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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ------------------
Commission file number 0-28606
NUWAVE TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 22-3387630
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE PASSAIC AVENUE, FAIRFIELD, NEW JERSEY 07004
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 882-8810
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or such shorter period that registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the numberof shares outstanding of each of the issuer's classes of
common equity, as of June 30, 2002: 13,556,197
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Transitional Small Business Disclosure Format: Yes |_| No |X|
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NUWAVE TECHNOLOGIES, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Condensed Balance Sheets as of June 30, 2002 (unaudited)
and December 31, 2001 P. 3
Condensed Statements of Operations for the three and
six months ended June 30, 2002 (unaudited) and
June 30, 2001 (unaudited) P. 4
Condensed Statements of Cash Flows for the six months
ended June 30, 2002 (unaudited) and June 30, 2001
(unaudited) P. 5
Notes to Condensed Financial Statements P. 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION P. 9
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES P. 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K P. 16
SIGNATURES P. 17
2
NUWAVE TECHNOLOGIES, INC.
Balance Sheets
(In thousands, except share data)
ASSETS
June 30, December 31,
2002 2001
(unaudited)
Current assets:
Cash and cash equivalents $ 323 $ 1,011
Accounts receivable, net 6 138
Inventory 266 413
Prepaid expenses and other current assets 165 179
------- -------
Total current assets 760 1,741
Property and equipment 67 82
Other assets 26 30
Deferred tax benefit 280 280
------- -------
Total assets $ 1,133 $ 2,133
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 562 $ 846
------- -------
Total liabilities 562 846
------- -------
Commitments and contingencies
Stockholders' equity:
Series A Convertible Preferred Stock,
noncumulative, $.01 par value;
authorized 400,000 shares; none issued
Preferred stock, $.01 par value;
authorized 1,000,000 shares;
none issued - (preferences and
rights to be designated by the
Board of Directors)
Common stock, $.01 par value; authorized
40,000,000 shares; 13,556,197 shares
issued and outstanding at June 30, 2002 135 114
Additional paid in capital 26,445 25,613
Accumulated deficit (26,009) (24,440)
------- -------
Total stockholders' equity 571 1,287
------- -------
Total liabilties and stockholders' equity $ 1,133 $ 2,133
======= =======
The accompanying notes are an integral part of these condensed financial
statements
3
NUWAVE TECHNOLOGIES, INC.
Statements of Operations
(In thousands, except share and per share data)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
------------ ------------ ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $ 13 $ 70 $ 281 $ 72
Cost of sales (8) (28) (148) (28)
------------ ------------ ------------ -----------
5 42 133 44
------------ ------------ ------------ -----------
Operating expenses:
Research and development expenses (319) (234) (469) (512)
General and administrative expenses (664) (730) (1,237) (1,312)
------------ ------------ ------------ -----------
(983) (964) (1,706) (1,824)
------------ ------------ ------------ -----------
Loss from operations (978) (922) (1,573) (1,780)
------------ ------------ ------------ -----------
Other income (expense):
Interest income 2 26 5 72
Interest expense - (3) (1) (7)
------------ ------------ ------------ -----------
2 23 4 65
------------ ------------ ------------ -----------
Net loss $ (976) $ (899) $ (1,569) $ (1,715)
============ ============ ============ ===========
Basic and diluted loss per share:
Weighted average number of
common shares outstanding 12,459,742 10,557,729 12,151,007 10,557,729
============ ============ ============ ===========
Basic and diluted loss per share $ (0.08) $ (0.08) $ (0.13) $ (0.16)
============ ============ ============ ===========
The accompanying notes are an integral part of these condensed financial
statements.
4
NUWAVE TECHNOLOGIES, INC.
