<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 2, 1999
REGISTRATION STATEMENT NO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
WAVO CORPORATION
(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.)
- --------------------------------------------------------------------------------
3131 E. CAMELBACK RD., SUITE 320
PHOENIX, ARIZONA 85016
(602) 952-5500
(Address, including zip code, and telephone number, including
area code, of principal executive offices)
-------------------------------
DAVID E. DEEDS, CHIEF EXECUTIVE OFFICER
WAVO CORPORATION
3131 E. CAMELBACK RD., SUITE 320
PHOENIX, ARIZONA 85016
(602) 952-5500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------------
<TABLE>
<S> <C>
COPY TO: COPY TO:
DOUGLAS J. REICH, ESQ. STEVEN D. PIDGEON, ESQ.
WAVO CORPORATION SNELL & WILMER L.L.P.
3131 E. CAMELBACK RD., SUITE 320 ONE ARIZONA CENTER
PHOENIX, ARIZONA 85016 PHOENIX, ARIZONA 85004-0001
(602) 952-5500 (602) 382-6000
FAX (602) 952-5517 FAX (602) 382-6070
</TABLE>
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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 (2) Offering Price Registration Fee
--------------------------- ------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Common Shares Issuable Upon 6,126,826 Shares $3.859 $23,643,421 $6,572.87
Conversion of Preferred Stock and
as Dividends Thereon
Common Shares Issuable Upon 900,000 Shares $3.859 $ 3,473,100 $ 965.52
Exercise of Warrants
Total 7,026,826 Shares $27,116,521 $7,538.39
</TABLE>
(1) Shares of common stock that may be offered pursuant to this Registration
Statement consist of 6,126,826 shares issuable upon conversion of and as
dividends upon, 1,500 shares of Series D Convertible Preferred Stock, and
900,000 shares issuable upon exercise of certain warrants. For purposes of
estimating the number of shares of Common Stock to be included in this
Registration Statement, we calculated (i) 150% of the number of shares of common
stock issuable in connection with the conversion of the Series D Convertible
Preferred Stock, determined as if the Series D Convertible Preferred Stock were
converted in full at the conversion price of $3.9172 as of November 1, 1999;
plus (ii) 100% of the number of shares of common stock issuable as twelve months
of accrued dividends on the Series D Convertible Preferred Stock as if such
dividends were paid in full at the price of $3.9172 per share as of November 1,
1999; plus (iii) 100% of the number of shares of common stock issuable upon
exercise of the warrants. Pursuant to Rule 416 under the Securities Act of 1933,
as amended, this Registration Statement also covers such indeterminate
additional shares of common stock as may become issuable as a result of stock
splits, stock dividends or other similar transactions.
(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 stock on November 1, 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
Subject to Completion, dated November 2, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THE SECURITIES OFFERED BY THIS PROSPECTUS
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
WAVO CORPORATION
7,026,826 Common Shares
This prospectus relates to 7,026,826 shares of common stock of Wavo
Corporation which may be sold from time to time by the selling shareholders
named herein, or their transferees, pledgees, donees or successors.
The shares are being registered to permit the selling shareholders to
sell the shares from time to time in the public market. The shareholders may
sell the common stock through ordinary brokerage transactions, directly to
market makers of our shares, or through any other means described in the section
entitled "Plan of Distribution" beginning on page 12. We cannot assure you that
the selling shareholders will sell all or any portion of the common stock
offered hereby.
We will not receive any of the proceeds from the sale of these shares,
although we have paid the expenses of preparing this prospectus and the related
registration statement.
Our common stock is traded on the Nasdaq National Market under the
symbol "WAVO."
We are an Indiana corporation formed on November 13, 1990. Our
principal executive offices are located at 3131 E. Camelback Rd., Suite 320,
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 INCLUDED IN THE SECTION ENTITLED
"RISK FACTORS" BEGINNING ON PAGE 4. 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 STOCK 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 November ____, 1999.
-------------------------
<PAGE> 4
TABLE OF CONTENTS
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Page
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WAVO Corporation............................................................................................. 1
Recent Developments.......................................................................................... 2
Risk Factors................................................................................................. 4
Use of Proceeds.............................................................................................. 9
Selling Shareholders......................................................................................... 9
Description of Securities.................................................................................... 10
Plan of Distribution......................................................................................... 13
Legal Opinions............................................................................................... 14
Experts...................................................................................................... 14
Where You Can Find More Information.......................................................................... 14
</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 STOCK IS 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.
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WAVO CORPORATION
We provide 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 television, radio, and satellite broadcast infrastructures and the Internet.
Our operations consist of the following service and product areas:
VIRGIN JAMCAST: In September 1999, through a collaboration with Virgin
Entertainment Group, we launched a new entertainment-focused offering called
Virgin JamCast. This product will provide users with digital music files that
are delivered via the Internet or broadcast to their personal computer, or PC,
24 hours a day over the television signal used by the Public Broadcasting
System, or PBS. The service will enable PC users to download, store, listen to
and purchase digital music or purchase CDs at their home or business. The
JamCast product is built upon the same technology used in providing our WaveTop
service.
NEWSPAK: NewsPak is the latest release in our suite of Internet-driven
broadcasting solutions that delivers news content from 34 sources generating
more than 2000 stories a day. It allows web site operators and developers to put
pre-licensed, real-time news from well-known content sources on their sites
quickly and with minimum effort. Generally adding news to a website had been a
complex and difficult task involving time consuming negotiations with content
providers, the challenge of processing a variety of news from different sources
in different formats, and the purchase of expensive equipment and software.
NewsPak makes real time news immediately available for subscribers' websites
with the potential to add more site value and repeat visitors.
eWATCH: Our eWatch(TM) service provides a comprehensive Internet
monitoring service to our customers. This service monitors the Internet,
including public discussion and bulletin boards and web sites, for information
requested by our customers, and delivers the filtered results of the monitoring
to our customers daily via E-mail or the Internet. eWatch currently monitors
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 their competitors. We currently have more than 600 customers for
whom we provide this service.
WAVETOP: WaveTop is an Internet-like consumer-based entertainment and
programming service that is broadcast to PCs, in the home. 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 the users' home PCs via television signals that
are received by TV tuner cards installed in the PCs. 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 began offering WaveTop in April 1998. We seek to
generate revenues for WaveTop primarily from advertiser-sponsors and content
provider-sponsors for our various channels, and seek to generate additional
revenue through:
- revenue-sharing opportunities with on-line service providers
and electronic commerce vendors;
- licensing our WaveTop-related technology;
- creating subscriber-based premium channels; and
- pay-per-view downloads.
NEWSCAST: Our Newscast(TM) service delivers custom filtered 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. Newscast uses patented filtering and pattern matching
technology to filter over 80,000 articles, reports, documents and transcripts
per day from leading national and international sources and deliver customized
news and information to our customers on a real time basis. Throughout the day
this data and information is transmitted directly to our customers' computers,
or internal systems, for immediate and easy access. For example, we provide our
customers in banking and financial services with real-time news and information
about the economy and our customers in manufacturing with 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
quickly, efficiently and automatically searching thousands of sources to
retrieve the specific information they need. In addition to maintaining our
current customers, we are focused on increasing our market share by targeting
Fortune 2000 companies.
