<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1998.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
Commission File Number: 0-24858
WAVEPHORE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
INDIANA 86-0491428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
3311 NORTH 44TH STREET, PHOENIX, AZ 85018
(602) 952-5500
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Indicate by check mark whether the registrant (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 for such shorter period that the registrant was
required to file such reports, and (2) has been subject to the filing
requirements for the past 90 days.
Yes X No _______
The number of shares outstanding of the issuer's common stock, as of November
11, 1998:
COMMON SHARES, NO PAR VALUE: 25,166,411 SHARES
<PAGE> 2
WAVEPHORE, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997............................3
Condensed Consolidated Statements of Operations -
Three and nine months ended September 30, 1998 and 1997 ............4
Condensed Consolidated Statements of Cash Flows - Nine months
ended September 30, 1998 and 1997...................................5
Notes to Condensed Consolidated Financial Statements ...............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......................7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk..................................................11
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................12
SIGNATURES.....................................................................13
EXHIBIT INDEX..................................................................14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WavePhore, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $13,678,194 $11,552,646
Accounts receivable 4,527,528 8,358,769
Inventories 3,650,564 2,906,445
Other receivables 14,115 26,136
Notes receivable from officers, including interest -- 660,899
Prepaid expenses and other 1,494,566 1,466,565
----------- -----------
Total Current Assets 23,364,967 24,971,460
Property and equipment, net 4,824,965 4,507,124
Intangible assets of businesses acquired, net 21,354,510 22,084,017
Deposits and other assets 1,559,648 1,428,501
----------- -----------
$51,104,090 $52,991,102
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,659,292 $ 990,926
Accrued expenses 1,946,254 1,805,431
Deferred revenue 1,289,609 1,973,186
Bank loans 1,900,000 1,700,000
Current portion of long-term debt 22,089 531,735
----------- -----------
Total Current Liabilities 6,817,244 7,001,278
Long-term debt, less current portion -- 12,493
Other long-term liabilities 561,674 364,906
Stockholders' equity 43,725,172 45,612,425
----------- -----------
$51,104,090 $52,991,102
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
WavePhore, Inc.
Condensed Consolidated Statements of Operations
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Information delivery and
communication systems $ 3,675,189 $ 5,573,160 $ 12,984,225 $ 13,726,789
Subscription and fee services 1,160,384 955,454 4,081,023 2,010,497
------------ ------------ ------------ ------------
Total Revenues 4,835,573 6,528,614 17,065,248 15,737,286
Cost of revenues 2,668,666 3,469,377 9,005,153 8,606,786
------------ ------------ ------------ ------------
Gross margin 2,166,907 3,059,237 8,060,095 7,130,500
Operating expenses:
Research and development 2,715,695 2,024,003 7,298,390 5,551,816
Sales and marketing 5,012,270 2,362,500 12,020,863 7,002,411
General and administrative 1,493,020 1,211,329 4,592,118 3,527,061
Amortization 641,185 557,223 1,898,065 1,576,568
Charge for purchased research
and development -- -- -- 6,000,000
------------ ------------ ------------ ------------
9,862,170 6,155,055 25,809,436 23,657,856
------------ ------------ ------------ ------------
Loss from operations (7,695,263) (3,095,818) (17,749,341) (16,527,356)
Other (income) expense:
Interest expense 48,822 47,708 159,834 140,479
Interest income (251,069) (226,405) (697,266) (489,553)
Other (2,395) 3,920 (6,941) 16,123
------------ ------------ ------------ ------------
(204,642) (174,777) (544,373) (332,951)
------------ ------------ ------------ ------------
Net loss $ (7,490,621) $ (2,921,041) $(17,204,968) $(16,194,405)
============ ============ ============ ============
Less: Preferred stock dividends (392,819) (537,427) (1,408,810) (1,108,652)
------------ ------------ ------------ ------------
Net loss after preferred stock dividends $ (7,883,440) $ (3,458,468) $(18,613,778) $(17,303,057)
============ ============ ============ ============
Basic and diluted net loss per common share $ (0.33) $ (0.18) $ (0.84) $ (0.99)
============ ============ ============ ============
Basic and diluted net loss per common share
after preferred stock dividends $ (0.35) $ (0.21) $ (0.91) $ (1.05)
============ ============ ============ ============
Number of shares used in per share
calculation 22,366,344 16,648,873 20,534,515 16,420,288
============ ============ ============ ============
</TABLE>
See accompanying notes.
