325
shares (3,352,250 shares). Also, pursuant to the 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 Warrant Price of
the Public Warrants for a period of 20 consecutive trading days: consequently,
the average closing price now required is $6.225.

On May 28, 1999, in accordance with the terms of Rave Settlement
Agreement, the Company issued 100,000 shares of its Common Stock and options to
purchase 50,000 shares of the Company's Common Stock at an exercise price of
$1.46. Operations has been charged $163,895, the estimated fair value of the
Common Stock and options on May, 28 1999.

PREFERRED STOCK

During July and August 1995, the Company sold 600,000 shares of Series
A Convertible Preferred Stock for $900,000 to several investors, one of whom was
the purchaser of the initial bridge notes. The preferred shares converted into
common shares on a one-for-one basis, at the IPO date.

On April 30, 1996, the board of directors and the Company's
stockholders authorized an additional 1,000,000 shares of preferred stock, $.01
par value, which may have such preferences and rights as the board of directors
may designate.

BRIDGE UNITS

On December 15, 1995, the Company issued to a Series A Convertible
Preferred stockholder 14 initial bridge units, each unit consisting of the
Company's unsecured initial bridge notes in the principal amount of $25,000 with
a stated interest rate of 10% per annum and 5,000 shares of the Company's common
stock with a fair market value of $1.50 per share for proceeds of $350,000.
After giving effect to the amortization of the initial bridge notes debt
discount, the effective interest rate of the initial bridge notes was 33% per
annum.

On March 1, 1996, based upon an offer from the Company, the initial
bridge noteholder elected to exchange the 14 initial bridge units for 14 bridge
units.

F-14
<PAGE>

On March 1 and March 27, 1996, the Company sold and exchanged to
accredited investors an accumulative total of 80 units (the "bridge units")
respectively, in its PPO. Each bridge unit consisted of (i) a senior
subordinated non-negotiable promissory note ("Bridge Notes") in the principal
amount of $25,000, with a stated interest rate of 10% per annum, and (ii) 5,000
shares of common stock with a fair market value of $2.00 per share. After giving
effect to the amortization of the Bridge Notes debt discount, the effective
interest rate of the Bridge Notes was 49%.

On July 9, 1996, the aggregate principal amount of the Bridge Notes of
$2,000,000 and accrued interest of $73,652 was repaid upon the consummation, and
out of the proceeds, of the IPO.

STOCK OPTIONS

The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB
No. 25"). Under APB No. 25, generally, no compensation expense is recognized in
the financial statements in connection with the awarding of stock option grants
to employees provided that, as of the grant date, all terms associated with the
award are fixed and the quoted market price of the Company's stock, as of the
grant date, is not more than the amount an employee must pay to acquire the
stock as defined; however, to the extent that stock options are granted to non
employees, for goods or services, the fair value of these options is included in
operating results as an expense.

A summary of the Company's stock option activity under its plans, and
related information, is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE NUMBER OF
COMMON EXERCISE PRICE EXERCISE SHARES
SHARES RANGE PER SHARE PRICE EXERCISABLE
------------ ----------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1996.. 362,000 $ 1.50 - $ 5.75 $ 1.72 311,524
==========
Granted........................... 192,500 $ 5.78 - $ 6.88 $ 6.54
Exercised ........................ (23,334) $ 2.00 $ 2.00
Canceled ......................... (25,000) $ 6.38 - $ 6.81 $ 6.64
-----------
Outstanding at December 31, 1997.. 506,166 $ 1.50 - $ 6.75 $ 2.92 401,000
==========
Granted........................... 733,000 $ 1.50 - $ 3.25 $ 3.13
Exercised......................... (11,666) $ 2.00 $ 2.00
Canceled.......................... (13,000) $ 3.00 - $ 6.75 $ 5.23
-----------
Outstanding at December 31, 1998.. 1,214,500 $ 1.50 - $ 6.88 $ 3.18 633,503
==========
Granted........................... 205,000 $ 1.97 - $ 2.50 $ 2.03
Cancelled......................... (25,000) $ 3.00 - $ 3.25 $ 3.20
-----------
Outstanding at December 31, 1999.. 1,394,500 $ 1.50 - $ 6.88 $ 3.02 1,199,338
=========== ==========
</TABLE>

Disclosures required by Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123"), including pro
forma operating results had the Company prepared its financial statements in
accordance with the fair value based method of accounting for stock-based
compensation are shown below.