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DIGITAL MEDIA SERVICES: Our Digital Media Services provide end-to-end
satellite, FM radio signal, cable, Internet, and land-based data broadcast
communications solutions to companies that send all types of information, from
news, stock quotes and sports scores to digital background music, to their
customers at more than 90,000 sites worldwide.
Our customers include the Associated Press, Business Wire, Dow Jones,
Knight-Ridder/Tribune, PR Newswire, Reuters and Thomson Financial Services. We
also sell satellite receiver equipment and build data broadcast systems that
enable customers, such as the Muzak DBS Division, Standard & Poor's ComStock and
AEI Music Network, to create their own communication networks.
RECENT DEVELOPMENTS
JamCast.com, Inc. was formed as a collaboration between Wavo
Corporation and Virgin Entertainment Group in September 1999. In return for its
contributions, including its agreement to provide $15 million of in-store
promotions over the next three years, Virgin Entertainment Group received a 25%
equity stake in JamCast.com, Inc. We own the remaining 75% interest in
JamCast.com. We also granted to Virgin warrants to purchase one million shares
of our common stock, 500,000 of which may be acquired at an exercise price of
$4.00 per share and the remaining 500,000 shares of which may be acquired at an
exercise price of $5.00 per share.
In September 1999, we entered into a loan modification agreement with
Silicon Valley Bank in order to, expand our credit facility, among other things.
In connection with this agreement, we issued to Silicon Valley Bank a warrant to
purchase 7,500 shares of our common stock at an exercise price of $5.42 per
share. The exercise price and number of shares purchasable upon exercise of the
warrants are subject to adjustment upon the occurrence of certain dilution
events.
On October 4, 1999, we issued 1,500 shares of our Series D Convertible
Preferred Stock, $10,000 par value per share, and warrants to purchase 900,000
shares of our common stock in a private placement to institutional investors.
The net proceeds of the offering, after expenses, were approximately
$13,925,000. Donaldson, Lufkin & Jenrette served as our placement agent for this
transaction. The Series D Preferred Shares carry a dividend rate of 10% per
annum, payable quarterly or upon conversion or redemption and which may be paid
in cash or common stock, and are non-voting. The shares of Series D Preferred
Stock mature on April 6, 2001, subject to extension in certain circumstances, at
which time the Preferred Shares will be redeemed or converted at our option. The
conversion price of the Series D Preferred Shares will be 100% of the lowest
dollar-volume weighted average price of our common shares for any day during the
six trading days ending on and including the conversion date, provided that the
conversion price may not exceed $10.00. From the date of issuance of the Series
D Preferred Shares through October 4, 2000, the holders may not convert any
Series D Preferred Shares, except as described below. This restriction does not
apply if certain events occur, including:
- during the period we trigger a mandatory conversion;
- the delisting or suspension or the threatened delisting or
suspension from trading of our common stock;
- the occurrence of a change of control or the announcement of a
pending change of control;
- the closing bid price of our common stock is less than $3.00
for 30 consecutive trading days,
- we do not have access to our credit facility with Silicon
Valley Bank (or a substantially identical credit facility with
another bank);
- after we issue convertible securities at a variable conversion
price;
- on any date after June 30, 2000 on which the closing bid
price is less than $5.80125 for 15 consecutive trading days;
- after June 30, 2000 unless we meet certain financial and other
conditions;
- with respect to any conversions at a conversion price of
$10.00;
- with respect to an amount of Preferred Shares equal to the
consideration we receive from the issuance of equity
securities after October 4, 1999; or
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- after there has occurred an event described as a triggering
event in the Articles of Amendment which generally covers
circumstances which represent a material default under our
obligations in the Articles of Amendment.
In addition, no holder may convert any Series D Preferred Shares
exceeding the number of shares which, upon giving effect to such conversion,
would cause the holder's beneficial ownership to exceed 4.99% of the common
stock then outstanding (excluding any shares of common stock underlying Series D
Preferred Shares which have not been converted and warrants which have not been
exercised).
The number of shares of common stock to be issued upon conversion of a
Series D Preferred Share is determined by dividing the sum of $10,000 plus
accrued and unpaid dividends by the conversion price. Subject to certain
limitations discussed below, at any time prior to October 5, 2000, we have the
right to require conversion of any or all of the outstanding Series D Preferred
Shares. Among the conditions to our ability to require conversion of the Series
D Preferred Shares are the following:
- a registration statement covering the resale of at least
7,026,826 shares of common stock issued and issuable upon
conversion of the Series D Preferred Shares, dividends on the
Series D Preferred Shares and exercise of the related warrants
has been effective for at least 30 days;
- the common stock has been listed on a national market or
exchange since the Series D Preferred Shares were issued and
no delisting or suspension is threatened;
- from October 4, 1999 through the required conversion date, we
have timely delivered shares of common stock upon conversion
of the Series D Preferred Shares and exercise of the related
warrants and we have been in compliance in all material
respects with and have not breached in any material respects
the documents governing the investment in the Series D
Preferred Shares and the warrants;
- there has been no public announcement by us of a pending
change of control; and
- we must give written notice to the holders of the Series D
Preferred Shares of our election to require conversion of a
certain number of Series D Preferred Shares during the period
beginning on the date after our notice and ending between 10
and 60 business days after the date following our notice.
In addition, we have the right, provided certain conditions are
satisfied, to redeem any outstanding Series D Preferred Shares prior to October
5, 2000 for cash, in whole or in part, at 110% of par plus accrued dividends.
The conditions to our right to redeem Series D Preferred Shares
include, among others:
- a registration statement covering the resale of at least
7,026,826 shares issued or issuable upon conversion of the
Series D Preferred Shares, dividends and exercise of the
related warrants has been effective for at least 30 days;
- the common stock has been listed on a national market or
exchange for at least 30 days prior to such redemption; and
- from October 4, 1999 through the redemption date, we have
timely delivered shares of common stock upon conversion of the
Series D Preferred Shares and exercise of the related warrants
and we have been in compliance in all material respects with
and have not breached in any material respects the documents
governing the investment in the Series D Preferred Shares and
the warrants.
The warrants to purchase the 900,000 shares of our common stock are
exercisable at the price of $4.641 per share, subject to certain antidilution
adjustments. We intend to use the proceeds of this funding for working capital
and to grow our business. In addition, subject to satisfaction of certain
conditions, we may elect to sell an additional $5 million of Series D Preferred
Shares to the investors.
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RISK FACTORS
BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, YOU
SHOULD CAREFULLY READ AND CONSIDER THE RISK FACTORS 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 MAY NEVER BECOME PROFITABLE
We have generated relatively limited revenues from operations and
incurred significant expenses in developing our products and services. As a
result, we have realized net losses each year since our inception in November
1990. We incurred net losses of approximately $8.6 million in 1996,
approximately $19.8 million in 1997, and approximately $28.5 million in 1998. As
of December 31, 1998, we had an accumulated deficit of approximately $96.3
million. We expect to incur significant operating losses through the end of 1999
and may continue to incur operating losses after 1999. Given our history of
losses, limited revenues from operations and significant expenses, we may never
become profitable.