4
<PAGE> 5
WavePhore, Inc.
Condensed Consolidated Statements of Cash Flows
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
---------------------------------
September 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(17,204,968) $(16,194,405)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 3,198,294 2,212,472
(Gain) loss on disposal of assets 790 (55,763)
Provision for doubtful accounts 155,000 112,037
Charge for purchased research and
development -- 6,000,000
Changes in operating assets and liabilities 3,648,168 (1,273,923)
------------ ------------
Net cash used in operating activities (10,202,716) (9,199,582)
INVESTING ACTIVITIES:
Purchase of property and equipment (1,658,155) (1,398,460)
Proceeds from sale of property & equipment 587 81,718
Purchase of business, net of cash acquired (117,600) (3,075,434)
Purchase of treasury stock (679,485) (362,954)
Loans to officers, including interest -- (41,370)
------------ ------------
Net cash used in investing activities (2,454,653) (4,796,500)
FINANCING ACTIVITIES:
Issuance of preferred shares, net 343,232 23,763,091
Payment of preferred stock dividend (467,570) (276,288)
Issuance of common stock, net 15,265,896 400,001
Payments on notes payable (522,139) (2,027,838)
Credit line, net 200,000 1,345,678
Other (36,502) 8,357
------------ ------------
Net cash provided by financing activities 14,782,917 23,213,001
------------ ------------
Net increase in cash and cash equivalents 2,125,548 9,216,919
Cash and cash equivalents at beginning of period 11,552,646 11,793,205
------------ ------------
Cash and cash equivalents at end of period $ 13,678,194 $ 21,010,124
============ ============
Supplemental cash flow information
- Payable related to business acquisition $ -- $ 6,000,000
============ ============
- Issuance of common stock in connection
with the purchase of a business $ 1,000,000 $ --
============ ============
- Issuance of common stock in connection
with dividend payment on preferred stock $ 792,037 $ 585,681
============ ============
</TABLE>
See accompanying notes.
5
<PAGE> 6
WavePhore, Inc.
Notes to Condensed Consolidated Financial Statements
September 30, 1998
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles, pursuant
to the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Certain
information and footnote disclosures normally included in financial statements
have been condensed or omitted pursuant to such rules and regulations. These
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997. The results of operations for the three and
nine month periods ended September 30, 1998 are not necessarily indicative of
the results to be expected for the full year.
(2) RECLASSIFICATIONS
Certain amounts presented for the three and nine months ended September
30, 1997 have been reclassified to conform to September 30, 1998 presentation.
(3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
Finished goods $ 806,948 $ 708,220
Work-in-process 1,697,798 1,334,944
Raw materials 1,145,818 863,281
---------- ----------
$3,650,564 $2,906,445
========== ==========
</TABLE>
(4) RECENTLY ENACTED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. The Company is required to adopt
the provisions of SFAS No. 131 in fiscal year 1998. The Company is
evaluating applicability of the provisions of SFAS No. 131.
6
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
WavePhore, Inc. (the "Company") is The New Media Delivery Company. It
partners with the foremost providers of news, business data, Web-based content
and multimedia programming, in order to deliver selective intelligence and
quality content to an information-dependent society. The Company enables people
and enterprises to more efficiently receive, manage and productively use all
types of urgent, insightful, and relevant information. The Company's
technologies and services aggregate, filter, customize and distribute digital
content (text, graphics, music and video) using a wide range of reliable,
low-cost broadcast (FM sideband, TV-VBI), satellite and Web-based delivery
systems, It has technology sourcing and strategic alliances with Microsoft,
Intel, Compaq, Sony, Gateway, STB, ADS and PBS National Datacast, in addition to
information service agreements with some two hundred Fortune 1,000 companies
worldwide.
