<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 1999
REGISTRATION STATEMENT NO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
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: COPY TO:
DOUGLAS J. REICH, ESQ. STEVEN D. PIDGEON, ESQ.
WAVEPHORE, INC. SNELL & WILMER L.L.P.
3311 NORTH 44TH STREET ONE ARIZONA CENTER
PHOENIX, ARIZONA 85018 PHOENIX, ARIZONA 85004-0001
(602)952-5500 (602) 382-6000
----------------------------
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, 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, 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./ /
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered(1) Per Share Offering Price Registration Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares 879,116 Shares $ 8.25(2) $7,252,707 $2016.25
- --------------------------------------------------------------------------------------------------------------------
Common Shares Issuable 250,000 Shares $8.25(2) $2,062,500 $573.38
Upon Exercise of Warrants
- --------------------------------------------------------------------------------------------------------------------
Total 1,129,116 Shares $9,315,207 $2,589.63
====================================================================================================================
</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving Common Shares of the Company, in order to prevent dilution, the number
of shares registered shall be automatically increased to cover the additional
shares in accordance with Rule 416(a) under the Securities Act of 1933.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based upon the average of the high and low prices of
the Common Shares on January 8, 1999, as reported by the Nasdaq National Market.
----------------------------
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.
<PAGE> 3
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
1,129,116 Common Shares
Wavephore, Inc.
We have issued and sold, in a private placement transaction, 879,116
shares of our Common Stock (the "Common Shares"), as well as a Warrant to
purchase an additional 250,000 Common Shares, to a shareholder, Castle Creek
Technology Partners LLC (the "Selling Shareholder"). Pursuant to this
Prospectus, the Selling Shareholder may sell some or all of the Common Shares,
including the shares it may receive by exercising the Warrant, to new
purchasers. The Selling Shareholder may sell the Common Shares through ordinary
brokerage transactions, directly to market makers of our shares, or through any
of the other means described in the "Plan of Distribution" section beginning on
page 19.
The Selling Shareholder will receive all of the proceeds from the sale of
the Common Shares, less any brokerage or other expenses of sale incurred by
them. We will receive up to $2,665,000 if the Selling Shareholder exercises the
Warrant. We are paying for the costs of registering the Common Shares and the
shares underlying the Warrant covered by this Prospectus.
Our Common Shares are traded on the Nasdaq National Market ("Nasdaq")
under the symbol "WAVO."
We are an Indiana corporation, formed on November 13, 1990. Our principal
executive offices are located at 3311 N. 44th Street, Phoenix, Arizona and our
telephone number is (602) 952-5500.
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, CAREFULLY
READ AND CONSIDER THE RISK FACTORS BEGINNING ON PAGE 4, UNDER "RISK FACTORS."
YOU SHOULD BE PREPARED TO ACCEPT ANY AND ALL OF THE RISKS ASSOCIATED WITH
PURCHASING THE SHARES, INCLUDING A LOSS OF ALL OF YOUR INVESTMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SALE OF THE COMMON SHARES OR DETERMINED THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR ANY
PERSON TO TELL YOU OTHERWISE.
The date of this Prospectus is January [ ], 1999.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information....................................... 1
The Company .............................................................. 2
Risk Factors.............................................................. 3
Use of Proceeds........................................................... 12
Selling Security Holder................................................... 12
Description of Securities................................................. 13
Plan of Distribution...................................................... 15
Legal Opinions............................................................ 16
Experts................................................................... 16
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO
ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE COMMON SHARES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENTS.
WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS: We file annual, quarterly and special reports and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any document that we file at the SEC's Public Reference Room
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. Please call the SEC at 1-800-SEC-0330 for more
information about the Public Reference Rooms. Most of our SEC filings are also
available to you free of charge at the SEC's web site at http://www.sec.gov.
STOCK MARKET: The 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.
REGISTRATION STATEMENT: We have filed a registration statement (the
"Registration Statement") under the Securities Act of 1933 (the "Act") with the
SEC with respect to the Common Shares offered under this Prospectus. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information contained in the Registration Statement and its
exhibits. You should refer to the Registration Statement for further information
about us and the Common Shares offered under this Prospectus. Statements made in
this Prospectus concerning the provisions of any documents filed as an exhibit
to the Registration Statement or otherwise filed with the SEC are not
necessarily complete and, in each instance, reference is made to the copy of the
document as filed. These statements are qualified in their entirety by this
reference.
INFORMATION INCORPORATED BY REFERENCE. The SEC allows us to "incorporate
by reference" the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this Prospectus,
and information that we file later with the SEC will automatically update and
supersede this information. We have filed the following documents with the SEC
and they are incorporated by reference into this Prospectus:
<PAGE> 5
- Our Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
- Our Proxy Statement for the 1998 Annual Meeting of Securityholders,
dated March 23, 1998;
- Our Current Report on Form 8-K, and its Exhibits, filed January 12,
1999;
- The description of our Capital Stock contained in our registration
statement on Form 8-A, including all amendments or reports filed for
the purpose of updating the description.
Please note that all other documents and reports filed pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") subsequent to the date of this Prospectus and prior to the termination of
this offering will be deemed to be incorporated by reference into this
Prospectus and to be made a part of it from the date of the filing of our
reports and documents.
You may request free copies of these filings by writing or telephoning us
at the following address:
Investor Relations
WavePhore, Inc.
3311 North 44th Street
Phoenix, Arizona 85018
(602) 952-5500.
PROSPECTUS SUMMARY
You should read the following summary, together with the more detailed
information appearing elsewhere in this Prospectus, including under "Risk
Factors" beginning on page 4. Except as otherwise specified, any use of the word
"we", "us, "our", the "Company" or "WavePhore" includes WavePhore, Inc., an
Indiana corporation, and each of its subsidiaries.
THE COMPANY
WavePhore provides technologies, products, and services that enable people
and enterprises to more efficiently receive, manage and productively use all
types of information. Our technologies and services aggregate, filter, customize
and distribute content in text, graphics, audio, and video form using a wide
range of the existing worldwide television, radio, and satellite broadcast
infrastructures and the Internet.
We currently operate in four service and product areas.
WAVETOP: Our WaveTop service is an Internet-like consumer-based
entertainment and programming service for data broadcasting to home PCs and
TV/PCs. WaveTop is a free service that offers a variety of "channels", including
broadcast news, sports, games, family, and other popular information content.
WaveTop operates by transmitting data directly to our users' home PCs over
television signals that are received by TV tuner cards. By using existing
television signals rather than telephone lines or cable, WaveTop can provide
large streaming multimedia content, including audio, video, software and
real-time data, without the bandwidth limitations of traditional Internet
transmission methods. We are seeking to generate revenue from
advertiser-sponsors and content provider-sponsors for our various channels. We
are also seeking to create revenue-sharing opportunities with on-line service
providers and electronic commerce vendors and are exploring opportunities to
license our WaveTop related technology and to create subscriber-based premium
channels and pay-per-view downloads.