IF WE DO NOT GENERATE WIDESPREAD DEMAND FOR OUR VIRGIN JAMCAST AND NEWSPAK
SERVICES WE MAY NEVER BECOME PROFITABLE
To become profitable, we need to generate broad-based market acceptance
for our recently announced two new services, Virgin JamCast and NewsPak. In
addition to achieving widespread consumer demand, the success of our various
services depends on our ability to meet the following objectives, none of which
we may achieve.
- attracting and retaining the most popular information
providers;
- including our software and technology in products manufactured
by others, including personal computers, TV tuner boards, set
top boxes and other consumer products; and
- generating significant revenues through e-commerce, technology
licensing and other opportunities.
IF WE DO NOT SIGNIFICANTLY EXPAND THE MARKETS FOR OUR NEWSCAST, DIGITAL MEDIA
AND eWATCH SERVICES WE MAY NEVER BECOME PROFITABLE
Our profitability also depends on expanding the market for our
Newscast, Digital Media and eWatch services. The markets for these services also
are relatively new and evolving. Increasing our share of this market depends on
meeting the following objectives, none of which we may achieve.
- demonstrating a technological or economic advantage over our
competitors;
- providing strong customer service to support these services;
- attracting and retaining information providers; and
- increasing sales through our direct sales force.
OUR PRODUCTS AND SERVICES MAY BECOME OBSOLETE UNLESS WE ADAPT TO RAPID
TECHNOLOGICAL CHANGE AND FREQUENT NEW PRODUCT INTRODUCTIONS BY OUR COMPETITORS
The markets for our products and services experience rapid
technological change, frequent new product introductions, and evolving industry
standards. Rapid technological change and new product introduction could render
one or more of our products or services obsolete or place us at a competitive
disadvantage. Accordingly, we believe that our success depends upon our ability
to anticipate changes in consumer preferences, develop and market products and
services that incorporate new technologies, and enhance and expand our existing
product lines and services to keep pace with competing products. 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. Our failure to
anticipate or adapt to technological change or evolving industry standards, and
to successfully introduce new products and services, could materially and
adversely affect our business.
WE MAY NOT SUCCEED UNLESS WE ARE ABLE TO SUCCESSFULLY ADDRESS THE DIFFERENT
COMPETITIVE CHALLENGES IN EACH OF OUR MARKETS
Each of the markets in which we compete presents different competitive
challenges. For example, we currently offer our Virgin JamCast and WaveTop
services primarily to PC users at home and provide our NewsPak. Newscast, eWatch
and Digital Media services primarily to business users. We must respond to
different competitive
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challenges and compete with a different set of competitors in each of our
markets. In addition, with the rapid expansion of the Internet, the number of
companies that can provide similar products and services in each of our markets
is growing significantly. As a result, we expect that more competitors will
enter the markets in which we operate. Increased competition may result in price
reductions, reduced gross margins and loss of market share.
The data broadcasting and information services industry is intensely
competitive, rapidly changing and significantly affected by new product
introductions and other market activities. Each of the markets in which we
operate includes numerous competitors with well recognized brand names that
provide products and services that compete with those we offer, including, but
not limited to:
- several e-commerce and music companies in the Internet
business;
- 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!, among others,
in the Internet-based consumer information and entertainment
market; and
- Scientific-Atlanta, Inc., in the satellite equipment business.
Many of our competitors have longer operating histories and greater
presence in key markets, greater name recognition, access to larger customer
bases and significantly greater financial, sales, marketing, distribution,
technical and other resources. Given these competitive disadvantages, we may not
be able to compete effectively against these competitors. Our inability to
compete would have a material adverse effect on our business. These competitors
may be able to adapt to new or emerging technologies and changes in customer
requirements more quickly than we can. They might also be able to devote greater
resources to the development, promotion and sale of competing products and
services.
WE MAY LOSE THE EXCLUSIVE RIGHT TO USE TECHNOLOGY REQUIRED TO OPERATE NEWSCAST
THEREBY OPENING THE WAY FOR DIRECTLY COMPETITIVE PRODUCTS
A portion of the technology critical to the operation of Newscast,
including the Fast Data Finder technology that filters information from vast
amounts of data, is licensed from third parties. Under a license from Paracel,
Inc., we have been granted exclusive rights to software associated with the use
of the Fast Data Finder and the Newscast technologies through May 29, 2002, and
non-exclusive rights after that time. After May 29, 2002, Paracel could license
its technology, including Fast Data Finder technology, to other parties. If this
were to occur, these other parties may compete with us or offer similar
products. This would likely have a material adverse effect on our business.
THIRD PARTY INFORMATION PROVIDERS MAY TERMINATE OR CHOOSE NOT TO RENEW
AGREEMENTS TO PROVIDE CONTENT WHICH WOULD ADVERSELY AFFECT OUR SERVICE OFFERINGS
We currently rely on a number of content and information providers to
supply entertainment, news, and other information we offer through our various
services. Our agreements with information providers are generally for a term of
one or more years. The termination of or failure to renew one or more
significant information provider agreements would decrease the available
entertainment, news and information that we can offer our customers. Many of the
agreements 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. We cannot
guarantee that an information provider will not terminate its agreement with us
or that it will choose to renew the agreement at the end of its term.
PBS NATIONAL DATACAST, INC. MAY TERMINATE OUR AGREEMENT TO BROADCAST DATA WHICH
COULD PRECLUDE US FROM OFFERING KEY SERVICES
The success of our Virgin JamCast service also will depend to a large
degree on our relationship with PBS National Datacast, Inc. We have entered into
an agreement with PBS National Datacast under which our services will be
broadcast through the television signals transmitted by PBS member stations. If
PBS National Datacast were to terminate our agreement, we likely would not be
able to broadcast these services over television signals without interruption,
if at all. The agreement expires on January 1, 2002. We have an option to extend
the term for an additional five years. However, PBS National Datacast may
terminate the agreement if we fail to comply with the
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provisions of the agreement, breach the agreement, or are in default under the
agreement. We do not have any arrangements with other television broadcasters to
provide alternative transmission of these services and do not currently intend
to enter into any other alternative arrangements. Alternative methods of
transmission may present significant barriers we would have to overcome in order
to make use of them. Any alternative broadcaster would likely be unable to offer
the same geographic coverage of transmission as PBS.
FAILURE OR DISRUPTION OF OUR TELECOMMUNICATIONS SYSTEMS MAY DISRUPT OUR
OPERATIONS AND SERVICE OFFERINGS TO OUR CUSTOMERS
Our customers rely on our ability to provide and distribute information
24 hours a day seven days a week without failures. As a result, our business
depends to a significant extent on our ability to maintain continuous operation
of our computer and telecommunications systems. 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 or those operated by Internet service providers, could have a
material adverse effect on our business. Our systems may suffer damage or
disruption from fire, natural disaster, power loss, telecommunications failure,
or similar events. Our operations also depend 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
arrangement 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 or lead to
degradations in performance or system failure.
