<PAGE>
FILED PURSUANT TO RULE 424(b)(1)
File No. 333-94801
PROSPECTUS
10,000,000 Shares
[LOGO OF GOAMERICA]
Common Stock
----------------
This is an initial public offering of shares of common stock of GoAmerica,
Inc. We are selling the 10,000,000 shares of common stock offered under this
prospectus.
Prior to this offering, there has been no public market for our shares. Our
common stock has been approved for listing on the Nasdaq National Market under
the symbol "GOAM."
See "Risk Factors" beginning on page 6 to read about risks that you should
consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
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<TABLE>
<CAPTION>
Per
Share Total
------ ------------
<S> <C> <C>
Public offering price...................................... $16.00 $160,000,000
Underwriting discount...................................... $ 1.12 $ 11,200,000
Proceeds, before expenses, to us........................... $14.88 $148,800,000
</TABLE>
----------------
The underwriters may purchase up to an additional 1,500,000 shares of common
stock from us at the initial public offering price less the underwriting
discount to cover over-allotments.
The underwriters expect to deliver the shares against payment in New York, New
York on April 12, 2000.
----------------
Bear, Stearns & Co. Inc.
Chase H&Q
U.S. Bancorp Piper Jaffray
Wit SoundView
----------------
DLJdirect Inc.
----------------
The date of this prospectus is April 6, 2000
<PAGE>
GOAMERICA, INC.
[Graphic appears here. The graphic depicts a businessman working on a wirelessly
enabled personal computer. The Company's logo appears across the top of the
graphic. The word "go" appears in the upper lefthand section and the words
"innovation" and "connectivity" appear in the foreground.]
[Description of Artwork]
[Graphic appears here. This graphic is a two page gatefold with the Company's
logo appearing across the top. The words "Goamerica provides wireless access..."
appear under the logo followed by four boxes aligned from left to right. The
first box includes the text "Email, the Web and corporate intranets" and has an
accompanying photograph of the globe. The second box includes the text "Secure,
reliable network operations center" and has an accompanying photograph of
computer technology. The third box contains the text "Allows use on various
network carriers" and has an accompanying photograph of various networks. The
fourth box contains the text "Using GoAmerica software, enables use of a variety
of mobile devices" and has an accompanying photograph of various mobile devices.
In the background are various pictures of business persons and certain wording
including the words "independent access," "internet architecture," "devices,"
"corporate intranets," "wireless connectivity" and "networks."]
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all the information that you should consider
before investing in our common stock. You should read the entire prospectus
carefully, especially "Risk Factors" beginning on page 6 and our financial
statements and related notes.
GoAmerica, Inc.
Our Company
We are a nationwide wireless Internet services provider. We enable our
individual and business subscribers to access remotely the Internet, email and
corporate intranets in real time through a wide variety of mobile computing and
communications devices. Through our Wireless Internet Connectivity Center, we
offer our subscribers comprehensive and flexible mobile data solutions for
wireless Internet access by providing wireless network services, mobile
devices, software and subscriber service and support. We have a limited
operating history and have incurred operating losses since our inception. We
expect to continue to incur increasing operating and net losses for at least
the next several quarters.
Our Go.Web technology and Wireless Internet Connectivity Center enable our
subscribers to access a wide variety of Internet content, such as business and
financial data, news, sports, travel, entertainment, personal contact and other
information. Our subscribers can conduct ecommerce transactions, such as
shopping, reservations and stock trading, to the extent permitted by their
mobile device of choice. Our subscribers can also customize their personal Web
site or "personal portal," www.mygoweb.com, to access their favorite Web sites
quickly. In addition, we offer a variety of email solutions which allow our
subscribers to access their email at their existing Internet and business email
accounts as well as a GoAmerica email address.
We provide our subscribers with flexible and reliable wireless Internet
services across a number of wireless networks and mobile device platforms. To
provide our subscribers with nationwide access, we have established strategic
relationships with many leading wireless network carriers. Our subscribers are
able to use our wireless Internet services with their choice of a wide variety
of leading mobile devices, including Palm operating system-based computing
devices, Research In Motion's interactive pagers, laptop computers, Microsoft
Windows CE-based computers and wirelessly-enabled smart phones. We also have
engineered our wireless Internet services to operate with new versions of many
wireless devices. We seek to enhance our offerings with value-added services
and additional functionality to expand our subscriber base and increase our
recurring revenues.
Our Opportunity
We believe that the growth of the Internet, email and mobile wireless
communications has created a significant market opportunity for service
providers capable of efficiently delivering wireless Internet and email
services over wireless communication networks. While the wireless data services
market is developing rapidly, widespread adoption of wireless data services has
been hindered by a number of challenges, including limited wireless data
service coverage areas, incompatible mobile devices and wireless networks, and
slow wireless data transmission speeds. We believe that adoption of wireless
data applications that serve specific industries, such as financial services,
or enterprise solutions, such as sales force automation, have shown the
greatest penetration to date. However, the rapid development of the Internet,
with the resulting nearly unlimited access to content and to corporate
intranets, has created the opportunity for rapid adoption of wireless devices
for large scale applications, including messaging, email connectivity, personal
information management (address and calendar) connectivity, and access to the
Internet. As a result, we believe that a significant opportunity exists for
wireless Internet service providers that are capable of offering individuals
and businesses easy-to-use, cost-effective and reliable wireless data service.
<PAGE>
The Offering
<TABLE>
<C> <S>
Common Stock offered by us.......... 10,000,000 shares
Common Stock to be outstanding after
this offering...................... 47,136,760 shares
Use of proceeds..................... We expect to use the net proceeds from
this offering to expand sales and
marketing initiatives, expand customer
service and support systems and
capabilities, build a redundant network
operating center, acquire and implement
new operational and financial systems,
increase working capital and for possible
future acquisitions.
Nasdaq National Market symbol....... GOAM
</TABLE>
The number of shares of common stock to be outstanding after this offering
include 13,222,760 shares of common stock to be issued upon automatic
conversion of all outstanding shares of our preferred stock upon completion of
this offering. The shares of common stock to be outstanding after this offering
exclude:
. 10,716,000 shares of common stock authorized for issuance under our
stock option plans and employee stock purchase plan, of which 2,440,008
shares were subject to outstanding options as of December 31, 1999 at a
weighted average exercise price of $0.92; and
. 1,276,800 shares of common stock issuable upon exercise of outstanding
warrants as of December 31, 1999 at a weighted average exercise price of
$1.17.
----------------
Except as otherwise noted, the information in this prospectus reflects a
2,000-for-one split of our outstanding shares of common stock on May 28, 1998
and an eight-for-one split of our outstanding shares of common stock on
February 25, 2000 and assumes (1) the conversion of all outstanding shares of
preferred stock into shares of common stock prior to the closing of this
offering and (2) no exercise of the underwriters' overallotment option.
GoAmerica Communications Corp. was incorporated in Delaware in 1996. In
December 1999, GoAmerica, Inc. was incorporated in Delaware and each of the
security holders of GoAmerica Communications Corp. exchanged all their
outstanding securities for newly issued securities of GoAmerica, Inc. with
equivalent rights and preferences. As a result, GoAmerica Communications Corp.
became a wholly-owned subsidiary of GoAmerica, Inc. See "Description of Capital
Stock." Our principal offices are located at 401 Hackensack Avenue, Hackensack,
New Jersey 07601, and our telephone number is (201) 996-1717.
We maintain a Web site at http://www.goamerica.net. The information
contained at our Web site is not incorporated into and does not constitute part
of this prospectus, and the only information that you should rely on in making
your decision whether to invest in our common stock is the information
contained in this prospectus.
2
<PAGE>
SUMMARY FINANCIAL DATA
The following summary statement of operations data for the period from
August 6, 1996, our date of inception, to December 31, 1996 and for the years
ended December 31, 1997, 1998 and 1999 are derived from our audited financial
statements. The pro forma statement of operations data presented below give
effect to the conversion of all of our Series A Preferred Stock into an
aggregate of 8,038,304 shares of common stock upon the closing of this
offering, as if such conversion had occurred at the dates of issuance. The pro
forma balance sheet data reflects the conversion of our Series A Preferred
Stock described above and the issuance and sale of 648,057 shares of our Series
B Preferred Stock after December 31, 1999 for total net proceeds of
approximately $25.2 million; the issuance of 226,816 shares of common stock in
connection with the Series B Preferred Stock financing; and the conversion of
all of our Series B Preferred Stock into an aggregate of 5,184,456 shares of
common stock. The pro forma as adjusted balance sheet data further reflects the
sale of the 10,000,000 shares of common stock offered by us in this offering,
after deducting the underwriting discount and estimated offering expenses
payable by us. You should read the selected financial data together with our
financial statements and the sections of this prospectus entitled
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
3
<PAGE>
<TABLE>
<CAPTION>
Period from
August 6,
1996 (date of Years Ended
inception) to December 31,
December 31, --------------------------
1996 1997 1998 1999
------------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Subscriber......................... $ -- $ 115 $ 360 $ 1,183
Equipment.......................... -- 33 449 1,341
Other.............................. -- 25 18 207
------ ------- ------- --------
Total revenue........................ -- 173 827 2,731
Costs and expenses:
Cost of subscriber revenue......... -- 88 304 4,051
Cost of equipment revenue.......... -- 15 532 1,648
Sales and marketing................ 43 243 909 3,283
General and administrative......... 175 841 1,549 4,810
Depreciation and amortization...... 3 32 124 275
Settlement costs................... -- -- -- 297
Interest income.................... -- -- (14) (165)
------ ------- ------- --------
Net loss............................. $ (221) $(1,046) $(2,577) $(11,468)
Beneficial conversion feature and
accretion of redemption value of
mandatorily redeemable convertible
preferred stock..................... -- -- -- (10,464)
------ ------- ------- --------
Net loss applicable to common
stockholders........................ $ (221) $(1,046) $(2,577) $(21,932)
====== ======= ======= ========
Basic net loss per share applicable
to common stockholders.............. $(0.02) $ (0.07) $ (0.14) $(1.02)
Diluted net loss per share applicable
to common stockholders.............. $(0.02) $ (0.06) $ (0.14) $(1.00)
====== ======= ======= ========
Weighted average shares used in
computation of basic net loss per
share applicable to common
stockholders........................ 13,947 16,083 18,391 21,590
Weighted average shares used in
computation of diluted net loss per
share applicable to common
stockholders........................ 14,382 16,518 18,826 22,025
Pro forma basic net loss per share... $ (0.45)
Pro forma diluted net loss per
share............................... $ (0.45)
========
Weighted average shares used in
computation of pro forma basic net
loss per share...................... 25,258
Weighted average shares used in
computation of pro forma diluted net
loss per share...................... 25,693
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Forma As
Actual Pro Forma Adjusted
------- --------- ------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $ 6,344 $31,534 $178,984
Working capital.............................. 2,426 27,616 175,066
Total assets................................. 9,757 34,947 182,397
Series A redeemable convertible preferred
stock....................................... 20,755 -- --
Series B redeemable convertible preferred
stock....................................... -- -- --
Stockholders' equity (deficit)............... (16,658) 29,287 176,737
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Period from
August 6,
1996 (date of
inception) to Years Ended December 31,
December 31, --------------------------
1996 1997 1998 1999
------------- ---------------- --------
(in thousands)
<S> <C> <C> <C> <C>
Other Financial Data:
Cash provided by (used in):
Operating activities............. $ (338) $ (803) $ (2,215) $ (6,745)
Investing activities............. (74) (180) (498) (643)
Financing activities............. 1,000 415 4,654 11,771
</TABLE>
Recent Developments
On January 17, 2000, we executed a binding stock purchase agreement with
Dell USA L.P., Impact Venture Partners, L.P., Carousel Capital Partners, L.P.
and Forstmann Little & Co. Equity Partnership-VI, L.P. On January 28, 2000, we
completed this transaction and issued and sold an aggregate of 648,057 shares
of Series B Preferred Stock and issued 226,816 shares of common stock for net
proceeds of approximately $25.2 million. Each share of Series B Preferred Stock
will convert into eight shares of common stock upon completion of this
offering, or an aggregate of 5,184,456 shares.
