8-K 1 p64086e8-k.txt 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 11, 2000 WAVO CORPORATION (Exact name of registrant as specified in its charter) INDIANA 0-24858 86-0491428 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 3131 E. CAMELBACK ROAD, SUITE 320, PHOENIX, ARIZONA 85016 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (602) 952-5500 Not applicable. (Former name or former address, if changed since last report.) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On October 11, 2000, WAVO Corporation (the "Company") and WavePhore Networks, Inc. ("Networks"), a wholly-owned subsidiary of the Company, completed the sale of substantially all of the assets of Networks related to the satellite and FM delivery of data, to Cidera, Inc. ("Cidera"), a privately held Delaware corporation, for a purchase price of $12,000,000 in cash, $2,500,000 of Cidera's common stock, and the assumption of certain liabilities of Networks. The value of the Networks assets sold to Cidera and the amount and type of consideration paid were negotiated among the Company, Networks and Cidera. The assets sold to Cidera constituted approximately 33% of the Company's total assets and accounted for approximately 71% and 27% of the Company's total revenue and expenses, respectively, on a consolidated basis as of and for the fiscal year ended December 31, 1999, and approximately 41%, 76% and 23% of such amounts, respectively, as of and for the six months ended June 30, 2000. The Company expects to recognize a gain of approximately $2 million as a result of this transaction. The assets being sold to Cidera are not part of the Company's strategic focus for the future. The Company believes that this transaction will allow the Company to focus on its MediaXpress Internet media delivery business. Cidera also has become a preferred Original Equipment Manufacturer of the Company's MediaXpress service for Cidera's information provider customers. A copy of the Press Release issued by the Company on October 12, 2000 is attached hereto as Exhibit 99.1. Such Exhibit is incorporated by reference into this Item 2 and the foregoing description is qualified in its entirety by reference to such Exhibit. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (b) Pro Forma Financial Information. The unaudited pro forma condensed consolidated statements of operations of the Company for the year ended December 31, 1999 and the six months ended June 30, 2000 present historical statements of operations data for the Company, as if the sale of substantially all of the assets of WavePhore Networks, Inc. had been sold to Cidera, Inc. on January 1, 1999. The following unaudited pro forma condensed consolidated balance sheet at June 30, 2000 presents historical information as if the Cidera transaction had occurred on June 30, 2000. The pro forma data are not necessarily indicative of the financial position or results of operations which would actually have been reported had the transactions been consummated at the dates mentioned above or which may be reported in the future. The pro forma financial information should be read in conjunction with the notes to unaudited pro forma condensed financial information and the historical financial statements of Wavo Corporation and notes thereto. 3 Wavo Corporation Unaudited Pro Forma Condensed Balance Sheet as of June 30, 2000 (in thousands)

~~Exhibit~~LESS ~~Number~~BUSINESS ~~Description~~PRO FORMA HISTORICAL DIVESTED ADJUSTMENTS PRO FORMA -------------- ------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $ 4,772 $ -- $ 10.,505 (A) $ 15,277 Cash held in escrow -- -- 500 (B) 500 Accounts receivable 2,443 1,871 ~~Asset~~-- ~~Purchase~~572 ~~Agreement~~Inventories 1,790 ~~dated~~1,790 as-- of-- ~~September~~Investments 11-- -- 2,500 ~~2000~~(C) 2,500 byPrepaid expenses and ~~among~~other ~~WAVO~~1,441 ~~Corporation~~14 -- 1,427 ~~WavePhore~~------------------------------------------------------------- ~~Networks~~Total current assets 10,446 ~~Inc.~~3,675 13,505 20,276 Property and ~~Cidera~~equipment, ~~Inc.~~net ~~99.~~6,204 1,354 ~~Press~~-- ~~Release~~4,850 ~~dated~~Goodwill, ~~September~~net 2,439 -- -- 2,439 Intangible assets, net 10,647 7,441 -- 3,206 Deposits and other assets 566 91 -- 475 ------------------------------------------------------------- Total assets $ 30,302 $ 12,561 ~~2000.~~$ 13,505 $ 31,246 ============================================================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,180 $ 117 $ -- $ 2,063 Deferred revenue 1,668 195 -- 1,473 Accrued expenses 3,094 178 -- 2,916 Bank credit lines 1,660 -- (995) (D) 665 Current portion of long-term debt 1,008 -- -- 1,008 ------------------------------------------------------------- Total current liabilities 9,610 490 (995) 8,125 Long-term debt, less current portion 700 -- -- 700 Other long-term liabilities 1,024 -- -- 1,024 Minority interest (563) -- -- (563) 1999 Series D preferred stock 6,311 -- -- 6,311 Shareholders' equity 13,220 12,071 14,500 15,649 ------------------------------------------------------------- Total liabilities and shareholders' equity $ 30,302 $ 12,561 $ 13,505 $ 31,246 =============================================================

