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As filed with the Securities and Exchange Commission on October 1, 1996
Registration Statement No. 333-12485
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WAVEPHORE, INC.
(Exact name of registrant as specified in its charter)
Indiana 86-0491428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3311 North 44th Street
Phoenix, Arizona 85018
(602) 952-5500
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
---------------------------
David E. Deeds, Chief Executive Officer
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
(602) 952-5500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------------
Copy to:
Douglas J. Reich, Esq.
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
(602) 952-5500
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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Pursuant to Rule 429 under the Securities Act of 1933, as amended, this
Registration Statement contains a combined prospectus relating to the
registration of 1,500,000 common shares, no par value (the "Common Shares"), of
the Company registered hereby and (i) 3,335,000 Common Shares, (ii) 165,000
warrants to purchase Common Shares, and (iii) 165,000 Common Shares issuable
upon exercise of the warrants registered on February 8, 1996 pursuant to
Registration Statement No. 333-1198, of which 68,000 Common Shares, 165,000
Warrants, and 165,000 Common Shares issuable upon exercise of the Warrants
(collectively, the "Remaining Securities") remain available for issuance
thereunder. A filing fee of $17,708.00 was paid in connection with Registration
Statement No. 333-1198 of which $1,373.00 was attributable to the Remaining
Securities that remain subject to such Registration Statement.
The Registrant hereby amends this Registration Statement on such 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 of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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SUBJECT TO COMPLETION, DATED OCTOBER 1, 1996
PROSPECTUS
1,733,00 COMMON SHARES
165,000 WARRANTS
WAVEPHORE, INC.
All of the Common Shares and Warrants (collectively, the "Securities")
offered hereby (the "Offering") are being sold by certain Selling Security
Holders (the "Selling Security Holders") of WavePhore, Inc. ("WavePhore" or the
"Company"). The number of Common Shares offered hereby includes such presently
indeterminate number of Common Shares as may be issued on conversion of the
Series A and Series B Convertible Preferred Shares (collectively, the "Preferred
Shares") pursuant to the provisions thereof regarding determination of the
applicable conversion price. The Warrants and 165,000 Common Shares purchasable
upon exercise of the Warrants are being offered by the holders of the
Representatives' Warrants (the "Warrants") previously sold by the Company
pursuant to the Underwriting Agreement relating to its initial public offering
in October, 1994. See "Selling Security Holders." The Company will not receive
any of the proceeds from the sale of Common Shares or Warrants by the Selling
Security Holders.
The Common Shares registered for resale hereby have been registered
pursuant to the Company's obligations contained in written agreements with
certain of the Selling Securityholders. The Selling Securityholders may elect to
sell all, a portion or none of the Common Shares offered by them hereunder.
The Common Shares are traded on the Nasdaq National Market ("Nasdaq")
under the symbol "WAVO." On September 27, 1996, the last reported sales price of
the Common Shares, as reported by Nasdaq, was $11.31 per share. If such market
price of the Common Shares were used to determine the number of Common Shares
issuable upon conversion of the Series A and Series B Convertible Preferred
Shares, the Company would be obligated to issue a total of approximately
1,389,000 Common Shares if all 490,558 Series A and Series B Convertible
Preferred Shares outstanding on such date were to be converted. On September 27,
1996, the Company had outstanding (i) 490,558 Series A Preferred Shares, which
are convertible into an indeterminable number of Common Shares and (ii) Warrants
to purchase 64,595 Series B Convertible Preferred Shares, which are convertible
into an indeterminable number of Common Shares.
The Common Shares may be sold by the Selling Security Holders from time
to time, in ordinary brokers' transactions through Nasdaq at the price
prevailing at the time of such sales. The Commission payable will be the regular
commission a broker receives for effecting such sales. The Common Shares may
also be offered in block trades, private transactions, or otherwise. The net
proceeds to the Selling Security Holders will be the proceeds received by them
upon such sales, less brokerage commissions. No market presently exists for the
Warrants and there can be no assurance that any such market will develop in the
future. All expenses of registration incurred in connection with this Offering
are being borne by the Company, but the Selling Security Holders will pay any
brokerage and other expenses of sale incurred by them. There can be no assurance
that the Selling Security Holders will sell any or all of the Common Shares or
Warrants registered hereunder.
SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
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EACH SELLING SECURITYHOLDER AND ANY BROKER EXECUTING SELLING ORDERS ON BEHALF OF
THE SELLING SECURITYHOLDERS MAY BE DEEMED TO BE AN "UNDERWRITER" WITHIN THE
MEANING OF THE SECURITIES ACT. COMMISSIONS RECEIVED BY ANY SUCH BROKER MAY BE
DEEMED TO BE UNDERWRITING COMMISSIONS UNDER THE SECURITIES ACT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER ___, 1996
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy, and information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission. The Company's
Common Shares are listed on Nasdaq and similar information can be inspected and
copied at the offices of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement (the
"Registration Statement") with respect to the Common Shares offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information contained in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
Common Shares offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Statements contained herein concerning the
provisions of any documents filed as an exhibit to the Registration Statement or
otherwise filed with the Commission are not necessarily complete and, in each
instance, reference is made to the copy of such document as so filed. Each such
statement is qualified in its entirety by such reference.
No person is authorized to give any information or make any
representation other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with the
Commission and are hereby incorporated by reference into this Prospectus: (1)
Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (2)
Quarterly Report on Form 10-Q for the quarters ended March 31, 1996 and June 30,
1996; (3) the Proxy Statement for the 1996 Annual Meeting of Securityholders;
(4) Current Report on Form 8-K dated December 27, 1995 (as amended by Form 8-K/A
filed on March 11, 1996); (5) Schedule 13E-4 Issuer Tender Offer Statement dated
September 25, 1996; and (6) Description of Capital Stock contained in the
Company's registration statement on Form 8-A, including all amendments or
reports filed for the purpose of updating such description. All other documents
and reports filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
this Offering shall be deemed to be incorporated by reference in this Prospectus
and to be made a part hereof from the date of the filing of such reports and
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
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The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all documents incorporated herein by
reference (not including the exhibits to such documents, unless such exhibits
are specifically incorporated by reference in the document which this Prospectus
incorporates). Requests for such documents should be directed to Kenneth D.
Swenson, Chief Financial Officer, WavePhore, Inc., 3311 North 44th Street,
Phoenix, Arizona 85018; telephone (602) 952-5500.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including all documents incorporated by reference,
includes "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. All statements other than
statements of historical facts included in this Prospectus (and in documents
incorporated by reference), including without limitation, statements under "The
Company," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" regarding the Company's
financial position, business strategy and plans and objectives of management of
the Company for future operations, are forward-looking statements. Although the
Company believes that the expectations reflected in such forward- looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's expectations are disclosed under "Risk
Factors" and elsewhere in this Prospectus, including without limitation in
conjunction with the forward-looking statements included in this Prospectus. 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 this section.
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THE COMPANY
WavePhore, Inc., including its wholly-owned subsidiaries WavePhore
Canada, Inc. ("WavePhore Canada"), WavePhore Networks, Inc. ("WavePhore
Networks") and WavePhore Japan, K.K. ("WavePhore Japan") (collectively,
"WavePhore" or the "Company"), is a developer and provider of proprietary
products and services for low-cost, high-speed, wireless data broadcasting
systems for distributing digital data via the existing worldwide television,
radio and satellite broadcast infrastructures. The Company believes that it is
the leading operator worldwide of broadcasting networks, and the only fully
integrated multimedia, datacasting services company in the world. The Company's
proprietary technologies for broadcast and reception, application software,
content, and network services provide its customers with low-cost, highly
reliable delivery of electronic information.
The Company is a leading supplier of wireless data broadcasting network
services and equipment for information providers ("IPs"), including vendors of
financial data, news, and other services, such as Reuters America, Inc.