In connection with the issuance and sale of the Series B Preferred Stock in
January 2000, we expect to incur a non-cash, non-recurring charge to net loss
applicable to common stockholders in the amount of approximately $22 million in
the first quarter of 2000.
5
<PAGE>
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
carefully consider the following risks together with the other information
contained in this prospectus before deciding to buy our common stock. If any
of the following risks or uncertainties actually occur, our business,
financial condition and operating results could be significantly and adversely
affected. If that happens, the price of our common stock could decline, and
you could lose all or part of your investment.
Risks Particular To GoAmerica
We have historically incurred losses and these losses will increase in the
foreseeable future.
We have never earned a profit. We had net losses of $1.0 million, $2.6
million and $11.5 million for the years ended December 31, 1997, 1998 and
1999, respectively. Since our inception, we have invested significant capital
to build our wireless network operations and customer support centers as well
as our customized billing system. Recently, we have invested additional
capital in the development of our software application Go.Web. We plan to
acquire and implement new operational and financial systems, continue to
invest in our network operations and customer support centers, and expand our
sales and marketing efforts. We also provide and expect to continue to provide
mobile devices made by third parties to our customers at prices below our
costs for such devices. In addition, our costs of subscriber revenue,
consisting principally of our purchase of wireless airtime from network
carriers, have historically exceeded our subscriber revenue and we expect such
negative margins to continue until at least March 2000. Further, we have
experienced and expect to continue to experience negative overall gross
margins, which consist of margins on our subscriber revenues, equipment sales
and other revenue. As a result, we have incurred operating losses since our
inception and expect to continue to incur increasing operating losses for at
least the next several quarters. Therefore, we will need to generate
significant revenue to become profitable and sustain profitability on a
quarterly or annual basis.
We may not achieve or sustain our revenue or profit goals, and our ability
to do so depends on the factors specified elsewhere in "Risk Factors" as well
as on a number of factors outside of our control, including the extent to
which:
. our competitors announce and develop, or lower the prices of, competing
services;
. wireless network carriers, data providers and manufacturers of mobile
devices dedicate resources to selling our services; and
. prices for our services decrease as a result of reduced demand or
competitive pressures.
As a result, we may not be able to increase revenue or achieve
profitability on a quarterly or annual basis.
We have only a limited operating history, which makes it difficult to evaluate
an investment in our common stock.
We have only a limited operating history on which you can evaluate our
business, financial condition and operating results. We face a number of risks
encountered by early stage technology companies that participate in new
technology markets, including our ability to:
. manage our dependence on wireless data services which have only limited
market acceptance to date;
. expand our marketing, sales, engineering and support organizations, as
well as our distribution channels;
. negotiate and maintain favorable usage rates with telecommunications
carriers;
. retain and expand our subscriber base at profitable rates;
. recoup our expenses associated with the wireless devices we resell to
subscribers;
6
<PAGE>
. manage expanding operations, including our ability to expand our systems
if our subscriber base grows substantially;
. attract and retain management and technical personnel; and
. anticipate and respond to market competition and changes in technologies
such as wireless data protocols and wireless devices.
We may not be successful in addressing or mitigating these risks and
uncertainties, and if we are not successful our business could be significantly
and adversely affected.
To generate increased revenue we will have to increase substantially the number
of our subscribers, which may be difficult to accomplish.
We will have to increase substantially the number of our subscribers in
order to achieve our business plan. In addition to increasing our subscriber
base, we will have to limit our churn, or the number of subscribers who
deactivate our service. Adding new subscribers will depend to a large extent on
the success of our direct and indirect marketing campaigns, and there can be no
assurance that they will be successful. Limiting our churn rate will require
that we provide our subscribers with a favorable experience in using our
wireless service. Our subscribers' experience may be unsatisfactory to the
extent that our service malfunctions or our customer care efforts, including
our Web site and 800 number customer service efforts, do not meet or exceed
subscriber expectations. In addition, factors beyond our control, such as
technological limitations of certain of the current generation of wireless
devices, which may cause our subscribers' experience with our service to not
meet their expectations, could increase our churn rate and adversely affect our
revenues. Because a significant minority of our subscribers have low or no
usage rates for our services, our churn rates could increase in the future.
We need to improve our systems to monitor our wireless airtime costs more
effectively.
We seek to reduce our wireless airtime costs by periodically matching our
subscribers airtime usage needs to the most appropriate, lowest cost wireless
carrier plans. It is possible for a small number of subscribers, if we do not
assign them to the proper airtime pricing plan, to significantly increase our
costs. The current systems that we use to monitor the airtime charges that we
incur from our wireless carriers do not permit us to timely and effectively
respond to changes in volume and geographic location of subscriber usage, which
directly impact our costs of subscriber revenue. We currently use a manual
system to track such costs and monitor wireless plan usage. We cannot assure
you that we will be able to acquire or develop automated control systems or, if
implemented, that our systems will be able to monitor all subscriber usage or
improve our gross margins.
We have experienced and may continue to experience negative gross margins on
our subscriber revenue.
We intend to pass through to our subscribers all the airtime charges that we
incur from our wireless carriers; however, we have not always been and will not
always be able to pass through such charges because the pricing plans offered
to us by our wireless carriers and to which we assign our subscribers may not
allow us to always cover our subscriber costs. For example, many of our
subscribers have contracted for our Go.Unlimited Plan, which provides for
unlimited nationwide wireless Internet service for a fixed monthly fee. If we
assign those subscribers to a carrier plan that charges us an increasing fee as
subscriber usage increases, then as subscriber usage and our related airtime
costs increase, our margins on subscriber revenues would decrease and may
become negative. Our airtime costs also increase substantially when subscribers
use our services outside of their pre-determined geographic area, which results
in roaming charges to us by the carriers that we do not pass on to our
subscribers. We do not have and may not be able to develop the automated
systems necessary to monitor our subscribers' usage and roaming patterns and
quickly switch our subscribers to a more appropriate, lower cost airtime plan.
In addition, while we continually seek to negotiate better pricing of wireless
airtime plans with our carriers, we cannot assure you that we will be
successful in that regard.
7
<PAGE>
We subsidize the mobile devices that we resell which results in negative gross
margins on our equipment revenue.
In order to facilitate the sale of our wireless Internet services, the sales
prices of the mobile devices manufactured by third parties that we sell to our
subscribers are generally below our costs for such devices. Additionally, we
have also provided many of our resellers and marketing partners with
complimentary mobile devices and GoAmerica service during a trial period in
order to facilitate additional sales of our services. As a result, we have
experienced, and expect to continue to experience, negative gross margins on
the mobile devices that we resell.
We have limited resources and we may be unable to support effectively our
anticipated growth in operations.
We have begun aggressively expanding our operations in anticipation of an
increase in the number of our subscribers. The number of our employees
increased from 23 on December 31, 1998 to 49 on December 31, 1999. We intend to
use a portion of the net proceeds of this offering to hire a significant number
of additional employees. We also intend to use a portion of the net proceeds
from this offering to acquire a state-of-the-art accounting and business
process software package to replace our current manual systems which must be
updated. Additionally, we must continue to develop and expand our systems and
operations as the number of subscribers and the amount of information they wish
to receive, as well as the number of services we offer, increases. This
development and expansion has placed, and we expect it to continue to place,
significant strain on our managerial, operational and financial resources. We
may be unable to develop and expand our systems and operations for one or more
of the following reasons:
. we may not be able to locate or hire at reasonable compensation rates
qualified engineers and other employees necessary to expand our capacity
on a timely basis;
. we may not be able to obtain the hardware necessary to expand the
subscriber capacity of our systems on a timely basis;
. we may not be able to expand our customer service, billing and other
related support systems; and
. we may not be able to obtain sufficient additional capacity from
wireless carriers on a timely basis.
If we cannot manage our growth effectively, our business and operating
results will suffer. Additionally, any failure on our part to develop and
maintain our wireless data services if we experience rapid growth could
significantly adversely affect our reputation and brand name which could reduce
demand for our services and adversely affect our business, financial condition
and operating results.
Our business prospects depend in part on our ability to maintain and improve
our services as well as to develop new services.
We believe that our business prospects depend in part on our ability to
maintain and improve our current services and to develop new services on a
timely basis. Our services will have to achieve market acceptance, maintain
technological competitiveness and meet an expanding range of customer
requirements. As a result of the complexities inherent in our service
offerings, major new wireless data services and service enhancements require
long development and testing periods. We may experience difficulties that could
delay or prevent the successful development, introduction or marketing of new
services and service enhancements. Additionally, our new services and service
enhancements may not achieve market acceptance.
If we do not respond effectively and on a timely basis to rapid technological
change, our business could suffer.
The wireless and data communications industries are characterized by rapidly
changing technologies, industry standards, customer needs and competition, as
well as by frequent new product and service
8
<PAGE>
introductions. Our services are integrated with wireless handheld devices and
the computer systems of our corporate customers. Our services must also be
compatible with the data networks of wireless carriers. We must respond to
technological changes affecting both our customers and suppliers. We may not be
successful in developing and marketing, on a timely and cost-effective basis,
new services that respond to technological changes, evolving industry standards
or changing customer requirements. Our success will depend, in part, on our
ability to accomplish all the following in a timely and cost-effective manner:
. effectively use and integrate new technologies;
. continue to develop our technical expertise;
. enhance our wireless data, engineering and system design services;
. develop applications for new wireless networks and services;
. develop services that meet changing customer needs;
. advertise and market our services; and
. influence and respond to emerging industry standards and other changes.
We depend upon wireless carriers' networks. If we do not have continued access
to sufficient capacity on reliable networks, our business will suffer.
Our success partly depends on our ability to buy sufficient capacity on the
networks of wireless carriers such as AT&T Wireless Services, American Mobile,
Bell Atlantic Mobile and BellSouth Mobile Data and on the reliability and
security of their systems. We depend on these companies to provide
uninterrupted and "bug free" service and would be adversely affected if they
failed to provide the required capacity or needed level of service. In
addition, although we have some forward price protection in our existing
agreements with certain carriers, we could be adversely affected if wireless
carriers were to increase the prices of their services. Our existing agreements
with the wireless carriers generally have one-to-three year terms. Some of
these wireless carriers are, or could become, our competitors.
We depend on third parties for sales of our services which could result in
variable and unpredictable revenues.
We rely substantially on the efforts of others to sell many of our wireless
data communications services. While we monitor the activities of our resellers,
we cannot control how those who sell and market our service perform and we
cannot be certain that their performance will be satisfactory. If the number of
customers we obtain through these efforts is substantially lower than we expect
for any reason, this would have an adverse effect on our business, operating
results and financial condition.