Statements of Cash Flows
(In thousands)
Six Months Six Months
Ended Ended
June 30, June 30,
2002 2001
(unaudited) (unaudited)
----------- -----------
Cash flows from operating activities:
Net loss $ (1,569) $ (1,716)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation expense 15 22
Amortization of website development costs 45
Amortization of software development costs 26
Decrease in accounts receivable 132
Decrease (increase) in inventory 147 (50)
Decrease in prepaid expenses and other
current assets 14 18
Decrease in other assets 4 19
Decrease in accounts payable and accrued
liabilities (284) (134)
Issuance of options and warrants in
connection with consultant agreements 156 7
----------- -----------
Net cash used in operating activities (1,385) (1,763)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (18)
----------- -----------
Net cash used in investing activities - (18)
----------- -----------
(Continued)
The accompanying notes are an integral part of these condensed financial
statements.
5
NUWAVE TECHNOLOGIES, INC.
Statements of Cash Flows
(In thousands)
(Continued)
Six Months Six Months
Ended Ended
June 30, June 30,
2002 2001
(unaudited) (unaudited)
----------- ------------
Cash flows from financing activities:
Proceeds from equity offering 810
Costs incurred for equity offerings
and warrants (113)
----------- ------------
Net cash provided by financing
activities 697
----------- ------------
Net decrease in cash and cash
equivalents (688) (1,781)
Cash and cash equivalents at the
beginning of the period 1,011 3,847
----------- ------------
Cash and cash equivalents at
the end of the period $ 323 $ 2,066
=========== ============
Supplemental disclosure of cash flow
information:
Interest paid during the period $ 1 $ 7
=========== ============
The accompanying notes are an integral part of these condensed financial
statements.
6
NUWAVE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Interim Financial Statement Preparation
------------------------------------------------
The accompanying unaudited condensed financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America 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"), believes
that the quarterly information presented includes all adjustments (consisting
only of normal, recurring adjustments) necessary for a fair presentation in
accordance with generally accepted accounting principles. The accompanying
condensed financial statements should be read in conjunction with the Company's
Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission ("SEC") on April 16, 2002.
2. Capital Transactions
--------------------
On February 5, 2002, the Company entered into a private placement
agreement with investors whereby the Company issued 600,000 shares of the
Company's Common Stock for an aggregate purchase price of $330,000. In
connection with this agreement, the Company issued to the Placement Agent a
Placement Agent Warrant, exercisable to purchase up to 30,000 shares of Common
Stock, representing five percent of the total of the stock issued in the
Offering. The warrants shall be exercisable for a period of five years, expiring
on February 5, 2007, at an exercise price of $.55 per share. The Placement Agent
also received a cash placement fee of eight percent of the purchase price and a
non-accountable allowance equal to two percent of the purchase price, totaling
$33,000.
On February 27, 2002, the Company entered into agreement with an investor
whereby the Company issued 214,286 shares of Common Stock for an aggregate
purchase price of $150,000 and warrants to purchase up to 50,000 shares of
Common Stock at an exercise price of $1.00 per share with an exercise period of
five years expiring February 27, 2007. Under the terms of the agreement a
consultant was paid a finder's fee of $1,500 representing one percent of the
purchase price.
On April 15, 2002, the Company entered into a $3.0 million Equity Line of
Credit Agreement with Cornell Capital Partners, LP (the "Purchaser"). Provided
we are in compliance with the terms of the Agreement, we may, at our option,
periodically require the Purchaser to purchase up to $100,000 in any seven day
period of the Company's Common Stock (the "put" shares) up to a maximum of $3.0
million over the next two years, commencing on May 31, 2002 the effective date
of a Securities Act of 1933 (the "Securities Act") registration statement on
7
Form SB-2 for the registration of 5,000,000 shares of Common Stock to be sold
under the Equity Line of Credit, plus the 238,095 shares mentioned below. The
Company has issued to the Purchaser 218,095 shares of Common Stock as a
commitment fee for entering into the Equity Line of Credit Agreement. In
addition, the Company issued to the placement agent 20,000 shares of NUWAVE's
common stock. For each share of Common Stock purchased under the Equity Line of
Credit, the Purchaser will pay 97% of the then Market Price (as defined in the
Equity Line of Credit), and will be paid a fee of 4% of each advance.
The Equity Line of Credit is non-exclusive; thereby permitting us to offer
and sell our securities to third parties while the Equity Line of Credit is in
effect. NUWAVE has the option to terminate the Equity Line of Credit Agreement
at any time, provided there is no pending advance thereunder.