Exercise prices and weighted-average contractual lives for stock
options outstanding as of December 31, 1999 are as follows:

F-15
<PAGE>

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
---------------- ------------- ------------ ----------- ------------- ----------
$ 1.50 - $ 2.50 570,000 4.48 $1.71 390,004 $1.61
$ 3.00 - $ 3.25 653,000 3.40 $3.25 653,000 $3.25
$ 5.87 - $ 6.88 171,500 3.08 $6.50 156,334 $6.49

The following table summarizes the pro forma operating results of the
Company had compensation costs for the stock options granted been determined in
accordance with the fair-value-based method of accounting for stock based
compensation as prescribed by SFAS No. 123. Since certain option grants awarded
during 1999 and 1998 vest over several years and additional awards are expected
to be issued in the future, the pro forma results noted below are not likely to
be representative of the effects on future years of the application of the
fair-value-based method.

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- -----------------
<S> <C> <C>
Pro forma net loss............................ $(4,285,280) $(2,986,914)
Pro forma basic and diluted loss per share.... $ (.59) $ (.35)
</TABLE>

For the purpose of the above pro forma information, the fair value of these
options was estimated at the date of grant using the Black-Scholes option
pricing model. The weighted-average fair value of the options granted during
1999 and 1998 was $1.52 and $.85, respectively. The following weighted-average
assumptions were used in computing the fair value of option grants for 1999 and
1998: weighted-average risk-free interest rates ranged from 5.50% to 6.39% for
1999 and 4.26% to 5.60% for 1998; zero dividend yields for both years;
volatility of the Company's Common Stock of 60% for 1999 and 30% for 1998; and
an expected life of the options of ten years for 1999 and three years for 1998,
respectively.

Performance Incentive Stock Option Plan

On January 31, 1996, the Company adopted its 1996 Performance
Incentive Stock Option Plan (the "Plan"). Under the Plan, incentive and
nonqualified stock options, stock appreciation rights and restricted stock may
be granted to key employees and consultants (the "Participants") by certain
disinterested directors of the Board of Directors. Any incentive option granted
under the Plan will have an exercise price of not less than 100% of the fair
market value of the shares on the date on which such option is granted. With
respect to an incentive option granted to a Participant who owns more than 10%
of the total combined voting stock of the Company or of any parent or subsidiary
of the Company, the exercise price for such option must be at least 110% of the
fair market value of the shares subject to the option on the date on which the
option is granted. A nonqualified option granted under the Plan (i.e., an option
to purchase the common stock that does not meet the Internal Revenue Code's
requirements for incentive options) must have an exercise price of at least the
par value of the stock. Stock appreciation rights may be granted in conjunction
with the grant of an incentive or nonqualified option under the Plan or
independently of any such stock option. The directors determine the vesting of
the options under the Plan at the date of grant. A maximum of 1,205,000 options
can be awarded under the Plan (as amended May 26, 1998). As of December 31, 1996
no options had been issued. During 1997, 172,500 options were granted and 25,000
options were canceled under the plan. During 1998, 605,000 options were granted
under the plan. During 1999, 145,000 options were granted under the plan.

F-16
<PAGE>

Non-Employee Director Stock Option Plan

On November 25, 1996, the Company established a Non-Employee Director
Stock Option Plan (the "Director's Plan"). The Director's Plan provides that
each member of the Board of Directors (an "Eligible Director") who otherwise (1)
is not currently an employee of the Company, or (2) is not a former employee
still receiving compensation for prior services (other than benefits under a
tax-qualified pension plan) shall be eligible for the grant of stock options
under the Director's Plan. Each Eligible Director at the time of his election to
the Board of Directors, shall be granted an option to purchase 3,000 shares of
the Company's common stock at an exercise price equal to closing price of such
common stock at close of business at the date of such grant, such option to vest
immediately and to expire five years from the date of such grant.

Beginning with the annual meeting of the stockholders of the Company
held on May 29, 1997 and provided that a sufficient number of shares remain
available under the Director's Plan, each year immediately following the date of
the annual meeting of the Company there automatically will be granted to each
Eligible Director who is then serving on the Board an option to purchase 5,000
shares of the Company's Common Stock. The first 1,000 options vest immediately,
the remainder vest equally over the next four years from the date of grant and
are exercisable at the closing price of such shares of common stock at the date
of grant. Such options expire five years from the date of vesting.