("Reuters"), Dow Jones & Company, Inc. ("Dow Jones"), the Associated Press,
Knight-Ridder, Inc., and Thompson Financial Services, the provider of First
Call(R). The Company believes it is the only company that provides wireless data
broadcasting services to the majority of the leading IPs in North America. The
Company provides IPs with multiple private and shared broadcast delivery options
for distribution of time-sensitive information. Its turnkey, reliable,
cost-effective solutions include FM sub-carrier, Vertical Blanking Interval
("VBI"), television in-band, and VSAT Satellite technologies.
The Company operates high quality wireless data delivery networks for
numerous IPs via its FM subcarrier and small dish satellite data broadcasting
networks. The networks utilize established broadcast technologies, and is
particularly suited to the economical one-way transmission of data from one
central location to many remote sites. The Company's FM subcarrier transmission
operations are established in 14 major United States markets which, combined
with the Company's small dish satellite coverage, enables the Company to serve
all of the continental United States and the major population centers in Canada.
In addition, the Company sells and rents sophisticated data receivers to IPs for
use with the Company's network. The Company also markets and sells in the U.S.
and Canada commercial data broadcasting network services through exclusive
long-term agreements with radio and television broadcasters, including the
Canadian Broadcasting Corporation ("CBC") in Canada.
The Company sells advanced data receivers and network management
systems which employ FM subcarrier, Ku-band, C-band and single channel per
carrier satellite transmission to companies which operate private networks to
disseminate information or audio programming to numerous remote locations. These
companies include Novanet Communications (Canada), SkyTel Corp., AEI Music
Network, Inc., Reuters, Muzak, 3M and WSI Weather.
The Company has designed and produced VBI hardware, including encoders,
decoders and bridges, and has developed various software packages for data
transmission and reception, including a datacasting network management server.
Certain of the Company's VBI technology has been licensed to Intel Corporation
("Intel") by the Company and is now a part of the Intercast(R) Standard which
has been developed by Intel. Products made by industry suppliers utilizing the
Intercast Standard are expected to be available in the second half of 1996.
The Company's TVT1/4 data broadcasting system transmits digital data,
inserted into analog television signals, at approximately 300,000 bits per
second ("bps"), which is up to approximately 10 times faster than conventional
consumer telephone modems currently in use. The TVT1/4 product consists of an
encoder, installed at the television broadcasting site, and decoders placed at
data reception sites within the reach of the broadcast signal.
The Company intends to establish its wireless data broadcasting systems
as an integral part of an emerging, worldwide data broadcast industry. The
Company believes that its wireless data broadcasting systems are
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particularly suited for those international markets which have underdeveloped
wired telecommunications infrastructures.
The Company's Newscast service allows users to create customer
information profiles and have news and information matching those profiles
electronically "clipped" from over 400 services and delivered continuously to
the users' personal computers. The Newscast service, which incorporates hardware
and software, enables end-users to continuously filter real time news from IPs
and allows easy integration of this flow of information into an organization's
local area network or electronic mail system for delivery to persons who need
timely access to such information. The Company offers versions of the Newscast
product for Microsoft Windows(R) and Apple Macintosh(R) operating systems.
On January 25, 1995, the Company purchased all of the outstanding
common stock of BleuMont Telecom Inc. ("BleuMont Telecom") of Montreal, Canada,
in consideration for $284,831 (including direct acquisition costs of $148,699)
and 244,626 Common Shares, which were valued at a total of approximately
$1,135,000 as of January 25, 1995. As a result of this transaction, BleuMont
Telecom became a wholly-owned subsidiary of the Company. Subsequent to this
acquisition, the Company caused BleuMont Telecom to change its name to WavePhore
Canada, Inc.
In December, 1995 and January, 1996, the Company completed a private
placement of shares of its Series A and Series B Convertible Preferred Shares to
institutional and other accredited investors which resulted in gross proceeds to
the Company of $33,500,000, less commissions of $2,512,500 and other offering
expenses estimated to total approximately $129,000.
On December 29, 1995, the Company purchased all of the outstanding
common stock of Mainstream Data, Inc. ("Mainstream") of Salt Lake City, Utah, in
consideration for $20,000,000 in cash and 747,029 Common Shares, which were
valued at a total of approximately $9,400,000 as of December 29, 1995. In
addition, the Company incurred costs of approximately $100,000 in connection
with such acquisition. As a result of this transaction, Mainstream became a
wholly-owned subsidiary of the Company. Subsequent to this acquisition, the
Company caused Mainstream to change its name to WavePhore Networks, Inc.
On September 18, 1996, certain of the Series B Convertible Preferred
Warrant Holders exercised 72,005 Warrants, at an aggregate exercise price of
approximately $1.8 million, into 72,005 Series B Preferred Shares which were
immediately converted into Common Shares.
On September 25, 1996, the Company filed a Schedule 13E-4 Issuer Tender
Offer Statement with the Commission relating to consents being sought by the
Company from the holders of its outstanding Preferred Shares and warrants to
purchase Series B Preferred Shares (the "Series B Warrants") with respect to a
proposed 180 day non-conversion period for the Preferred Shares and certain
requested revisions to the terms of the Preferred Shares, including revisions to
the conversion price for the Preferred Shares, and to agreements under which the
Series B Warrants and Preferred Shares were issued. Consenting holders of
Preferred Shares will be entitled to receive a warrant to purchase up to two
Common Shares for each Preferred Share held by such holder at the price of $7.00
per share, subject to adjustment in certain circumstances and certain other
conditions. The solicitation expires at 5:00 p.m., Arizona time, on October 21,
1996, and is subject to certain conditions, including without limitation the
receipt by the Company of (i) consents of at least 75% of the shares of each of
the Series A Preferred and Series B Preferred, and (ii) consents of all of the
holders of Series B Warrants, unless the Company elects to accept a lesser
approval percentage.
On September 27, 1996, the Company issued 500,000 Common Shares to
Intel Corporation for aggregate consideration of $4,000,000 and cancellation
of a Stock Purchase Warrant dated May 5, 1995, pursuant to a Stock Purchase
Agreement dated as of September 13, 1996.
The Company is an Indiana corporation formed on November 13, 1990.
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RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the factors discussed below in
evaluating the Company and its business before purchasing any of the Common
Shares offered hereby. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward- looking statements as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in this Prospectus. See "Disclosure Regarding
Forward-Looking Statements."
LIMITED OPERATING HISTORY; LACK OF PROFITABILITY
The Company was organized in November 1990 as the successor to an
Arizona corporation formed in 1983. Prior to the acquisition of Mainstream in
December, 1995, the Company had very limited revenues from operations and had
incurred significant losses and substantially negative operating cash flow.
Since the acquisition of Mainstream, the Company's revenues have increased
significantly, however, the Company has continued to incur losses and negative
cash flow.
RAPID TECHNOLOGICAL CHANGE AND FREQUENT NEW PRODUCT INTRODUCTIONS
The market for the Company's products and services is characterized by
rapid technological change and frequent new product introductions. The Company
believes that its future success depends upon its ability to develop and market
products and services which incorporate new technologies, and to enhance and
expand its existing product lines. The Company will need to spend significant
amounts of capital to develop and enhance its products and services to meet
technological changes. There can be no assurance that the Company (i) can
develop or market new products or services successfully, (ii) can respond
effectively to technological changes or new product announcements by its
competitors, or (iii) will have sufficient capital when required to implement
such strategies.
The Company is continuing its development of certain of its analog
television data broadcasting products. To date, there have been limited sales of
such products. There can be no assurance (i) that the Company will be successful
in commercially developing such products, (ii) that third party manufacturers of
personal computers, set top boxes, facsimile machines and other consumer
electronic products will be willing to incorporate the Company's technology into
their products, or (iii) that such technology and products will achieve
significant market acceptance.