ANY DISRUPTION IN RECEIVING INFORMATION FROM THIRD PARTY INFORMATION PROVIDERS
WILL DISRUPT OUR ABILITY TO PROVIDE TIMELY INFORMATION TO OUR CUSTOMERS
We depend on the timely receipt of information feeds and computer
downloads from third parties. Any loss, interruption or disruption of the
transmission of this 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 adversely affect customers of our services. These disruptions could result
in those customers terminating, or failing to renew, their contracts with us. In
either case, our business could be materially and adversely affected.
We also depend largely on the integrity, capability, and maintenance of
third party controlled systems, including satellites and the Internet. 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
contracts. Our Digital Media services use a third party shared satellite uplink
facility in Raleigh, North Carolina, as well as third party FM radio
transmission facilities. Similarly, our WaveTop and Virgin JamCast services use
PBS member station television broadcast facilities to broadcast and deliver
these services. We do not control any of these facilities or equipment.
WE MAY EXPERIENCE DIFFICULTIES AND DELAYS IN MIGRATING OUR TECHNOLOGY TO THE NEW
ADVANCED TELEVISION SYSTEM FORMAT WHICH COULD RESULT IN AN INABILITY TO TRANSMIT
DATA AND A CONSEQUENTIAL LOSS OF CUSTOMERS
The television broadcast industry is in the process of migrating to a
new advanced television system format. This format will enable television
broadcasters to transmit digital programming and non-programming related data at
high speeds using a digital television signal. We may experience unanticipated
difficulties and delays in adapting our analog signal-based data broadcasting
products and services, such as WaveTop and Virgin JamCast, to the digital-based
advanced television system format when it becomes available. Most U.S. and other
television broadcasters, including PBS member stations, currently use analog
signals. When the digital-based advanced television system format achieves
widespread implementation, we will be required to adapt our analog television
signal-based data broadcasting products and services to be compatible. If we
experience significant difficulties or delays in migrating to the digital
format, it could result in a loss of customers or an inability to transmit data,
which could have a material adverse effect on our business.
THE FCC MAY REVOKE OR NOT RENEW LICENSES UPON WHICH WE DEPEND TO PROVIDE OUR
SERVICES TO CUSTOMERS
We must comply with regulations issued by the Federal Communications
Commission. Specifically, the FCC requires broadcasters in television, radio and
other media to obtain and maintain licenses to transmit information. As
described below, the FCC has the right to revoke a license and may elect not to
renew a license after its expiration. If we or any third party broadcaster on
which we rely fails to maintain any required FCC licenses, our ability to
provide our services may be disrupted.
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<PAGE> 11
TELEVISION. In the United States, broadcast television transmissions
are subject to regulation by the FCC. Although we are not currently required to
hold an FCC license to provide our broadcasting services, third parties on which
we rely are or may be required to obtain or maintain FCC licenses to provide
their services to us. In addition, the services we provide may require us to
obtain an FCC license in the future. If we or a third party on which we rely
fails to obtain or maintain any required FCC license, we may be unable to
provide our broadcast services on a continuous basis.
FM SUBCARRIERS. We have entered into contracts with various 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 finding alternative stations, or the terms
upon which they would be willing to supply their services, could adversely
affect our business. We are not currently required to hold an FCC license to act
as a private carrier to use FM subcarrier channels. If in the future we are
required to hold an FCC license in order to use these FM subcarriers, there is
no assurance we will be granted one.
SATELLITE UPLINKS. 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. These licenses 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 our
business. We also share a satellite uplink facility in Raleigh, North Carolina.
This facility is required to hold a license from the Federal Communications
Commission in order to broadcast information via satellite transmission. If this
transmission facility were to fail to obtain any required license from the FCC,
fail to maintain its license, or fail to have a required license renewed by the
FCC, we would be unable to transmit information using this facility.
ADVANCED TELEVISION SYSTEM FORMAT. While Congress specifically
authorized the use of the advanced television system format in the legislation
adopting the format, the FCC has not issued final regulations regarding the
transmission of non-programming related content in the format. If we migrate our
analog signal-based data broadcasting services to the new digital format, we
will become subject to any regulations adopted by the FCC governing transmission
of content in that format.
WE MAY NOT BE ABLE TO RAISE THE SUBSTANTIAL ADDITIONAL CAPITAL REQUIRED TO
EXECUTE OUR BUSINESS PLAN
We expect to continue to incur significant operating expenses in
continuing to develop and market our products and services. Although we believe
currently available funds and capital resources will be sufficient to meet
anticipated needs for capital through mid 2000, we expect that we will need
substantial additional capital to fully implement our business plan beyond mid
2000. We also may need to raise additional funds in order to acquire
complementary businesses, products, or technology. 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
execute our business plan or take advantage of our business opportunities. In
addition, if we elect to raise capital by issuing additional shares of stock,
existing shareholders may incur dilution.
OUR BUSINESS IS LIKELY TO BE HURT IF WE ARE UNABLE TO KEEP OUR SENIOR EXECUTIVE
OFFICERS AND KEY EMPLOYEES
We rely considerably on the abilities of our founder and Chief
Executive Officer, David E. Deeds. We also depend to a significant extent upon
the performance of our other senior executive officers. 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
some members of management not to compete with us, there can be no assurance
that these agreements will be enforceable or effective in retaining these
individuals. As a result, we may lose one or more key individuals to resignation
or death and may be unable to adequately replace these individuals. In addition,
our products and services are highly technical and require key employees with
high levels of technical expertise. Demand for these individuals, particularly
in the locations where we operate, is very high. The loss of the services of any
of our key employees, or the failure to attract and retain qualified personnel
to replace them, could have a material adverse effect on our business.
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<PAGE> 12
A LARGE PORTION OF OUR REVENUE COMES FROM A SMALL NUMBER OF CUSTOMERS, THE LOSS
OF WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR OPERATING RESULTS
A significant percentage of our revenue comes from a relatively small
group of customers. 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 effect on our operating results.
AS AN INTERNET-BASED COMPANY OUR COMMON STOCK PRICE IS UNUSUALLY VOLATILE, WHICH
MAY IMPEDE OUR ABILITY TO RAISE CAPITAL, AND CAUSE OUR INVESTORS TO LOSE MONEY
The market price of our common stock, like the stock of many other
technology companies, particularly those involved in Internet-related businesses
and e-commerce, has been highly volatile. In addition, we have experienced, and
may continue to experience, significant fluctuations in revenues and operating
results from period to period, which tends to increase the volatility of our
common stock price. Factors that affect volatility include:
- unexpected fluctuations in our operating results;
- announcements of technological innovations and new products by
us or our competitors;
- increases in governmental regulation;
- developments or changes in legislation affecting the
industries in which we operate;
- developments in our patent or other proprietary rights or
those of our competitors;
- analyst reports, media stories, news broadcasts, and
interviews; and
- market conditions for technology and Internet-related stocks
in general.