<PAGE> 6
NEWSCAST: Our Newscast(TM) service delivers personalized business
information from over 4,500 sources to more than 200,000 of our customers'
employees, associates, and members, through the Internet, extranets, and
corporate intranets. Using patented filtering and pattern matching technology,
we filter over 30,000 articles per day from leading national and international
sources to deliver customized and aggregated news and information. Throughout
the day our customers receive data and information transmitted directly to their
computers, or internal systems, for easy access. For example, our customers that
are banks and financial institutions can receive real-time news and information
about the economy; our customers that are manufacturers can receive real-time
news and information about supplies, transportation, and other stories that
affect their industry. Our Newscast service saves our customers time and
resources by searching thousands of sources for the information they need. In
addition to maintaining our current customers, we are focused on increasing our
market share by targeting Fortune 2000 companies.
NETWORKS: Our Networks service provides data broadcasting services to major
information providers to enable them to broadcast news and other information to
their customers. We provide end-to-end satellite, FM radio signal, and land
based data broadcast communications solutions for companies that send all types
of information, from stock quotes and sports scores to digital background music.
Our customers include the Associated Press, Business Wire, Dow Jones,
Knight-Ridder/Tribune, PR Newswire, Reuters and Thomson Financial Services. We
also enable customers, such as the Muzak DBS Division, Standard & Poor's
ComStock and AEI Music Network, to create their own communication networks by
building systems for them with our satellite receivers. In January 1998, we
announced the creation of "WINDS"(TM) (WavePhore Internet News Delivery
Service). WINDS transmits data for customers through the Internet. We expect
WINDS to complement Network's FM and satellite data broadcasting systems by
reaching end users who may not currently be accessible via FM signals.
EWATCH: Our eWatch service provides a comprehensive Internet monitoring
service to our customers. We monitor the Internet, including public discussion
bulletin boards and web sites, and report to our customers daily, via email or
the Internet, the filtered results of the monitoring which they have requested.
We currently monitor approximately 250,000 Internet postings per day. Typically,
monitoring involves messages and information related to the customer and its
business, or that of others, such as competitors. We have more than 600
customers for whom we provide this service.
RISK FACTORS
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, YOU SHOULD
CAREFULLY READ AND CONSIDER THE RISK FACTORS WE HAVE SET FORTH BELOW. YOU SHOULD
BE PREPARED TO ACCEPT ANY AND ALL OF THE RISKS ASSOCIATED WITH PURCHASING THE
SHARES, INCLUDING A LOSS OF ALL OF YOUR INVESTMENT.
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT
We have generated relatively limited revenues from operations, and have
incurred net losses each year since our inception in November 1990. Our net
losses for the 1995, 1996 and 1997 fiscal years were approximately $15.5
million, $8.6 million and $19.8 million, respectively. As of December 31, 1997,
we had an accumulated deficit of approximately $66.3 million. We expect to incur
significant operating losses through approximately the end of 1999 and may
continue to incur operating losses thereafter. There is no assurance that we
will achieve profitability in the foreseeable future, if ever.
THE MARKETS FOR SOME OF OUR PRODUCTS AND SERVICES ARE STILL IN DEVELOPMENT
Our success depends in large part on our ability to continue to develop a
market for our WaveTop service and to expand the market for our Newscast
service, as well as develop other new products and services. Because the markets
for our WaveTop and Newscast services are new and evolving, the demand for these
services is highly uncertain.
The success of our WaveTop service will depend on a number of factors,
including:
<PAGE> 7
- our ability to address a consumer market and market acceptance of
WaveTop by consumers;
- our ability to attract and retain information providers;
- the inclusion of our WaveTop software and technology in products
manufactured by others, including personal computers, TV tuner
boards, set top boxes and other consumer products; and
- our ability to generate significant revenues through e-commerce,
technology licensing and other opportunities.
The receipt of paid advertising sponsorship of WaveTop will depend on:
- our ability to develop and continually increase the number of users
who view WaveTop advertising to a size sufficient, and with
appropriate demographics, to attract advertisers;
- our ability to build a direct sales force to sell advertising; and
- our ability to attract paid advertisers.
Market acceptance of our Newscast service will depend upon numerous
factors, including:
- our ability to demonstrate a technological or economic advantage
over our competitors;
- our level of customer service available to support Newscast; and
- our ability to attract and retain information providers.
There can be no assurance we will meet these challenges.
WE FACE RAPID TECHNOLOGICAL CHANGE AND FREQUENT NEW PRODUCT INTRODUCTIONS
The markets for our products and services are characterized by rapid
technological change, frequent new product introductions, and evolving industry
standards. We believe that our future success depends upon our ability to
develop and market products and services that incorporate new technologies, and
our ability to enhance and expand our existing product lines and services. We
will need to spend significant amounts of capital to develop, market and enhance
our products and services to meet and take advantage of technological changes.
There can be no assurance that we:
- can develop or market new products or services successfully;
- will be successful in commercially developing new products and
services;
- can respond effectively to technological changes, new industry
standards, or new products or services offered by our competitors;
or
- will have sufficient capital when required to implement such
strategies.
Our failure to anticipate technological change or evolving industry standards,
and to successfully introduce new products and services, could materially and
adversely affect us.
WE FACE INTENSE COMPETITION
The data broadcasting and information services industry is intensely
competitive, rapidly changing and significantly affected by new product
introductions and other market activities of industry participants. We are aware
of numerous competitors that provide products and services similar to those
offered by us, including, but by no means limited to:
- the regional Bell operating companies, AP SatNet and Data
Broadcasting Corporation in the data broadcasting business;
- Reed Elsevier, Inc.'s LEXIS/NEXIS(R), and NewsEDGE corporation in
the electronic information access and processing business market;
- America Online, @Home, Compuserve, and Yahoo!, in the Internet based
consumer information and entertainment market; and
- Wegener Communications, Comstream Corporation, International
Datacasting Corporation and Scientific-Atlanta, Inc., in the
satellite equipment business.
<PAGE> 8
In addition, with the rapid expansion of the Internet, numerous companies
provide access to, or deliver, similar products. It is likely that more
competitors will enter the market. Increased competition may result in price
reductions, reduced gross margins and loss of market share for us.
Many of our competitors have longer operating histories and presence in
key markets, greater name recognition, access to larger customer bases and
significantly greater financial, sales, marketing, distribution, technical and
other resources than us. As a result, such competitors may be able to adapt to
new or emerging technologies and changes in customer requirements, or devote
greater resources to the development, promotion and sale of their products and
services, more quickly than us. We could face a competitive disadvantage if
two-way data broadcast or information services are developed that transmit
digital information through existing analog infrastructures more efficiently
than our technologies. There can be no assurance that we will be able to compete
against current or potential competitors. Our inability to compete would have a
material adverse effect on us.
WE DEPEND ON LICENSED TECHNOLOGY
Certain technology critical to the operation of Newscast, including the
Fast Data Finder ("FDF") technology that we use in filtering information, is
licensed from third parties. Under a license from Paracel, Inc., we have been
granted exclusive rights to certain software through May 29, 2002, and
non-exclusive rights thereafter. After May 29, 2002, Paracel could license its
technology, including FDF technology, to other parties. If this were to occur,
these other parties may end up competing with us or offering similar products.
This could have a material adverse effect on us.