The success of the Company's analog television data broadcasting
products will depend upon the continued use of the analog television broadcast
signal. The replacement of the analog television broadcast signal by a digital
television broadcast signal as the standard medium of television transmission
could materially adversely affect the Company's analog television data
broadcasting products. In this regard, so-called high definition television
("HDTV") is expected to eventually enable television broadcasters to transmit
non-programming related digital data at high speeds to a mass audience. HDTV
involves a digital television signal which is incompatible with the Company's
analog TVT1/4 technology. However, if and when implemented, HDTV will use a
separate bandwidth allocated by the FCC, and other regulatory authorities in
other markets, which would be non-interfering with the bandwidth currently used
for the analog broadcast infrastructure. Further, since development and
deployment of an HDTV system will involve the re-equipping of the television
industry with new transmitters and millions of homes with new receivers, the
development of a new broadcast infrastructure and the development of a
technology standard, the Company believes that the widespread acceptance and
deployment of HDTV will not occur in the United States and other worldwide
markets for several years. The Company also believes that the current analog
infrastructure may continue to be used for several years beyond HDTV's initial
introduction in the United States market, with similar transition periods in
other markets. Accordingly, HDTV may not be an
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immediate threat to the successful deployment of the Company's TVT1/4 technology
in a worldwide market; however, it may become a competing technology in the
future.
AGGRESSIVE COMPETITION
The Company has aggressive competitors in the data broadcasting and
electronic information access and processing businesses. The Company's sales and
potential profitability will be affected by competition from other businesses,
including established firms with greater financial and technical resources and
more experience in data broadcasting and information distribution than the
Company. The Company is aware of numerous competitors which provide products and
services similar to those offered by the Company, including, among others, the
regional Bell operating companies, AP SatNet and Data Broadcasting Corporation
in the data broadcasting business, dial-up services such as Reed Elsevier,
Inc.'s LEXIS(R)/NEXIS(R), Desktop Data, Inc., Point Cast Incorporated and
Individual, Inc. in the electronic information access and processing business,
and Wegener Communications, Comstream Corporation, International Datacasting
Corporation and Scientific-Atlanta, Inc. in the equipment sales business. In
addition, with the rapid expansion of the Internet, numerous companies provide
access to or deliver similar products via this on-line facility. Additional
competitors may enter the market as demand for the Company's products and
services expands. The Company's sales and marketing efforts will be critical as
the Company continues to face competition in the marketplace. The Company does
not offer two-way, interactive communications products or services, and the
Company could face a potential competitive disadvantage in the event that
two-way systems are developed and offered at prices lower than the Company's
broadcast systems. There can be no assurance that the Company will, in the
future, (i) be able to provide the technological enhancements and new products
necessary to maintain its competitive position, or (ii) have the financial
resources to make the required investments in sales, marketing, engineering, and
research and development necessary to sustain a competitive position for its
products and services. The Company's financial condition and results of
operations may be affected adversely by the actions of existing or future
competitors, including the development of new technologies, the introduction of
new products and the reduction of prices to gain or retain market share.
GOVERNMENT REGULATION
In the United States, broadcast transmissions are subject to regulation
by the Federal Communications Commission ("FCC"). In June, 1996, the FCC, acting
upon a petition submitted by the Company, ruled that television broadcast
licensees may, without prior FCC authorization, use the Company's TVT1/4
technology to broadcast digital data within the video portion of the National
Television Standards Committee ("NTSC") television broadcast signal of the type
currently transmitted by FCC licensees. In adopting this amendment to its rules,
the FCC stated that allowing television broadcast licensees to use this
technology, among others, to insert digital data into the video portion of the
television signal will allow licensees to provide a wide variety of ancillary
services, which the FCC expects will expand the products and services available
to businesses and consumers within a television service area. However, there is
no assurance that any television networks or television stations will utilize
the Company's TVT1/4 technology to broadcast digital data.
The FCC authorizes FM station licensees to utilize subcarriers within
the FM baseband signal for specified purposes including data broadcasting. The
Company has entered into contracts with certain FM licensees to lease their
subcarriers to broadcast data. The Company is not currently required to hold an
FCC license to act as a private carrier to use FM subcarrier channels. An FM
license is granted for a period of seven years and may be renewed by the FCC for
like terms. Although there can be no assurance that the licenses for the FM
stations used by the Company will be renewed, the Company believes that adequate
alternative FM stations would be available for use by the Company. The Company
currently holds an FCC license for a satellite uplink in Salt Lake City, Utah.
The Company's license is subject to renewal, and there can be no assurance that
its license will be renewed
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upon the expiration of its term on October 23, 2002. Any such license may be
revoked for cause. Future changes in regulations affecting allocation of the
spectrum for services which compete with the Company's services could also
adversely affect the Company's business, including spectrum allocations
currently under consideration by the FCC.
DIFFICULTIES IN MANAGING GROWTH AND EXPANSION, AND RISKS OF FUTURE ACQUISITIONS
The Company has experienced significant growth, primarily through two
acquisitions in 1995 and anticipates continuing expansion of its operations and
business. The management of such growth will require an expansion and
integration of the Company's management and financial controls, as well as a
corresponding increase in the Company's quality control, delivery, and service
capabilities, and could place significant strain on the Company's resources.
There can be no assurance that the Company will be able to increase these
capabilities effectively or do so in a timely manner. In addition, in order to
accommodate this planned growth, it is expected that the Company's operating
expenses will increase; there can be no assurance that revenues will increase as
rapidly and operating results may therefore be adversely affected. Future
acquisitions by the Company may result in potentially dilutive issuances of
equity securities, the incurrence of additional debt, and amortization of
expenses related to goodwill and intangible assets that could adversely affect
the Company's profitability. In addition, acquisitions involve numerous risks,
including difficulties in the assimilation of the operations and products of the
acquired company, the diversion of management's attention from other business
concerns, risks of entering markets in which the Company has no or limited
direct prior experience, and the potential loss of key employees of the acquired
companies.
DEPENDENCE ON SENIOR MANAGEMENT AND KEY EMPLOYEES
The Company's success depends to a significant extent upon the
performance of its executive officers and other key personnel. The loss of the
services of any of its executive officers or other key employees could have a
material adverse affect on the Company. The Company has not entered into
employment agreements with any of its senior executive officers and is not the
beneficiary of life insurance on any of them. Although the Company has
agreements with certain members of management not to compete with the Company,
there can be no assurance that such agreements will be enforceable or effective
in retaining such management persons. In addition, there can be no assurance
that the Company will be successful in attracting and retaining qualified
personnel.
DEPENDENCE UPON STRATEGIC ALLIANCES OR RELATIONSHIPS
The Company's future success may, in part, depend upon its ability to
develop strategic alliances or relationships with one or more IPs, personal
computer and computer chip manufacturers, television networks, consumer
electronic manufacturers, software developers, and sales and marketing partners.
Through such relationships, the Company may seek to develop additional
commercial opportunities in the data broadcasting industry, including the
deployment of encoders and decoders, applications and device driver software,
network operations, and widespread demand for high-speed data broadcasting. The
Company may be dependent on the subsequent success of such third parties to
commercialize such products. There can be no assurance that the Company will be
able to develop strategic relationships, or that any strategic partner will
contractually commit to utilize the Company's products or technology. The
inability of the Company to develop and maintain strategic relationships could
have a material adverse affect on the Company's business. In addition, there can
be no assurance that the Company's collaborators will not pursue alternative
technologies or develop alternative products either on their own or in
collaboration with others, including the Company's competitors. The Company may
seek to enter into arrangements with third parties for foreign commercialization
of its products and services. The Company's ability to address markets outside
the United States may depend in large part on its ability to enter into
collaborative arrangements with such third parties. To the extent that the
Company enters into collaborative
8
<PAGE> 12
relationships with third parties, whether for territories outside the United
States or otherwise, the success of the Company's products and services that are
subject to such relationships may depend in large part on the efforts and
commitment of such collaborative partners. The Company has limited experience in
business operations outside the United States and Canada, and there can be no
assurance that the Company will be able to compete successfully in international
markets. International operations and sales are also subject to political and
economic risks, including political instability, currency controls, exchange
rate fluctuations, and changes in import/export regulations, any of which could
have a material adverse effect on the Company.