Our goal of building the GoAmerica brand is likely to be difficult and
expensive and our inability to do so could adversely affect our business.
We believe that a quality brand identity will be essential if we are to
increase our number of subscribers and our revenues. We intend to use a
significant portion of the proceeds of the offering to increase substantially
our marketing budget as part of our efforts to build the GoAmerica brand. Our
sales and marketing expenses were approximately $909,000 and $3.3 million for
the years ended December 31, 1998 and 1999, respectively. In 2000, we expect
our sales and marketing expenses to substantially exceed our 2000 revenues. If
our marketing efforts cost more than anticipated, if we cannot increase our
brand awareness or if the GoAmerica brand is not well received by our existing
and potential subscribers, our losses will increase and our business will be
adversely affected.
9
<PAGE>
We depend on our key management and on recruiting and retaining key personnel.
The loss of our key employees could adversely affect our business.
We are particularly dependent on Aaron Dobrinsky and Joseph Korb, our
chairman, chief executive officer and president, and our executive vice
president, respectively, for most of our strategic, managerial and marketing
initiatives. The unexpected loss of such officers would likely have an adverse
effect on our business. In addition, because of the technical nature of our
services and the dynamic market in which we compete, our performance depends on
attracting and retaining other key employees. Competition for qualified
personnel in the wireless data, communications and software industries is
intense and finding and retaining such qualified personnel with experience in
such industries is even more difficult. We believe there are only a limited
number of individuals with the requisite skills to serve in many of our key
positions, and it is becoming increasingly difficult to hire and retain these
persons. Competitors and others may attempt to recruit our employees. A major
part of our compensation to our key employees is in the form of stock option
grants. A prolonged depression in our stock price could make it difficult for
us to retain our employees and recruit additional qualified personnel. We
currently maintain and are the beneficiary of key person life insurance
policies on the lives of Aaron Dobrinsky and Joseph Korb. We do not maintain
insurance policies for any of our other employees.
Wireless data systems failures could harm our business by injuring our
reputation or lead to claims of liability for delayed, improper or unsecured
transmission of data.
A significant barrier to the growth of ecommerce and wireless data services
has been the need for secure and reliable transmission of confidential
information. Our existing wireless data services are dependent on real-time,
continuous feeds from various sources. The ability of our subscribers to access
data in real-time requires timely and uninterrupted connections with our
wireless network carriers. Any significant disruption from our backup landline
feeds could result in delays in our subscribers' ability to receive such
information. In addition, our systems could be disrupted by unauthorized
access, computer viruses and other accidental or intentional actions. We may
incur significant costs to protect against the threat of security breaches or
to alleviate problems caused by such breaches. If a third party were able to
misappropriate our subscribers' personal or proprietary information or credit
card information, we could be subject to claims, litigation or other potential
liabilities that could adversely impact our business. There can be no assurance
that our systems will operate appropriately if we experience a hardware or
software failure. A failure in our systems could cause delays in transmitting
data, and as a result we may lose customers or face litigation that could
adversely affect our business.
An interruption in the supply of products and services that we obtain from
third parties could cause a decline in sales of our services.
In designing, developing and supporting our wireless data services, we rely
on wireless carriers, mobile device manufacturers, content providers and
software providers. These suppliers may experience difficulty in supplying us
products or services sufficient to meet our needs or they may terminate or fail
to renew contracts for supplying us these products or services on terms we find
acceptable. Any significant interruption in the supply of any of these products
or services could cause a decline in sales of our services, unless and until we
are able to replace the functionality provided by these products and services.
We also depend on third parties to deliver and support reliable products,
enhance their current products, develop new products on a timely and cost-
effective basis and respond to emerging industry standards and other
technological changes.
We may face increased competition which may negatively impact our prices for
our services or cause us to lose business opportunities.
The market for our services is expected to become increasingly competitive.
The widespread adoption of industry standards in the wireless data
communications market may make it easier for new market entrants and existing
competitors to introduce services that compete against ours. We developed our
solutions using standard industry development tools. Many of our agreements
with wireless carriers, wireless handheld device manufacturers and data
providers are non-exclusive. Our competitors may use the same products and
services
10
<PAGE>
in competition with us. With time and capital, it would be possible for
competitors to replicate our services and offer similar services at a lower
price. We expect that we will compete primarily on the basis of the
functionality, breadth, quality and price of our services. Our current and
potential competitors include:
. Emerging wireless Internet services providers, including OmniSky,
Wireless Knowledge, a joint venture of Microsoft and Qualcomm,
Incorporated, and Infospace.com which recently acquired Saraide.com and
those, such as Aether Systems, Inc., focusing on specific industries
such as on-line financial trading;
. Wireless device manufacturers, such as 3Com, Motorola and Research in
Motion;
. Wireless network carriers, such as AT&T Wireless Services, Bell Atlantic
Mobile, BellSouth Wireless Data, Sprint PCS and Nextel Communications,
Inc.; and
. Wireline internet service providers and portals, such as America Online
and Yahoo!.
Many of our existing and potential competitors have substantially greater
financial, technical, marketing and distribution resources than we do.
Additionally, many of these companies have greater name recognition and more
established relationships with our target customers. Furthermore, these
competitors may be able to adopt more aggressive pricing policies and offer
customers more attractive terms than we can. In addition, we have established
strategic relationships with many of our potential competitors. In the event
such companies decide to compete directly with us, such relationships would
likely be terminated, which might have an adverse effect on our business and
reduce our market share or force us to lower prices to unprofitable levels.
We may not have adequately protected our intellectual property rights.
Our success substantially depends on our ability to sell services for which
we may not have intellectual property rights. We currently do not have patents
on any of our intellectual property. We have filed for a patent on certain
aspects of our Go.Web technology. We cannot assure you we will be successful in
protecting our intellectual property through patent law. In addition, although
we have applied for U.S. federal trademark protection, we do not have any U.S.
federal trademark registrations for the marks "GoAmerica", "Go.Web", "Law on
the Go" or certain of our other marks and we may not be able to obtain such
registrations due to conflicting marks or otherwise. We rely primarily on trade
secret laws, patent law, copyright law, unfair competition law and
confidentiality agreements to protect our intellectual property. To the extent
that our technology is not adequately protected by intellectual property law,
other companies could develop and market similar products or services which
could adversely affect our business.
We may be sued by third parties for infringement of their proprietary rights
and we may incur defense costs and possibly royalty obligations or lose the
right to use technology important to our business.
The telecommunications and software industries are characterized by the
existence of a large number of patents and frequent litigation based on
allegations of patent infringement or other violations of intellectual property
rights. As the number of participants in our market increases, the possibility
of an intellectual property claim against us could increase. Any intellectual
property claims, with or without merit, could be time consuming and expensive
to litigate or settle and could divert management attention from administering
our business. A third party asserting infringement claims against us or our
customers with respect to our current or future products may adversely affect
us by, for example, causing us to enter into costly royalty arrangements or
forcing us to incur settlement or litigation costs. Please refer to "Business--
Intellectual Property Rights" for information relating to claims we have
received.
We may be subject to liability for transmitting information, and our insurance
coverage may be inadequate to protect us from this liability.
We may be subject to claims relating to information transmitted over systems
we develop or operate. These claims could take the form of lawsuits for
defamation, negligence, copyright or trademark infringement or other actions
based on the nature and content of the materials. Although we carry general
liability insurance,
11
<PAGE>
our insurance may not cover potential claims of this type or may not be
adequate to cover all costs incurred in defense of potential claims or to
indemnify us for all liability that may be imposed.
We may acquire or make investments in companies or technologies that could
cause loss of value to our stockholders and disruption of our business.
We intend to explore opportunities to acquire companies or technologies in
the future. Entering into an acquisition entails many risks, any of which could
adversely affect our business, including:
. failure to integrate the acquired assets and/or companies with our
current business;
. the price we pay may exceed the value we eventually realize;
. loss of share value to our existing stockholders as a result of issuing
equity securities as part or all of the purchase price;
. potential loss of key employees from either our current business or the
acquired business;
. entering into markets in which we have little or no prior experience;
. diversion of management's attention from other business concerns;
. assumption of unanticipated liabilities related to the acquired assets;
and
. the business or technologies we acquire or in which we invest may have
limited operating histories and may be subject to many of the same risks
we are.
Our quarterly operating results are subject to significant fluctuations and, as
a result, period-to-period comparisons of our results of operations are not
necessarily meaningful.
Our quarterly operating results may fluctuate significantly in the future as
a result of a variety of factors. These factors include:
. the demand for and market acceptance of our services;
. downward price adjustments by our competitors on services they offer
that are similar to ours;
. changes in the mix of services sold by our competitors;
. technical difficulties or network downtime affecting wireless
communications generally;
. the ability to meet any increased technological demands of our
customers; and
. economic conditions specific to our industry.
Therefore, our operating results for any particular quarter may differ
materially from our expectations or those of security analysts and may not be
indicative of future operating results. The failure to meet expectations may
cause the price of our common stock to decline substantially.
We may need additional funds which, if available, could result in an increase
in our interest expense or additional dilution to stockholders. If additional
funds are needed and are not available, our business could be negatively
impacted.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to fund our operating needs
for at least the next 24 months, including the expansion of our sales and
marketing program. Thereafter, we may require additional financing. At this
time, we do not have any bank credit facility or other working capital credit
line under which we may borrow funds for working capital or other general
corporate purposes. If our plans or assumptions change or are inaccurate, we
may be required to seek additional capital sooner than anticipated. We may need
to raise such capital through public or private debt or equity financing.
12
<PAGE>
If funds are raised through the issuance of equity securities, the
percentage ownership of our then-current stockholders will be reduced and the
holders of new equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock. If additional funds are
raised through a bank credit facility or the issuance of debt securities, the
holder of such indebtedness would have rights senior to your rights and the
terms of such indebtedness could impose restrictions on our operations. If we
need to raise additional funds, we may not be able to do so on terms favorable
to us, or at all. If we cannot raise adequate funds on acceptable terms, we may
not be able to continue to fund our operations.
Risks Particular To Our Industry
The market for our services is new and highly uncertain.
The market for wireless data services is still emerging and continued growth
in demand for and acceptance of these services remains uncertain. Current
barriers to market acceptance of these services include cost, reliability,
functionality and ease of use. We cannot be certain that these barriers will be
overcome. If the market for our services does not grow or grows slower than we
currently anticipate, our business, financial condition and operating results
could be adversely affected.
New laws and regulations that impact our industry could adversely affect our
business.
We are not currently subject to direct regulation by the Federal
Communications Commission or any other governmental agency, other than
regulations applicable to businesses in general. However, in the future, we may
become subject to regulation by the FCC or another regulatory agency. In
addition, the wireless carriers who supply us airtime are subject to regulation
by the FCC and regulations that affect them could adversely affect our
business. Our business could suffer depending on the extent to which our
activities or those of our customers or suppliers are regulated.
Risks Particular To The Offering
Our stock price, like that of many technology companies, may be volatile and it
is difficult to predict whether a market for our common stock will develop.
