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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
incorporation or organization) Identification No.)
ONE PASSAIC AVENUE, FAIRFIELD, NEW JERSEY 07004
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 882-8810
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of November 4, 2002: 15,853,117
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 September 30, 2002
(unaudited) and December 31, 2001 P.3
Condensed Statements of Operations for the three
and nine months ended September 30, 2002
(unaudited) and September 30, 2001 (unaudited) P.4
Condensed Statements of Cash Flows for the nine
months ended September 30, 2002
(unaudited) and September 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
ITEM 3. CONTROLS AND PROCEDURES P.14
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES P.15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K P.15
SIGNATURES P.16
CERTIFICATIONS P.17
2
NUWAVE TECHNOLOGIES, INC.
Balance Sheets
(In thousands, except share data)
ASSETS
September 30, December 31,
2002 2001
------------ ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 62 $ 1,011
Accounts receivable, net 6 138
Inventory 266 413
Prepaid expenses and other current assets 184 179
------------ ------------
Total current assets 518 1,741
Property and equipment 55 82
Other assets 26 30
Deferred tax benefit 280 280
------------ ------------
Total assets $ 879 $ 2,133
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 559 $ 846
------------ ------------
Long-term liabilities:
Note payable 155
------------ ------------
Total liabilities 714 846
------------ ------------
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;
14,833,999 shares issued and outstanding at September 30, 2002 148 114
Additional paid in capital 26,592 25,613
Accumulated deficit (26,575) (24,440)
------------ ------------
Total stockholders' equity 165 1,287
------------ ------------
Total liabilties and stockholders' equity $ 879 $ 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 Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
Net sales $ 445 $ 281 $ 517
Cost of sales (208) (148) (236)
------------- ------------- -------------
237 133 281
------------- ------------- -------------
Operating expenses:
Research and development expenses $ (122) 288) (591) (801)
General and administrative expenses (442) (1,013) (1,679) (2,324)
------------- ------------- ------------- -------------
(564) (1,301) (2,270) (3,125)
------------- ------------- ------------- -------------
Loss from operations (564) (1,064) (2,137) (2,844)
------------- ------------- ------------- -------------
Other income (expense):
Interest income 12 5 84
Interest expense (2) (2) (3) (10)
------------- ------------- ------------- -------------
(2) 10 2 74
------------- ------------- ------------- -------------
Net loss $ (566) $ (1,054) $ (2,135) $ (2,770)
============= ============= ============= =============
Basic and diluted loss per share:
Weighted average number of
common shares outstanding 13,852,308 10,639,953 12,724,339 10,585,438
============= ============= ============= =============
Basic and diluted loss per share $ (0.04) $ (0.10) $ (0.17) $ (0.26)
============= ============= ============= =============
The accompanying notes are an integral part of these condensed
financial statements
4
NUWAVE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2002 2001
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (2,135) $ (2,770)
Adjustments to reconcile net loss to net cash used
in operating activities:
Provision for Doubtful Accounts 28
Depreciation expense 24 34
Loss on disposal of equipment 7
Amortization of website development costs 67
Amortization of software development costs 38
Decrease in accounts receivable 132
Decrease (increase) in inventory 147 (219)
Increase in prepaid expenses and other
current assets (5) (386)
Decrease in other assets 4 23
Decrease (increase) in accounts payable and accrued liabilities (287) 103
Issuance of options and warrants in connection with
consultant agreements 209 11
------------- -------------
Net cash used in operating activities (1,904) (3,071)
------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (7) (21)
Proceeds from sale of equipment 3
------------- -------------
Net cash used in investing activities (4) (21)
------------- -------------
(Continued)
The accompanying notes are an integral part of these condensed
financial statements
5
NUWAVE TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2002 2001
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Proceeds from debt 300
Proceeds from equity offerings 815
Costs incurred for equity offerings and warrants (156)
Issuance of common stock in connection with
exercise of warrants 435
------------- -------------
Net cash provided by financing activities 959 435
------------- -------------
Net decrease in cash and cash equivalents (949) (2,657)
Cash and cash equivalents at the beginning of the period 1,011 3,847
------------- -------------
Cash and cash equivalents at the end of the period $ 62 $ 1,190
============= =============
Supplemental disclosure of cash flow information:
Interest paid during the period $ 3 $ 10
============= =============
Supplemental discolsures of non-cash financing activities:
During 2002, the Company issued 1,277,802 shares
of common stock in settlement of debt
aggregating $145,000.