See Notes to Unaudited Pro Forma Financial Statements. 4 Wavo Corporation Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1999 (in thousands, except per share data)

~~Exhibit~~LESS ~~Number~~BUSINESS ~~Description~~PRO ~~10.1~~FORMA ~~Asset~~HISTORICAL ~~Purchase~~DIVESTED ~~Agreement~~ADJUSTMENTS PRO FORMA -------------------------------------------------------------- Revenues $ 22,115 ~~dated~~$ as15,662 $ 960 (E) $ 7,413 Cost of ~~September~~revenues 11,481 ~~2000~~8,671 by652 (F) 3,462 -------------------------------------------------------------- Gross margin 10,634 6,991 308 3,951 Operating expenses Research and ~~among~~development ~~WAVO~~13,269 ~~Corporation~~1,965 ~~WavePhore~~-- ~~Networks~~11,304 ~~Inc.~~Sales and ~~Cidera~~marketing 12,929 ~~Inc.~~2,663 ~~99.~~-- 10,266 General and administrative 6,039 190 (240)(G) 5,609 Amortization 1,783 ~~Press~~709 ~~Release~~-- 1,074 ~~dated~~Special ~~September~~charge 128,491 ~~2000~~86 -- 8,405 -------------------------------------------------------------- 42,511 5,613 (240) 36,658 Other (income) expense: Interest expense 258 -- (84)(H) 174 Interest income and other (605) (6) -- (599) Gain on sale of business -- -- -- -- Minority interest (417) -- -- (417) -------------------------------------------------------------- (764) (6) (84) (842) -------------------------------------------------------------- Net loss (31,113) 1,384 632 (31,865) Less: Preferred stock dividends 1,437 -- -- 1,437 -------------------------------------------------------------- Net loss after preferred stock dividends $(32,550) $ 1,384 $ 632 $(33,302) Basic and dilutive net loss per common share after preferred stock dividends $ (1.13) $ (1.16) ============================================================== Number of shares used in per share calculations 28,827 28,827 ==============================================================

See Notes to Unaudited Pro Forma Financial Statements. 5 Wavo Corporation Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2000 (in thousands, except per share data)

See Notes to Unaudited Pro Forma Financial Statements. 6 Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements as of June 30, 2000 and December 31, 1999. The following explanations serve to describe the assumptions used in determining the pro forma adjustments necessary to present the pro forma condensed consolidated balance sheet as of June 30, 2000. A. Cash proceeds from the sale of certain assets of WavePhore Networks, Inc., net of the cash used to paydown bank credit facilities ($995). B. Cash proceeds from the sale of certain assets of WavePhore Networks, Inc. being held in escrow. C. Investments recorded for common shares of Cidera issued to the Company as part of the sale of certain assets of WavePhore Networks, Inc. D. Reduction of credit facilities using cash proceeds from the sale of certain assets of WavePhore Networks, Inc. The following explanations serve to describe the assumptions used in determining the pro forma adjustments necessary to present the pro forma condensed consolidated statements of operations for the year ended December 31, 1999 and the six months ended June 30, 2000. E. Revenue earned by Wavo from the sale of the Company's MediaXpress services to Cidera. F. Cost of FM radio station licenses retained by the Company. G. Reduction in general and administrative overhead, including such expenses as compensation, audit fees and insurance. H. Decrease of interest expense from reduction of bank credit facilities using cash proceeds from the sale of certain assets of WavePhore Networks, Inc. (c) Exhibits. Exhibit Number Description 99.1 Press Release, dated October 12, 2000. 7 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WAVO CORPORATION Date: October 26, 2000 By: /s/ Kenneth D. Swenson ------------------------------- Kenneth D. Swenson Executive Vice President and Chief Financial Officer 8 EXHIBIT INDEX Exhibit Number Description 99.1 Press Release, dated October 12, 2000.

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