We expect that the market price of our common stock will fluctuate as a
result of variations in our quarterly operating results. These fluctuations may
be exaggerated if the trading volume of our common stock is low. In addition,
due to the technology-intensive and emerging nature of our business, the market
price of our common stock may rise and fall in response to a variety of
factors, including:
. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of a significant customer or order;
. changes in estimates of our financial performance or changes in
recommendations by securities analysts regarding us or our industry; or
. general market or economic conditions.
This risk may be heightened because our industry is new and evolving,
characterized by rapid technological change and susceptible to the introduction
of new competing technologies or competitors.
In addition, equity securities of many technology companies have experienced
significant price and volume fluctuations. These price and volume fluctuations
often have been unrelated to the operating performance of the affected
companies. Volatility in the market price of our common stock could result in
securities class action litigation. This type of litigation, regardless of the
outcome, could result in substantial costs and a diversion of management's
attention and resources.
13
<PAGE>
We cannot predict the extent to which investor interest in our common stock
will lead to the development of a trading market or how liquid that market
might become. As discussed earlier, our financial results are difficult to
predict and could fluctuate significantly.
Upon completion of this offering, you will experience dilution.
Our tangible assets are readily identified assets like property, equipment,
cash, securities and accounts receivable. The value of these assets on a pro
forma as adjusted basis minus the value of our liabilities equals $3.75 per
share, assuming the offering is completed. The offering price exceeds this
amount by $12.25 per share. Therefore, you will be paying more for a share of
stock than the value reflected in our accounts of tangible assets for that
share. If we were forced to sell all our assets and distribute all the
proceeds, you would not recover the amount you paid for shares unless we can
sell the assets for more than the value we report for our tangible assets. We
also have outstanding a large number of stock options and warrants to purchase
common stock with exercise prices significantly below the price of shares in
this offering. You will experience further dilution to the extent these options
or warrants are exercised.
We have anti-takeover defenses that could delay or prevent an acquisition and
could adversely affect the price of our common stock.
Provisions of our certificate of incorporation and bylaws and provisions of
Delaware law could delay or prevent an acquisition or change of control of
GoAmerica or otherwise adversely affect the price of our common stock. For
example, our certificate of incorporation authorizes 4,351,943 shares of
undesignated preferred stock which our board of directors can designate and
issue without further action by our stockholders, establishes a classified
board of directors, eliminates the rights of stockholders to call a special
meeting of stockholders, eliminates the ability of stockholders to take action
by written consent, and requires stockholders to comply with advance notice
requirements before raising a matter at a stockholders' meeting. As a Delaware
corporation, we are also subject to the Delaware anti-takeover statute
contained in Section 203 of the Delaware General Corporation Law. Please refer
to "Description of Capital Stock" for a more detailed discussion of these
provisions.
Future sales of our common stock may negatively affect our stock price.
All the shares sold by us in this offering will be freely tradable.
Following this offering, a large number of other outstanding shares of our
common stock will be available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result
of sales of a large number of shares of our common stock in the market
following this offering, or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. For more information,
see "Shares Eligible for Future Sale." Our directors, executive officers, and
other stockholders, who collectively hold a total of 37,204,808 shares of
common stock, have agreed not to dispose of any shares of common stock, subject
to limited exceptions, for a period of 180 days after the date of this
prospectus, without the prior written consent of Bear, Stearns & Co. Inc., on
behalf of the underwriters.
We will retain broad discretion in using the net proceeds from this offering
and may spend a substantial portion in ways in which you do not agree.
Our management will retain broad discretion to allocate the proceeds of this
offering. The proceeds may be spent in ways with which you and other
stockholders may not agree. Management's failure to spend the proceeds
effectively could have an adverse affect on our business, results of operation
and financial condition.
Because we do not intend to pay any cash dividends on our shares of common
stock, our stockholders will not be able to receive a return on their shares
unless they sell them.
We have never paid or declared any cash dividends on our common stock or
other securities and intend to retain any future earnings to finance the
development and expansion of our business. We do not anticipate
14
<PAGE>
paying any cash dividends on our common stock in the foreseeable future. Unless
we pay dividends, our stockholders will not be able to receive a return on
their shares unless they sell them. See "Dividend Policy."
We make certain forward-looking statements in this prospectus that are not
based on historical facts, but discuss our future expectations. The words
"may," "would," "could," "will," "expect," "anticipate," "believe," "intend,"
"plan," "estimate" and similar expressions are meant to identify such forward-
looking statements. Actual results may differ materially from those expressed
or implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those set forth
above. Readers are cautioned not to place undue reliance on these forward-
looking statements which reflect our views only as of the date of this
prospectus.
15
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 10,000,000 shares of
common stock that we are offering will be approximately $147.5 million, after
deducting the underwriting discount and estimated offering expenses. The net
proceeds are estimated to be approximately $169.8 million if the underwriters
fully exercise their right to purchase additional shares of common stock to
cover over-allotments.
Our primary uses of the proceeds of this offering will be to:
. expand our sales and marketing initiatives (approximately $40.0
million);
. expand our customer service and support systems and capabilities
(approximately $5.0 million);
. build our planned redundant network operating center (approximately $5.0
million);
. acquire and implement new automated subscriber airtime monitoring
systems and new accounting and financial software (approximately $10.0
million); and
. increase our working capital.
We may also use a portion of the net proceeds to finance acquisitions that
complement our business. Although we have discussions in the ordinary course of
our business with potential acquisition targets, we currently do not have any
binding commitments or agreements with respect to any acquisitions. Pending
application of the net proceeds for the purposes described above, we intend to
invest such funds in short-term, investment-grade, interest bearing securities.
See "Risk Factors--We may acquire or make investments in companies or
technologies that could cause loss of value to our stockholders and disruption
of our business." and "--We will retain broad discretion in using the net
proceeds from this offering and may spend a substantial portion in ways in
which you do not agree."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently anticipate that we will retain any future earnings to fund the growth
and development of our business and, therefore, do not anticipate paying any
cash dividends in the foreseeable future. Payment of future dividends, if any,
will be at the discretion of our board of directors after taking into account
various factors, including our earnings, financial condition, operating results
and current and anticipated cash needs, as well as any economic conditions the
board of directors may deem relevant. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
16
<PAGE>
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of December 31, 1999. This unaudited information is
presented:
. on an actual basis;
. on a pro forma basis to give effect to: the issuance and sale of 648,057
shares of our Series B Preferred Stock in January 2000 for net proceeds
of approximately $25.2 million and 226,816 shares of common stock issued
in connection therewith; the increase in authorized shares of common
stock to 200,000,000 shares; and the conversion of our Series A and
Series B Preferred Stock into an aggregate of 13,222,760 shares of
common stock; and
. on a pro forma as adjusted basis to give further effect to the sale by
us of 10,000,000 shares of common stock offered by this prospectus,
after deducting the underwriting discount and estimated offering
expenses payable by us.
You should read this information together with "Selected Financial Data,"
our historical financial statements, and the notes relating to those financial
statements, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" which appear elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Pro Forma as
Actual Forma Adjusted
------- -------- ------------
(in thousands,
except share and per share
data)
<S> <C> <C> <C>
Cash and cash equivalents..................... $ 6,344 $ 31,534 $178,984
======= ======== ========
Series A redeemable convertible preferred
stock, $.01 par value, authorized: 10,500
shares actual, none pro forma and pro forma
as adjusted; issued and outstanding: 10,500
shares actual and none pro forma and pro
forma as adjusted; $10,500,000 liquidation
preference................................... $20,755 $ -- $ --
Series B redeemable convertible preferred
stock, $.01 par value, authorized: none
actual, pro forma and pro forma as adjusted;
issued and outstanding: none actual, pro
forma and pro forma as adjusted; $26,000,000
liquidation preference....................... -- -- --
Stockholders' equity (deficit):
Preferred Stock, $.01 par value, authorized;
5,000,000 shares actual, 4,351,943 pro
forma and pro forma as adjusted; issued and
outstanding: none actual, pro forma and pro
forma as adjusted.......................... -- -- --
Common Stock, $.01 par value, authorized:
100,000,000 shares actual, 200,000,000 pro
forma and pro forma as adjusted; issued and
outstanding: 23,687,184 actual, 37,136,760
pro forma and 47,136,760 shares pro forma
as adjusted, respectively ................. 237 371 471
Additional paid-in capital.................. 5,484 51,295 198,645
Deferred employee compensation.............. (7,067) (7,067) (7,067)
Accumulated deficit......................... (15,312) (15,312) (15,312)
------- -------- --------
Total stockholders' equity (deficit)...... (16,658) 29,287 176,737
------- -------- --------
Total capitalization...................... $ 4,097 $ 29,287 $176,737
======= ======== ========
</TABLE>
The number of shares as adjusted for this offering excludes:
. 10,716,000 shares of common stock authorized for issuance under our
stock option plans and employee stock purchase plan, of which 2,440,008
shares were subject to outstanding options as of December 31, 1999 at a
weighted average exercise price of $0.92; and
. 1,276,800 shares of common stock issuable upon exercise of outstanding
warrants as of December 31, 1999 at a weighted average exercise price of
$1.17.
17
<PAGE>
DILUTION
You will experience immediate and substantial dilution in the net tangible
book value per share of your common stock.
Our pro forma net tangible book value as of December 31, 1999, was $29.3
million, or $0.79 per share of common stock. Pro forma net tangible book value
per share is determined by dividing our tangible net worth (tangible assets
less liabilities), by the number of shares of common stock outstanding, after
giving effect to the conversion of our Series A and Series B Preferred Stock
into shares of common stock.
After giving effect to the sale of the shares of common stock offered by us
hereby, and after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us, our pro forma net tangible book
value as of December 31, 1999 was $3.75 per share of common stock. This
represents an immediate increase in such net tangible book value of $2.96 per
share to our existing investors and immediate dilution of $12.25 per share to
new investors purchasing shares in this offering. The following table
illustrates the per share dilution.
<TABLE>
<S> <C> <C>
Initial public offering price per share....................... $16.00
Pro forma net tangible book value per share as of December
31, 1999................................................... $0.79
Increase per share attributable to this offering............ 2.96
-----
Pro forma net tangible book value per share after this
offering..................................................... 3.75
------
Dilution per share to new investors in this offering.......... $12.25
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the total number of shares of common stock purchased from us, the total
consideration paid and the average consideration per share paid by existing
investors and by new investors purchasing shares offered by us hereby.
Underwriting discounts and commissions and offering expenses have not been
deducted.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing investors.... 37,136,760 78.8% $ 44,731,595 21.8% $ 1.20
New investors......... 10,000,000 21.2 160,000,000 78.2 16.00
---------- ----- ------------ -----
Total............... 47,136,760 100.0% $204,731,595 100.0%
========== ===== ============ =====
</TABLE>
The calculations above exclude from the number of outstanding shares of
common stock:
. 10,716,000 shares of common stock authorized for issuance under our
stock option plans and employee stock purchase plan, of which 2,440,008
shares were subject to outstanding options as of December 31, 1999 at a
weighted average exercise price of $0.92; and
. 1,276,800 shares of common stock issuable upon exercise of outstanding
warrants as of December 31, 1999 at a weighted average exercise price of
$1.17.
To the extent that such options and warrants are exercised, there will be
further dilution to new investors.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the period from
August 6, 1996, our date of inception, to December 31, 1996 and for the years
ended December 31, 1997, 1998 and 1999 and the following selected balance sheet
data as of December 31, 1996, 1997, 1998 and 1999 are derived from our audited
financial statements.