DEPENDENCE ON SUPPLIERS
Certain critical components used in the Company's products, including
microprocessors, Flash EPROMs, SCPC demodulator assemblies, and L-Band tuners,
are each currently available only from sole sources, while certain other
components are available from only a limited number of sources. Although to date
the Company has been able to obtain adequate supplies of these components, the
Company's inability in the future to obtain sufficient sole- or limited-source
components or to develop alternative sources could result in delays in product
introductions or shipments, which could have a material adverse affect on the
Company's operating results. In addition, the Company has elected to obtain
certain components, electronic component kitting, manufacture, assembly and test
of printed circuit boards, manufacture enclosures, and assembly of mechanical
components from single sources. The Company generally obtains these sources on a
purchase order basis and does not have long-term contracts with these suppliers
or subcontractors. Although the Company believes that other qualified
subcontractors are available, the inability of any of these suppliers or
subcontractors to provide these services to the Company on a timely basis could
materially adversely affect the Company's operations.
PATENTS AND PROPRIETARY RIGHTS
The success of the Company will be dependent upon its ability to
protect its intellectual property and maintain the proprietary nature of its
technology, through a combination of patents, licenses and other intellectual
property arrangements. There can be no assurance as to the range or degree of
protection which the Company's existing patents and any future patents which may
be issued to the Company will afford, that such patents will provide any
competitive advantages for the Company, or that others will not obtain patents
similar to any patents issued to the Company. There can be no assurance that any
patents issued to the Company will not be challenged by third parties,
invalidated, rendered unenforceable or designed around. Further, there can be no
assurance that any pending patent applications or future applications will
result in the issuance of any patents to the Company. There can be no assurance
that the Company will be successful in protecting its proprietary rights. Since
patent applications in the United States are maintained in secrecy until patents
issue, and since publication of inventions in technical or patent literature
tends to lag behind actual discoveries, there can be no assurance that others
will not obtain patents for technology that the Company's technology will
infringe, and that technology would need to be designed around or licensed from
the inventor by the Company. If the Company deems it necessary to license
technology to avoid infringement, there can be no assurance that such licenses
will be available on terms that the Company considers to be favorable. No
assurance can be given that the Company's technology will not infringe patents
or proprietary rights of others, nor that the Company can obtain licenses to use
such proprietary rights if necessary. In addition, there can be no assurance
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technology. Further,
the laws of certain countries in which the Company's products may be sold or
licensed may not protect the Company's products and intellectual property rights
to the same extent as the laws of the United States. Any litigation to determine
the validity of any third party claims could result in significant expense to
the Company, adversely affect operating results, and divert the efforts of the
Company's technical and management personnel, whether or not such litigation is
resolved in favor of the Company. Although the Company is not aware of any
pending or threatened litigation involving such matters as of the date of this
Prospectus, in the event of an adverse result in
9
<PAGE> 13
any such litigation, the Company could be required to expend significant
resources to develop non-infringing technology or obtain licenses to the
disputed technology. There can be no assurance that the Company would be
successful in such development or that any such licenses would be available on
commercially reasonable terms.
The Company's products, services and technology also incorporate
subject matter that the Company believes is in the public domain and subject
matter that is licensed to the Company or that it otherwise has the right to
use. There can be no assurance, however, that third parties will not assert
patent or other intellectual property infringement claims against the Company
with respect to its products, services, technology or other matters. There may
be patents and other intellectual property relevant to the Company's products,
services and technology which are not known to the Company and which are owned
by third parties.
The Company has conducted a legal review of two United States patents
owned by third parties and of certain prior art. One of the patents may have
claims which cover certain of the Company's technology. The Company does not
believe that it infringes any valid claims of these patents and the Company
believes that it has valid defenses if any claim of infringement is asserted
against the Company.
QUARTERLY RESULTS AND SEASONALITY
The Company has experienced quarterly fluctuations in operating results
and expects that such fluctuations will continue. These fluctuations have been
caused by various factors, including the timing of significant orders from major
customers and the timing of shipments. In addition, the Company's operating
results may be influenced by seasonality, which typically results in increased
revenue in the fourth quarter related to equipment sales. Because of these
factors, the Company expects that its future quarterly results of operations
will continue to be subject to significant fluctuations. These factors could
also affect significantly annual results of operations.
DEPENDENCE ON A RELATIVELY SMALL NUMBER OF CUSTOMERS
The Company's current customers include the world's leading providers
of financial information, general and industry-specific business news, and
business music. These customers utilize the Company's network services and
hardware products to distribute their products to end-users. A relatively small
group of these customers is responsible for a significant percentage of the
Company's revenue. Although the Company believes that its current relationships
with its customers are good, the loss of one or more of its major customers
could have a material adverse affect on the Company.
CONCENTRATION OF FACILITIES; RISK OF NETWORK DISRUPTION
The Company's business depends in significant part on its Network
Control Center in Salt Lake City, Utah, and access to shared satellite uplink
facilities in Raleigh, North Carolina and Chicago, Illinois. While the Company
does not currently maintain an off-site backup facility for its network control
center, it is in the process of arranging for an off-site backup facility for
critical network operations. Damage to or destruction of any of these facilities
would seriously disrupt the Company's operations and could materially and
adversely affect the Company's profitability.
CONTROL BY EXISTING SHAREHOLDERS
As of September 27, 1996, the current officers and directors of the
Company owned approximately 35% of the outstanding Common Shares of the Company.
Certain of such shareholders also hold stock options to purchase additional
Common Shares and hold Preferred Shares convertible into Common Shares, the
exercise or conversion of which would increase their percentage ownership of the
Company. Accordingly, the officers and
10
<PAGE> 14
directors, acting as a group, will likely be able to elect all of the Company's
directors and to determine corporate actions requiring shareholder approval. The
continuing control by such shareholders could have the effect of delaying or
preventing a change in control of the Company. See "Anti-Takeover Provisions."
VOLATILE COMMON SHARES PRICE
The market price of the Common Shares, like that of the common stock of
many other technology companies, has been highly volatile. Factors such as
announcements of technological innovations by the Company or its competitors,
governmental regulation, industry legislation, developments in patent or other
proprietary rights of the Company or its competitors, including litigation,
fluctuations in the Company's operating results, analyst reports and market
conditions for technology stocks in general, could have a significant impact on
the future price of the Common Shares. The stock market has from time to time
experienced extreme price and volume fluctuations that have particularly
affected the market price for many technology companies for reasons frequently
unrelated to the operating performance of the companies affected. The market
price for the Company's Common Shares could also be adversely affected by the
Common Shares which may be sold into the market pursuant to the registration
statement of which this Prospectus is a part and other registration statements
which the Company has filed or may be obligated to file for the sale of
additional Common Shares in the future.