Between June 7, 2002 and June 30, 2002 the Company entered into agreements
with various investors whereby a total of 1,101,165 shares of Common Stock was
issued for an aggregate purchase price of $330,350. In connection with the
issuance of these shares, the Company incurred costs of $20,640 in placement
agent fees and expenses.
3. Subsequent Events
-----------------
On July 3, 2002, the Company's Public Warrants, issued in the Company's
initial public offering expired. On the expiration, there was 2,530,000 public
warrants unexercised that then expired.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Report on Form 10-QSB contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements
other than statements of historical facts included in this Report, including
without limitation, the statements under "General," "Marketing and Sales," and
"Liquidity and Capital Resources," are forward-looking statements. The Company
cautions that forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
indicated in the forward-looking statements, due to several important factors
herein identified. Important factors that could cause actual results to differ
materially from those indicated in the forward-looking statements ("Cautionary
Statements") include delays in product development, competitive products and
pricing, lack of acceptance of the Company's products, general economic
conditions, risks of intellectual property litigation, product demand, industry
capacity, new product development, failure of distributor to market our products
effectively, commercialization of new technologies, the Company's ability to
raise additional capital, and the risk factors detailed from time to time in the
Company's Annual Report on Form 10-KSB and other materials filed with the SEC.
All subsequent written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
GENERAL
Our mission is to identify, develop and commercialize high-margin,
proprietary technologies suited for high-volume, high-growth markets and, in
turn, achieve attractive long-term growth for our company. Our focus to date has
been and continues to be on technology related to image and video enhancement
designed to enrich picture and video output with clearer, more defined detail in
texture, color, contrast and tone, at low cost. Our initial products can be used
by original equipment manufacturers (OEM's) for placement into products that
produce images for display screens such as televisions and/or DVD players, for
supplementing and increasing video quality on existing television monitors and
video displays via set-top boxes containing our technology, and by individuals
over the Internet for improving their personal images and photographs. Our
patented high speed filtering technology removes approximately 70% of the
picture noise while retaining correct focus (the image and text in the image
does not blur). The three product lines based upon our proprietary technology
are: 1) the NUWAVE Video Processor (NVP) Technology, 2) Retail Products and 3)
Digital Filtering Technology.
9
RESULTS OF OPERATIONS
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
Revenues for the six months ended June 30, 2002 were $281,000 compared to
$72,000 for the six months ended June 30, 2001 as we began selling the NVP
Technology in the form of ASIC (application specific integrated circuits) chips
to OEMs and our first retail product the "VGE" video game enhancer in June 2001
of 2001. In December 2001, we entered into a strategic alliance with Gemini
Industries (Gemini), a leading manufacturer and distributor of consumer
electronics accessories. Gemini was granted a five-year exclusive license to
market and distribute NUWAVE's VGE in North America. Initial shipments of the
VGE and ASIC chips to Gemini took place during the first quarter of 2002. Cost
of sales for the six months ended June 30, 2002 was $148,000 compared to $28,000
for the six months ended June 30, 2001. During the six months ended June 30,
2002, $469,000 was spent on research and development activities compared to
$512,000 for the same six-month period in 2001, a decrease of $43,000. This
decrease was primarily due to the elimination of amortization of the development
costs relating to Company's PicturePrep software product and PicturePrepClub
website. The majority of the research and development expenditures incurred
during 2002 related to the development of the Company's new ASIC chip, the "NVP
1104" which was completed in July 2002 and the development of our retail and
security/surveillance lines (see marketing and sales). General and
administrative expenses for the six months ended June 30, 2002, totaled
$1,237,000 representing a decrease of $75,000 compared to the six months ended
June 30, 2001. Such decrease was the result of decreases in payroll of $44,000
combined with decreases in recruiting of $37,000, professional fees of $18,000
and marketing costs of $33,000 and other of $24,000; these decreases were
offset by an increase in financial consulting $81,000 primarily representing
the non-cash costs (using the Black-Scholes calculation of accounting for
issuances of options and warrants) of options and warrants issued to
consultants.