The pro forma statement of operations data presented below give effect to
the conversion of all of our Series A Preferred Stock into an aggregate of
8,038,304 shares of common stock upon the closing of this offering, as if such
conversion had occurred at the dates of issuance. The pro forma balance sheet
data reflects the conversion of our Series A Preferred Stock discussed above
and the issuance and sale of 648,057 shares of our Series B Preferred Stock
after December 31, 1999 for total net proceeds of approximately $25.2 million;
the issuance of 226,816 shares of common stock in connection with the Series B
Preferred Stock financing; and the conversion of all of our Series B Preferred
Stock into an aggregate of 5,184,456 shares of common stock. The pro forma as
adjusted balance sheet data further reflects the sale of the 10,000,000 shares
of common stock offered by us in this offering, after deducting the
underwriting discount and estimated offering expenses payable by us. You should
read the selected financial data together with our financial statements and the
sections of this prospectus entitled "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
19
<PAGE>
<TABLE>
<CAPTION>
Period from
August 6, 1996 Years Ended December 31,
(date of inception) --------------------------
to December 31, 1996 1997 1998 1999
-------------------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Subscriber.................. $ -- $ 115 $ 360 $ 1,183
Equipment................... -- 33 449 1,341
Other....................... -- 25 18 207
------ ------- ------- --------
Total revenue................. -- 173 827 2,731
Costs and expenses:
Cost of subscriber revenue.. -- 88 304 4,051
Cost of equipment revenue... -- 15 532 1,648
Sales and marketing......... 43 243 909 3,283
General and administrative.. 175 841 1,549 4,810
Depreciation and
amortization............... 3 32 124 275
Settlement costs............ -- -- -- 297
------ ------- ------- --------
Total costs and expenses...... 221 1,219 3,418 14,364
------ ------- ------- --------
Loss from operations.......... (221) (1,046) (2,591) (11,633)
Interest income............... -- -- 14 165
------ ------- ------- --------
Net loss...................... $ (221) $(1,046) $(2,577) $(11,468)
====== ======= ======= ========
Beneficial conversion feature
and accretion of redemption
value of mandatorily
redeemable convertible
preferred stock.............. -- -- -- (10,464)
------ ------- ------- --------
Net loss applicable to common
stockholders................. $ (221) $(1,046) $(2,577) $(21,932)
====== ======= ======= ========
Basic net loss per share
applicable to common
stockholders................. $(0.02) $ (0.07) $ (0.14) $ (1.02)
====== ======= ======= ========
Diluted net loss per share
applicable to common
stockholders................. $(0.02) $(0.06) $(0.14) $(1.00)
====== ======= ======= ========
Weighted average shares used
in computation of basic net
loss per share applicable to
common stockholders.......... 13,947 16,083 18,391 21,590
Weighted average shares used
in computation of diluted net
loss per share applicable to
common stockholders.......... 14,382 16,518 18,826 22,025
Pro forma basic net loss per
share........................ $ (0.45)
========
Pro forma diluted net loss per
share........................ $ (0.45)
========
Weighted average shares used
in computation of pro forma
basic net loss per share..... 25,258
Weighted average shares used
in computation of pro forma
diluted net loss per share... 25,693
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
------------------------------------------------
1999
------------------------------
Pro Forma
1996 1997 1998 Actual Pro Forma as Adjusted
---- ---- ------ ------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.... $587 $ 20 $1,961 $ 6,344 $31,534 $178,984
Working capital (deficit).... 700 (143) 1,476 2,426 27,616 175,066
Total assets................. 791 324 3,010 9,757 34,947 182,397
Series A redeemable
convertible preferred
stock....................... -- -- -- 20,755 -- --
Series B redeemable
convertible preferred
stock....................... -- -- -- -- -- --
Stockholders' equity
(deficit)................... 779 148 2,225 (16,658) 29,287 176,737
</TABLE>
<TABLE>
<CAPTION>
Period from Years Ended December
August 6, 1996 31,
(date of inception) ------------------------
to December 31, 1996 1997 1998 1999
-------------------- ----- ------- --------
(in thousands)
<S> <C> <C> <C> <C>
Other Financial Data:
Cash provided by (used in):
Operating activities........... $ (338) $(803) $(2,215) $ (6,745)
Investing activities........... (74) (180) (498) (643)
Financing activities........... 1,000 415 4,654 11,771
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
results of operations in conjunction with the financial statements and the
notes thereto included elsewhere in this prospectus. The results shown in this
prospectus are not necessarily indicative of the results we will achieve in any
future periods.
Overview
We provide nationwide wireless Internet services. We derive our revenue
primarily from the sale of wireless data services and the sale of related
mobile devices to our subscribers. During March 1997, we commenced offering our
services to individuals and businesses. Since our inception, we have invested
significant capital to build our wireless network operations and customer
support centers as well as our customized billing system. Recently, we have
invested additional capital in the development of our software application
Go.Web and other software applications. Our plan is to continue to invest in
our network operations and customer support centers, as well as to expand our
sales and marketing efforts. We provide and expect to continue to provide
mobile devices made by third parties to our customers at prices below our costs
for such devices. We also expect to continue to incur significant sales and
marketing, systems development and administrative expenses. We have incurred
operating losses since our inception and expect to continue to incur increasing
operating losses for at least the next several quarters. Therefore, we will
need to generate significant revenue to become profitable and sustain
profitability on a quarterly or annual basis. We will have to increase
substantially our subscriber base in order to achieve our business plan.
Our subscriber revenue primarily consists of monthly service fees, which we
recognize as services are provided to the subscriber. Subscriber revenue
accounted for approximately 43.5% and 43.3% of our total revenue during 1998
and 1999, respectively. We currently offer two types of mobile data service
plans. Our Go.Unlimited Plan provides unlimited data usage on any mobile device
for a fixed monthly fee, which is currently $59.95 for retail subscribers. Our
Go.Lite Plan provides a fixed amount of data usage on any mobile computing
device for a significantly lower base monthly fee, which is currently $9.95 for
retail subscribers. Under the Go.Lite Plan, subscribers incur additional
charges for data usage in excess of the predetermined volume. However, we do
not charge our subscribers any additional amounts for roaming, which is using a
mobile device outside of a designated geographical area. We also generally
charge a non-refundable activation fee upon initial subscription. We offer new
subscribers a 14-day trial period during which they can cancel our service
without any penalty, although we do not refund the pro-rated fee for that trial
period, which we include in our revenue. Subscribers to our plans are subject
to a six-month or one-year contract which provides for an early cancellation
fee.
We also typically sell third-party mobile devices in conjunction with a
service agreement to a new subscriber. Equipment revenue accounted for
approximately 54.3% and 49.1% of our total revenue during 1998 and 1999,
respectively. We recognize equipment revenue at the time of the shipment of the
mobile device to a subscriber. During 1999, approximately 90% of our
subscribers purchased a mobile device upon their initial subscription. Over
time, we expect that such percentage will decrease as mobile devices for data
transmission become more prevalent.
In addition to our subscriber and equipment revenue, we historically have
generated other revenue which consists of consulting services relating to the
development and implementation of wireless data systems for certain corporate
customers. We do not intend for consulting services to be a significant element
of our business in the future. Such consulting revenue is recognized as the
work is performed.
We have experienced negative overall gross margins, which consist of margins
on our subscriber revenue, equipment revenue and other revenue. We expect to
continue to experience negative overall gross margins
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primarily because of negative margins on our resale of equipment and on our
subscriber revenue. We believe that our gross margins on subscriber revenue
will improve during 2000. Our cost of subscriber revenue consists primarily of
wireless airtime costs. Our airtime costs are determined by agreements we have
with several wireless carriers. Typically, we have one to three-year contracts
to buy data network capacity either for an agreed amount of kilobytes per
subscriber at a flat fee or on a cents-per-kilobyte basis. We intend to pass
through to our subscribers all the airtime charges that we incur from our
wireless carriers; however, we have not always been and will not always be able
to pass through such charges because the pricing plans offered to us by our
wireless carriers and to which we assign our subscribers may not allow us to
always cover our subscriber costs. For example, if we assign our Go.Unlimited
Plan subscribers to a carrier plan that charges us an increasing fee as
subscriber usage increases, then as subscriber usage and our related airtime
costs increase, our margins on subscriber revenues would decrease and may
become negative. Our airtime costs also increase substantially when subscribers
use our services outside of their pre-determined geographic area, which results
in roaming charges to us by the carriers that we do not pass on to our
subscribers. Our cost of subscriber revenue in 1999 was approximately $4.1
million compared to subscriber revenue of $1.2 million for such period. Such
negative gross margin, which was a substantial increase over prior periods, was
due in part to our placement of subscribers in more expensive carrier plans and
to excessive usage by a few subscribers. We do not have and may not be able to
develop the automated systems necessary to monitor our subscribers' usage and
roaming patterns and quickly switch our subscribers to a more appropriate,
lower cost airtime plan. We intend to implement alternative automated systems
by mid-2000. In addition, while we continually seek to negotiate better pricing
of wireless airtime plans with our carriers, we cannot assure you that we will
be successful in that regard. See "Risk Factors" for a discussion of the risks
relating to our negative gross margins and our need to improve our systems.
We also have experienced, and expect to continue to experience, negative
gross margins on the mobile devices that we resell. We currently are exploring
an outsourcing arrangement with a third party computer hardware aggregator that
will serve as our primary source of mobile devices. We believe that if such
arrangement is implemented, we should be able to reduce our equipment costs and
inventory risks by taking advantage of such partner's volume discounts and
inventory protection programs offered to them by device manufacturers. We
cannot assure you that we will be able to consummate such outsourcing
arrangement on favorable terms, if at all. Further, such arrangement may not
result in positive gross margins on our equipment sales.
Our sales and marketing expenses consist primarily of advertising and
promotions, cash compensation and related costs for marketing personnel, travel
and entertainment and other related costs. In 2000, we expect our sales and
marketing expense to increase substantially as a percentage of our annual
revenues. Our general and administrative expenses consist primarily of cash
compensation and related costs for general corporate, business development and
technology development personnel, along with rent and other related costs. Our
costs of performing consulting services is recorded as general and
administrative expense. We expect general and administrative expenses to
decrease as a percentage of our annual revenues. Depreciation and amortization
expenses consist primarily of depreciation expenses arising from equipment
purchased for our network operations center and other property and equipment
purchases.
During 1999, we granted options to certain of our employees at exercise
prices deemed to be below the fair market value per share of our common stock.
Such grants resulted in non-cash employee compensation expenses which have been
recorded to account for the difference, on the date of grant, between the fair
market value and the exercise price of stock options granted to employees. The
resulting deferred employee compensation will be amortized over the vesting
periods of the grants. During 2000, we expect to incur an aggregate of $8.2
million in non-cash employee compensation expense as a result of stock option
grants during 1999 and the first quarter of 2000 which were granted at prices
below the deemed fair market value of our common stock.
Net interest income consists primarily of interest earned on cash and cash
equivalents.