On November 25, 1996, four Eligible Directors were each granted 3,000
stock options at an exercise price of $5.75 per share. On May 29, 1997, four
Eligible Directors were each granted 5,000 stock options at an exercise price of
$6.75 per share. On May 26, 1998, one eligible director was granted 53,000
options at an excise price of $3.25 per share and the three remaining Eligible
Directors were each granted 25,000 stock options at $3.25 per share. The maximum
number of shares of Common Stock with respect to which options may be granted
under the Director's Plan (as amended May 26, 1998) is 235,000 shares. During
1998, 13,000 options previously granted under the plan were cancelled. During
1999, 60,000 options were granted, 45,000 options at $2.56 per share and 15,000
options at 2.06 per share, under the plan. As of December 31, 1999, there are
48,000 stock options reserved for issuance in the Director's Plan.

6. RAVE SETTLEMENT

On November 13, 1998, pursuant to the provisions of an Exclusive
Worldwide Licensing Agreement the "License Agreement" and a Development
Agreement, both dated July 21,1995 the Company commenced an arbitration
proceeding against Rave and its principal Randy Burnworth seeking (a) damages
for the injuries to the Company caused by Rave's and Burnworth's breaches of
their contractual and common law obligations to the Company, including but not
limited to those referred to above, and (b) a declaration that, among other
things, Rave is not entitled to any royalties or other payments with respect to
the Company's technology and that the Company continues to have exclusive
license rights to the "Licensed Product" and "Licensed Process" under the
License Agreement.

On May 28, 1999, a Settlement Agreement was reached, the Arbitration
was resolved and the License Agreement was terminated. As a result of the
Settlement Agreement, the Company continues to maintain exclusive worldwide
license rights to make, market and license its video enhancement technology free
of any claims of ownership or inventorship by Rave; in return, Rave and certain
individuals associated with Rave received $175,000 in cash as well as 100,000
shares of the Company's Common Stock and options to purchase 50,000 shares of
the Company's Common Stock at an exercise price of $1.46.

F-17
<PAGE>

7. INCOME TAXES

There is no benefit for federal income taxes for the year ended
December 31, 1998, since the Company has incurred operating losses. In addition,
the Company has fully reserved the net potential future tax benefits resulting
from its temporary differences and net operating loss carryforwards.

The tax effect of temporary differences consists of the following:

DECEMBER
31, 1999
-----------
Deferred tax assets:
Start up costs............................... $1,260,061
Property and equipment....................... 19,954
Net operating loss carryforward.............. 4,975,964
-----------
6,255,979
Valuation allowance.......................... (5,347,629)
-----------
$ 908,350
===========

In accordance with New Jersey statutes, the Company has entered into
an agreement to sell certain New Jersey net operating losses and research and
development credits accordingly, a state income tax benefit and deferred tax
asset has been recognized in 1999. There was no provision for income taxes for
the year ended December 31, 1998.

During the years ended December 31,1999 and 1998, the benefit for
deferred taxes before change in valuation allowances aggregated $1,053,041 and
$1,437,000, respectively. The change in valuation allowances for the years ended
December 31, 1999 and 1998 were $144,691 and $1,437,000, respectively.

The difference between the statutory federal income tax rate and the
effective rate for the Company's income tax benefit for each of the years ended
December 31, 1999 and 1998, respectively, is summarized as follows:

1999 1998
------- -------

Statutory federal income tax rate 34.0% 34.0%

State income tax benefit, net of federal tax effect 16.7%

Increase in valuation allowance (25.0)% (29.0)%

Miscellaneous (0.4)% (5.0)%
------- -------
Effective income tax rate 25.3% 0.0%
------- -------

As of December 31, 1999, the Company has unused net operating loss
carryforwards of $12,460,000 available for federal income tax purposes. The
unused net operating loss carryforwards expire in various years from 2010 to
2019. The Company, in the future, may be subject to limitations on the use of
its NOL's as provided under Section 382 of the Internal Revenue Code.

F-18
<PAGE>

8. COMMITMENTS AND CONTINGENCIES

CONSULTING AND REPRESENTATIVE AGREEMENTS

On June 1, 1998, the Company contracted with Innovation Partners
International, Inc. ("IPI") to provide sales management and engineering services
for the Company in Japan and other designated countries, for the purpose of
securing the Company's product sales to the Asian Original Equipment
Manufacturers market. In return for such services the Company agreed to pay IPI
a fee of $6,000 per month plus normal business expenses. At December 31, 1999, a
total of $133,085 had been paid under the terms of the contract, representing
consulting fees and out of the pocket expenses, which have been charged to
operations.