The Company provides wireless data broadcasting network services and
equipment to providers of financial data, news, and other information. The
Company's broadcast networks utilize established technologies, such as FM
subcarrier and small dish satellite broadcasting technologies, that are well
suited to the economical one-way transmission of time-sensitive data from one
central location to many remote sites. Those operations are established in 14
major United States markets that, combined with the Company's small dish
satellite coverage, enable the Company to service the continental U.S. and the
major population centers in Canada. In January 1998, the Company announced the
newest enhancement to its data broadcasting technology, which utilizes the
Internet, to enable virtually simultaneous real-time delivery of streaming news
and other information feeds to potentially thousands of end users. This new
system, named "WINDS" (WavePhore Internet News Delivery Service) leverages the
existing Internet communications infrastructure to force deliver, or "push",
streams of data or files from one central location to geographically dispersed
end users as soon as it is published by the information provider.
The Company's Newscast(TM) Today service allows business users to create
customized information profiles and have news and information matching those
profiles electronically "clipped" from a large variety of information sources
and delivered to the corporate users' PCs. The Newscast service, which
incorporates hardware and software elements, enables end users to filter
real-time news and other data from information providers and allows integration
of this information into an organization's local area network or e-mail system
for delivery to persons who need timely access to such information.
In February 1997, the Company announced the creation of WaveTop(TM)
("WaveTop") a wireless consumer broadcast service medium for the home PC user.
The new broadcast service delivers news, sports and entertainment programming,
utilizing the vertical blanking interval ("VBI") of existing analog TV broadcast
signals, to broadcast ready PCs or TV/PCs, without the bandwidth limitations
associated with the Internet. WaveTop leverages its partnership with PBS
National Datacast, Inc., by broadcasting data over the broadcast signals of its
264 member stations. The WaveTop service is free of charge to the consumer. The
Company is seeking to generate revenue from advertisers and content-provider
sponsors for the respective "channels". Through a strategic partnership with
Microsoft, Inc., the WaveTop software is included within the Windows(R) 98
operating system, which Microsoft released in June 1998. WaveTop software is
bundled with all the retail TV PCI tuner boards of a leading developer of
multimedia accelerators and multimedia subsystem products, as well as with
several PC OEMs. The tuner boards are an integral piece of hardware, allowing
the PC to be broadcast ready. The WaveTop service, which went live in April
1998, currently reaches the top 100 markets and is available in 85% of U.S.
households. It is expected to reach 99% of U.S. households by year-end. During
the third quarter of 1998, the Company initiated a multi-million dollar ad
campaign aimed at building consumer awareness and to promote its ability to
deliver high-bandwidth multimedia ads to advertisers. In addition, the Company
expects significant exposure as the WaveTop branding will appear in a separate
multi-million dollar Windows 98 ad campaign launched by Microsoft. In October
1998, the Company announced a new media delivery system architecture that will
allow its WaveTop consumer service to deliver programming to a much wider
7
<PAGE> 8
range of clients, including television set top boxes and wireless handheld
devices. By extending service beyond users of TV tuner board-enabled PCs, the
new architecture dramatically expands WaveTop's reach and value to consumers.
The new architecture will allow the Company to deliver programming that is
tailored for specific types of devices. Blending WaveTop's customized,
television-like programming aggregated Internet content into television set top
boxes and wireless handheld devices will begin the Company's transition into the
new digital marketplace in which the Company intends to play a major role.
RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues. Revenues are derived primarily from the following activities:
(i) Information delivery services generate volume-based fees and revenues from
the sale or rental of communication systems; and (ii) Annual subscriptions to
the Newscast Today information service and related fee-based integration
consulting services. Revenues for the nine months ended September 30, 1998 were
$17,065,000 and $15,737,000 for the comparable prior year period. Subscription
and fee services revenue grew 103%, the result of increased subscribers to the
service. This significant growth was offset by decreased overseas sales of
communication systems, caused by economic turmoil in certain international
markets. Total revenues increased 8%. Revenues for the third quarter of 1998
were down 26% from the same quarter of 1997. The decrease is the result of lower
communication systems sales, which were down $2,100,000 or 61%.
Cost of Revenues. Cost of revenues consists primarily of costs associated
with delivering information to end user sites as well as the cost of the
hardware component. The 1998 year to date increases in cost of revenues as
compared to the same period in 1997 corresponds to the increase in revenue.
Gross margin percentages are 45% and 47% for the three month periods, and 47%
and 45% for the nine month periods ended September 30, 1998 and 1997,
respectively. Year to date increases in gross margin percentages can be
attributed primarily to the subscription and fee service revenues, which have
higher gross margins, becoming a larger proportion of the total consolidated
revenue.
Research and Development. Research and development costs consist primarily
of design, development and testing of the Company's hardware and software
products and services, including payroll, and related costs attributable to
research and development personnel. Research and development expenses increased
34% or $692,000 for the three months ended September 30, 1998 from the
comparable prior year period. For the nine month periods, expenses increased 31%
or $1,746,000 in 1998 versus 1997. The increase in expenses is attributable to
the commitment to enhance existing technologies and products, and the continued
development of the consumer-based WaveTop service. The Company anticipates
continuing to make significant expenditures in product development as it
develops new and enhanced services for a growing customer base.
Sales and Marketing. Sales and marketing expenses include payroll,
commissions, travel and other costs attributable to direct sales, marketing and
customer support personnel, as well as ongoing advertising costs. Expenses for
the three month period ending September 30, 1998 were up 112% or $2,649,000 from
the same period ending September 30, 1997. Sales and marketing expenses for the
nine months ended September 30, 1998 increased $5,019,000 or 72% from the
comparable prior year period. These increases relate primarily to advertising
and promotional costs incurred for the WaveTop service, additional compensation,
increased travel, and expansion of the sales force to aggressively pursue new
markets and to accommodate the growth, particularly in the subscription and fee
service area.
General and Administrative. General and administrative expenses include
accounting, finance, human resources and administrative expenses. General and
administrative expenses for the nine months ended September 30, 1998 and 1997
were $4,592,000 and $3,527,000, respectively, a 30% increase. Quarterly costs
rose $282,000 or 23% from 1997 to 1998. These increases in costs relate
primarily to human resources and other administrative areas in conjunction with
the growth of the Company.
8
<PAGE> 9
Charge for Purchased Research and Development. The 1997 charge for
purchased research and development of $6,000,000 was recorded in connection with
the Paracel Online acquisition. The amount represents research and development
of new products and product upgrades that were in process by Paracel Online at
the acquisition date.
Other (Income) Expense. Interest expense was $160,000 and $141,000 for the
nine months ended September 30, 1998 and 1997. The fluctuation corresponds to
the average debt outstanding during the respective periods. Interest income was
$697,000 and $490,000 during the nine months ended September 30, 1998 and 1997.