WE MAY ISSUE ADDITIONAL SHARES AND DILUTE YOUR OWNERSHIP PERCENTAGE
Certain events over which you have no control could result in the
issuance of additional shares of our common stock, which would dilute your
ownership percentage in Wavo Corporation. We may issue additional shares of
common stock or preferred stock:
- to raise additional capital or finance acquisitions;
- upon the exercise or conversion of outstanding options,
warrants and shares of convertible preferred stock; or
- in lieu of cash payment of dividends.
As of October 25, 1999, there were outstanding convertible preferred
shares, warrants, and options to acquire up to approximately 13,925,807
additional shares of common stock at prices ranging from $3.9436 to $13.51 per
share. If converted or exercised, these securities will dilute your percentage
ownership of common stock. These securities, unlike the common stock, provide
for antidilution protection upon the occurrence of stock splits, redemptions,
mergers, reclassifications, reorganizations and other similar corporate
transactions, and, in some cases, major corporate announcements. If one or more
of these events occurs, the number of shares of common stock that may be
acquired upon conversion or exercise would increase.
OUR GOVERNING DOCUMENTS AND INDIANA LAW CONTAIN PROVISIONS THAT COULD PREVENT
TRANSACTIONS IN WHICH YOU WOULD RECEIVE A PREMIUM FOR YOUR STOCK
Our Articles of Incorporation and the Indiana Business Corporation Law
contain provisions that could have the effect of delaying, deferring, or
preventing a change in control and the opportunity to sell your shares at a
premium over current market prices. Although intended to protect Wavo
Corporation and its shareholders from unwanted takeovers, their effect could
hinder or prevent transactions in which you might otherwise receive a premium
for your common stock over then-current market prices, and may limit your
ability to approve transactions which may be in your best interests. As a
result, the mere existence of these provisions could adversely affect the price
of our common stock.
WE MAY ISSUE ADDITIONAL SHARES OF PREFERRED STOCK WITHOUT SHAREHOLDER APPROVAL
THAT HAVE RIGHTS SENIOR TO THOSE OF COMMON SHAREHOLDERS
Our Board of Directors has the authority to issue a total of up to
25,000,000 shares of preferred stock and to fix the rates, preferences,
privileges, and restrictions, including voting rights, of the preferred stock,
which typically are senior to the rights of the common shareholders, without any
further vote or action by you and the other common
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<PAGE> 13
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 also could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of Wavo Corporation. This could delay, defer, or prevent a change in
control. Furthermore, holders of preferred stock may have other rights,
including economic rights, senior to the common stock. As a result, their
existence and issuance could have a material adverse effect on the market value
of the common stock. We have in the past issued, and, 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 stock.
WE ARE SUBJECT TO RESTRICTIONS ON DIVIDENDS AND REDEMPTIONS AND DO NOT INTEND TO
PAY ANY DIVIDENDS
We have not paid any dividends on the common stock, and do not plan to
pay any dividends on the common stock for the foreseeable future. The provisions
of the Series 1994 Preferred Shares and the Series D Preferred Shares prohibit
the payment of dividends on the common stock unless the dividends on those
preferred shares are first paid and we get the consent of the holders of the
Series D Preferred Shares. 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 stock.
WE RELY ON COMPUTER HARDWARE, SOFTWARE, AND INTERNET-BASED TECHNOLOGY THAT COULD
HAVE YEAR 2000 PROBLEMS AND ADVERSELY AFFECT THE DELIVERY OF OUR SERVICES TO
CUSTOMERS
We rely extensively on computer hardware, software and related
technology, together with data, in the operation of our business. This
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. 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. The program utilizes a Year 2000 "team" which includes
executive officers. The team must identify Year 2000 issues and 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 these third parties will successfully remediate their own Year
2000 issues over which we have no control.
WE MAKE 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 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, and in
documents incorporated into this prospectus, including those set forth in "Risk
Factors" and "WAVO Corporation", describe factors, among others, that could
contribute to or cause these 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 shareholders will receive all of the proceeds from the sale
of the common stock offered under this prospectus.
SELLING SHAREHOLDERS
The shares of common stock being offered by the selling shareholders
are issuable (1) upon conversion of the Series D Preferred Shares, (2) as
dividends on the Series D Preferred Shares, or (3) upon exercise of the related
warrants. We are registering the shares in order to permit the selling
shareholders to offer these shares for resale
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<PAGE> 14
from time to time. Except for the ownership of the Series D Preferred Shares and
the warrants, the selling shareholders have not had any material relationship
with us within the past three years.
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the common stock by each of the selling
shareholders. The second column lists, for each selling shareholder, the number
of shares of common stock (based on its ownership of Series D Preferred Shares
and related warrants) which would have been issuable to the selling shareholders
on November 1, 1999 upon conversion of all Series D Preferred Shares and
exercise of all warrants held by such selling shareholder on that date. Our
calculations of the number of shares of common stock into which the selling
shareholders may convert the Series D Preferred Shares or exercise the warrants
in the second column assumes a conversion price for the Series D Preferred
Shares of $3.9172, which represents the lowest dollar-volume weighted average
price during the six consecutive trading days through and including November 1,
1999. Because conversion of the Series D Preferred Shares is based on a formula
that depends on the market price of our common stock, the numbers listed in the
second column may fluctuate from time to time. The third column lists each
selling shareholder's pro rata portion (based on its ownership of Series D
Preferred Shares) of the 7,026,826 shares of common stock being offered by
this prospectus. We determined the number of shares of common stock to be
offered for resale by this prospectus by agreement with the selling shareholders
and in order to adequately cover a reasonable increase in the number of shares
required. The number of shares that will actually be issued may be more or less
than 7,026,826 shares being offered by this prospectus, because the conversion
of the Series D Preferred Shares into common stock is based on a formula that
depends upon the market price of our common stock. The fourth column assumes the
sale of all of the shares offered by each selling stockholder.
Under the Articles of Amendment of our Articles of Incorporation for
the Series D Preferred Shares and under the terms of the warrants, no selling
shareholder can convert Series D Preferred Shares or exercise the warrants,
respectively, to the extent such conversion or exercise would cause such selling
shareholder's beneficial ownership of our common stock (other than shares deemed
beneficially owned through ownership of unconverted shares of the Series D
Preferred Shares or unexercised warrants) to exceed 4.99% of the outstanding
shares of our common stock. The selling shareholders may sell all, some or none
of their shares in this offering. See "Plan of Distribution."
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES COMMON SHARES
NAME OF SELLING SHAREHOLDER BENEFICIALLY OWNED OFFERED OWNED AFTER PERCENTAGE
- --------------------------- PRIOR TO THE OFFERING BY THIS PROSPECTUS OFFERINGS OF CLASS
--------------------- ------------------ --------- --------
<S> <C> <C> <C> <C>
2,379,320(1) 3,513,413(3)
HFTP Investment, L.L.C. 0 0%
Leonardo, L.P. 2,379,320(2) 3,513,413(3) 0 0%
</TABLE>
(1) Includes up to 1,929,320 shares of Common Stock issuable on November 1,
1999, upon conversion of the Series D Convertible Preferred Shares at
an assumed conversion price of $3.9172, and up to 450,000 shares of
common stock issuable upon the exercise of the warrant issued in
connection therewith held of record by HFTP Investment, L.L.P.