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 the Company is in compliance with the terms of the Agreement, the
Company may, at its option, periodically require the Purchaser to purchase up to
$100,000 in any seven day period of the Company's Common Stock (the "put"
7
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 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 the
Company to offer and sell its 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 were issued for an aggregate purchase price of $330,350. In connection
with the issuance of these shares, the Company incurred costs of $35,664 in
placement agent fees and expenses.
On July 3, 2002, 2,530,000 of the Company's unexercised Public
Warrants, issued in the Company's initial public offering expired.
On August 20, 2002, the Company received a loan from Cornell Capital
Partners, L.P. in the amount of $300,000. The loan was secured by advance puts
under the Equity Line of Credit. As of September 30, 2002, $145,000 of the
outstanding balance had been repaid from the proceeds of puts under the Equity
Line of Credit, leaving a current balance of $155,000. As of September 30, 2002,
under the terms of the Equity Line of Credit Agreement, the Company had received
a total of $150,000 and had issued 1,277,802 shares of common stock.
3. Subsequent Events
On October 9, 2002, the Company received a second loan secured by
advance puts under the Equity Line of Credit in the amount of $125,000.
On November 1, 2002 a registration statement filed by the Company on
Form SB-2 under the Securities Act of 1933 (the "Securities Act") for the
registration of 14,000,000 shares of Common Stock, to be available for sale
under the Equity Line of Credit was declared effective.
8
Item 2.
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
9
are: 1) the NUWAVE Video Processor (NVP) Technology, 2) Retail Products and 3)
Digital Filtering Technology.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001
Revenues for the nine months ended September 30, 2002 were $281,000
compared to $517,000 for the nine months ended September 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 of 2001. In December 2001, we entered into a strategic alliance
with Gemini Industries ("Gemini"), a 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.
Minimum ongoing purchase requirements under the contract were to begin in July
2002. After having received a three-month extension Gemini still had not met
their minimum contractual purchase requirements and management determined it was
in the Company's best interest to terminate the agreement. We are considering
the contractual implications as well as our alternatives so as to not further
restrict our ability to sell and market our products to the retail marketplace.
As part of this effort, we have entered into a non-exclusive strategic alliance
with Unical Enterprises, Inc. for the marketing, sales and distribution of our
proprietary products as well as a full line of consumer electronics accessories,
all with access to the Sylvania brand. Cost of sales for the nine months ended
September 30, 2002 was $148,000 compared to $236,000 for the nine months ended
September 30, 2001.
During the nine months ended September 30, 2002, $591,000 was spent on
research and development activities compared to $801,000 for the same nine-month
period in 2001, a decrease of $210,000. This decrease was primarily due to the
amortization incurred during 2001 relating to development costs for the
Company's PicturePrep software product and PicturePrepClub website amounting to
$124,000 and a reduction in the use of outside consultants in 2002 amounting to
$67,000. The majority of the research and development expenditures incurred to
date during 2002 has 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 nine months ended
September 30, 2002, totaled $1,679,000 representing a decrease of $645,000
compared to the nine months ended September 30, 2001. Such decrease was the
result of decreases in marketing costs of $267,000 combined with decreases in
payroll of $115,000, professional fees of $112,000, travel of $96,000, employee
benefits of $38,000, investor relations costs of $36,000, recruiting costs of
$37,000 and bad debts expense of $28,000; these decreases were offset by an
increase in financial consulting of $83,000 primarily representing the non-cash
costs (using the Black-Scholes calculation of accounting for issuances of
options and warrants) of warrants and options issued to consultants.
10
Interest income (net of interest expense) was $2,000 for the nine
months ended September 30, 2002 as compared to $74,000 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 $2,135,000 for
the nine months ended September 30, 2002 compared to a net loss for the nine
months ended September 30, 2001, of $2,770,000.
Three Months Ended September 30, 2002 Compared to Three Months Ended
September 30, 2001
The Company had no revenues for the three months ended September 30,
2002 as compared to $445,000 for the three months ended September 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 six month period ended September 30, 2002. As indicated above,
Gemini failed to meet their contractual obligations and management has deemed it
in the Company's best interest to terminate the agreement and focus our efforts
elsewhere. For the quarter ended September 30, 2002, we had a net loss of
$566,000 compared to a net loss for the quarter ended September 30, 2001 of
$1,054,000. The loss for the quarter ended September 30, 2002 included $442,000
in general and administrative expenses, representing a decrease of $571,000
compared to the quarter ended September 30, 2001. Such decrease was primarily
the result of reduced sales and marketing costs of $237,000 combined with
decreases in professional fees of $94,000, payroll of $71,000, travel &
entertainment of $52,000, employee benefits of $38,000, investor relations costs
of $42,000, bad debt expense of $28,000 and other $9,000.