DILUTION
Certain events, including the issuance of additional Common Shares upon
the exercise or conversion of outstanding options, warrants and preferred shares
of the Company, could result in substantial dilution of the Common Shares. The
Series A and Series B Preferred Shares are convertible into Common Shares of the
Company at a ratio based, in part, upon the daily low trading prices of such
Common Shares during the three consecutive trading days immediately preceding
the date of conversion, reduced by an applicable percentage as set forth in the
respective designations of the Series A and Series B Preferred Shares. Because
the applicable conversion price, and thus the number of Common Shares which may
be issued upon conversion, are dependent upon presently unknown future market
prices for the Common Shares, the number of Common Shares to be issued upon
conversion is not presently determinable. If the closing prices of $20.50 and
$11.31 per share for the Company's Common Shares on December 31, 1995 and
September 27, 1996, respectively, were utilized for the purpose of calculating
the conversion price of the Series A and Series B Preferred Shares, the
Company would be obligated to issue approximately 766,000 and 1,389,000 Common
Shares, respectively, if all of Series A and Series B Preferred Shares
outstanding on September 27, 1996 were converted at the conversion price
determined thereby. The issuance of such amount of Common Shares, additional
Common Shares issuable upon conversion of a total of 64,595 Series B Preferred
Shares underlying certain warrants, and the potential "overhang" of such shares
on the market, could adversely affect the prevailing market price of the
Company's Common Shares.
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation contain certain provisions that
could have the affect of delaying, deferring or preventing a change in control
of the Company. In addition, certain provisions of the Indiana Business
Corporation Law restrict business combinations with any "interested shareholder"
as defined in such law. These provisions may discourage, delay or prevent
certain types of transactions involving actual or potential change in control of
the Company, including transactions in which the shareholders might otherwise
receive a premium for their Common Shares over then-current market prices, and
may limit the ability of the Company's shareholders to approve transactions
which they may deem to be in their best interests. These provisions may have the
affect of delaying or preventing a change in control of the Company without
action by the shareholders, and therefore could adversely affect the price of
the Company's Common Shares.
11
<PAGE> 15
The Company's board of directors has the authority to issue a total of
up to 10,000,000 Preferred Shares and to fix the rates, preferences, privileges,
and restrictions, including voting rights, of such Preferred Shares, without any
further vote or action by the shareholders. The rights of the holders of the
Common Shares will be subject to, and may be adversely affected by, the rights
of the holders of the Preferred Shares that have been issued, or might be issued
in the future. The issuance of Preferred Shares, while providing desired
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company, thereby
delaying, deferring, or preventing a change in control of the Company.
Furthermore, holders of such Preferred Shares may have other rights, including
economic rights senior to the Common Shares, and, as a result, the existence and
issuance thereof could have a material adverse affect on the market value of the
Common Shares. The Company has in the past issued, and may from time to time in
the future issue, Preferred Shares for financing or other purposes with rights,
preferences, or privileges senior to the Common Shares.
SHARES ELIGIBLE FOR FUTURE SALE
As of September 27, 1996, the Company had 16,108,893 Common Shares
outstanding, all of which were eligible for trading on Nasdaq. Future sales of
such Common Shares and additional presently indeterminate Common Shares which
may be issued by the Company in the future, including the Common Shares offered
by this Prospectus and Common Shares subject to outstanding options, warrants
and conversion rights, could adversely affect the prevailing market price of the
Common Shares.
The Company has granted registration rights to certain other holders of
the Company's Common Shares. In addition, the Company may from time to time
issue additional Common Shares or securities exercisable for or convertible
into Common Shares to finance the expansion of its business, for acquisitions,
or for other corporate purposes.
NO DIVIDENDS
The Company has not paid any dividends on its Common Shares, and does
not plan to pay dividends on its Common Shares for the foreseeable future. In
addition, the provisions of certain series of its Preferred Shares prohibit the
payment of dividends on the Common Shares under certain circumstances.
USE OF PROCEEDS
The Selling Securityholders will receive all of the proceeds and the
Company will not receive any of the proceeds from the sale of Common Shares
offered hereby. However, if all of the outstanding Representative Warrants and
Series B Warrants were exercised, the Company would receive gross proceeds of
$2,994,750 and $1,614,875, respectively, which proceeds the Company expects to
use for general corporate purposes.
12
<PAGE> 16
SELLING SECURITYHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Shares and Representatives' Warrants of the
Company as of September 27, 1996, and as adjusted to reflect the sale of
securities offered hereby, by the Selling Security Holders. Except as otherwise
indicated, to the knowledge of the Company, all persons listed below have sole
voting and investment power with respect to their securities, except to the
extent that authority is shared by spouses under applicable law or as otherwise
noted below.
<TABLE>
<CAPTION>
Common Shares Common Shares
Beneficially Common Shares Beneficially
Owned Prior to to be Sold Owned After
Name of the Offering(1) in the Offering(1) the Offering
Selling Shareholder Number Percent Number Number Percent
- ------------------- -------------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Kyneton Investments Ltd. 419,595 2.4% 419,595 0 0
Barry Meisel 5,822 * 5,822 0 0
Theodore Meisel 11,645 * 11,645 0 0
The & Trust 5,662 * 5,662 0 0
Chestnut Pacific Limited
Partnership 7,406 * 7,406 0 0
Standard Global Equity
Partners, LP 12,739 * 12,739 0 0
Standard Pacific Capital
Offshore Fund, Ltd. 10,380 * 10,380 0 0
Scorpion Offshore Investment
Fund, Ltd. 71,702 * 71,702 0 0
Daniel S. Martin 7,331 * 7,331 0 0
Michael Angelo, LP 53,745 * 53,745 0 0
Raphael, LP 80,785 * 80,785 0 0
AG Super Fund International
Partners, LP 146,022 * 146,022 0 0
GAM Arbitrage, Inc. 169,603 1.0 169,603 0 0
Angelo, Gordon & Coe, LP 129,407 * 129,407 0 0
AG Super Fund, LP 127,756 * 127,756 0 0
AG ARB Partners, LP 127,197 * 127,197 0 0
Olympus Securities, Ltd. 242,761 1.4 242,761 0 0
Nelson Partners 450,388 2.5 450,388 0 0
LaRocque Trading Group, LLC 162,365 * 162,365 0 0
Kessler Asher Group Limited
Partnership 71,228 * 71,228 0 0
KA Trading, LP 39,898 * 39,898 0 0
Ronald H. Means 11,645 * 11,645 0 0
LICAP Partners 63,670 * 63,670 0 0
Everest Capital International,
Ltd. 183,039 1.0 183,039 0 0
Everest Capital Fund, LP 138,016 * 138,016 0 0
Silverton International Fund
Limited 685,573 3.9 685,573 0 0
</TABLE>
13
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C> <C>
Palladin Partners, LLP 217,748 1.2 217,748 0 0
Richard Friedman 34,683 * 34,683 0 0
Gildor Trading, Inc. 25,381 * 25,381 0 0
Bulldog Capital Partners L.P. 2,772 * 2,772 0 0
Andromeda Corp. N.V. 139,597 * 139,597 0 0
Steven A. Amos 29,019 * 29,019 0 0
Gracechurch & Co. 80,166 * 80,166 0 0
Concordia Partners, L.P. 179,272 * 179,272 0 0
The Common Fund 9,755 * 9,755 0 0
Emeritaatsfonds Gereformeerde
Kerken in Nederland 144,837 * 144,837 0 0
The Gifford Fund, Ltd. 44,366 * 44,366 0 0
Q Investments, L.P. 63,244 * 63,244 0 0
Amalgamated Gadget, L.P. 63,244 * 63,244 0 0
Cappello Capital Corp. 465,253 2.6 465,253 0 0
RAF Financial Corporation 63,467 * 63,467 0 0
Robert L. Long 63,467 * 63,467 0 0
Donald & Co. Securities Inc. 38,066 * 38,066 0 0
Index Special Situations
Fund, Ltd. 193,586 1.1 193,586 0 0
JMG Capital Partners, LP 73,610 * 73,610 0 0
Global Bermunda Limited
Partnership 240,256 1.4 240,256 0 0
Lakeshore International, Ltd. 29,114 * 29,114 0 0
Nicollet Fund Limited
Partnership 67,333 * 67,333 0 0
</TABLE>
- -----------------------
* Less than one percent.