WE DEPEND ON CONTENT PROVIDERS
We currently rely on a number of content and information providers to
supply entertainment, news, and other information we offer through our WaveTop
and Newscast services. Our agreements with information providers are generally
for a term of one or more years. Many automatically renew unless notice of
termination is provided before the end of the term by either party. However,
most of these agreements may be terminated by the information provider if we
fail to fulfill our obligations under the agreement and some agreements are
terminable at will. There can be no assurance that an information provider will
not terminate its agreement with us or that it will choose to renew such
agreement at the end of its term. The termination of or failure to renew one or
more significant information provider agreements would decrease the available
news and information that we can offer our customers.
WE DEPEND UPON STRATEGIC ALLIANCES OR RELATIONSHIPS
Our future success will, in part, depend upon our ability to maintain
existing and develop additional strategic alliances or relationships. We
currently have relationships with information providers, personal computer and
computer chip manufacturers, television networks, consumer electronic
manufacturers, software developers, and sales and marketing partners. Through
such relationships we 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
demand for high-speed data broadcasting products and services. We will be
dependent on the efforts of third parties to assist in commercializing these
products and services. In addition, our strategic partners may pursue
alternative technologies or develop alternative products either on their own or
in collaboration with others, including our competitors. We may not be able to
develop or maintain these strategic relationships, which could have a material
adverse affect on us.
We may also seek to enter into arrangements with third parties for foreign
commercialization of our products and services. Our ability to address markets
outside the United States is likely to depend in large part on our ability to
enter into strategic arrangements with third parties, as well as the efforts of
those third parties.
<PAGE> 9
OUR WAVETOP SERVICE DEPENDS ON OUR RELATIONSHIP WITH MICROSOFT AND PBS DATACAST
We believe that the success of WaveTop will depend significantly upon the
Company's relationship with Microsoft, Inc. Microsoft is bundling and
distributing our WaveTop software with its Windows 98 operating system. We will
be relying on that arrangement as the primary method of distributing the WaveTop
software and introducing the WaveTop service to consumers. On May 18, 1998, the
United States Department of Justice and the attorneys general of 20 states filed
suit against Microsoft seeking to prevent alleged anti-competitive behavior by
Microsoft in connection with, among other things, Windows 98. If the continued
availability of Windows 98 is adversely affected by the lawsuit, or otherwise,
or Windows 98 does not maintain acceptance in the marketplace, we could incur
significant delays and costs in distributing and marketing our WaveTop software
and service. Any adverse circumstances associated with our dependence on
Microsoft could have a material adverse effect on us.
The success of our WaveTop service also will depend to a large degree on
our relationship with PBS National Datacast, Inc. ("PBS Datacast"). We have
entered into an agreement with PBS Datacast pursuant to which the WaveTop
service will be broadcast through the television signals transmitted by PBS
member stations. The agreement expires on January 1, 2002. We have an option to
extend the term for an additional five years. However, PBS Datacast may
terminate the agreement if we fail to achieve certain conditions. We do not have
any arrangements with other television broadcasters to provide alternative
transmission of WaveTop. We do not currently intend to enter into any such
alternative arrangements. Alternative methods of transmission, including
satellite and television signals other than PBS's, may have significant barriers
we would have to overcome in order to make use of them. If PBS Datacast were to
terminate our agreement, we likely would not be able to broadcast the WaveTop
service without interruption, if at all. Any alternative broadcaster to PBS
would likely be unable to offer the same geographic coverage of transmission as
PBS. Any adverse circumstances associated with our dependence upon our
relationship with PBS Datacast could have a material adverse effect on us.
WE FACE A RISK OF SYSTEM FAILURE OR INADEQUACY
Our operations depend to a significant extent on our ability to maintain
our computer and telecommunications systems. We must also protect our systems
against damage from fire, natural disaster, power loss, telecommunications
failure, or similar events. Our business depends in significant part on our
Network Operations Centers in Phoenix, Arizona, Dallas, Texas, and Salt Lake
City, Utah. Although we have arranged for off-site back-up for our network
control, this measure does not eliminate the significant risk to our operations
from a natural disaster or system failure. In addition, growth of our customer
base may strain the capacity of our computer and telecommunications systems
and/or lead to degradations in performance or system failure. Any damage to or
loss of our computer and telecommunications networks, including our Network
Operations Centers, or damage to or loss of any third party controlled systems,
including satellites, could have a material adverse effect on us.
WE DEPEND ON THIRD PARTY INFORMATION TRANSMISSION FACILITIES
We depend on the timely receipt of information feeds and computer
downloads from our information providers. Any loss, interruption or disruption
of the transmission of such information to our news consolidation facility would
result in delay, loss, interruption or disruption of the transmission to the end
users. In addition to affecting customers of our information providers, these
events would affect customers of our Newscast service. These disruptions could
result in those customers terminating, or failing to renew, their contracts with
us. In either case, we could be materially and adversely affected.
We depend on the integrity, capability, and maintenance of third party
controlled systems, including satellites. Our Networks service uses a third
party shared satellite uplink facility in Raleigh, North Carolina, as well as
third party FM radio transmission facilities. Similarly, our WaveTop service
uses PBS member station television broadcast facilities to broadcast and deliver
WaveTop information and services. We do not control any of these facilities
and/or equipment. The loss or disruption of any facility or equipment, or the
interruption of any facility's or equipment's transmission capabilities, could
adversely affect our ability to broadcast services and information. It could
also cause one or more of our customers to terminate their contracts with us or
fail to renew their contract.
Generally, the shared satellite uplink facility in Raleigh and each of the
FM radio transmission facilities we utilize is required to obtain a license from
the Federal Communications Commission (the "FCC") in order to broadcast
information via satellite transmission or over the radio waves. If any
transmission facility were to fail to
<PAGE> 10
obtain any required license from the FCC, fail to maintain its license, or fail
to have a required license renewed by the FCC, we will be unable to transmit
information using that facility.
WE FACE RISKS ASSOCIATED WITH PATENTS AND PROPRIETARY RIGHTS
Our success and ability to compete effectively will depend, in part, on
our ability to protect our intellectual property. We rely on a combination of
patent, copyright, trademark and trade secret laws, confidentiality and
nondisclosure agreements, and other measures to establish and protect our
proprietary technologies and processes. There can be no assurance that such
measures will provide meaningful protection of our proprietary technologies and
processes. We have been issued several patents and submitted several patent
applications. There can be no assurance that we will be issued a patent as a
result of these applications or future applications, or that patents issued will
be sufficiently broad to protect our technology. In addition, any existing or
future patents may be challenged, invalidated or circumvented, and any right
granted thereunder may not provide meaningful protection to us. Moreover, the
Company's competitors may independently develop technologies that are
substantially equivalent or superior to our technology, duplicate our
technology, or design around any patent of ours. Further, the laws of certain
countries in which our products may be sold or licensed may not protect our
products and intellectual property rights to the same extent as the laws of the
United States.
We use employee and third-party confidentiality and non-disclosure
agreements to protect our trade secrets and unpatented know-how. We require our
employees to enter into a proprietary rights and non-disclosure agreement,
pursuant to which the employee agrees to maintain the confidentiality of our
proprietary information. We also require our employees, subject to certain
exceptions, to assign to us all rights in any proprietary information or
technology made or contributed by the employee during his or her employment us.