Interest income (net of interest expense) was $4,000 for the six months
ended June 30, 2002 as compared to $65,000 for the same period in 2001 primarily
due to the Company's lower cash position as well as lower interest rates. As a
result of the above, we had a net loss of $1,569,000 for the six months ended
June 30, 2002 compared to a net loss for the six months ended June 30, 2001, of
$1,715,000.
Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001
Revenues for the three months ended June 30, 2002 were $13,000 compared to
$70,000 for the three months ended June 30, 2001. The revenues for the 2001
period were attributable to the introduction and sale of the "VGE" in June 2001.
In compliance with the exclusive license and distribution agreement, Gemini
purchased their opening VGE inventory requirements during the first quarter of
this year and did not place additional orders during the quarter ended June 30,
2002. Per the amended terms of the agreement, beginning in October 2002
Gemini has minimum monthly purchase obligations throughout the remainder of the
agreement. For the quarter ended June 30, 2002, we had a net loss of $976,000
compared to a net loss for the quarter ended June 30, 2001 of $899,000. The loss
for the quarter ended June 30, 2002 included $664,000 in general and
administrative expenses, representing a decrease of $66,000 compared to the
10
quarter ended June 30, 2001. Such decrease was primarily the result of reduced
sales and marketing costs of $56,000 combined with decreases in professional
fees of $38,000, travel & entertainment of $29,000, recruiting of $20,000, and
other $9,000; these decreases were offset by an increase in financial consulting
of ($86,000) primarily representing the non-cash costs (using the Black-Scholes
calculation of accounting for issuances of options and warrants) of options and
warrants issued to consultants.
Although we anticipate deriving revenue from the sale of our ASIC
chips, retail products and proprietary software during the second half of 2002,
no assurance can be given that these products will be successfully marketed
during such period. See "Liquidity and Capital Resources."
MARKETING AND SALES
Retail & Security/Surveillance Products
We have licensed our proprietary VGE technology to Gemini to manufacture,
market and distribute the VGE to its customer base, which covers approximately
17,000 retail locations in North America. This alliance supports our strategy to
obtain access to an established retail distribution channel for the specialized
image enhancement products we develop. Additionally, it allows us to allocate
our time and resources away from costly retail marketing and distribution
processes, to focus on developing innovative technologies and products for
license to third parties with established marketing and distribution channels.
In light of the Gemini agreement we have also reduced our marketing expenditures
in Europe and are currently concentrating our efforts there on finding a
distributor to market our products on a similar arrangement as Gemini.
On July 24, 2002 the Company announced its introduction of (1) a line of
Retail video products and (2) Security/Surveillance image enhancement products
for applications within the growing Homeland Security market. These two new
product lines are scheduled for release in the third and fourth quarters of
2002. The retail line includes a series of video game hook-up cables, an "S"
Video Enhancer (SVE) set top box and four video selector boxes that feature the
company's proprietary technology for image enhancement. The Company expected the
retail line to be sold to OEMs and consumer electronic distributors for resale
to national retail chains and specialty audio/video stores. The introduction of
these products, should not only satisfy consumer demand for better video
quality, but also should allow consumers to mix multiple video sources, from
popular products like DVD Players, Satellite Receivers, Video Camcorders, and
Video Game Consoles.
The NUWAVE ENABLED Security/ Surveillance image enhancement products will
be rolled out in the third quarter of 2002 for the Homeland Security markets.
NUWAVE's patented hardware chip technology breaks down a video signal into its
chrominance and luminance components and then modifies specific parameters:
color, luminance, black level, clarity and noise reduction, to remove visual
noise before reassembling the signal and sending it to a playback device, such
as a video monitor. When integrated into a security and surveillance system,
this technology has applications for law enforcement, anti-terrorism and
business surveillance, in public locations such as airports, retail stores,
11
sports stadiums and other public gathering places. The Company has received its
first order from an agency of the Federal Government for this new line of
security/surveillance image enhancement products.