The increases in interest income relate to increases in cash balances available
for investment.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1998 and 1997, the Company used
cash in its operations of $10,203,000 and $9,200,000, respectively. Cash used in
operations is less than net losses primarily because of non-cash charges of
depreciation and amortization. Cash flows used in investing activities were
$2,455,000 for the nine months ended September 30, 1998, compared to cash used
in investing activities of $4,797,000 for the same period in the prior year. The
Company made purchases of $1,658,000 in property and equipment and 96,500 shares
of treasury stock for $679,000 during the first nine months of 1998. For the
nine months ended September 30, 1998, the Company generated cash from financing
activities of $14,783,000, compared to $23,213,000 generated in the first nine
months of 1997. Cash generated in 1997 included $22,806,000 from the issuance of
Series C Preferred Shares. The generation of cash in 1998 was primarily from the
issuance of common stock in connection with the exercise of employee stock
options and common stock warrants called for redemption in May 1998. In August
1998, the Board of Directors of the Company approved a stock repurchase program
under which the Company may purchase up to 1,000,000 shares of the Company's
common stock through open market transactions at prevailing market prices.
Depending upon the pace of revenue growth during the remainder of 1998 in
subscription and fee services and the WaveTop product, and the level of internal
investment necessary to expand the users of the WaveTop service, it is possible
the Company will need additional equity funding and/or credit facilities to
support operating activities during the early part of 1999. The Company believes
that it will be able to generate additional funding through equity offerings as
it has successfully done in the past. Additionally, the Company currently has
credit facilities available totaling $4,000,000.
The Company will continue to evaluate business acquisitions and the
development of strategic partnerships to help accelerate its growth. The pace at
which these acquisitions and strategic partnerships occur will have an impact on
the capital resources of the Company to the extent they are funded with cash,
and may cause the dilution of existing shareholder interests to the extent they
are funded with equity.
IMPACT OF YEAR 2000
The Year 2000 presents potential concerns for business computing due to
calculation problems from the general use of the two digit year format as the
year changes from 1999 to 2000. This problem may affect certain computer
software, hardware, and other systems containing processors and embedded chips.
Consequently, information technology ("IT") systems and Non-IT systems
(collectively, "Business Systems") may not be able to accurately process certain
transactions or information before, during or after January 1, 2000. As a
result, users of IT systems and Business Systems are at risk for potential
disruption to their business from malfunctions or failures of such systems. This
is commonly referred to as the Year 2000 Issue.
The Company could be impacted by any failure of its own IT and Business
Systems, as well as that of its suppliers, customers and business partners. The
Company relies on computer hardware, software and related technology, together
with data, in the operation of its business. Such technology and data are
9
<PAGE> 10
used in creating and delivering the Company's products and services, as well as
the Company's internal operations, such as billing and accounting. The Company
is in the process of implementing an enterprise-wide Year 2000 compliance
program utilizing a Year 2000 team, including the executive officers of the
Company, to identify and evaluate its IT and Business Systems, to identify and
assess Year 2000 issues related thereto, and to develop and implement a testing,
remediation, and contingency plan. The Year 2000 program has compiled a detailed
inventory of the hardware and software used in the Company's IT and Business
Systems operations and has commenced testing the components for Year 2000
compliance. The Company intends to use the results of such procedures to
determine which systems are compliant, and which will be replaced or remediated.
The Company believes that the testing procedures will be substantially completed
by December 31, 1998, and that replacement or remediation of its critical IT and
Business Systems will be substantially completed by June 30, 1999.
The Year 2000 plan also includes resolving any Year 2000 issues that are
related to the Company's customers, suppliers and business partners.
Accordingly, the Company has sent correspondence to its information providers,
vendors and other suppliers requesting confirmation that they have a Year 2000
compliance program, the date they expect to be Year 2000 compliant, and to
warrant their products and services will function properly with respect to dates
after December 31, 1999. Because of the vast number of Business Systems used by
such third parties and their varying levels of Year 2000 readiness, it is
difficult to access the likelihood and impact of a malfunction due to third
party Year 2000 issues. The Company is not currently aware of any business
relationships with key third parties which it believes will be likely to result
in a significant disruption of its business. However, such a Year 2000 failure
could occur and have a material adverse affect on the Company. The Company
currently believes that its greatest Year 2000 risk is with its utility
suppliers, information providers, financial institutions, and suppliers of
telecommunications services, in the United States and various other locations
throughout the world in which the Company operates. Potential consequences of
the failure of the Company or key third parties to have Year 2000 compliant
systems include the failure to operate due to a lack of utility services,
disruption, delays or errors in information collection, management and
distribution, network operation failures, the inability to deliver products and
services to or for customers, and delays in receiving inventory and supplies. If
any of such events were to occur, the results could have a material adverse
impact on the Company and its operations.