In addition, we regularly enter into non-disclosure agreements with third
parties, such as consultants, potential strategic partners and customers.
Unfortunately, these methods cannot guarantee the confidentiality of our trade
secrets or unpatented know-how nor can they prevent third parties from
independently developing substantially equivalent proprietary information or
copying, developing, or otherwise obtaining and using our proprietary
information without authorization.
We may have to resort to litigation in the future to enforce our
intellectual property rights, to determine the validity and scope of the
proprietary rights of others, or to defend ourselves against claims of
infringement or invalidity by others. While we are not currently engaged in any
intellectual property litigation or proceedings, we may be in the future. An
adverse outcome in such litigation or similar proceedings could subject us to
significant liabilities to third parties, require disputed rights to be licensed
from others, or require us to cease marketing or using certain products or
services, any of which could have a material adverse effect on us. If we are
required to obtain licenses to use patents or proprietary rights of others, the
required licenses may not be made available on terms acceptable to us, if at
all. In addition, the cost of addressing any intellectual property litigation,
both in legal fees and the diversion of management resources, regardless of
whether the claim is valid, could be significant.
Our technologies, products, and services also incorporate subject matter
that we believe is in the public domain. They also incorporate subject matter
that is licensed to us or that we otherwise have the right to use. There can be
no assurance, however, that third parties will not assert patent or other
intellectual property infringement claims against us with respect to our
technologies, products, and services, or other matters. There may be patents and
other intellectual property relevant to our technologies, products, and services
which are not known to us and which are owned by third parties.
WE FACE RISKS ASSOCIATED WITH DEVELOPMENT OF ADVANCED TELEVISION SYSTEM FORMAT
The broadcast industry is currently developing an advanced television
system format ("ATV"). ATV is expected eventually to enable television
broadcasters to transmit digital programming and non-programming related data at
high speeds. ATV utilizes a digital television signal. Most U.S. and other
television broadcasters currently use analog signals. We expect to migrate our
television signal-based data broadcasting products and services to the
digital-based ATV format when it becomes available. We also anticipate that we
will develop products and services that will take advantage of the data
broadcasting opportunities expected to be created by implementation of ATV.
However, there can be no assurance that we will be successful in these efforts.
If the digital-based ATV format
<PAGE> 11
achieves widespread acceptance in the future, we will likely be required to
adapt our television signal-based data broadcasting products and services to be
compatible with such format. If we fail to do so it could result in a loss of
customers and/or an inability to transmit data, which could have a material
adverse effect on us.
WE FACE RISKS ASSOCIATED WITH ACQUISITIONS
As part of our business strategy, we review possible acquisition
candidates that we believe would complement our existing products and services,
expand our customer base, or enhance our technological capabilities. However,
there can be no assurance that we will be able to successfully identify suitable
acquisition candidates or complete future acquisitions. Acquisitions involve a
number of potential risks, including:
- difficulties in the assimilation of the acquired companies'
operations, technology, products and personnel;
- completion and integration of acquired in-process technology;
- diversion of management's resources;
- uncertainties associated with operating in new markets; and
- the potential loss of the acquired companies' key employees.
Even if successfully integrated, the acquired companies' operations may not
achieve levels of revenues or productivity comparable to those achieved by our
existing operations, or otherwise perform as expected.
In addition, in order to finance acquisitions or fund the operations of
any acquired business, we may issue additional shares of stock or debt, which
could dilute your investment in the Company or add significant interest expense.
There can be no assurance that any equity or debt financing proposed in
connection with an acquisition would be available to us on acceptable terms or
at all. Acquisitions also may reduce our cash balances and/or result in the
amortization of expenses related to goodwill and other intangible assets and
other charges to operating results. Although we expect to analyze carefully any
proposed acquisition, there can be no assurance that any acquisition that is
completed will result in long-term benefits to us or our shareholders, or that
we will be able to effectively manage the resulting business.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
Part of our strategy is to expand into international markets. To date, we
have only limited experience, and therefore may not be successful, in marketing,
selling, and delivering our products and services internationally. We anticipate
that any significant international expansion efforts may require a substantial
commitment of our funds. There are certain risks inherent in doing business on
an international level, such as:
- regulatory requirements, export restrictions, tariffs and other
trade barriers;
- difficulties in staffing and managing foreign operations;
- difficulties in protecting intellectual property rights;
- longer payment cycles and problems in collecting accounts
receivable;
- political instability;
- fluctuations in currency exchange rates and currency controls;
- changes in import/export regulations; and
- potentially adverse tax consequences.
One or more of these factors could have a material adverse effect on our future
international operations.
WE FACE RISKS WITH FCC 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 we submitted, ruled that television broadcast licensees may,
without prior FCC authorization, broadcast digital data within the video portion
of the National
<PAGE> 12
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 insert digital
data into the video portion of the television signal will allow licensees to
provide a wide variety of ancillary services that could expand the products and
services available to businesses and consumers within a television service area.
In the future, however, the FCC could reverse its position and require a license
to broadcast data in the video portion of the television signal. If this were to
happen we, or our signal provider, would be required to obtain an FCC license to
broadcast our data.
We are not currently required to hold an FCC license to act as a private
carrier to use FM subcarrier channels. The FCC authorizes FM station licensees
to utilize subcarriers within the FM baseband signal for specified purposes
including data broadcasting. We have entered into contracts with certain FM
licensees to lease their subcarriers to broadcast data. An FM license is granted
for a period of seven years and may be renewed by the FCC for like terms.
However, there is no guarantee that the licenses for the FM stations we use will
be renewed. Although we believe that adequate alternative FM stations would be
available for our use, any delay in identifying alternative stations or the
terms upon which they are willing to supply their services could adversely
affect us.
We currently hold two FCC licenses for satellite uplinks in Salt Lake
City, Utah. Our satellite uplink licenses are subject to renewal. There can be
no assurance that these licenses will be renewed upon their expiration on
October 23, 2002, and January 16, 2008. Any such license may be revoked for
cause. Failure to renew, or revocation of, either or both of our FCC licenses
for satellite uplinks could have a material adverse affect on us.
Future changes in regulations affecting allocation of the spectrum for
services which compete with our services could also adversely affect our
business, including spectrum allocations currently under consideration by the
FCC. Specifically, the FCC has not issued final regulations regarding the
transmission of non-programming related content in the ATV format, although
Congress specifically authorized such use in the legislation adopting the ATV
format. If we migrate our television signal-based data broadcasting services to
the ATV format, we will become subject to any regulations adopted by the FCC
governing transmission of content in the ATV format.
WE FACE FUTURE CAPITAL NEEDS AND UNCERTAINTY IN ACQUIRING ADDITIONAL FINANCING
TO MEET THESE NEEDS
We anticipate that currently available funds, including funds available
through our credit facility, funds we may receive from selling additional
Common Shares to the Selling Shareholder under the Securities Purchase
Agreement, and cash flow generated from business operations, will be sufficient
to meet anticipated needs for working capital, capital expenditures, and
business expansion at least through the end of 1999. We may need to raise
additional funds in order to acquire complementary products, businesses, or
technologies. If additional funds are raised through the issuance of equity or
convertible securities, your percentage ownership in WavePhore will be reduced.