NVP ASIC Technology
The NUWAVE Video Processor (NVP) technology is 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. We are marketing this technology in the form of ASIC chips
(Application Specific Integrated Circuits) directly to OEM's who by
incorporating this enabling technology would improve picture quality in their
televisions, VCR's, DVD's, camcorders, set-top boxes and other video output
devices. This technology can also be licensed to the OEM for incorporation onto
their own ASIC design. The NVP 104 plastic (silicon) chip was completed during
2001.
During July 2002, the Company announced the availability of its new ASIC
Chip, the "NVP 1104". This new chip can create economies of scale in the
marketplace by offering a superior product with unique features, which satisfy
customer's demands for higher video quality at modest prices. It supports the
latest video standards such as component video and progressive scan systems,
includes features that are targeted at video enhancement for the
Security/Surveillance and Home Entertainment applications. These important
features together with its low cost implementation make it very attractive to
incorporate into OEM consumer audio/video products like DVD players, AV
receivers, Video Games, Satellite Receivers, AV Selectors, TV's and Retail
set-top box products. The NVP 1104 is `future proofed' due to its' unique design
philosophy, and by its' ability to function with the many video standards
available today.
Digital Filtering Technology
Our proprietary digital filters remove graininess and digital artifacts
while preserving proper focus better than any other "real time" filters that are
on the market today. In October 2001, we were granted a patent by the U.S.
Patent Office covering our digital filters. We plan to license our digital
filtering technology to OEM's for embedding in products such as PC's, printers,
scanners, camcorders and DVD's, among other digital imaging devices. These
patented filters are expected to be in demand for use in processing digital
video and movies used for streaming video over the Internet. The digital
technology not only complements our proprietary analog ASIC chip technology but
can also work in conjunction with it to further improve the resulting image
quality. In April 2002, we signed an agreement with Sony Corporation, giving
Sony the non-exclusive right to use one of our filters in its digital color
printers, in return for a nominal one-time licensing fee. While this initial
step may lead to a growing relationship between Sony Corporation and NUWAVE,
there is no assurance that such a relationship will develop.
12
With the initial sales of our VGE retail product and our ASIC chips to
Gemini during the first six months of 2002, our net sales for the six months
ended June 30, 2002 were $281,000 as compared to $72,000 for the six months
ended June 30, 2001. As a result of the exclusive Gemini Agreement, we
anticipate a substantial reduction in our overall marketing and distribution
costs in 2002 since they will be responsible for marketing and selling to retail
outlets in North America. Gemini has taken longer than originally anticipated to
integrate and market the VGE to their customer base and has been granted an
extension from July 1 to October 1, 2002 to begin minimum monthly purchase
obligations throughout the remainder of the agreement. Although we anticipate
deriving increased revenues from the sale of our ASIC chips and retail products
and the licensing of our proprietary digital software during 2002, no assurance
can be given that these products will be successfully marketed or that losses
will not continue to occur during such period. See "Liquidity and Capital
Resources."
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2002, the Company had cash and cash equivalents of
approximately $323,000 and no long-term liabilities. On April 15, 2002, we
entered into a $3 million Equity Line of Credit. Provided we are in compliance
with the terms of the Equity Line of Credit Agreement, we may, at our option,
require the Purchaser to purchase up to $100,000 in any seven business day
period of our Common Stock, up to a maximum of $3 million over the two years
from May 31, 2002. The purchase price of the shares will be 97% of the then
current market price. Upon the initial advance and all subsequent advances, the
Investor shall receive a fee equal to 4% of the gross proceeds of each advance.
The Equity Line of Credit is non-exclusive; thereby permitting us to offer and
sell our securities to third parties while the Equity Line of Credit is in
effect. We have the right to terminate the Equity Line of Credit Agreement at
any time, provided there is no pending advance thereunder. As of July 31, 2002,
the Company had not exercised any of its "put" options under the Equity
Agreement.
Between June 7, 2002 and June 30, 2002 the Company entered into
agreements with various investors whereby a total of 1,101,165 shares of Common
Stock was issued for an aggregate purchase price of $330,350. In connection with
the issuance of these shares, the Company incurred costs of $20,640 in placement
agent fees and expenses.