(1) Includes such number of Common Shares issued and estimated to be
issuable upon conversion of the Series A and Series B Convertible
Preferred Shares, assuming the market price of $11.31 per share of
Common Shares on September 27, 1996 were used to determine the Common
Shares issuable on such conversion. The actual number of such Common
Shares may be greater or lesser than the indicated amount as a result
of the application of the conversion provisions at the actual date of
conversion. The Series A and Series B Shares were purchased by the
Selling Security Holders in a private placement by the Company in
December, 1995 and January, 1996. The Series A Shares were convertible
commencing March 29, 1996 and the Series B Shares commencing March 31,
1996. Also includes Common Shares issuable upon conversion of 64,595
Series B Convertible Preferred Shares which may be purchased upon
exercise of certain warrants. Also includes 165,000 Common Shares
issuable upon exercise of the Representatives' Warrants. See "The
Company."
----------------------------------------------
<TABLE>
<CAPTION>
Warrants
Warrants Beneficially Beneficially
Owned Prior to Warrants to be Sold Owned After
Name of the Offering in the Offering the Offering
Selling Warrant Holder Number Percent Number Number Percent
- ---------------------- ------------------ -------------------- ----------------
<S> <C> <C> <C> <C> <C>
RAF Financial Corporation 63,467 38.5% 63,467 0 0
Robert L. Long 63,467 38.5% 63,467 0 0
Donald & Co. Securities Inc. 38,066 23.0% 38,066 0 0
</TABLE>
14
<PAGE> 18
DESCRIPTION OF SECURITIES
The Company has authorized 50,000,000 Common Shares and 10,000,000
Preferred Shares. As of September 27, 1996, 16,412,393 Common Shares were
issued, of which 16,108,893 Common Shares were outstanding and 303,500 were held
in the Company's treasury; and a total of 992,521 Preferred Shares in three
series were issued and outstanding.
The Company's Board of Directors has the authority, without further
action by the shareholders, to issue a total of up to 10,000,000 Preferred
Shares in one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any series of unissued Preferred Shares
and to fix the number of shares constituting any series and the designation of
such series, without any further vote or action by the shareholders. The
issuance of Preferred Shares may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
shareholders, may discourage bids for the Company's Common Shares at a premium
over the market price of the Common Shares, and may adversely affect the market
price of and other rights of the holders of Common Shares.
The following summary of certain provisions of the Common Shares and
Preferred Shares does not purport to be complete and is subject to, and is
qualified in its entirety by, the amended Articles of Incorporation of the
Company and the Restated Code of Bylaws of the Company which are included as
exhibits to the Registration Statement of which this Prospectus is a part, and
by the provisions of applicable law.
COMMON SHARES
Holders of Common Shares are entitled to one vote per share on all
matters on which shareholders are entitled to vote. Subject to the rights of
holders of any class or series of shares, including Preferred Shares, having a
preference over the Common Shares as to dividends or upon liquidation, holders
of Common Shares are entitled to such dividends as may be declared by the
Company's Board of Directors out of funds lawfully available therefor, and are
entitled upon liquidation to receive pro rata the assets available for
distribution to shareholders. Holders of the Common Shares have no preemptive,
subscription or conversion rights. The Common Shares are not subject to
assessment and have no redemption provisions.
SERIES 1994 CUMULATIVE CONVERTIBLE PREFERRED SHARES
The Series 1994 Cumulative Convertible Preferred Shares (the "Series
1994 Shares") consists of a total of 501,963 authorized and issued shares which
have a stated value of $11.00 per share and are convertible at any time into
Common Shares at $11.00 per share. The conversion provisions are subject to
adjustment in certain circumstances. Cumulative dividends on the Series 1994
Shares accrue at the rate of 10% per annum and are payable when, as and if
declared by the Board of Directors of the Company. No dividends may be paid on
the Common Shares or other series junior to the Series 1994 Shares unless all
accrued dividends have been paid on the Series 1994 Shares. On liquidation of
the Company, holders of the Series 1994 Shares will be entitled to receive,
before any distribution to holders of Common Shares or other series junior to
the Series 1994 Shares, liquidation distributions equal to the stated value per
Series 1994 Share, plus accrued and unpaid dividends. The Company may redeem the
Series 1994 Shares at any time on at least 30 days written notice at the
redemption price of $11.00 per share, plus accrued and unpaid dividends,
provided that such redemption has been approved by a majority of the directors
of the Company who are not holders of such Series 1994 Shares. The Series 1994
Shares have no voting rights except as otherwise provided by law or the Articles
of Incorporation. All of the Series 1994 Shares are held by David E. Deeds, the
Chairman, Chief Executive Officer and President of the Company.
15
<PAGE> 19
SERIES A CONVERTIBLE PREFERRED SHARES
The Company is authorized to issue 1,308,000 Series A Convertible
Preferred Shares (the "Series A Shares"), of which 490,558 Series A Shares were
outstanding as of September 27, 1996. Holders of the Series A Shares are
entitled to receive cumulative dividends at the rate of $1.25 per share per
annum, payable semi-annually on June 30 and December 31 of each year, when and
as declared by the Company's Board of Directors, in preference and priority to
any payment of any dividend on the Common Shares or any other class or series of
shares of the Company. In the event of any liquidation, dissolution or winding
up of the Company, holders of the Series A Shares are entitled to receive, prior
and in preference to any distribution of any assets of the Company to the
holders of any other class or series of shares, the amount of $25.00 per share,
plus any accrued but unpaid dividends (the "Liquidation Preference"). The Series
A Shares may be redeemed in whole or in part at any time beginning on the first
year anniversary after the date of issuance, on at least 30 days notice, at a
redemption price equal to the Liquidation Preference. However, the Company may
not exercise the right of redemption unless and until (i) the average last trade
price of the Common Shares for the 20 consecutive trading days prior to the
redemption date exceeds $38.00 per share, and (ii) shares issuable upon
conversion of the Series A Shares have been registered for resale under the
Securities Act of 1933, as amended (the "Act"). At any time more than three
months after the date of issuance, each share of the Series A Shares may be
convertible, at the option of the holder thereof, into such number of Common
Shares as is determined by dividing (i) the Liquidation Preference by (ii) the
applicable Conversion Price. At any date, the Conversion Price shall be the
lesser of (x) $21.00 or (y) the average of the daily low trading prices of the
Common Shares during the three consecutive trading days immediately preceding
such date, reduced by the applicable percentage of such average, which increases
from 13% to 29% during the period commencing three months after the date of
issuance through 13 or more months after the date of issuance of the Series A
Shares. The conversion provisions are subject to adjustment in certain
circumstances. On the third anniversary of the date of issuance of the Series A
Shares (December 27, 1998), such shares shall be converted into Common Shares
without any action on the part of the holders thereof. Except as otherwise
provided by law, the Series A Shares have no voting rights. The sole holder of
the Company's Series 1994 Shares consented to the creation by the Company of the
Series A Shares which have certain rights senior to the Series 1994 Shares.
SERIES B CONVERTIBLE PREFERRED SHARES
The Company is authorized to issue 600,000 Series B Convertible
Preferred Shares (the "Series B Shares"), of which none was outstanding as of
September 27, 1996. The provisions of the Series B Shares are identical to that
of the Series A Shares, with the exception that the Series A Shares have certain
rights, preferences and privileges which are superior to those of the Series B
Shares in matters involving dividends, liquidation preference, redemption and
the issuance of Common Shares on conversion. The sole holder of the Company's
Series 1994 Shares consented to the creation by the Company of the Series B
Shares which have certain rights senior to the Series 1994 Shares.
REPRESENTATIVE'S WARRANTS
The Representative's Warrants were sold by the Company pursuant to the
Underwriting Agreement relating to its initial public offering in October, 1994.
Such Warrants enable the holders to purchase an aggregate of 165,000 Common
Shares at the purchase price of $18.15 per share at any time until their
expiration on October 20, 1999. The exercise price and number of shares
purchasable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events.