Also, such securities may have rights, preferences or privileges senior to the
Common Shares. Additional financing may not be available on terms favorable to
us, or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to take advantage of our business
opportunities.
WE DEPEND ON SENIOR MANAGEMENT AND KEY EMPLOYEES
We depend to a significant extent upon the performance of our executive
officers and other key personnel. We have not entered into employment agreements
with any of our senior executive officers and are not the beneficiary of life
insurance on any of them. Although we have agreements with certain members of
management not to compete with us, there can be no assurance that such
agreements will be enforceable or effective in retaining such individuals. In
addition, we may not be successful in attracting and retaining qualified
personnel. The loss of the services of any of our executive officers or other
key employees, the failure to retain management and key employees, and the
failure to attract and retain qualified personnel, could have a material adverse
affect on us.
WE DEPEND ON OUR SUPPLIERS
Components used in certain of our products, including microprocessors and
other electronic components, may be available from only one source. Certain
other components are available from only a limited number of
<PAGE> 13
sources. Although to date we have been able to obtain adequate supplies of these
components, our 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. In addition, we have elected to
obtain certain components, electronic component kitting, manufacture, assembly
and test of printed circuit boards, manufacture of enclosures, and assembly of
mechanical components from single sources. We generally obtain these products on
a purchase order basis and do not have long-term contracts with these suppliers
or subcontractors. Although we believe that other qualified subcontractors are
available, the inability of any of these suppliers or subcontractors to provide
these services or products to us on a timely basis could materially adversely
affect us.
WE ARE AFFECTED BY FLUCTUATING QUARTERLY RESULTS AND SEASONALITY
We have experienced, and may continue to experience, significant
fluctuations in revenues and operating results from period to period. This
fluctuation is the result of a number of factors including, without limitation:
- the volume and timing of orders;
- our ability to fill orders on a timely basis;
- our pricing policies and those of our competitors;
- variations in the mix of product and service sales;
- market acceptance of our products and services;
- the timing of product and service introductions by us and our
competitors;
- product or service obsolescence resulting from new product or
service introductions or changes in customer demand;
- expenses associated with the launch of new products and services; or
- the acquisition of businesses, products, or technologies.
The impact of the foregoing factors may cause our operating results to be below
the expectations of public market analysts and investors. In such event, the
price of the Common Shares could be adversely affected. Quarterly results may
not necessarily predict future performance for any particular period, and there
can be no assurance that we will attain or sustain growth in sales or
profitability on a quarterly or annual basis.
A LARGE PORTION OF OUR REVENUES COMES FROM A SMALL NUMBER OF CUSTOMERS
A relatively small group of our customers are responsible for a
significant percentage of our revenue. For example, sales to Reuters America,
Inc. amounted to more than 10% of our consolidated revenues for the year ended
December 31, 1997. Although we believe that our current relationships with our
customers are generally good, the loss of one or more of our major customers
could have a material adverse affect on us.
OUR OFFICERS AND DIRECTORS HAVE A MEASURE OF VOTING POWER
As of January 11, 1999, our officers and directors beneficially owned
approximately 11% of the outstanding Common Shares. Certain of these persons
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 total percentage ownership of WavePhore to approximately 22%.
Accordingly, the officers and directors, acting as a group, may be able to
effectively elect all of our directors and to determine corporate actions
requiring shareholder approval. The continuing voting power by these
shareholders could have the effect of delaying or preventing a change in control
of WavePhore.
THE PRICE OF OUR COMMON SHARES IS VOLATILE
The market price of the Common Shares, like the stock of many other
technology companies, has been highly volatile. Factors such as:
- announcements of technological innovations and new products by us or
our competitors;
- governmental regulation;
- industry legislation;
<PAGE> 14
- developments in patent or other proprietary rights of us or our
competitors;
- fluctuations in our operating results;
- analyst reports, media stories, news broadcasts, and interviews; 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. Frequently the reasons are unrelated to the operating
performance of the companies affected.
The price of the Common Shares might also be affected by the issuance of
additional Common Shares or preferred shares.
CERTAIN EVENTS COULD RESULT IN A DILUTION OF YOUR OWNERSHIP
Certain events could result in a dilution of your ownership in WavePhore.
They include:
- the issuance of additional Common Shares or preferred stock to raise
additional capital or finance acquisitions;
- the issuance of additional Common Shares upon the exercise or
conversion of outstanding options, warrants and shares of
convertible preferred stock; or
- the issuance of additional Common Shares in connection with the
payment of dividends.
There are currently outstanding convertible preferred shares, warrants,
and options to acquire up to 7,776,931 additional Common Shares at prices
ranging from $4.125 to $18.15 per share. These securities provide for
antidilution protection upon the occurrence of certain events such as stock
splits, redemptions, mergers, and, in some cases, major corporate announcements.
If one or more of these events occurs the number of Common Shares that may be
acquired upon conversion or exercise would increase. If converted or exercised
these securities will result in a dilution to your percentage ownership of the
Common Shares.
We entered into a Securities Purchase Agreement with the Selling
Shareholder under which they acquired the Common Shares. Pursuant to this
agreement, we may require the Selling Shareholder to purchase an aggregate of up
to $7,500,000 of additional Common Shares from us, on or before March 31, 1999
(unless otherwise extended pursuant to the terms of the agreement). As part of
this purchase the Selling Shareholder would also receive a warrant to purchase
an additional 250,000 Common Shares from us at an exercise price of 131.25% of
the closing price of the Common Shares on the day preceding the closing of the
purchase (subject to certain provisions). This additional issuance of Common
Shares, if it occurs, would result in a dilution to your percentage ownership of
the Common Shares.
WE ARE SUBJECT TO CERTAIN PROVISIONS WHICH COULD AFFECT A CHANGE OF CONTROL
Our Articles of Incorporation contain certain provisions that could have
the affect of delaying, deferring, or preventing a change in control. 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. This would include transactions
in which you might otherwise receive a premium for your Common Shares over
then-current market prices, and may limit your ability to approve transactions
which may be in your best interests. These provisions could adversely affect the
price of the Common Shares.
<PAGE> 15
THE ISSUANCE OF PREFERRED STOCK COULD AFFECT A CHANGE OF CONTROL
Our Board of Directors has the authority to issue a total of up to
10,000,000 shares of preferred stock and to fix the rates, preferences,
privileges, and restrictions, including voting rights, of such preferred stock,
without any further vote or action by you and the other shareholders. Your
rights will be subject to, and may be adversely affected by, the rights of the
holders of the preferred stock that have been issued, or might be issued in the
future. Preferred stock provides desired flexibility in connection with possible
acquisitions and other corporate purposes. However, it could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of WavePhore. This could delay, defer, or prevent a
change in control. Furthermore, holders of such preferred stock may have other
rights, including economic rights, senior to the Common Shares. As a result, the
existence and issuance thereof could have a material adverse affect on the
market value of the Common Shares. We have in the past issued, and, subject to
certain contractual limitations, may from time to time in the future issue,
preferred stock for financing or other purposes with rights, preferences, or
privileges senior to the Common Shares.