On July 22, 1998, the Company contracted with David Kwong
("consultant") to sell and license products in China and to maintain a sales
office for the Company in China. The contract may be terminated, by either
party, any time subsequent to September 30, 1999 by giving the other party at
least 90 days' notice of termination. In return for such services the Company
agreed to pay the consultant a monetary commission and grant certain stock
options upon attaining determined sales levels. In addition the consultant will
receive a monthly consulting. The Company further agreed to pay the costs to
establish and maintain an office in China within the limits of an approved
budget. As of December 31, 1999 a total of $222,316 had been paid under the
terms of the contract, representing consulting fees of $106,500, office expenses
of $90,492 and travel costs of $31,448. No commissions had been earned and no
stock options had been granted through December 31, 1999 pursuant to this
agreement.

On November 11, 1999 the Company contracted with Wolfe Axelrod
Associates (WAA) to provide various Investor Relations and Public Relations
services for the Company. The contract is for an initial period of twelve months
and provides for automatic renewal for an additional one-year period unless
terminated by NUWAVE's written notification at least 30 days prior to the end of
the 12 month term provided however that NUWAVE may terminate this agreement upon
30 days written notice within the initial seven months of the contract. In
return for such services the Company granted to WAA 300,000 options for the
purchase of the Company's common stock at $2.00 per share (market price on date
of grant). The 300,000 options vest as follows: 125,000 on July 14, 2000;
100,000 on November 15, 2000 provided that the contract remained in force beyond
July 14, 2000 and 75,000 on November 15, 2000 provided that the contract remains
in force on that date. The estimated fair value of the options at date of issue
was $342,286 and is being amortized over twelve months. For the year ended
December 31, 1999 the Company recognized an expense of $34,682 relating to this
agreement. In addition the Company agreed to pay WAA a fee of $10,000 per month
plus normal business expenses. As of December 31, 1999 $30,162 had been paid
under the terms of the contract.

LEASES

The Company leases shared office space on a month-to-month basis for a
monthly rental of $6,600. Rent expense incurred for the cumulative period from
July 17, 1995 (inception) to December 31, 1999 amounted to $273,918; and for the
years ended December 31, 1999 and December 31, 1998 amounted to $77,471 and
$74,098, respectively.

9. EMPLOYMENT AGREEMENTS

Mr. Zarin entered into an employment agreement with the Company, dated
as of July 20, 1995, pursuant to which he agreed to serve as the Company's
President and Chief Executive Officer through December 31, 2000. In December
1997, the term of the agreement was extended for two additional years to
December 31, 2002. The agreement provided for an initial salary of $90,000 per
year and increased to $120,000 on March 15, 1996. Mr. Zarin is also entitled to
an annual bonus equal to (i) 30% of his base compensation if the Company's net

F-19
<PAGE>

profits before taxes are equal to projections to be approved by the Company's
Board of Directors, (ii) 60% of his base compensation if the Company's net
profits before taxes are equal to 110% of such projections, and (iii) 100% of
his base compensation if the Company's net profits before taxes are equal to
120% of such projections. Mr. Zarin can terminate the agreement upon 180 days
notice. The Company can terminate the agreement for good cause at any time. If
the Company terminates the agreement other than for good cause, or otherwise
materially breaches the agreement, Mr. Zarin will receive a single payment equal
to the remaining payments he would have been entitled to receive during the
unexpired portion of the agreement. Pursuant to the employment agreement
provides Mr. Zarin was granted an option to purchase 200,000 shares of Common
Stock at $1.50 per share. The option expires December 31, 2000 and terminates if
Mr. Zarin voluntarily leaves the Company or the employment agreement is
terminated by the Company for good cause. In connection with services rendered
in establishing the Company and creating its business plan and projections, Mr.
Zarin received 450,000 shares of the Company's Common Stock valued at $.01 per
share.

Mr. Webb entered into an employment agreement with the Company, dated
as of September 11, 1995, pursuant to which Mr. Webb was appointed Vice
President-Marketing of the Company. In March 1997, his title was changed to Vice
President-Marketing/Technical Development in order to more accurately reflect
his duties. The employment agreement continued until March 31, 1996 and
thereafter has been continuing for successive 3-month periods. Mr. Webb's
initial salary was $5,000 per month and was increased to $108,000 per year as of
August 14, 1996. In connection with his employment agreement, Mr. Webb received
options to purchase 70,000 shares of the Company's Common Stock at $1.50 per
share.