MARKETING AND SALES
Retail & Security/Surveillance Products
On July 24, 2002 we announced the introduction of (1) a line of Retail
video products and (2) Security/Surveillance image enhancement products for
applications within the growing Homeland Security market. 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 expects 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 will
allow consumers to mix multiple video sources, from popular products like DVD
Players, Satellite Receivers, Video Camcorders, and Video Game Consoles.
We have entered into a non-exclusive strategic alliance with Unical
Enterprises, Inc. for the marketing, sales and distribution of our proprietary
products as well as a full line of consumer electronics accessories with access
to the Sylvania brand. Unical Enterprises, Inc., a leading manufacturer and
distributor of Northwestern Bell Phones and the exclusive licensee of the
Sylvania name for home automation and consumer electronics accessories, recently
announced its entry into the video game accessories market. Along with video
11
game accessories we will now, with Unical's support, market a full line of
consumer electronics accessories, with access to the Sylvania brand. This line
will include products like Universal Remote Controls, Indoor TV antennas, Web
Cams, and Nuwave Enabled hookup cables. In connection with this agreement we
received a $2.85 million order for universal remote control units to be
delivered to Electronics Etc., Inc. over the next year. We initially anticipated
this order would begin shipping during the current fourth quarter but due to
product specification changes, we will begin filling this order during the first
quarter of 2003. In addition to Unical, the Company is in discussions with other
potential retail distribution customers who have seen demonstrations of our new
retail products and have expressed interest in going forward. We expect to close
some of these customers within the next few months.
The NUWAVE ENABLED Security/ Surveillance image enhancement products
includes NUWAVE's patented hardware chip technology which 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, 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. Delivery of this
order is expected to take place in December.
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 and
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. We are currently in discussions with potential customers at
12
major OEM's who have indicated their desire to incorporate our technology into
their products. We expect to close some of these customers within the next few
months.
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. In October, we
provided Sony an upgrade to this filter and they have indicated their desire to
purchase the upgrade. While these initial steps may lead to a growing
relationship between Sony Corporation and NUWAVE, there is no assurance that
such a relationship will develop.
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 2003, 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 September 30, 2002, the Company had cash and cash
equivalents of approximately $62,000, other than the $155,000 due to Cornell
Capital Partners, L.P. which will be repaid from the proceeds of puts under the
Equity Line of Credit there are 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. On August 20 and
October 9, 2002, the Company received loans from Cornell Capital totaling
$425,000. The loans were secured by advance puts under the Equity Line of
Credit. As of November 10, 2002, we have repaid $185,000 of the outstanding
balance from the proceeds of puts under the Equity Line of Credit, leaving a
current balance of $240,000, which we intend to repay at the rate of
13
approximately $15,000 per week from the proceeds of puts under the Equity Line
of Credit over the next four months. As of November 10, 2002, we have utilized
$195,000 of the Equity Line credit facility and have issued 2,261,928 shares of
common stock. In addition, the outstanding loan balance due to Cornell Capital
is secured by advance puts.
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 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.
The Company's common stock is traded 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
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have reviewed
and evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c) as of
a date within 90 days before the filing date of this quarterly report. Based
on that evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that the Company's current disclosure controls and procedures are
effective and timely, providing all material information relating to the Company
required to be disclosed in reports filed or submitted under the Exchange Act.
Changes in Internal Controls
There have not been any significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation. We are not aware of any significant
deficiencies or material weaknesses, therefore no corrective actions
were taken.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
(c) On July 3, 2002, 2,530,000 of the Company's unexpired Public
Warrants, issued in the Company's initial public offering expired.
As of November 10, 2002, under the terms of the Equity Line of
Credit Agreement, the Company had received a total of $190,000 and had issued
2,261,928 shares of common stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 99 - 906 Certificates
(b) Reports on Form 8-K
none
15
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
November 14, 2002.
NUWAVE TECHNOLOGIES, INC.
(Registrant)
DATE: November 14, 2002 By: /s/ Gerald Zarin
------------------------------------
Gerald Zarin
Chief Executive Officer and
Chairman of the Board
DATE: November 14, 2002 By: /s/ Jeremiah F. O'Brien
------------------------------------
Jeremiah F. O'Brien
Chief Financial Officer
(Principal Financial Officer)
16
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald Zarin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of NUWAVE
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Gerald Zarin
-------------------------------------
Gerald Zarin
Chairman of the Board, President, and
Chief Executive Officer
17
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeremiah F. O'Brien, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of NUWAVE
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/Jeremiah F. O'Brien
-------------------------------------
Jeremiah F. O'Brien
Vice President and Chief Financial
Officer
18