WE ARE SUBJECT TO CERTAIN RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS
We have not paid any dividends on the Common Shares, and do not plan to
pay any dividends on the Common Shares for the foreseeable future. The
provisions of certain series of our preferred stock prohibit the payment of
dividends on the Common Shares under certain circumstances. In addition,
although our credit facility does not include any specific prohibitions on the
payment of dividends, it does include various financial covenants that could
have the effect of limiting cash dividend or redemption payments. The Indiana
Business Corporation Law includes limitations on the ability of corporations to
pay dividends on or to purchase or redeem their own stock. Accordingly, you
should not expect that dividends will be paid on your Common Shares.
THERE ARE ADDITIONAL COMMON SHARES ELIGIBLE FOR FUTURE SALE
As of January 11, 1999, we had 28,407,766 Common Shares outstanding, all
of which were eligible for trading on the Nasdaq National Market. We also had
outstanding, as of January 11, 1999, 501,963 Series 1994 Cumulative Preferred
Shares, and options and warrants to acquire an additional 7,247,218 Common
Shares. All of the Common Shares underlying the warrants, and substantially all
of the shares underlying any outstanding options, have been registered for
resale. We have granted registration rights to certain other holders of Common
Shares. In addition, we may from time to time issue additional Common Shares or
securities exercisable for or convertible into Common Shares to finance the
expansion of our business, acquisitions, or other corporate purposes. Future
sales of Common or convertible preferred shares, including the Common Shares
subject to outstanding options, warrants and conversion rights, could adversely
affect the prevailing market price of the Common Shares.
WE MAY FACE YEAR 2000 PROBLEMS
We rely on computer hardware, software and related technology, together
with data, in the operation of our business. Such technology and data are used
in creating and delivering our products and services, and in our internal
operations, such as billing and accounting. We have initiated an enterprise-wide
program to evaluate the technology and data used in the creation and delivery of
our products and services, and in our internal operations. The program utilizes
a Year 2000 "team" which includes executive officers. The team is to identify
Year 2000 issues and to develop and implement a plan to handle them. The plan
includes resolving any Year 2000 issues that are related to our customers and
suppliers. However, there can be no assurances that such third parties will
successfully remediate their own Year 2000 issues over which we have no control.
If we fail to complete the implementation of our Year 2000 plan prior to the
commencement of the Year 2000, or our customers and suppliers fail to
successfully remediate their own Year 2000 issues, it could materially adversely
affect us.
THERE ARE FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS THAT MAY NOT PROVE TO BE
ACCURATE
This Prospectus contains or incorporates forward-looking statements
including statements regarding, among other items, our business strategy, growth
strategy, and anticipated trends in our business. We may make additional written
or oral forward-looking statements from time to time in filings with the
Securities and Exchange Commission or otherwise. When we use the words
"believe," "expect," "anticipate," "project" and similar expressions, this
should alert you that this is a forward-looking statement. Forward-looking
statements speak only as of the date the statement is made. These
forward-looking statements are based largely on our expectations. They are
subject to a
<PAGE> 16
number of risks and uncertainties, some of which cannot be predicted or
quantified and are beyond our control. Future events and actual results could
differ materially from those set forth in, contemplated by, or underlying the
forward-looking statements. Statements in this Prospectus (or made in documents
incorporated into this Prospectus), including those set forth in "Risk Factors"
and "The Company", describe factors, among others, that could contribute to or
cause such differences. In light of these risks and uncertainties, there can be
no assurance that the forward-looking information contained in this Prospectus
will in fact transpire or prove to be accurate. All subsequent written and oral
forward-looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by this Section.
USE OF PROCEEDS
The Selling Shareholder will receive all of the proceeds from the sale of
the Common Shares offered under this Prospectus. If the Selling Shareholder
exercises all of the Warrant, we will receive gross proceeds of approximately
$2,665,000, which we would use for general corporate purposes. There can be no
assurance that any or all of the Warrant will be exercised.
SELLING SECURITY HOLDER
The following table provides information regarding the Selling
Shareholder's beneficial ownership of Common Shares as of January 11, 1999, and
as adjusted to reflect the sale of the securities offered under this Prospectus.
Unless we have indicated otherwise, to our knowledge, the Selling Shareholder
has sole voting and investment power with respect to its securities.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY COMMON SHARES COMMON SHARES
OWNED PRIOR TO THE TO BE SOLD IN BENEFICIALLY OWNED
OFFERING(1) THE OFFERING(1) AFTER THE OFFERING(2)
NAME OF SELLING ----------- --------------- ------------------------
SECURITY HOLDER NUMBER NUMBER NUMBER PERCENT
--------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Castle Creek Technology 1,129,116 1,129,116 0 0
Partners LLC
</TABLE>
- ---------------------
(1) The figure above includes 250,000 shares of Common Stock underlying the
Warrant issued in connection with the purchase of the 879,116 Common Shares
covered by this Prospectus. This Warrant may not be exercised to the extent the
issuance of shares underlying the Warrant would cause the Selling Shareholder to
own in excess of 9.9% of the outstanding Common Shares of WavePhore.
The figure above does not include 52,218 Common Shares obtained upon
conversion of Series C Convertible Preferred Shares, and up to 136,364 Common
Shares issuable upon conversion of a related warrant, held by CC Investments,
LDC. These securities are registered pursuant to a separate registration
statement and prospectus. Except under certain limited circumstances, the
warrant relating to the Series C Preferred Shares may not be exercised to
the extent the issuance of shares underlying the warrant would cause the
Selling Shareholder to own in excess of 4.9% of the outstanding Common
Shares of WavePhore.
The Selling Shareholder is indirectly wholly-owned by CC Investments, LDC.
Pursuant to a management agreement Castle Creek Partners, LLC shares with the
Selling Shareholder, and CC Investments, LDC, voting and investment power with
respect to the securities held by the Selling Shareholder and CC Investments,
LDC, respectively. John Ziegelman and Daniel Asher, as members of Castle Creek
Partners, LLC, may be deemed, as a result of the management agreement, to have
beneficial ownership of such securities. Messrs. Ziegelman and Asher disclaim
such ownership.
(2) These figures assume that the Selling Shareholder disposes of all of the
Common Shares covered by this Prospectus and does not acquire any additional
Common Shares. Except as set forth in footnote 1, they also assume no other
exercise of options, warrants or conversion rights or issuances of additional
securities.
<PAGE> 17
We entered into a Securities Purchase Agreement with the Selling
Shareholder under which they acquired the Common Shares and Warrant. Pursuant to
this agreement, we may require the Selling Shareholder to purchase an aggregate
of up to $7,500,000 of additional Common Shares from us, on or before March 31,
1999 (unless otherwise extended pursuant to the terms of the agreement). As part
of this purchase the Selling Shareholder would receive a warrant to purchase an
additional 250,000 Common Shares from us at an exercise price of 131.25% of the
closing price of the Common Shares on the day preceding the closing of the
purchase (subject to certain provisions). The agreement also requires that we
register for resale by the Selling Shareholder, under a Prospectus similar to
this one, any additional shares that we sell to it.
DESCRIPTION OF SECURITIES
We are authorized to issue up to 50,000,000 Common Shares and 10,000,000
Preferred Shares ("Preferred Shares"). As of January 11, 1999, 28,853,766 Common
Shares were issued, of which 28,407,766 Common Shares were outstanding and
446,000 were held in our treasury; and a total of 501,963 Preferred Shares were
issued and outstanding.