(2) Includes up to 1,929,320 shares of Common Stock issuable on November 1,
1999, upon conversation of the Series D Convertible Preferred Shares at
an assumed conversion price of $3.9172, and up to 450,000 shares of
common stock issuable upon exercise of the warrant issued in connection
therewith held of record by Leonardo, L.P.
(3) In accordance with the Registration Rights Agreement between us and
these selling shareholders, the number of shares shown as offered by
this prospectus represents 150% of the number of shares issuable upon
conversion of the Series D Preferred Shares as described in note (1)
and (2), plus the shares issuable as dividends thereon and upon
exercise of the warrants.
DESCRIPTION OF SECURITIES
We are authorized to issue up to 100,000,000 shares of common stock and
25,000,000 preferred shares. As of October 29, 1999, 28,924,230 shares of common
stock were issued and outstanding, and a total of 503,463 preferred shares were
issued and outstanding.
Of the 28,924,230 shares of common stock outstanding on October 29,
1999, this amount does not include the 2,702,954 shares of common stock issuable
upon exercise of currently outstanding warrants, and 6,849,922 shares of common
stock reserved for issuance upon exercise of currently outstanding stock
options.
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The following summary of certain provisions of the common stock 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 STOCK
The holders of our common stock 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 stock as to dividends or upon liquidation, the
holders of our common stock are also entitled to 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 stock. Holders of the common stock have no
preemptive, subscription, or conversion rights. The common stock is not subject
to assessment and has no redemption provisions.
PREFERRED STOCK
Our Board of Directors has the authority, without further action by the
shareholders, to issue a total of up to 25,000,000 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
the series, without any further vote or action by the shareholders.
SERIES 1994 PREFERRED SHARES
We have authorized, issued and outstanding 501,963 of our Series 1994
Cumulative Convertible Preferred Shares. These shares have a stated value of
$11.00 per share and are convertible at any time into common stock at $11.00 per
share. The conversion provisions are subject to adjustment if there is a stock
split, dividend, distribution, reorganization, reclassification, merger,
consolidation, share exchange, or other similar corporate transaction.
Cumulative dividends on the shares accrue at the rate of 10% per annum and are
payable when declared by the Board of Directors. We may not pay dividends on the
common stock or other series junior to these preferred shares unless all accrued
dividends have been paid on the latter. On liquidation, the holder of the
preferred shares will be entitled to receive, before any distribution to holders
of our common stock or other series junior to the preferred shares, liquidation
distributions equal to the stated value of $11.00 per preferred share, plus
accrued and unpaid dividends. We may redeem the 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
preferred shares. The preferred shares have no voting rights except as otherwise
provided by law or the Articles of Incorporation. David E. Deeds, the Chairman
and Chief Executive Officer, owns all of the Series 1994 Preferred Shares.
SERIES A, SERIES B, AND SERIES C PREFERRED SHARES
We were authorized to issue, and in the past did issue, three separate
series of convertible preferred shares called the Series A, Series B, and Series
C Convertible Preferred Shares, all with varying provisions. All of these
preferred shares have been converted into common stock and are no longer
outstanding.
SERIES D PREFERRED SHARES
On October 4, 1999, we issued 1,500 shares of our Series D Convertible
Preferred Stock and related warrants in a private placement to institutional
investors. The Series D Preferred Shares carry a dividend rate of 10% per annum,
which may be paid in cash or common stock, and are non-voting. The conversion
price of the Series D Preferred Shares will be 100% of the lowest
weighted-average trading price of our common shares for any day during the six
days prior to conversion date. We may call for conversion of various amounts of
the outstanding preferred shares and at various times throughout the term of the
agreement, subject to certain conditions, including the availability of an
effective registration statement covering the underlying shares of common stock.
In addition, we have the right, subject to certain conditions, to redeem any
outstanding preferred shares for cash, in whole or in part, at 110% of par plus
accrued dividends. The terms of the private placement are more fully set forth
earlier in this prospectus and in our Current Report on Form 8-K, and its
exhibits, filed October 5, 1999.
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WARRANTS
As of the date of this prospectus, we have the following warrants
outstanding:
- We issued warrants to purchasers of our Series C Preferred
Shares. Warrants to purchase up to 545,454 shares of common
stock remain outstanding. The exercise price of these warrants
is $8.80 per share, which is equal to 115% of the average of
the closing sale prices of the common stock for the five
trading days immediately preceding the date we issued the
Series C Preferred Shares. These warrants expire on July 24,
2000.
- In connection with the sale of our Series D Preferred Shares,
we issued warrants to purchase up to 900,000 shares of common
stock. The exercise price of these warrants is $4.641 per
share. These warrants expire on October 4, 2004. The exercise
price and number of shares purchasable upon exercise of the
warrants are subject to adjustment upon the occurrence of
certain dilution events.
- We issued a warrant to Castle Creek Technology Partners, LLC
in connection with a private placement. This warrant enables
Castle Creek to purchase an aggregate of 250,000 shares of
common stock at a purchase price of $11.89 per share. The
exercise price and number of shares purchasable upon exercise
of the warrants are subject to adjustment upon the occurrence
of a stock split, reverse stock split, or distribution to
shareholders. The warrants expire on March 25, 2004.
- In connection with the formation of JamCast.com, we issued to
Virgin Entertainment Group, Inc. warrants to purchase an
aggregate of 1,000,000 shares of our common stock. Warrants to
purchase 500,000 shares are exercisable at $4.00 per share and
expire on September 14, 2001. Warrants to purchase the
remaining 500,000 shares are exercisable at $5.00 per share
and expire on September 14, 2004.
- In connection with a loan modification agreement with Silicon
Valley Bank, we issued to Silicon Valley Bank a warrant to
purchase 7,500 shares of our common stock. The warrants are
exercisable at $5.42 per share. The Warrants expire on
September 24, 2002. The exercise price and number of shares
purchasable upon exercise of the warrants are subject to
adjustment upon the occurrence of certain dilution events.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is American
Securities Transfer & Trust, Inc.
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:
- 270 days after the adjournment of the previous annual meeting;
or
- the close of business on the seventh day following the date on
which notice of the meeting is given to shareholders.
Under the Indiana Business Corporation Law, any person who acquires 10%
of the voting power of the common stock of a corporation is considered an
"interested shareholder." For a period of five (5) years after an acquisition,
certain business combinations between Wavo Corporation and the interested
shareholder are prohibited, unless prior to the acquisition of that common stock
by the interested shareholder, the Board of Directors approves the acquisition
of common stock or the business combination. After the five-year period, only
the following three types of business combinations between Wavo Corporation and
the interested shareholder are permitted:
- a business combination approved by the Board of Directors
before the acquisition of common stock by the interested
shareholder;
- a business combination approved by holders of a majority of
the common stock not owned by the interested shareholder; and
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<PAGE> 17
- a business combination in which the shareholders receive a
price for their common stock at least equal to a formula price
based on the highest price per share paid by the interested
shareholder.