Mr. Legato entered into an employment agreement with the Company,
dated as of February 11, 1997, pursuant to which Mr. Legato was appointed Vice
President-Sales of the Company. The employment agreement continued until August
1997 and thereafter has been continuing for successive 3-month periods. Mr.
Legato's initial salary was $150,000 per year and has not been increased. In
connection with his employment agreement, Mr. Legato received options to
purchase 60,000 shares of the Company's Common Stock at $6.875 per share.

In connection with services performed by Mr. O'Brien, on July 17,
1995, he received 5,000 shares of the Company's Common Stock valued at $.01 per
share and has been granted options to purchase 25,000 shares of the Company's
Common Stock at $1.50 per share and 5,000 shares of the Company's Common Stock
at $2.00 per share.

On September 4, 1998 the Company entered into an employment agreement
with its Vice President - Engineering. As part of the agreement, the Company
granted to this individual, under the Company's Plan, options to purchase 50,000
shares of common stock at $1.50 per share, the underlying value of the Company's
common stock at October 1, 1998, the date of grant: 10,000 options vested on
March 16, 1999; 13,334 options vest on March 16, 2000; 13,333 options vest on
March 16, 2001; 13,333 options vest on March 16, 2002.

10. EXTRAORDINARY ITEM

The terms of the Bridge Notes of the Company contained early repayment
provisions in the event the Company completed an IPO. As a result of the
Company's completing an IPO in July 1996, the Bridge Notes were repaid and the
unamortized financing costs of $251,938 and the unamortized debt discount of
$596,222 as of that date, totaling $848,160, were written off and recorded as an
extraordinary item for the year ended December 31, 1996.

F-20
<PAGE>

11. SUBSEQUENT EVENTS

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.

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
March 14, 2005 to purchase up to 522,159 shares of the Company's Common Stock at
a price per share of $3.16.

F-21
<PAGE>

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 outstanding - (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 liabilities and stockholders' equity........ $7,743,002
============

The accompanying notes are an integral part of these financial statements.

F-22
<PAGE>

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 financial statements.

F-23
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C>
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
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
============= ============== ===============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-24
<PAGE>

NUWAVE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

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)
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 statements.

F-25
<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.

2. CAPITAL TRANSACTIONS

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

F-26
<PAGE>

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.

F-27
<PAGE>

3,916,151 SHARES OF COMMON STOCK
1,305,384 COMMON STOCK PURCHASE WARRANTS

NUWAVE TECHNOLOGIES, INC.

--------------------------------
P R O S P E C T U S
--------------------------------

July 21, 2000

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article Seventh of the registrant's Certificate of Incorporation
provides that "[t]he Corporation shall, to the fullest extent permitted by the
provisions of ss. 145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all persons whom
it shall have the power to indemnify under said section from and against any and
all of the expenses, liabilities, or other matters referred to in or covered by
said section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person."

Section 145 of the DGCL permits a corporation, among other things, to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation), by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.

A corporation also may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. However, in such an action by or on behalf of a corporation, no
indemnification may be made in respect of any claim, issue or matter as to which
the person is adjudged liable to the corporation unless and only to the extent
that the court determines that, despite the adjudication of liability but in
view of all the circumstances, the person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.

In addition, the indemnification and advancement of expenses provided
by or granted pursuant to Section 145 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.

ITEM 25. OTHER EXPENSES OF ISSUANCE ANd DISTRIBUTION

The estimated expenses of this offering in connection with the issuance and
distribution of the securities being registered, all of which are to be paid by
the Registrant, are as follows:

II-1
<PAGE>

Registration Fee............................................. $ 2,882
Legal Fees and Expenses...................................... 25,000
Accounting Fees and Expenses................................. 20,000
Miscellaneous Expenses....................................... 7,118
---------
Total................................................... $55,000
=========

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

On February 6, 1998, the Company entered into a two-year agreement
with an investor whereby the Company issued 253,485 shares of Common Stock. The
issuance of the shares was exempt from registration under the provisions of
Section 4(2) of the Securities Act.

On March 3, 1998, the Company entered into a consulting agreement
pursuant to which the Company issued to the consultant warrants to purchase
400,000 shares of common stock. The issuance of the warrants was exempt from
registration under the provisions of Section 4(2) of the Securities Act

Between May 19, 1998 and June 6, 1998, the Company sold 2,742,904
shares of its Common Stock and 2,057,207 Class A Redeemable Warrants ("Class A
Warrants") for an aggregate purchase price of $7,280,546 to persons who
represented that they were "accredited investors" as defined in Regulation D of
the Securities Act. The placement agent, as part of its compensation, received
warrants exercisable until May 11, 2003 to purchase up to (i) 688,084 shares of
the Company's Common Stock at a price per share ranging from $2.50 to $3.06 and
(ii) 516,068 Class A Warrants. The issuance of the shares and Class A Warrants
was exempt from registration under the provisions of Section 4(2) of the
Securities Act.