16
<PAGE> 20
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Shares and the
Preferred Shares is American Securities Transfer, Incorporated.
CERTAIN CHARTER PROVISIONS AND EFFECTS OF INDIANA LAW
The Company's Articles of Incorporation require that proposals for
consideration at a meeting of shareholders must be submitted to the Secretary of
the Company not later than the earlier of (i) two hundred seventy (270) days
after the adjournment of the next preceding annual meeting, or (ii) the close of
business on the seventh day following the date on which notice of the meeting is
formally given to shareholders. The foregoing provision may not be amended
except with the affirmative vote of 85% of the voting power of all shares
entitled to vote.
In the event any person acquires 10% of the voting power of the
Company's Common Shares (an "Interested Shareholder"), then, for a period of
five (5) years after such acquisition, the Indiana Business Corporation Law (the
"IBCL") prohibits certain business combinations between the Company and such
Interested Shareholder unless prior to the acquisition of such Common Shares by
the Interested Shareholder, the Board of Directors of the Company approves of
such acquisition of Common Shares or approves of such business combination.
After such five-year period, only the following three types of business
combinations between the Company and such an Interested Shareholder are
permitted: (i) a business combination approved by the Board of Directors of the
Company before the acquisition of Common Shares by the Interested Shareholder,
(ii) a business combination approved by holders of a majority of the Common
Shares not owned by the Interested Shareholder, and (iii) a business combination
in which the shareholders receive a price for their Common Shares at least equal
to a formula price based on the highest price per Common Share paid by the
Interested Shareholder. In addition, certain accretions of voting power may
result in an acquiring shareholder losing the right to vote the Common Shares
acquired unless such voting power is approved by a majority of the disinterested
Common Shares and, if authorized by an appropriate provision of the Company's
Articles of Incorporation or Code of Bylaws adopted prior to the time the person
becomes an Interested Shareholder, may permit the redemption of the acquiring
shareholder's Common Shares. The Company has not adopted such redemption
provisions.
PLAN OF DISTRIBUTION
The Common Shares may be sold by the Selling Securityholders from time
to time in either underwritten public offerings, in transactions pursuant to
Rule 144 under the Securities Act, in privately negotiated transactions, through
the facilities of Nasdaq, or otherwise, at market prices prevailing at the time
of such sale, at prices relating to such prevailing market prices, or at
negotiated prices. The Company will not receive any of the proceeds from the
sale of Common Shares and Warrants by the Selling Securityholders. The net
proceeds to the Selling Securityholders will be the proceeds received by them
upon such sales, less brokerage commissions. No market presently exists for the
Representatives' Warrants.
In the case of sales of the Common Shares effected to or through
broker-dealers, such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholders or the
purchasers of the Common Shares sold by or through such broker-dealers, or both.
The Company has advised the Selling Securityholders that the anti-manipulative
Rules 10b-6 and 10b-7 under the Securities Exchange Act of 1934, as amended
("Exchange Act") may apply to their sales in the market and has informed them of
the need for delivery of copies of this Prospectus. The Company is not aware as
of the date of this Prospectus of any agreements between any of the Selling
Securityholders and any broker-dealers with respect to the sale of the Common
Shares and Warrants offered by this Prospectus. The Selling Securityholders and
any broker-dealer or other agent executing sell orders on behalf of the Selling
Securityholders may be deemed to be "underwriters" within the meaning of the
Securities Act, in which case the commissions received by any such broker-dealer
or agent and profit on any resale of the Common Shares and Warrants may be
deemed to be underwriting commissions under the Securities
17
<PAGE> 21
Act. The commissions received by a broker-dealer or agent may be in excess of
customary compensation.
The Selling Securityholders may elect to sell all, a portion or none of
the Common Shares and Warrants offered by them hereunder.
The Company will pay substantially all of the expenses incident to the
registration of the Common Shares and Warrants offered hereby, other than
underwriting or brokerage discounts, commissions and selling expenses with
respect to the Common Shares and Warrants being sold by the Selling
Securityholders.
LEGAL OPINIONS
The validity of the Common Shares offered hereby will be passed upon
for the Company by Snell & Wilmer L.L.P., One Arizona Center, Phoenix, Arizona
85004-0001.
EXPERTS
The consolidated financial statements of WavePhore, Inc. appearing in
WavePhore, Inc.'s Annual Report (Form 10-K) for the year ended December 31,
1995, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such financial statements are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Mainstream Data, Inc., as of December 31,
1995 and for the year then ended appearing in WavePhore Inc.'s Current Report
(Amendment No. 1 to Form 8-K/A filed on March 11, 1996), have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Mainstream Data, Inc. as of December 31,
1994 and 1993 and for each of the two years in the period ended December 31,
1994, incorporated in this Prospectus by reference to WavePhore, Inc.'s Current
Report on Form 8-K/A dated March 8, 1996, have been so incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
18
<PAGE> 22
No dealer, sales representative, or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company, the Selling Securityholders, or any other
person. This Prospectus does not constitute an offer of any securities other
than those to which it relates or an offer to sell, or a solicitation of an
offer to buy, to any person in any jurisdiction where such an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
and thereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
Page
Available Information.........................2
Information Incorporated
by Reference................................2
Disclosure Regarding Forward-
Looking Statements..........................3
The Company...................................4
Risk Factors..................................6
Use of Proceeds..............................12
Selling Securityholders......................13
Description of Securities....................15
Plan of Distribution .......................17
Legal Opinions...............................18
Experts......................................18
1,733,000 Common Shares
165,000 Warrants
WAVEPHORE, INC.
----------
PROSPECTUS
----------
October ___, 1996
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS.
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses in connection with the
issuance and distribution of the securities being registered, all of which
expenses will be paid by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission
Registration Fee...................................... $ 3,492
Nasdaq Listing Fee...................................... 5,000*
Printing and Engraving Expenses......................... 1,500*
Legal Fees and Expenses................................. 10,000*
Accounting Fees and Expenses............................ 2,500*
Blue Sky Fees and Expenses.............................. 1,000*
Transfer Agent Fees and Expenses........................ 1,000*
Miscellaneous........................................... *
Total.......................................... $24,492
=======
</TABLE>
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Unless limited by the Articles of Incorporation, the Indiana Business
Corporation Law (the "IBCL") requires that a corporation indemnify a director
who was wholly successful, on the merits or otherwise, in the defense of any
proceeding to which the director was a party because the director is or was a
director of the corporation against reasonable expenses incurred by the director
in connection with the proceeding. The IBCL permits a corporation to indemnify
an individual made a party to a proceeding because the individual is or was a
director against liability incurred in the proceeding if: (1) the individual's
conduct was in good faith; and (2) the individual reasonably believed: (A) in
the case of conduct in the individual's official capacity with the corporation,
that the individual's conduct was in its best interest; and (B) in all other
cases, that the individual's conduct was at least not opposed to its best
interests; and (3) in the case of any criminal proceeding, the individual
either: (A) had reasonable cause to believe the individual's conduct was lawful;
or (B) had no reasonable cause to believe the individual's conduct was unlawful.
Unless a corporation's articles of incorporation provide otherwise, an officer
of the corporation, whether or not a director, is entitled to mandatory and
court-ordered indemnification to the same extent as a director; and the
corporation may indemnify an officer, employee or agent of the corporation,
whether or not a director, to the same extent as a director, and to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract. The indemnification provisions of the IBCL are not exclusive of any
other rights to indemnification that a person may have under the corporation's
articles of incorporation or bylaws, a resolution of the board of directors or
of the shareholders, or any other authorization, whenever adopted, after notice,
by a majority vote of all of the voting shares then issued and outstanding.