In addition, under Indiana law, a party acquiring Wavo Corporation common stock
may lose the right to vote some or all of those shares if the acquisition
results in that party holding greater than 20%, 33%, or 50% of the outstanding
shares of Wavo Corporation. An acquiring party can avoid the loss of the right
to vote these shares if the right to vote is approved by shareholders holding a
majority of the "disinterested" common stock, and, if authorized by a provision
of our Articles of Incorporation or Bylaws adopted before the time that party
became an interested shareholder, permit the redemption of the acquiring party's
common stock. We have not adopted this kind of a redemption provision.
PLAN OF DISTRIBUTION
The selling shareholders (or, subject to applicable law, their
pledgees, donees, distributees, transferees, or successors in interest) are
offering shares of our common stock, which are issuable to them upon conversion
of the Series D Preferred Shares, in lieu of cash dividends on the Series D
Preferred Shares, and upon exercise of warrants that they acquired from us in a
private placement transaction. This prospectus covers the selling shareholders'
resale of up to 7,026,826 shares of our common stock that we may issue to them
upon conversion of the Series D Preferred Shares, as payments of dividends
thereon and upon exercise of the related warrants, as well as any additional
shares that may become issuable upon conversion of the Series D Preferred
Shares or exercise of the warrants because of stock splits, stock dividends
and other similar transactions.
In connection with our issuance to the selling shareholders of the
Series D Preferred Shares and the related warrants, we subsequently filed a
registration statement on Form S-3 with the Commission. That registration
statement covers the resale of the common stock from time to time on the Nasdaq
National Market or in privately negotiated transactions. This prospectus forms a
part of that registration statement. We have also agreed to prepare and file any
amendments and supplements to the registration statement as may be necessary to
keep it effective until this prospectus is no longer required for the selling
shareholders to sell their shares of common stock and to indemnify and hold the
selling shareholders harmless against certain liabilities under the Securities
Act that could arise in connection with the selling shareholders' sale of their
shares. We have agreed to pay all reasonable fees and expenses incident to the
filing of the registration statement, but the selling shareholders will pay any
brokerage commissions, discounts or other expenses relating to the sale of the
common stock.
The selling shareholders may sell the shares of common stock described
in this prospectus directly or through underwriters, broker-dealers or agents.
The selling shareholders may also transfer, devise or gift their shares by other
means not described in this prospectus. As a result, pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer may offer shares of
common stock. In addition, if any shares covered by this prospectus qualify for
sale pursuant to Rule 144 under the Securities Act, the selling shareholders may
sell such shares under Rule 144 rather than pursuant to this prospectus.
The selling shareholders may sell shares of common stock from time to
time in one or more transactions:
- at fixed prices that may be changed,
- at market prices prevailing at the time of sale, or
- at prices related to such prevailing market prices or at
negotiated prices.
The selling shareholders may offer their shares of common stock in one
or more of the following transactions:
- on any national securities exchange or quotation service on
which the common stock may be listed or quoted at the time of
sale, including the Nasdaq National Market,
- in the over-the-counter market,
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- in privately negotiated transactions,
- through options,
- by pledge to secure debts and other obligations,
- by a combination of the above methods of sale, or
- to cover short sales made pursuant to this prospectus.
In effecting sales, broker or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate in the
resales. The selling shareholders may enter into hedging transactions with
broker-dealers, and in connection with those transactions, broker-dealers may
engage in short sales of the shares. The selling shareholders also may sell
shares short and deliver the shares to close out such short positions. The
selling shareholders also may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the shares,
which the broker-dealer may resell pursuant to this prospectus. The selling
shareholders also may pledge the shares to a broker or dealer, and upon a
default, the broker or dealer may effect sales of the pledged shares pursuant to
this prospectus.
The SEC may deem the selling shareholders and any underwriters,
broker-dealers or agents that participate in the distribution of the shares of
common stock to be "underwriters" within the meaning of the Securities Act. The
SEC may deem any profits on the resale of the shares of common stock and any
compensation received by any underwriter, broker-dealer or agent to be
underwriting discounts and commissions under the Securities Act.
Under the Exchange Act, any person engaged in the distribution of the
shares of common stock may not simultaneously engage in market-making activities
with respect to the common stock for five business days prior to the start of
the distribution. In addition, each selling shareholder and any other person
participating in a distribution will be subject to the Exchange Act, which may
limit the timing of purchases and sales of common stock by the selling
shareholder or any such other person.
LEGAL OPINIONS
Barnes & Thornburg, of Indianapolis, Indiana, will pass upon the
validity of the common stock offered under this prospectus.
EXPERTS
The consolidated financial statements of Wavo Corporation, (formerly
known as WavePhore Corporation) appearing in our Annual Report (Form 10-K) for
the years ended December 31, 1998 and 1997 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference. These consolidated financial statements
are incorporated herein by reference in reliance upon the report given upon the
authority of Ernst & Young LLP, as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS: We file annual, quarterly and special reports and
other information with the Securities and Exchange Commission. You may read and
copy any document that we file at the Commission'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 Commission at 1-800-SEC-0330 for more
information about the Public Reference Rooms. Most of our filings are also
available to you free of charge at the Commission's web site at
http://www.sec.gov.
STOCK MARKET: Our common stock is listed on the Nasdaq National Market
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 under
the Securities Act with the Commission with respect to the common stock offered
under this prospectus. This prospectus is a part of the
14
<PAGE> 19
registration statement. However, it does not contain all of the information
contained in the registration statement and its exhibits. You should refer to
the registration statement and its exhibits for further information about Wavo
Corporation and the common stock offered under this prospectus.
INFORMATION INCORPORATED BY REFERENCE: The Commission 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 Commission will
automatically update and supersede this information. We have filed the following
documents with the Commission and they are incorporated by reference into this
prospectus:
- our Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
- our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1999 and June 30, 1999;
- our Proxy Statement for the 1998 Annual Meeting of Security
Holders, dated April 26, 1999;
- our Current Report on Form 8-K, including Exhibits, filed June
4, 1999;
- our Current Report on Form 8-K, including Exhibits, filed
October 5, 1999; and
- 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 under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act following 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
Wavo Corporation
3131 E. Camelback Road, Suite 320
Phoenix, Arizona 85016
(602) 952-5500.
15
<PAGE> 20
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF INSURANCE AND DISTRIBUTION
The following are the estimated expenses in connection with the
issuance and distribution of the securities being registered, all of which will
be paid by Wavo Corporation:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 7,539
Nasdaq Listing Fee $ 17,500
Legal Fees and Expenses $ 5,000
Accounting Fees and Expenses $ 1,000
Transfer Agent Fees and Expenses $ 500
Miscellaneous $ 1,000
-----------
TOTAL $ 32,539
</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
<PAGE> 21
member if the director reasonably believes the committee merits confidence. A
director is not acting in good faith if the director has knowledge concerning
the matter in question that makes reliance otherwise permitted by the foregoing
provisions unwarranted. A director may, in considering the best interests of a
corporation, consider the effects of any action on shareholders, employees,
suppliers, and customers of the corporation, and communities in which offices or
other facilities of the corporation are located, and any other factors the
director considers pertinent.