On May 28, 1999, in accordance with the terms of Rave Settlement
Agreement, the Company issued 100,000 shares of its Common Stock and options to
purchase 50,000 shares of the Company's Common Stock. The issuance of the shares
and options was exempt from registration pursuant to Section 4(2) of the
Securities Act.

On March 14, 2000, the Company sold 2,088,608 shares of its Common
Stock and 1,044,304 Class B Redeemable Common Stock Purchase Warrants ("Class B
Warrants") for an aggregate purchase price of $6,600,000 to persons who
represented that they were "accredited investors" as defined in Regulation D of
the Securities Act. The placement agent, as part of its compensation, received
warrants exercisable until March 14, 2005 to purchase up to (i) 522,159 shares
of Common Stock and (ii) 261,080 Class B Warrants. The issuance of the shares
and the Class B Warrants was exempt from registration under the provisions of
Section 4(2) of the Securities Act.

II-2
<PAGE>

ITEM 27. EXHIBITS

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------

3.1 Articles of Incorporation of NUWAVE (Delaware) (See Exhibit
3.1(a) to Registration Statement on Form SB-2 filed with the
Commission on April 2, 1996).

3.2 Certificate of Amendment to Articles of Incorporation of NUWAVE
(Delaware) (See Exhibit 3.1(b) to Registration Statement on Form
SB-2 filed with the Commission on April 2, 1996).

3.3 Certificate of Authority (New Jersey) (See Exhibit 3.1(c) to
Registration Statement on Form SB-2 filed with the Commission on
April 2, 1996).

3.4 Amended Certificate of Authority (New Jersey) (See Exhibit 3.1(d)
to Registration Statement on Form SB-2 filed with the Commission
on April 2, 1996).

3.5 Certificate of Amendment to Articles of Incorporation of NUWAVE
(Delaware) (See Exhibit 3.1(e) to Registration Statement on Form
SB-2 filed with the Commission on April 2, 1996).

3.6 By-Laws of NUWAVE (See Exhibit 3.2 to Registration Statement on
Form SB-2 filed with the Commission on April 2, 1996)

3.7 Form of Common Stock Certificate (See Exhibit 4.1 to Amendment
No. 2 to Registration Statement on Form SB-2 filed with the
Commission on July 3, 1996).

3.8 Form of Public Warrant Agreement between NUWAVE, American Stock
Transfer & Trust Company and Rickel & Associates, Inc. (See
Exhibit 4.2 to Amendment No. 1 to Registration Statement on Form
SB-2 filed with the Commission on May 22, 1996).

3.9 Form of Public Warrant Certificate (See Exhibit 4.3 to Amendment
No. 2 to Registration Statement on Form SB-2 filed with the
Commission on July 3, 1996).

3.10 Form of Underwriter's Warrant Agreement (including Warrant
Certificate) between NUWAVE and Rickel & Associates (See Exhibit
4.4 to Amendment No. 1 to Registration Statement on Form SB-2
filed with the Commission on May 22, 1996).

3.11 Selected Dealer Agreement among Rickel & Associates, Inc. and
certain underwriters (See Exhibit 4.5 to Amendment No. 2 to
Registration Statement on Form SB-2 filed with the Commission on
July 3, 1996).

3.12 Certificate of Amendment to Articles of Incorporation of NUWAVE
(Delaware) (See Exhibit 3.1 to Current Report on Form 8-K filed
with the Commission on February 22, 2000).

II-3
<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------

5* Opinion of Thelen Reid & Priest LLP.

10.1 Restated Employment Agreement dated as of July 20, 1995 between
NUWAVE Engineering, Inc. and Gerald Zarin (See Exhibit 10.1 to
Registration Statement on Form SB-2 filed with the Commission on
April 2, 1996).

10.2 Option Agreement for the Purchase of Common Stock dated as of
July 17, 1995 between NUWAVE Engineering, Inc. and Jeremiah F.
O'Brien (See Exhibit 10.14 to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).

10.3 Option Agreement for the Purchase of Common Stock dated as of
September 11, 1995 between NUWAVE Engineering, Inc. and Robert I.
Webb (See Exhibit 10.15 to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).

10.4 Option Agreement for the Purchase of Common Stock dated as of
November 9, 1995 between NUWAVE Engineering, Inc. and Lyle E.
Gramley (See Exhibit 10.16 to Registration Statement on Form SB-2
filed with the Commission on April 2, 1996).