Concurrent with the remediation and evaluation of the IP Systems and Business
Systems of the Company, and the Business Systems of key third parties, the
Company is developing contingency plans to mitigate the risks that could occur
in the event of a Year 2000 business disruption. Such contingency plans may
include securing alternate sources of critical services and supplies, and such
other actions as the Company may deem prudent. The Company's estimated costs
associated with developing and implementing such contingencies are not currently
estimateable.
The total cost of the Company's Year 2000 Program is currently estimated at $
100,000, and is being funded by available cash. To date, the Company has
incurred a total of approximately $ 15,000 ($ 5,000 expensed and $ 10,000
capitalized for new systems and equipment) related to all phases of the Year
2000 Program. The Company believes that approximately 50% of its remaining
estimated Year 2000 Program costs relate to remediation and will be expensed as
incurred.
Management of the Company believes it has an effective Year 2000 Program in
place to resolve the Year 2000 issue in a timely manner. However, as noted
above, the Company has not yet completed all necessary phases of the Year 2000
Program. The scheduled completion dates and costs associated with the various
components of the Company's Year 2000 program are estimates and are subject to
change. The failure of the Company to complete any additional phases could have
a material adverse impact on the Company and its operations. In addition,
disruptions in the economy generally resulting from Year 2000 issues could also
materially adversely affect the Company.
10
<PAGE> 11
FORWARD-LOOKING STATEMENTS
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and otherwise in this Report are
forward-looking. These may be identified by the use of forward-looking words or
phrases such as "believe", "expect", "anticipated", "should", "planned",
"estimated" and "potential" among others. These forward-looking statements are
based on the Company's reasonable current expectations. A variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in such
forward-looking statements. The risk and uncertainties that may affect the
operations, performance, development and results of the Company include: the
complexity and uncertainty regarding the development and implementation of high
technology products and services; market acceptance of new products and
services; the introduction of competing products or technologies by other
companies; pricing pressures from competitors and/or customers; changes in the
information services and data broadcasting industries and markets; the Company's
ability to protect its proprietary information and technology or to obtain
necessary licenses on commercially reasonable terms; the dependence of the
Company's businesses upon a variety of suppliers and vendors; the ability to
maintain computer and telecommunications systems, essential to its business
operations; the integration and assimilation of acquisitions; the need for
future additional financing; the risks and uncertainties of expansion into
various international markets; the ability to retain key employees; dependence
upon strategic alliances or relationships with other parties; volatility in the
price of the Company's Common Shares; the adoption of new or change in existing
governmental regulations affecting the Company's business; and the Company's
ability to complete the implementation of its Year 2000 plan timely.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are included herein:
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the period.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WavePhore, Inc.
Date: November 13, 1998 By /s/ David E. Deeds
-------------------------------------
David E. Deeds,
President and Chief Executive Officer
(Duly Authorized Officer)
Date: November 13, 1998 By /s/ Kenneth D. Swenson
-------------------------------------
Kenneth D. Swenson,
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal Financial and Accounting
Officer)
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Exhibit
Number Description
------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,678
<SECURITIES> 0
<RECEIVABLES> 4,804
<ALLOWANCES> 276
<INVENTORY> 3,651
<CURRENT-ASSETS> 23,365
<PP&E> 8,359
<DEPRECIATION> 3,534
<TOTAL-ASSETS> 51,104
<CURRENT-LIABILITIES> 6,817
<BONDS> 1,922
19,229
0
<COMMON> 113,213
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</TABLE>