Our 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
determine the number of shares constituting any series and the designation of
such series, without any further vote or action by the shareholders.
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, our amended Articles of Incorporation, Restated
Code of Bylaws, and by the provisions of applicable law.
COMMON SHARES
The holders of our 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, the
holders of our Common Shares are also entitled to such dividends as may be
declared by our Board of Directors out of funds that are lawfully available, and
are entitled upon liquidation to receive pro rata the assets that are available
for distribution to holders of Common Shares. 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 PREFERRED SHARES
We have authorized, issued and outstanding 501,963 of our Series 1994
Cumulative Convertible Preferred Shares (the "Series 1994 Preferred Shares").
These shares 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 Preferred Shares accrue at the rate of 10% per annum and are payable
when, as and if declared by the Board of Directors. We may not pay dividends on
the Common Shares or other series junior to the Series 1994 Preferred Shares
unless all accrued dividends have been paid on the Series 1994 Preferred Shares.
On liquidation of the Company, the holders of our Series 1994 Preferred Shares
will be entitled to receive, before any distribution to holders of our Common
Shares or other series junior to the Series 1994 Preferred Shares, liquidation
distributions equal to the stated value per Series 1994 Preferred Share, plus
accrued and unpaid dividends. We may redeem the Series 1994 Preferred 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 the redemption has
been approved by a majority of the Board of Directors who are not holders of the
Series 1994 Preferred Shares. The Series 1994 Preferred Shares have no voting
rights except as otherwise provided by law or the Articles of Incorporation.
David E. Deeds, the Chairman, Chief Executive Officer and President of the
Company, owns all of the Series 1994 Preferred Shares.
<PAGE> 18
SERIES A, SERIES B, AND SERIES C CONVERTIBLE PREFERRED SHARES
We were authorized to issue, and in the past did issue, Series A, Series B,
and Series C Convertible Preferred Shares, all with varying provisions. All of
these preferred shares have been converted into Common Shares or are no longer
outstanding.
WARRANTS
In addition to the Warrant, we have issued various warrants, including the
following which are still outstanding as of the date hereof:
REPRESENTATIVE'S WARRANTS
We issued warrants to our underwriters in connection with our initial
public offering in October 1994. These warrants enable the underwriters (or
other holders) to purchase an aggregate of 165,000 Common Shares at a purchase
price of $18.15 per share. The exercise price and number of shares purchasable
upon exercise of the Warrants are subject to adjustment upon the occurrence of
certain events. The Warrants expire on October 20, 1999.
WARRANTS RELATED TO SERIES C CONVERTIBLE PREFERRED SHARES
We also issued warrants to purchasers of our Series C Preferred Shares.
Warrants to purchase up to 545,454 additional Common Shares remain outstanding.
The exercise price of the Warrants is $8.80, which is equal to 115% of the
average of the closing sale prices of the Common Shares for the five trading
days immediately preceding the date we issued the Series C Convertible Preferred
Shares. The Warrants expire on July 24, 2000.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our Common Shares is American
Securities Transfer & Trust, Inc.
CERTAIN CHARTER PROVISIONS AND EFFECTS OF INDIANA LAW
Our Articles of Incorporation require that proposals for consideration at
a meeting of shareholders must be submitted to the Secretary not later than the
earlier of (i) 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. This provision
may not be amended except with the affirmative vote of 85% of the voting power
of all shares entitled to vote.
Under the Indiana Business Corporation Law, in the event any person
acquires 10% of the voting power of the Common Shares (an "Interested
Shareholder"), then, for a period of five (5) years after such acquisition,
certain business combinations between us and the Interested Shareholder are
prohibited, unless prior to the acquisition of such Common Shares by the
Interested Shareholder, the Board of Directors approves of the acquisition of
Common Shares or the business combination. After the five-year period, only the
following three types of business combinations between us and the Interested
Shareholder are permitted: (i) a business combination approved by the Board of
Directors 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, under Indiana law, certain increases in
voting power may (a) result in an acquiring shareholder losing the right to vote
his Common Shares unless his right to vote is approved by a majority of the
"disinterested" Common Shares, and (b) if authorized by an appropriate provision
of our Articles of Incorporation or Bylaws adopted prior to the time the person
becomes an Interested Shareholder, permit the redemption of the acquiring
shareholder's Common Shares. We have not adopted such a redemption provision.
<PAGE> 19
PLAN OF DISTRIBUTION
We are registering the Common Shares covered by this Prospectus for the
Selling Shareholder. As used in this Prospectus, "Selling Shareholder" includes
the pledgees, donees, transferees, or other successors in interest who later
hold the Selling Shareholder's interests. We are paying the costs and fees of
registering the Common Shares, but the Selling Shareholder will pay any
brokerage commissions, discounts or other expenses relating to the sale of the
Common Shares. We have also agreed to indemnify the Selling Shareholder and
certain related persons against certain liabilities, including liabilities under
the Act.
The Selling Shareholder may sell the Common Shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices, or at fixed prices, which may be changed. The
Selling Shareholder may sell some or all of their Common Shares through:
- ordinary brokers' transactions which may include long or short sales
(in certain circumstances);
- transactions involving cross or block trades or otherwise on the
Nasdaq National Market;
- purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to this
Prospectus;
- "at the market" to or through market makers or into an existing
market for the Common Shares;
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents;
- through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise); or
- any combination of the foregoing, or by any other legally available
means.
The Selling Shareholder may enter into hedging transactions with broker-dealers
who may engage in short sales of Common Shares in the course of hedging the
positions they assume. The Selling Shareholder also may enter into option or
other transactions with broker-dealers that require the delivery by such
broker-dealers of the Common Shares. Thereafter, the shares may be resold
thereafter pursuant to this Prospectus. In its selling activities, the Selling
Shareholder will be subject to applicable provisions of the Exchange Act and
rules and regulations thereunder, including without limitation, Regulation M,
which may limit the timing of purchases and sales of any of the Shares of Common
Stock by the Selling Shareholder.
The Selling Shareholder may negotiate and pay broker-dealers commissions,
discounts or concessions for their services. Broker-dealers engaged by the
Selling Shareholders may allow other broker-dealers to participate in resales.
The Selling Shareholder and any broker-dealers involved in the sale or resale of
the Common Shares may qualify as "underwriters" within the meaning of Section
2(11) of the Securities Act of 1933 (the "Act"). In addition, the
broker-dealers' commissions, discounts or concession may qualify as
underwriters' compensation under the Act. If the Selling Shareholder or any
broker-dealer qualifies as an "underwriter," they will be subject to the
prospectus delivery requirements of section 153 of the Act, which may include
delivery through the facilities of the NASD. In conjunction with sales to or
through brokers, dealers or agents, the Selling Shareholder may agree to
indemnify them against liabilities arising under the Act. We know of no existing
arrangements between the Selling Shareholder, any other shareholder, broker,
dealer, underwriter or agent relating to the sale or distribution of the Common
Shares.