10.5 Option Agreement for Purchase of Common Stock dated as of March
1, 1996 between NUWAVE Technologies, Inc. and Jeremiah F. O'Brien
(See Exhibit 10.17 to Registration Statement on Form SB-2 filed
with the Commission on April 2, 1996).

10.6 Option Agreement for Purchase of Common Stock dated as of July
20, 1995 between NUWAVE Technologies, Inc. and Gerald Zarin (See
Exhibit 10.18 to Registration Statement on Form SB-2 filed with
the Commission on April 2, 1996).

10.7 Option Agreement for Purchase of Common Stock dated as of March
1, 1996 between NUWAVE Technologies, Inc. and Joseph A. Sarubbi
(See Exhibit 10.19 to Registration Statement on Form SB-2 filed
with the Commission on April 2, 1996).

10.8 Option Agreement for Purchase of Common Stock dated as of March
1, 1996 between NUWAVE Technologies, Inc. and Ed Bohn (See
Exhibit 10.20 to Registration Statement on Form SB-2 filed with
the Commission on April 2, 1996).

10.9 Form of Indemnification Agreement between the Company and its
directors, dated as of January 31, 1996 (See Exhibit 10.24 to
Registration Statement on Form SB-2 filed with the Commission on
April 2, 1996).

10.10 Non-Employee Director Stock Option Plan (See Exhibit 10.1 to
Current Report on Form 8-K filed with the Commission on June 6,
1997).

10.11 Form of Incentive Stock Option Agreement (See Exhibit 4.3 to
Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).

10.12 Form of Non-Employee Director Stock Option Agreement (See Exhibit
4.4 to Registration Statement on Form S-8 filed with the
Commission on November 12, 1997).

II-4
<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------

10.13 Form of Non-Qualified Stock Option Agreement covering options not
granted under either the 1996 Performance Incentive Plan or the
Non-Employee Director Stock Option Plan (See Exhibit 4.5 to
Registration Statement on Form S-8 filed with the Commission on
November 12, 1997).

10.14 Letter Agreement, dated March 3, 1998, between NuWave
Technologies, Inc. and Janssen/Meyers Associates, L.P. (See
Exhibit 10.41 to Annual Report on Form 10-KSB filed with the
Commission on March 25, 1998).

10.15 Warrant, dated March 3, 1998, executed by NuWave Technologies,
Inc. in favor of Janssen/Meyers Associates, L.P., to purchase up
to 400,000 shares of Common Stock, par value $.01 per share, of
NuWave Technologies, Inc. (See Exhibit 10.41 to Annual Report on
Form 10-KSB filed with the Commission on March 25, 1998).

10.16 Letter Agreement, dated December 3, 1997, between NuWave
Technologies, Inc. and Lippert/Heilshorn & Associates, Inc. (See
Exhibit 10.41 to Annual Report on Form 10-KSB filed with the
Commission on March 25, 1998).

10.17 Option Agreement, dated December 9, 1997, between NuWave
Technologies, Inc. and Lippert/Heilshorn & Associates, Inc. (See
Exhibit 10.41 to Annual Report on Form 10-KSB filed with the
Commission on March 25, 1998).

10.18 First Amendment to Restated Employment Agreement, dated December
9, 1997, between NuWave Technologies, Inc. and Gerald Zarin (See
Exhibit 10.41 to Annual Report on Form 10-KSB filed with the
Commission on March 25, 1998).

10.19 Placement Agency Agreement, dated as of May 11, 1998, between
Janssen-Meyers Associates, L.P. and NuWave Technologies, Inc.
(See Exhibit 10.1 to Current Report on Form 8-K filed with the
Commission on June 11, 1998).

10.20 Warrant Agreement, dated May 15, 1998, between NuWave
Technologies, Inc. and American Stock Transfer & Trust Company
(See Exhibit 10.3 to Current Report on Form 8-K filed with the
Commission on June 11, 1998).

10.21 Form of Warrant Certificate (See Exhibit 10.4 to Current Report
on Form 8-K filed with the Commission on June 11, 1998).

10.22 Form of Placement Agent Warrant Certificate (See Exhibit 10.6 to
Current Report on Form 8-K filed with the Commission on June 11,
1998).

10.23 Form of Subscription Agreement (See Exhibit 10.7 to Current
Report on Form 8-K filed with the Commission on June 11, 1998).