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Results of Operations
The following table sets forth for the periods indicated certain financial
data as a percentage of revenue:
<TABLE>
<CAPTION>
Percentage of Revenue
-------------------------
Years Ended
December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenue:
Subscriber......................................... 66.3% 43.5% 43.3%
Equipment.......................................... 19.4 54.3 49.1
Other.............................................. 14.3 2.2 7.6
------- ------- -------
Total revenue.................................... 100.0 100.0 100.0
Costs and expenses:
Cost of subscriber revenue......................... 50.7 36.7 148.4
Cost of equipment revenue.......................... 8.7 64.4 60.4
Sales and marketing................................ 140.5 109.9 120.2
General and administrative......................... 486.9 187.4 176.1
Depreciation and amortization...................... 18.7 15.0 10.0
Settlement costs................................... -- -- 10.9
------- ------- -------
Total costs and expenses......................... 705.5 413.4 526.0
------- ------- -------
Loss from operations............................. 605.5 313.4 426.0
Interest income...................................... -- 1.7 6.0
------- ------- -------
Net loss......................................... 605.5% 311.7% 420.0%
======= ======= =======
</TABLE>
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Subscriber revenue. Subscriber revenue increased from $359,000 for the year
ended December 31, 1998 to $1.2 million for the year ended December 31, 1999.
The increase primarily was due to having a larger subscriber base in the year
ended December 31, 1999 than in the year ended December 31, 1998. Our increase
in subscriber revenue was offset in part by lower average revenue per
subscriber. Our subscriber base increased from 1,630 subscribers at December
31, 1998 to 5,859 subscribers at December 31, 1999. We expect the number of
our subscribers to increase as a result of our expanded sales and marketing
efforts.
Equipment revenue. Equipment revenue increased from $449,000 for the year
ended December 31, 1998 to $1.3 million for the year ended December 31, 1999.
This increase primarily was due to an increase in the number of the mobile
devices sold during the year ended December 31, 1999 compared to the year
ended December 31, 1998.
Other revenue. Other revenue increased from $18,000 for the year ended
December 31, 1998 to $206,000 for the year ended December 31, 1999. This
increase primarily was due to the performance of a single systems integration
consulting project for a third party during the year ended December 31, 1999
compared to the year ended December 31, 1998. Consulting services are not
expected to be a significant element of our business in the future.
Cost of subscriber revenue. Cost of subscriber revenue increased from
$303,000 for the year ended December 31, 1998 to $4.1 million for the year
ended December 31, 1999. This increase primarily was due to an increase in our
subscriber base and a related increase in airtime usage during the year ended
December 31, 1999 than in the year ended December 31, 1998. Our cost of
subscriber revenue consists primarily of wireless airtime costs. Our negative
gross margin for the year ended December 31, 1999 was a substantial increase
over prior periods and was due in part to our placement of subscribers in more
expensive carrier plans and to extensive usage by a few subscribers. We expect
the number of subscribers and related use of our services to increase which
will result in an increase in the cost of subscriber revenue.
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Cost of equipment revenue. Cost of equipment revenue increased from $532,000
for the year ended December 31, 1998 to $1.6 million for the year ended
December 31, 1999. This increase was primarily due to an increase in the number
of mobile devices sold during the year ended December 31, 1999 compared to the
year ended December 31, 1998.
Sales and marketing. Sales and marketing expenses increased from $909,000
for the year ended December 31, 1998 to $3.3 million for the year ended
December 31, 1999. This increase was primarily due to increased advertising
costs paid to third parties and the salaries and benefits, including stock-
based compensation, for the additional personnel performing sales and marketing
activities. We expect sales and marketing expenses to further increase as we
expand our advertising program to increase brand awareness and add personnel to
our sales and marketing department.
General and administrative. General and administrative expenses increased
from $1.5 million for the year ended December 31, 1998 to $4.8 million for the
year ended December 31, 1999. This increase was primarily due to the addition
of salaries and benefits, including stock-based compensation, for personnel
performing business development and general corporate activities. We expect
general and administrative expenses to increase as we add personnel and incur
additional expenses related to the anticipated growth of our business and costs
associated with our operation as a public company.
Settlement costs. Settlement costs for the year ended December 31, 1999
represents the non-cash charge resulting from the settlement of our obligations
arising from claims by certain stockholders relating to the sale of equity
securities. Such settlement costs represent the fair value of options and
warrants issued to such stockholders.
Interest income. Interest income increased from $14,000 for the year ended
December 31, 1998 to $165,000 for the year ended December 31, 1999. Such income
was primarily due to increased cash balances as a result of our private
placement financings completed in 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Subscriber revenue. Subscriber revenue increased from $115,000 for the year
ended December 31, 1997 to $359,000 for the year ended December 31, 1998. The
increase in subscriber revenue was primarily due to having a larger subscriber
base in 1998 than in 1997. Our subscriber base increased from 531 subscribers
at December 31, 1997 to 1,630 subscribers at December 31, 1998.
Equipment revenue. Equipment revenue increased from $33,000 for the year
ended December 31, 1997 to $449,000 for the year ended December 31, 1998. The
increase in equipment revenue was primarily due to an increase in the number of
mobile devices sold during the year ended December 31, 1998 compared to the
year ended December 31, 1997.
Other revenue. Other revenue decreased from $25,000 for the year ended
December 31, 1997 to $18,000 for the year ended December 31, 1998.
Cost of subscriber revenue. Cost of subscriber revenue increased from
$88,000 for the year ended December 31, 1997 to $303,000 for the year ended
December 31, 1998. We began to incur costs of subscriber revenue in March 1997
as we launched our wireless services. The increase in the cost of subscriber
revenue from 1997 to 1998 was primarily due to an increase in our subscriber
base and related increase in airtime usage.
Cost of equipment revenue. Cost of equipment revenue increased from $15,000
for the year ended December 31, 1997 to $532,000 for the year ended December
31, 1998. We began to sell mobile devices in March 1997 in conjunction with the
launch of our wireless services. The increase in the cost of equipment revenue
from 1997 to 1998 was primarily due to an increase in the number of mobile
devices sold during the year ended December 31, 1998 compared to the year ended
December 31, 1997.
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Sales and marketing. Sales and marketing expenses increased from $243,000
for the year ended December 31, 1997 to $909,000 for the year ended December
31, 1998. This increase was primarily due to increased advertising costs paid
to third parties and the salaries and benefits for additional personnel
performing sales and marketing activities. We expect sales and marketing
expenses to increase as we expand our advertising program to increase brand
awareness and add personnel to our sales and marketing department.
General and administrative. General and administrative expenses increased
from $841,000 for year ended December 31, 1997, to $1.5 million for the year
ended December 31, 1998. This increase was primarily due to the salaries and
benefits for additional personnel performing business development and general
corporate activities. We expect general and administrative expenses to increase
as we add personnel and incur additional expenses related to the anticipated
growth of our business and costs associated with our operation as a public
company.
Interest income. There was no interest income earned for the year ended
December 31, 1997. Net interest income was $14,000 for the year ended December
31, 1998. The increase for the year ended December 31, 1998 was primarily due
to increased cash balances.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through
private placements of our equity securities and our redeemable convertible
preferred stock, which have resulted in aggregate net proceeds of approximately
$18.4 million through December 31, 1999, of which approximately $12.3 million
was raised since June 1999. As of December 31, 1999, we had $6.3 million in
cash and cash equivalents and $2.4 million of working capital. Subsequent to
December 31, 1999, we issued and sold 648,057 shares of Series B Preferred
Stock for net proceeds of approximately $25.2 million.
Net cash used in operating activities was $803,000, $2.2 million and $6.7
million for the years ended December 31, 1997, 1998 and 1999, respectively. The
principal use of cash in each of these periods was to fund our losses from
operations.
Net cash used in investing activities was $180,000, $498,000 and $643,000
for the years ended December 31, 1997, 1998 and 1999, respectively. Cash used
in investing activities for the year ended December 31, 1997 and 1998 was for
purchases of property, equipment and leasehold improvements. For the year ended
December 31, 1999, we used cash in investment activities for purchases of
$387,000 of property, equipment and leasehold improvements and the purchase of
$256,000 of preferred stock in DataRover Mobile Systems, Inc.
Net cash provided by financing activities was $415,000, $4.7 million and
$11.8 million for the years ended December 31, 1997, 1998 and 1999,
respectively. Cash provided by financing activities in each of these periods
was primarily attributable to proceeds from additional private sales of our
equity securities.
As of December 31, 1999, our principal commitments consisted of obligations
outstanding under operating leases. As of December 31, 1999, future minimum
payments for non-cancelable operating leases having terms in excess of one year
amounted to $4.9 million, of which $931,000 is payable in 2000. Although we
have no material commitments for capital expenditures, we anticipate a
substantial increase in our capital expenditures and lease commitments
consistent with our anticipated growth in operations, infrastructure and
personnel, including the deployment of additional network equipment.
We have undertaken several operating initiatives which will require
significant use of our cash resources. For example, we intend to use a
significant portion of the proceeds of this offering to increase substantially
our marketing budget as part of our efforts to build the GoAmerica brand. If
our marketing efforts cost more than anticipated, if we cannot increase our
brand awareness or if the GoAmerica brand is not well received by our existing
and potential subscribers, our losses and cash needs will increase. In
addition, we are pursuing the
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acquisition and development of automated systems to track our airtime usage
costs and monitor subscribers' wireless plan usage. We also intend to acquire
new accounting and business process software and systems with a portion of the
net proceeds from this offering. We expect that the acquisition and
implementation of our automated subscriber usage monitoring systems and new
accounting and business process software will cost approximately $7.0 to $10.0
million over the next twelve months. We anticipate that our development costs
related to improving our service offerings will also increase as we respond to
technological changes in the wireless data industry and as new competitors
emerge. We expect that our development costs will be approximately $1.0 million
to $2.0 million for 2000 which will be funded primarily from our current cash
position. We may also use funds to complete any business acquisitions that we
may decide to pursue and to integrate such businesses, technologies and
personnel upon completion of any such transaction.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to fund our operating needs
for at least the next 24 months. Thereafter, we may require additional
financing. At this time, we do not have any bank credit facility or other
working capital credit line under which we may borrow funds for working capital
or other general corporate purposes. If our plans or assumptions change or are
inaccurate, we may be required to seek additional capital or to seek capital
sooner than anticipated. We may need to raise funds through public or private
debt or equity financing. In the event additional financing is not available,
we will be required to significantly reduce our expenses and substantially
curtail operations.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivatives and Hedging Activities" (SFAS 133), which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. SFAS 133,
as amended, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. As we do not currently intend to engage in derivatives or
hedging transactions, we do not anticipate that there will be any impact on our
results of operations, financial position or cash flows upon the adoption of
SFAS 133.
Quantitative and Qualitative Disclosures About Market Risk
We have limited exposure to financial market risks, including changes in
interest rates. At September 30, 1999, all of our available excess funds are
cash or cash equivalents whose value is not subject to changes in interest
rates. We currently hold no derivative instruments and do not earn foreign-
source income. We expect to invest our cash only in debt obligations issued by
the U.S. government or its agencies with maturities of less than one year.
Update on Year 2000 Computer Issues
We did not experience any computer or systems problems relating to the Year
2000. Upon review of our internal and external systems during 1999, we
determined that we did not have any material exposure to such computer problems
and that the software and systems required to operate our business and provide
our services were Year 2000 compliant. As a result, we did not incur, and do
not expect to incur, any material expenditures relating to Year 2000 systems
remediation.