The IBCL provides that a director is not liable for any action taken as
a director, or any failure to take any action, unless: (1) the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 of the IBCL; and (2) the breach or failure to perform
constitutes willful misconduct or
II - 1
<PAGE> 24
recklessness. Section 23-1-35-1 of the IBCL provides that a director shall,
based upon the facts then known to the director, discharge the duties as a
director, including the director's duties as a member of a committee: (1) in
good faith; (2) with the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and (3) in a manner the director
reasonably believes to be in the best interests of the corporation. In
discharging the director's duties, a director is entitled to rely upon
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by: (1) one or more officers
or employees of the corporation whom a director reasonably believes to be
reliable and competent in the matters presented; (2) legal counsel, public
accountants, or other persons as to matters the director reasonably believes are
within the person's professional or expert competence; or (3) a committee of the
board of directors of which the director is not a member if the director
reasonably believes the committee merits confidence. A director is not acting in
good faith if the director has knowledge concerning the matter in question that
makes reliance otherwise permitted by the foregoing provisions unwarranted. A
director may, in considering the best interests of a corporation, consider the
effects of any action on shareholders, employees, suppliers, and customers of
the corporation, and communities in which offices or other facilities of the
corporation are located, and any other factors the director considers pertinent.
The Company's Articles of Incorporation provide that the corporation
shall 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 (including any action
or suit 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, to the maximum extent permitted under the IBCL. Such indemnification
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any statute, bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise.
The Company's Restated Code of Bylaws provide that the corporation
shall indemnify any individual who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, partner or trustee of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or
enterprise whether or not for profit, against liability and expenses, including
attorneys fees, incurred by him in any action, suit or proceeding, whether
civil, criminal, administrative, investigative, and whether formal or informal,
in which he has been made or threatened to be made a party by reason of being or
having been in any such capacity, or arising out of his status as such, except
(i) in the case of any action, suit, or proceeding terminated by judgment, order
or conviction, in relation to matters as to which he is adjudged to have
breached or failed to perform the duties of his office and the breach or failure
to perform constituted a willful misconduct or recklessness; and (ii) in any
other situation, in relation to matters as to which it is found by a majority of
a committee composed of all directors not involved in the matter in controversy
(whether or not a quorum) that the person breached or failed to perform the
duties of his office and the breach or failure to perform constituted willful
misconduct or recklessness.
The directors and officers of the Company are covered by an insurance
policy indemnifying against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"), in certain circumstances.
The Company has agreed to indemnify the Warrant Securityholder,
including its officers, directors, or controlling persons, against certain
liabilities, including liabilities under the Act.
II-2
<PAGE> 25
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ -------
<S> <C>
3.1 Restated Articles of Incorporation (incorp-
orated by reference to Exhibit 4 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
3.2 Articles of Amendment to the Company's Articles
of Incorporation, dated December 27, 1995
(incorporated by reference to Exhibit 3 to the
Company's Current Report on Form 8-K dated
December 27, 1995).
3.3 Articles of Amendment to the Company's Articles
of Incorporation, dated February 7, 1996 (incorporated
by reference to Exhibit 4.3 to the Company's Registration
Statement No. 333-1198 on Form S-3).
3.4 Restated Code of Bylaws (incorporated by
reference to Exhibit 4.2 to the Company's
Registration Statement No. 33-80343 on Form S-8).
5 Opinion of Snell & Wilmer L.L.P. regarding legality.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Price Waterhouse L.L.P.
23.3 Consent of Snell & Wilmer L.L.P. (included in Exhibit 5).
24 Power of Attorney (included on signature page of
Registration Statement).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the 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;
II-3
<PAGE> 26
(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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934, as
amended (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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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 Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 27
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 S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on September 30, 1996.
WAVEPHORE, INC.
By/s/ David E. Deeds
---------------------------------
David E. Deeds, Chairman, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ David E. Deeds Chairman of the Board, Chief September 30, 1996
- ---------------------------- Executive Officer and President
David E. Deeds (Principal Executive Officer)
/s/ R. Glenn Williamson Executive Vice President, Chief September 30, 1996
- ----------------------------
R. Glenn Williamson Operating Officer and Director
/s/ Scott E. Calder Executive Vice President and September 30, 1996
- ----------------------------
Scott E. Calder Director
/s/ Kenneth D. Swenson Chief Financial Officer and September 30, 1996
- ---------------------------- Treasurer (Principal Financial
Kenneth D. Swenson Officer and Principal Accounting
Officer)
/s/ C. Roland Haden Director September 30, 1996
- ----------------------------
C. Roland Haden
/s/ Glenn Scolnik Director September 30, 1996
- ----------------------------
Glenn Scolnik
/s/ J. Robert Collins Director September 30, 1996
- ----------------------------
J. Robert Collins
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5
October 1, 1996
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
Re: Registration Statement on Form S-3 (File No. 333-12485)
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-3 (the "Registration Statement") relating to the registration and sale from
time to time by certain securityholders of WavePhore, Inc., an Indiana
corporation (the "Company"), of up to an aggregate of 1,500,000 common shares,
no par value ("Common Shares"), of the Company. The Registration Statement also
relates to (i) 3,335,000 Common Shares, (ii) 165,000 warrants to purchase
common shares (the "Warrants"), and (iii) 165,000 Common Shares issuable upon
exercise of the Warrants registered on February 8, 1996 pursuant to
Registration Statement No. 333-1198, of which 68,000 Common Shares, 165,000
Warrants, and 165,000 Common Shares issuable upon exercise of the Warrants
remain available for issuance thereunder. In addition, we have reviewed the
originals, or copies certified or otherwise identified to our satisfaction, of
all such corporate records of the Company and such other instruments and
certificates of public officials, officers, and representatives of the Company
and other persons, and have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below. In rendering the
opinions expressed below, we have assumed that the signatures on all documents
that we have reviewed are genuine and that the Common Shares will conform in
all material respects to the description thereof set forth in the Registration
Statement. Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Registration Statement.
Based upon the foregoing, we advise you that in our opinion, when the
following events have occurred:
(a) The Registration Statement has become effective under the
Securities Act of 1933, as amended;
<PAGE> 2
WavePhore, Inc.
October 1, 1996
Page 2
(b) The due authorization, registration, and delivery of the
certificate or certificates evidencing the Common Shares has occurred; and
(c) The Common Shares have been issued and sold in the manner
specified in the Registration Statement; then
(1) The Common Shares to be issued by you pursuant to the conversion
of any Series A or Series B Convertible Preferred Shares of the Company or upon
exercise of any Warrants to purchase Common Shares will be legally issued,
fully-paid and nonassessable.
The foregoing opinions are limited to the federal law of the United
States of America and the general corporation law of the State of Indiana. We
express no opinion as to the application of the various states' securities laws
to the offer, sale, issuance or delivery of the Common Shares.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
SNELL & WILMER L.L.P.
<PAGE> 1
Exhibit 23.1
Consent of Ernst & Young LLP Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3) and related Prospectus
of WavePhore, Inc. for the registration of 1,500,000 shares of its common stock
and to the incorporation by reference therein of our reports (a) dated February
23, 1996, with respect to the consolidated financial statements of WavePhore,
Inc. included in its Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, and (b) dated February 23, 1996, with respect to the
financial statements of Mainstream Data, Inc. for the year ended December 31,
1995 included in WavePhore, Inc.'s Current Report on Form 8-K dated December
27, 1995 (as amended by Form 8-K/A filed on March 11, 1996), both filed with
the Securities and Exchange Commission.
Ernst & Young LLP
Phoenix, Arizona
September 27, 1996
<PAGE> 1
EXHIBIT 23.2
[LETTERHEAD OF PRICE WATERHOUSE LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-12485) of
WavePhore, Inc. of our report dated March 17, 1995 relating to the financial
statements of Mainstream Data, Inc., which appears in the Current Report on
Form 8-K/A of WavePhore, Inc. dated March 8, 1996.
/s/ Price Waterhouse LLP
Phoenix, Arizona
September 27, 1996