10.24 Agreement, dated February 1, 1999, between NuWave Technologies,
Inc. and Terk Technologies Corp. (See Exhibit 10.54 to Annual
Report on Form 10-KSB filed with the Commission on March 30,
2000).

II-5
<PAGE>

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------

10.25 Option Agreement for Purchase of Common Stock dated as of
September 28, 1999 between NUWAVE Technologies, Inc. and Richard
E. Ekstract. (See Exhibit 10.55 to Annual Report on Form 10-KSB
filed with the Commission on March 30, 2000).

10.26 Placement Agency Agreement, dated as of February 14, 2000,
between Janssen-Meyers Associates, L.P. and NUWAVE Technologies,
Inc. (See Exhibit 10.56 to Annual Report on Form 10-KSB filed
with the Commission on March 30, 2000).

10.27 Warrant Agreement, dated March 13, 2000, between NUWAVE
Technologies, Inc. and American Stock Transfer & Trust Company.
(See Exhibit 10.57 to Annual Report on Form 10-KSB filed with the
Commission on March 30, 2000).

10.28 Form of Warrant Certificate. (See Exhibit 10.58 to Annual Report
on Form 10-KSB filed with the Commission on March 30, 2000).

10.59 Form of Subscription Agreement. (See Exhibit 10.59 to Annual
Report on Form 10-KSB filed with the Commission on March 30,
2000).

10.60 Placement Agent Warrant Agreement, dated March 14, 2000, between
NUWAVE Technologies, Inc. Janssen-Meyers Associates, L.P. (See
Exhibit 10.60 to Annual Report on Form 10-KSB filed with the
Commission on March 30, 2000).

23.1* Consent of Richard A. Eisner & Company, LLP.

23.2* Consent of PricewaterhouseCoopers LLP.

23.3* Consent of Thelen Reid & Priest LLP (included as part of Exhibit
5).

24* Power of Attorney (included on p. II-7 of this Registration
Statement).

-----------------------------
* Filed herewith.

ITEM 28. UNDERTAKINGS

(a) The undersigned Company hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and

(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement.

II-6
<PAGE>

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.

(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described under Item 15 above, or
otherwise, the Company has been advised that in the opinion of the
Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted against the Company by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

(c) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-7
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM SB-2 AND HAS AUTHORIZED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF FAIRFIELD, AND STATE OF NEW JERSEY, ON THE 21ST DAY
OF JULY, 2000.

NUWAVE TECHNOLOGIES, INC.

By: /s/ Gerald Zarin
-------------------------------------
Gerald Zarin
Chairman of the Board of Directors,
President and Chief Executive Officer

POWER OF ATTORNEY

EACH DIRECTOR AND/OR OFFICER OF NUWAVE WHOSE SIGNATURE APPEARS BELOW
HEREBY APPOINTS GERALD ZARIN AND JEREMIAH F. O'BRIEN AS HIS ATTORNEY-IN-FACT TO
SIGN IN HIS NAME AND BEHALF, IN ANY AND ALL CAPACITIES STATED BELOW AND TO FILE
WITH THE COMMISSION ANY AND ALL AMENDMENTS, INCLUDING POST-EFFECTIVE AMENDMENTS,
TO THIS REGISTRATION STATEMENT.

IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

Chairman of the Board of
/s/ Gerald Zarin Directors, President and
----------------------------- Chief Executive Officer
Gerald Zarin (Principal Executive Officer) July 21, 2000

Chief Financial Officer and
/s/ Jeremiah F. O'Brien Secretary (Principal
----------------------------- Financial Officer and
Jeremiah F. O'Brien Accounting Officer) July 21, 2000

/s/ Ed Bohn
-----------------------------
Ed Bohn Director July 21, 2000

/s/ Richard E. Ekstract
-----------------------------
Richard E. Ekstract Director July 21, 2000

/s/ Lyle E. Gramley
-----------------------------
Lyle E. Gramley Director July 21, 2000

/s/ Joseph A. Sarubbi
-----------------------------
Joseph A. Sarubbi Director July 21, 2000

II-8
<PAGE>

INDEX TO EXHIBITS

EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
------- ---------------------- ------
5* Opinion of Thelen Reid & Priest LLP. III-1

23.1* Consent of Richard A. Eisner & Company, LLP. III-2

23.2* Consent of PricewaterhouseCoopers LLP. III-3

23.3* Consent of Thelen Reid & Priest LLP (included as part of
Exhibit 5).

24* Power of Attorney (included on p. II-8 of this
Registration Statement).

-----------------------------
* Filed herewith.