Wavo Corporation'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.
Wavo Corporation'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
- 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
- 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 Wavo Corporation are covered by an
insurance policy indemnifying against certain liabilities which arise from their
activities performed on behalf of Wavo Corporation, including liabilities under
the Securities Act of 1933 in certain circumstances.
Insofar as indemnification for liabilities arising under the Securities
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 Securities Act and is therefore unenforceable.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1
to WAVO Corporation's Current Report on Form 8-K dated June 4, 1999).
3.2 Articles of Amendment to the Company's Articles of
Incorporation dated September 30, 1999 (incorporated by
reference to Exhibit 3.1 to WAVO Corporation's Current
Report on Form 8-K filed as of October 5, 1999).
</TABLE>
<PAGE> 22
<TABLE>
<S> <C>
3.3 Restated Code of Bylaws (incorporated by reference to Exhibit 4.2 to the Company's
Registration Statement No. 33-80343 on Form S-8).
4.1 Form of Warrant issued to Selling Shareholders (incorporated by reference to Exhibit 4.1
to WAVO Corporation's Current Report on Form 8-K filed as of October 5, 1999).
4.2 Registration Rights Agreement (incorporated by reference
to Exhibit 4.2 to WAVO Corporation's Current Report on
Form 8-K filed as of October 5, 1999).
5 Opinion of Barnes & Thornburg regarding legality.
10.1 Securities Purchase Agreement (incorporated by reference
to Exhibit 10.1 to WAVO Corporation's Current Report on
Form 8-K filed as of October 5, 1999).
23.1 Consent of Ernst & Young LLP
23.2 Consent of Barnes & Thornburg (included in Exhibit 5).
24 Power of Attorney (included on signature page of registration statement).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement. To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective 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
Securities 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 Securities Act, each filing of the
Registrant's Annual Report under 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 under 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 Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
<PAGE> 23
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities 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 Securities 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 November 2, 1999.
WAVO CORPORATION
/s/ David E. Deeds
----------------------------------------------------
David E. Deeds, Chairman and Chief Executive Officer
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 and Chief Executive Officer November 2, 1999
- ------------------------ (Principal Executive Officer)
David E. Deeds
/ s / Peter M. White President and Director November 2, 1999
- ------------------------
Peter M. White
/ s / Kenneth D. Swenson Executive Vice President, Chief Financial Officer, November 2, 1999
- ------------------------ Treasurer (Principal Financial Officer and
Kenneth D. Swenson Principal Accounting Officer) and Director
/ s / Glenn Scolnik Director November 2, 1999
- ------------------------
Glenn Scolnik
/ s / J. Robert Collins Director November 2, 1999
- ------------------------
J. Robert Collins
</TABLE>
<PAGE> 25
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
3.1 Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
WAVO Corporation's Current Report on Form 8-K dated June 4, 1999).
3.2 Articles of Amendment to the Company's Articles of Incorporation dated September 30, 1999 (incorporated by
reference to Exhibit 3.1 to WAVO Corporation's Current Report on Form 8-K filed as of October 5, 1999).
3.3 Restated Code of Bylaws (incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement No. 33-80343 on Form S-8).
4.1 Form of Warrant issued to Selling Shareholders (incorporated by reference to Exhibit 4.1 to
WAVO Corporation's Current Report on Form 8-K filed as of October 5, 1999).
4.2 Registration Rights Agreement (incorporated by reference to Exhibit 4.2 to WAVO Corporation's
Current Report on Form 8-K filed as of October 5, 1999).
5 Opinion of Barnes & Thornburg regarding legality.
10.1 Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to WAVO Corporation's
Current Report on Form 8-K filed as of October 5, 1999).
23.1 Consent of Ernst & Young LLP
23.2 Consent of Barnes & Thornburg (included in Exhibit 5).
24 Power of Attorney (included on signature page of registration statement).
</TABLE>
<PAGE> 1
Exhibit 5
Barnes & Thornburg
November 2, 1999
WAVO Corporation
3131 E. Camelback Road
Suite 320
Phoenix, Arizona 85016
Re: Registration of Common Shares
Gentlemen:
We have acted as special Indiana counsel to WAVO Corporation, an Indiana
corporation (the "Company"), in connection with its Registration Statement on
Form S-3 (the "Registration Statement") filed under the Securities Act of 1933,
as amended (the "1933 Act"), relating to the registration of up to 7,026,826
of the Company's Common Shares, without par value (the "Shares") comprised of
(i) up to 6,126,826 Shares issuable (a) upon conversion of its Series D
convertible Preferred Stock (the "Preferred Stock") issued pursuant to that
certain Securities Purchase Agreement dated September 30, 1999 (the "Purchase
Agreement") between certain purchasers and the Company (the "Conversion Shares")
and (b) as dividends on the Preferred Stock in accordance with the terms of the
Company's Articles of Incorporation (the "Dividend Shares"), and (ii) up to
900,000 Shares issuable upon exercise of warrants (the "Warrants") issued to
the purchasers of the Preferred Stock under the Purchase Agreement (the
"Warrant Shares").
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 the
Company's Common Shares, without par value, 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 October 26, 1999, attesting
to the corporate existence of the Company in the State of Indiana, and
telephonic verification with such Secretary of State with respect to the
Company's continued valid existence as of the date hereof.
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.
<PAGE> 2
WAVO CORPORATION
November 2, 1999
Page 2
In rendering the opinion expressed below, we have assumed that (i) the Shares
will conform in all material respects to the description thereof set forth in
the Registration Statement, (ii) the Conversion Shares will be issued and
delivered in accordance with the terms of the Preferred Stock and the Purchase
Agreement, (iii) the Dividend Shares will be issued and delivered upon action of
the Board of Directors of the Company in accordance with the Company's Articles
of Incorporation and By-Laws and applicable Indiana law, and (iv) the Warrant
Shares will be issued and delivered in accordance with the terms of the
Warrants, and (v) the Shares will be issued pursuant to an exemption from the
registration requirements of the 1933 Act.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that (i) the Conversion Shares, when issued upon
conversion of the Preferred Shares in accordance with the terms thereof and of
the Purchase Agreement, (ii) the Dividend Shares, when issued upon action of the
Board of Directors of the Company in accordance with the Company's Article of
Incorporation and By-laws and applicable Indiana law, and (iii) the Warrant
Shares, when issued upon exercise of the Warrants in accordance with the terms
thereof, 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 principle 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 Shares. It may not be relied upon by any other
person or for any other 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 reference 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
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Wavo Corporation
for the registration of 7,026,826 shares of its common stock and to the
incorporation by reference therein of our report dated January 25, 1999, with
respect to the consolidated financial statements of Wavo Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1998, filed
with the Securities and Exchange Commission
/s/ Ernst & Young LLP
Phoenix, Arizona
October 26, 1999