In their report on the audit of NUWAVE's financial statements for the year
ended December 31, 2001, our independent auditors included an explanatory
paragraph because of the uncertainty that we could continue in business as a
going concern in the event we are unable to complete a registration and sale of
our Common Stock pursuant to this Equity Line of Credit. We anticipate that with
our cash currently on hand and the completion of an effective registration
statement on May 31, 2002 relating to the $3 million Equity Line of Credit and
sales thereunder, we will be able to satisfy currently contemplated cash
requirements for at least through the next twelve months. In the event we are
unable to complete the sale of our Common Stock pursuant to this agreement or
otherwise; there would be substantial doubt about our ability to continue as a
going concern. We are continuing our efforts to raise capital in the financial
markets on terms that would potentially be less dilutive than utilization of the
Equity Line of Credit as well as exploring other options such as
mergers/acquisitions and strategic alliances. There can be no assurance that we
will be successful in these endeavors.
13
Effective as of the opening of business on Tuesday, August 13, 2002 the
Company's common stock will be trading on the OTC bulletin board (OTCBB) Market
under the symbol WAVE. The OTCBB is a regulated quotation service that displays
real-time quotes, last-sale prices and volume information in over-the-counter
(OTC) equity securities. Prior to August 13, 2002, the stock had been traded on
the Nasdaq SmallCap Market.
14
PART II - OTHER INFORMATION
Item 2. Changes in Securities
---------------------
(c) On April 15, 2002, the Company entered into a $3.0 million Equity Line
of Credit Agreement with a qualified investor (the "Purchaser"). Provided we are
in compliance with the terms of the Agreement, we may, at our option,
periodically require the Purchaser to purchase up to $100,000 in any seven day
period of the Company's Common Stock (the "put" shares) up to a maximum of $3.0
million over the next two years, commencing upon the effective date of a
Securities Act registration statement covering such shares. For each share of
common stock purchased under the Equity Line of Credit, the Purchaser will pay
97% of the then Market Price (as defined in the Equity Line of Credit), and will
be paid a fee of 4% of each advance. The sale of the shares under the Equity
Line of Credit is conditioned upon the SEC declaring effective a registration
statement under the Securities Act of 1933 concerning the shares of Common Stock
to be sold under the equity line of credit. The Company filed a registration
statement on Form SB-2 for the registration of 5,000,000 shares of Common Stock
to be sold under the Equity Line of Credit, plus the 238,095 shares mentioned
below, which was declared effective on May 31, 2002. The Company has issued to
the purchaser 218,095 shares of Common Stock as a commitment fee for entering
into the Equity Line of Credit Agreement. In addition, the Company issued to the
placement agent 20,000 shares of NUWAVE's common stock.
The Equity Line of Credit is non-exclusive; thereby permitting us to offer
and sell our securities to third parties while the Equity Line of Credit is in
effect. NUWAVE has the option to terminate the Equity Line of Credit Agreement
at any time, provided there is no pending advance thereunder.
Between June 7, 2002 and June 30, 2002 the Company entered into agreements
with various investors whereby a total of 1,101,165 shares of Common Stock was
issued for an aggregate purchase price of $330,350. In connection with the
issuance of these shares, the Company incurred costs of $20,640 in placement
agent fees and expenses.
These placements were claimed exempt form the registration requirements of
the Securities Act of 1933 by reason of Section 4(2) thereon and Regulation D
thereunder as each purchaser represented it was an "accredited investor" and
made additional representations regarding its purchase.
15
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit 99 - 906 Certificate
--------------------------------
(b) Reports on Form 8-K
none
16
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this Quarterly Report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Fairfield in the State of New Jersey on
August 13, 2002.
NUWAVE TECHNOLOGIES, INC.
-------------------------
(Registrant)
DATE: August 13, 2002 By: /s/ Gerald Zarin
------------------------------------
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: August 13, 2002 By: /s/ Jeremiah F. O'Brien
------------------------------------
Jeremiah F. O'Brien
Chief Financial Officer
(Principal Financial Officer)
17