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BUSINESS
Overview
We are a nationwide wireless Internet services provider. We enable our
individual and business subscribers to access remotely the Internet, email and
corporate intranets in real time through a wide variety of mobile computing and
communications devices. Through our Wireless Internet Connectivity Center, we
offer our subscribers comprehensive and flexible mobile data solutions for
wireless Internet access by providing wireless network services, mobile
devices, software and subscriber service and support.
Our Go.Web technology and Wireless Internet Connectivity Center enable our
subscribers to access a wide variety of Internet content, such as business and
financial data, news, sports, travel, entertainment, personal contact and other
information. Our subscribers can also conduct ecommerce transactions, such as
shopping, reservations and stock trading, to the extent permitted by their
mobile device of choice. Our subscribers can also customize their personal Web
site or "personal portal," www.mygoweb.com, to access their favorite Web sites
quickly. In addition, we offer a variety of email solutions which allow our
subscribers to access their email at their existing Internet and business email
accounts as well as a GoAmerica email address.
We provide our subscribers with flexible and reliable wireless Internet
services across a number of wireless networks and mobile device platforms. To
provide our subscribers with nationwide access, we have established strategic
relationships with many leading wireless network carriers, such as AT&T
Wireless Services, American Mobile, BellSouth Wireless Data and Bell Atlantic
Mobile. Our subscribers are able to use our wireless Internet services with
their choice of a wide variety of leading mobile devices, including Palm
operating system-based computing devices, Research In Motion's interactive
pagers, laptop computers, Microsoft Windows CE-based computers and wirelessly-
enabled smart phones. We also have engineered our wireless Internet services to
operate with new versions of many wireless devices.
Market Opportunity
We believe that the growth of the Internet, email and mobile wireless
communications creates a significant market opportunity for service providers
capable of delivering wireless Internet and email services over wireless
communication networks. We believe that the following trends contribute to this
market opportunity:
The Growth of the Internet and Ecommerce. The Internet and corporate
intranets are becoming an increasingly important global medium for
communications and commerce. The number of Internet users worldwide is
projected to increase from approximately 140 million at the end of 1998 to over
500 million by the end of 2003, according to International Data Corporation. In
addition, International Data Corporation estimates that the worldwide volume of
commerce conducted over the Internet was approximately $50 billion in 1998 and
will grow to approximately $1.3 trillion in 2003. Until recently, ecommerce has
been dependent upon wired computer access to the Internet, which we believe has
limited the overall demand and ability to conduct commercial transactions
electronically. The ability to access the Internet remotely through a variety
of wireless devices on a nationwide basis will, we believe, fuel the increasing
demand for ecommerce. We further believe that the growth of the Internet and
ecommerce will also increase the demand for wireless access to these services.
The Proliferation of Email. Email is becoming an increasingly important
means of communication, with both the number of email users and usage level per
individual projected to increase significantly. Forrester Research, Inc.
projects that daily Internet email traffic in the United States will increase
from 100 million email messages per day in 1996 to 1.5 billion per day in 2002.
We believe that as email becomes an increasingly important means of
communication, there will be an increasing desire for mobile access to email.
The Growth of Mobile Communications. International Data Corporation
forecasts that the remote and mobile workforce in the United States, defined as
employees spending more than 20% of their time away from the office, will grow
from 34 million individuals at the end of 1998 to 47 million at the end of
2003. As a
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result, we believe that individuals will increasingly use mobile devices for
convenience and to enhance productivity when away from their home or office. We
further believe that the number of individuals using mobile devices, such as
handheld personal organizers, notebook computers, pagers and mobile phones,
will grow as these devices become smaller, less expensive, more reliable
including longer battery life and have more features than earlier devices.
Jupiter Communications estimates that shipments of advanced pagers and personal
organizers capable of accessing the Internet will grow from 1.8 million devices
in 1998 to 9.4 million in 2002.
The Challenge
While the wireless data services market is developing rapidly, widespread
adoption of wireless data services has been hindered by a number of factors,
including:
. limited geographic coverage of digital communications services;
. incompatible mobile devices and wireless carrier networks;
. high costs associated with using wireless data networks;
. an inability to access and transmit data over wireless networks at
adequate speeds;
. data security concerns;
. a lack of personnel with the expertise to develop and operate wireless
data systems; and
. mobile devices with difficult-to-read user interfaces and features.
As a result of these challenges, a significant opportunity exists for
wireless Internet service providers that are capable of offering an easy-to-
use, cost-effective and reliable wireless service.
The GoAmerica Wireless Solution
We provide our subscribers with easy-to-use wireless access to the Internet,
email and corporate intranets. Through our Wireless Internet Connectivity
Center, we offer our subscribers comprehensive and flexible mobile data
solutions for wireless Internet access by providing wireless network services,
mobile devices, software and subscriber service and support. The following are
key components of our comprehensive wireless Internet solution:
Offer Easy-To-Use Wireless Internet Access, Ecommerce and Email. Through our
Go.Web technology, we provide our subscribers with easy-to-use access to the
Internet. Our subscribers can access Web sites to obtain a broad variety of
content, such as business and financial data, news, sports, travel,
entertainment, personal contact and other information. Our subscribers can also
conduct ecommerce transactions, such as shopping, reservations and stock
trading, to the extent permitted by their mobile device of choice. We also
offer our subscribers their own personal Web site, www.mygoweb.com, which each
subscriber can customize in order to access their favorite Web sites quickly.
In addition, we offer a variety of email solutions, which allow our subscribers
to access their email at their existing Internet and business email accounts as
well as a GoAmerica email account.
Provide Nationwide Services Across Multiple Wireless Networks. We have
established relationships with many of the leading wireless network carriers,
including AT&T Wireless Services, American Mobile, Bell Atlantic Mobile and
BellSouth Wireless Data, which enable our subscribers to access their
information on a nationwide basis. Our network carriers operate on a variety of
different network technologies, such as Cellular Digital Packet Data, or CDPD,
Mobitex, dataTAC, Code Division Multiple Access, or CDMA, and Global System for
Mobile telecommunications, or GSM, which allow us to offer our services through
a broad range of wireless devices. Our airtime agreements with wireless
carriers permit us to offer our subscribers a flat-rate pricing plan and a
variable pricing plan with rates which vary depending upon the level of data
traffic utilized
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by a subscriber. In addition, our relationships with wireless network carriers
enable us continually to adapt our existing solutions and develop new systems
to integrate with new technologies and platforms as they emerge for commercial
use.
Enable Wireless Services Through a Wide Variety of Mobile Devices. We
currently offer our services through a wide variety of wireless access devices
including Palm OS-based computing devices, Research-In-Motion's interactive
pagers, laptop computers, Windows CE-based computers and WAP-enabled smart
phones. We are able to provide service through these devices because we support
a range of wireless networks and utilize our own and third-party device
software. This capability enables us to offer service through devices that we
believe will achieve the greatest market acceptance and penetration.
Integrate Various Wireless Technologies and Networks to Provide Seamless
Internet Solutions. We deliver content across a broad range of wireless carrier
networks to a wide variety of mobile devices. We are able to do so through our
Wireless Internet Connectivity Center, which serves as a secure link between
broadband networks, such as the Internet, and narrowband wireless
communications networks. By using our own and third-party software, we compress
content from broadband sources to enable faster and more cost-effective data
delivery over wireless networks. We support leading wireless protocols, such as
wireless application protocol, or WAP. In addition, our Wireless Internet
Connectivity Center has the flexibility to format content automatically to meet
the requirements of a subscriber's wireless device. Our Wireless Internet
Connectivity Center is also scalable, enabling us to move quickly to meet the
demands of increased data traffic and expanding wireless network capabilities.
Offer Flexible Wireless Solutions for Corporate Customers. Businesses often
require wireless solutions that enable them to provide their customers and
employees with access to proprietary information, corporate services, the
Internet and email. However, many businesses do not have the financial and
administrative resources, internal information technology capabilities and size
required to develop and maintain wireless services on a cost-effective basis.
We provide corporate customers with a broad range of secure and reliable
wireless solutions by outsourcing our Wireless Internet Connectivity Center and
wireless networking expertise. Through our services, corporate customers can
enable employees and customers to access the Internet, intranets and Internet-
based email. Businesses can also enable wireless access to their internal
corporate databases and systems by securely interconnecting with our Wireless
Internet Connectivity Center.
Focus on Subscriber Service and Support. We strive to provide our
subscribers with easy-to-use wireless Internet services. This begins with
providing customers with flexible wireless solutions that include all the
necessary components to enable service. In addition, we provide our customers
with advice during their purchase decision process through our direct sales
representatives, dealers, resellers and Web site, in order to help them choose
the appropriate combination of device, carrier service and pricing plan. Once a
subscriber has initiated services, we offer extensive customer service and
support. We maintain toll free customer service phone lines Monday through
Friday, 8 a.m. to 8 p.m. Eastern time. Existing subscribers can inquire about
their accounts or receive technical support through the same toll free service.
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The following chart illustrates the wide variety of mobile devices and
communications networks that we provide to our subscribers to enable them to
seamlessly access the Internet and their corporate networks to obtain critical
information and conduct electronic transactions:
Graphic appears here. The graphic depicts four boxes aligned from left to
right.
.The first box, which is labelled "Content" includes the text "World Wide Web"
and "Corporate Intranets" with an accompanying photograph of the globe.
.The second box, which is labelled "GoAmerica Wireless Internet Connectivity
Center", includes the text "Go.Web Gateway" and "Go.Web formatting, encryption,
authentication, and compression architecture" and has an accompanying
photograph of computer technology.
.The third box, which is labelled "Wireless Networks", includes the text
"Cellular Digital Packet Data (CDPD)", "Code Division Multiple Access (CDMA)",
"Global System for Mobile Communications (GSM)", "Mobitex" and "Data TAC" and
has an accompanying photograph of a communications tower.
.The fourth Box, which is labelled "Mobile Devices", includes the text "Palm
Operating System", "Interactive Pagers", "Laptops", "Windows CE" and "Wireless
Application Protocol (WAP) Phones"
The GoAmerica Strategy
Our goal is to be the leading provider of nationwide wireless Internet
services and mobile data solutions for individuals and businesses. We seek to
enhance our offerings with value-added services and additional functionality to
expand our subscriber base and increase our recurring revenues. Our strategy
includes the following key elements:
Offer Comprehensive and Flexible Solutions. We continually improve our
subscribers' wireless experience by simplifying user interfaces, expanding the
features of the Go.Web services, and improving the ease with which our
subscribers can personalize the mygo.web menus. We also intend to complement
our Web-based service offerings by providing customized solutions that meet the
specific needs of our existing and potential subscribers. For example, we
recently entered into strategic arrangements that will provide our subscribers
with direct access to Avis Rent-A-Car's rental car reservations system and
Lexis-Nexis' legal libraries and related data. We also introduced one-way
paging services which we can provide as an added feature for our Internet and
email subscribers.
Capitalize on Marketing and Branding Initiatives. We market and advertise in
order to establish our brand name and create sales opportunities. With a
portion of the net proceeds from this offering we intend to expand
significantly our presence as a mass market provider of wireless Internet
access by making a significant investment in establishing and building the
GoAmerica brand. Through a combination of mass media advertising and Web
advertising, we seek to expand our subscriber base, strengthen our customer
relationships and capture significant market share. We supplement our existing
subscriber acquisition programs through value-added reseller and dealer co-
marketing programs and partner marketing programs such as our relationship
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with Lexis-Nexis. We have and will continue to target market segments and
geographic markets where we believe there is opportunity for substantial
subscriber penetration.