In addition to selling their Common Shares under this Prospectus, the
Selling Shareholder may:
- Transfer its Common Shares in other ways not involving market
makers or established trading markets, including by gift,
distribution, or other transfer; or
- Sell their Common Shares under Rule 144 of the Act rather than
under this Prospectus, if the transaction meets the requirements of
Rule 144.
<PAGE> 20
LEGAL OPINIONS
Barnes & Thornburg, of Indianapolis, Indiana, will pass upon the validity
of the Common Shares offered under this Prospectus.
EXPERTS
The consolidated financial statements of WavePhore, Inc. appearing in our
Annual Report (Form 10-K) for the years ended December 31, 1997 and 1996, and
for each of the three years in the period ended December 31, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
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.
<PAGE> 21
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 $ 2,590
Nasdaq Listing Fee $ 17,500
Legal Fees and Expenses $ 10,000
Accounting Fees and Expenses $ 1,000
Transfer Agent Fees and Expenses $ 500
Miscellaneous $ 1,000
---------
TOTAL $ 32,590
</TABLE>
- ----------------
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 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 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: (a) in good faith; (b) with the care an ordinarily prudent
person in a like position would exercise under similar circumstances; and (c) 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
<PAGE> 22
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 must
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 must
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.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed
in the Act and is therefore unenforceable.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
3.1 Restated Articles of Incorporation (incorporated 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 Articles of Amendment to the Company's Articles of Incorporation dated July 23, 1997
(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed as
of August 1, 1997).*
3.5 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 Barnes & Thornburg regarding legality.
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
23.1 Consent of Ernst & Young L.L.P.
23.2 Consent of Barnes & Thornburg (included in Exhibit 5).
24 Power of Attorney (included on signature page of Registration Statement).
</TABLE>
*Previously filed
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;
(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 Act
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) 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.
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.
<PAGE> 24
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 January 15, 1999.
WAVEPHORE, INC.
/s/ David E. Deeds
-------------------------------------------
David E. Deeds, Chairman, Chief
Executive Officer and President
Know all men by these presents, that each person whose signature appears
below constitutes and appoints David E. Deeds, Kenneth D. Swenson, and Douglas
J. Reich, and each of them, his true and lawful attorneys-in-fact and agent,
with full powers of substitution and resubstitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments to
this Registration Statement on Form S-3 and to sign any registration statement
for the same offering that is to be effective upon filing pursuant to Rule
462(b) of the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith with the Securities and
Exchange Commission, granting under said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises as fully and to all
intents and purposes as he might or could do in person hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ David E. Deeds Chairman of the Board, Chief Executive Officer January 15, 1999
- ------------------------------ and President (Principal Executive Officer)
David E. Deeds
/s/ R. Glenn Williamson Executive Vice President, Chief Operating Officer January 15, 1999
- ------------------------------ and Director
R. Glenn Williamson
/s/ Kenneth D. Swenson Executive Vice President, Chief Financial Officer, January 15, 1999
- ------------------------------ Treasurer (Principal Financial Officer and Principal
Kenneth D. Swenson Accounting Officer) and Director
/s/ C. Ronald Haden Director January 15, 1999
- ------------------------------
C. Roland Haden
/s/ Glenn Scolnik Director January 15, 1999
- ------------------------------
Glenn Scolnik
/s/ J. Robert Collins Director January 15, 1999
- ------------------------------
J. Robert Collins
</TABLE>
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
3.1 Restated Articles of Incorporation (incorporated 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 Articles of Amendment to the Company's Articles of Incorporation dated July 23, 1997
(incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed as
of August 1, 1997).*
3.5 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 Barnes & Thornburg regarding legality.
23.1 Consent of Ernst & Young L.L.P.
23.2 Consent of Barnes & Thornburg (included in Exhibit 5).
24 Power of Attorney (included on signature page of Registration Statement).
</TABLE>
*Previously filed
<PAGE> 1
Exhibit 5
January 15, 1999
WAVEPHORE, INC.
3311 North 44th Street
Phoenix, Arizona 85018
Re: Issuance of Common Shares
Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-3 (the "Registration Statement") to be filed by WavePhore,
Inc., an Indiana corporation (the "Company"), under the Securities Act of 1933,
as amended (the "1933 Act"), relating to the registration of, and covering the
resale of (i) the 879,116 shares (the "Common Shares") of common stock, without
par value, of the Company ("Common Stock"), and (ii) the 250,000 shares of
Common Stock (the "Warrant Shares") issuable upon exercise of the First Warrant
(the "Warrant"), which Common Shares and Warrant were issued at the First
Closing pursuant to that certain Securities Purchase Agreement effective as of
December 23, 1998 between the Company and Castle Creek Technology Partners LLC
(the "Agreement"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings assigned to such terms in the
Agreement.
In rendering the opinions set forth herein, we have limited our factual
inquiry to (i) reliance on a certificate of the Secretary of the Company, (ii)
reliance on the facts and representations contained in the Registration
Statement, including without limitation those relating to the number of shares
of Common Stock which are authorized, issued or reserved for issuance upon
conversion or exercise of preferred shares, warrants and options, and (iii) such
documents, corporate records and other instruments as we have deemed necessary
or appropriate as a basis for the opinions expressed below, including without
limitation a certificate issued by the Secretary of State of the State of
Indiana dated January 8, 1999, attesting to the corporate existence of the
Company in the State of Indiana.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. In rendering the
opinion expressed below, we have assumed that (i) the Common Shares and the
Warrant conform, and that the Warrant Shares will conform, in all material
respects, to the description thereof set forth in the Registration Statement,
(ii) the Common Shares and the Warrant were issued and delivered at the First
Closing in accordance with the terms of the Agreement, and (iii) the Common
Shares and the Warrant were issued pursuant to an exemption from the
registration requirements of the 1933 Act pursuant to Section 4(2) of the 1933
Act.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that the Common Shares are, and that the Warrant
Shares to be issued upon the exercise of the Warrant will be, validly issued,
fully paid and nonassessable.
The foregoing opinion is limited to the current internal laws of the State
of Indiana (without giving effect to any conflict of law principles thereof),
and we have not considered, and express no opinion on, the laws of any other
jurisdiction. This opinion is based on the laws in effect and facts in existence
on the date of this letter, and we assume no obligation to revise or supplement
this letter should the law or facts, or both, change.
This opinion is intended solely for the use of the Company in connection
with the registration of the Common Shares and the Warrant Shares. It may not be
relied upon by any other person or for any other
<PAGE> 2
purpose, or reproduced or filed publicly by any person, without the written
consent of Barnes & Thornburg; provided, however, that we hereby consent to the
filing of this opinion as Exhibit 5 to the Registration Statement and to the
references to Barnes & Thornburg contained in the Registration Statement.
.
Very truly yours,
/s/Barnes & Thornburg
<PAGE> 1
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
[ERNST & YOUNG LLP LOGO]
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of WavePhore, Inc. for
the registration of 1,129,116 shares of its common stock and to the
incorporation by reference therein of our report dated January 28, 1998, with
respect to the consolidated financial statements of WavePhore, Inc. included in
its Annual Report (Form 10-K) for the year ended December 31, 1997, filed with
the Securities and Exchange Commission
/s/ Ernst & Young LLP
Phoenix, Arizona
January 15, 1999