Expand Sales and Distribution Channels. We currently sell our services
through a combination of direct sales representatives, inbound telemarketers,
our Web site and through indirect channels such as value-added resellers and
dealers. In addition, we seek to generate sales from joint selling agreements
we have with third parties. As of January 31, 2000, we had two full-time direct
sales professionals who focus on small to mid-sized corporate subscriber
accounts and two full-time telemarketers who focus on our individual customers.
We intend to increase our dedicated sales force significantly during the next
twelve months. We have a four-tiered channel program that includes resellers,
master dealers, dealers and agents. We compensate our resellers and dealers
with commissions for each sale generated by them. As of January 31, 2000, we
had five channel manager professionals who supervise our four-tiered channel
program. We intend to expand significantly our indirect channel activities
during the next twelve months. We have partnered and seek to continue to
partner for joint selling purposes with other companies that have complementary
wireless data products or services such as manufacturers, application partners
and cellular and PCS carriers.
Provide Superior Customer Service and Technical Support. Because wireless
Internet access is an evolving and growing communications channel, subscribers
may face a number of potential problems. We believe that even sophisticated
subscribers periodically have questions or encounter problems as applications
designed for wireless data proliferate. Consequently, we focus on providing
high levels of customer service and technical support in an effort to achieve
maximum levels of customer satisfaction. We intend to offer our customer
service and support 24 hours a day, seven days a week. In addition, through our
planned automation system, subscribers will be able to manage their accounts
and troubleshoot 24 hours a day at our Web site. We believe that superior
customer service will help us minimize subscriber deactivations and promote
customer referrals.
Continue to Develop Solutions With Leading Wireless Technologies. We focus
our technology development efforts on applications and solutions which
integrate with and enable leading third-party mobile devices and wireless
networks. We also intend to continue to develop solutions that we expect will
allow our Go.Web service to operate on next generation protocols, devices and
networks. We believe that our relationships with leading device manufacturers
and wireless network carriers enhance our ability to continually adapt our
existing solutions and develop new systems to integrate with new technologies
and platforms as they emerge for commercial use.
Pursue Strategic Acquisitions. We intend to pursue acquisitions that we
believe will allow us to increase quickly the scale and scope of our resources.
In particular, we expect to seek acquisitions that will expand our subscriber
base or engineering force, enable us to enter new markets or industry sectors
or to provide new services.
Service Offerings
We offer comprehensive and flexible wireless data solutions that permit
subscribers to access their email, corporate intranets, personal Web pages and
the Internet anytime on a nationwide basis.
Access to the Internet. Our subscribers efficiently and reliably access
public Web sites from all our supported devices. Through our Go.Web service, we
provide a personal menu of popular Web sites which enable our subscribers to
access a wide variety of Internet content, such as business and financial data,
news, sports, travel, entertainment, personal contact and other information.
Our subscribers can also conduct ecommerce transactions, such as shopping,
reservations and stock trading, to the extent permitted by their mobile device
of choice. This menu is organized by major content categories and reduces the
amount of time and the amount of data input it takes for our customers to
access these sites. The dynamic nature of the menu allows us to update it
periodically and add valuable wireless Web sites for our subscribers. Our menu
also allows our corporate subscribers to pre-determine the choices available to
their users. Through business
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arrangements, we offer streamlined access to public databases such as those
from Lexis-Nexis, as well as personal ecommerce access to banking, brokerage
and shopping services. Mygo.web allows our subscribers to customize their menus
by bookmarking and linking to their Web sites of choice.
Access to Corporate Networks. Our business customers often require secure
connections to their enterprise systems, but do not want to change the way that
their systems are configured. Through our virtual private network and data
hosting services, we provide the required secure and reliable wireless access
to corporate data. Business users can access their corporate databases through
Web servers either inside our firewall or their own security system. Through
standard Internet interfaces, our corporate subscribers can access their
enterprise messaging systems such as Microsoft Exchange and Lotus Notes or use
value-added services such as sales force automation, customer retention
management and Web dispatch offerings.
Email Services. Our services provide individual and business subscribers
access to the wide variety of Internet based email services. We also provide an
email address at goamerica.net for all of our subscribers as a free service.
Our business subscribers are able to fully manage their email accounts if their
corporate networks permit remote access. In such cases, our subscribers can
send, receive, read, reply, forward and delete their regular corporate email on
a remote basis. Individual subscribers who have accounts at Internet service
providers or Web portals, such as Earthlink or Yahoo!, can access those email
accounts when they are using their existing wireline service or their GoAmerica
wireless Internet service.
Instant Messaging, Paging and Operator Services. We currently provide an
instant messaging service between GoAmerica subscribers with compatible
interactive pagers that generally provides quicker transmission than
traditional paging. Our instant messaging service also provides confirmation of
message delivery and a read receipt between sender and recipient. In addition,
through our business alliances with paging service providers, we also provide
traditional paging and operator services that allow our subscribers to migrate
from one-way to two-way services without disruption.
Customers
We sell and market to individual and corporate customers. Our subscriber
base has grown from 1,630 subscribers at December 31, 1998 to 5,859 subscribers
at December 31, 1999. We generally target our corporate marketing and selling
efforts toward decision-makers within communication-intensive small to mid-
sized businesses. We focus our individual consumer customer marketing and
selling efforts on high-end mobile professionals. These mobile professionals
typically have computer and Internet access, use a cellular phone or pager, and
have a strong professional or personal need to stay in touch with Web-based
information. The majority of our subscribers today are corporate customers, but
we expect over time that individual consumers will represent a larger portion
of our subscriber base. We continually seek to enhance and expand our service
offerings for our customers which we believe is a critical element in growing
our subscriber base and maintaining customer satisfaction.
We also develop corporate solutions which enable us to expand our subscriber
base while allowing our corporate partner to enhance its service offerings to
its customers. For example, regional wireless service provider, Frontier
Cellular, uses our hosting services for its wireless data products. We host and
manage Phone.com WAP servers at our Wireless Internet Connectivity Center for
Frontier and provide our content to digital PCS phones on Frontier's network.
We also developed a customer management interface to allow Frontier to
provision and manage its customers remotely. We connect to Frontier's network
over a virtual private network that we engineered jointly with Frontier. This
virtual private network connection provides the security required by Frontier
and is similar to connections deployed for our other corporate customers.
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Sales and Marketing
Sales
We currently sell our services directly through a combination of sales
representatives, inbound telemarketers and our Web site and sell indirectly
through value-added resellers and dealers. In addition, we seek to generate
sales from joint marketing relationships, such as the relationship we have with
Sierra Wireless.
Direct Sales Representatives. As of January 31, 2000, we had two direct
sales professionals who focus primarily on small to mid-sized corporate
customers seeking to establish wireless Internet services for their employees
or customers. We intend to grow our direct sales force significantly over the
next 12 months. Our business development personnel and senior executives,
particularly our chief executive officer and executive vice president, also
spend a considerable amount of their time developing potential customer
relationships and selling and promoting our services.
Telemarketing. As of January 31, 2000, we had two telemarketing
professionals. Our telemarketing professionals respond to queries generated as
a result of Web site visits and our marketing efforts which usually list our
toll-free sales telephone number.
GoAmerica Web Site. Our Web site seeks to educate and inform potential
customers about wireless data networks and devices. When a customer is ready to
order, they can order directly through an online subscription form that is
automated with our order entry and product fulfillment operations. We receive
no advertising or sponsorship revenues from our Web site currently. We will
continue to explore ways to gain revenues from our Web site.
Value-Added Resellers and Dealers. Through our GoAmerica Alliance Program,
we provide commissions to value-added resellers and dealers for each sale they
bring to us. As of January 31, 2000, we had five channel manager professionals
who supervise our four-tiered program that includes resellers, master dealers,
dealers and agents.
Resellers buy GoAmerica service at a wholesale price and sell it at a retail
price. Resellers are not paid a commission. Resellers are responsible for
selling the GoAmerica service and mobile devices, and billing and supporting
the customer. GoAmerica is responsible for billing the reseller. We believe
that as of December 31, 1999, our resellers had in excess of 200 direct sales
professionals. In addition, in January 2000, we added significantly to our
reseller network by entering into an agreement with Arch Paging Inc., the
second largest paging company in the United States. We intend to leverage
Arch's sales force to reach potential new subscribers of our services. We also
have a reselling relationship with American Mobile pursuant to which American
Mobile resells our Go.Web service as a part of American Mobile's suite of
services to its customers through its distribution channels.
Master dealers sell GoAmerica service through a network of other dealers and
are paid a higher commission than dealers but are assigned a quota. Master
dealers are responsible for selling the GoAmerica service, training their
dealer network, providing the mobile devices, and supporting the subscriber.
Under such arrangements, we are responsible for billing the subscriber. Our
master dealers have approximately 500 direct sales professionals. Our dealers
and agents sell the GoAmerica service through their own sales efforts, and are
not assigned a quota. Dealers are paid a smaller commission than a master
dealer. Dealers are responsible for selling the GoAmerica service and providing
the mobile devices. We bill and support the subscribers provided by our
dealers. Our dealers have approximately 250 direct sales professionals. Agents
are paid a smaller commission than dealers because they are only responsible
for selling the GoAmerica service. We sell and provide the mobile devices, bill
and support the subscribers provided by our agents. Our agents have
approximately 50 direct sales professionals.
Joint Selling Relationships. We have partnered and seek to continue to
partner for joint selling purposes with other companies that have complementary
wireless data products or services. For example, we offer
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wireless data, PCS and cellular carriers a single resource for outsourcing
ready-to-market wireless email and Web-based data solutions based on standard
platforms from the leading software vendors and device manufacturers. By
providing a suite of platform and device-independent services, we position
these carriers to be able to address the data needs of their customers today.
We then engage in joint selling activities with clearly defined
responsibilities. We offer wireless device manufacturers an opportunity to
increase their sales because our services increase the usefulness of their
devices. We also engage in joint selling activities with the sales
professionals of these manufacturers. In addition, we work with application
providers and jointly sell into the installed base of customers in the market
segment addressed by their application. For example, our relationship with w-
Trade, a wireless financial information software company, allows us to approach
broker dealers who want to wirelessly enable their customers using software
offered by w-Trade and our wireless data access and delivery expertise.
Marketing
We market and advertise in order to establish our brand name and create
sales opportunities. We conduct market awareness tracking research to measure
awareness of the GoAmerica brand and related sales. Our efforts have been and
will continue to be targeted in market segments and geographic markets where we
believe there is opportunity for substantial subscriber penetration. We believe
that high concentrations of potential subscribers reduce our subscriber
acquisition costs. With a portion of the net proceeds from this offering, we
intend to expand our presence as a mass market provider of wireless Internet
access by making a significant investment in establishing and building the
GoAmerica brand.
We continually seek new ways to reach potential subscribers that are
learning about wireless Internet communications. We also seek to establish
GoAmerica as a strong independent wireless Internet brand. Through a
combination of mass media advertising and Web advertising, we seek to expand
our subscriber base, strengthen our customer relationships and capture
significant market share. We supplement our existing subscriber acquisition
programs through value added reseller and dealer co-marketing programs and
partner marketing programs. We plan to continue to develop a variety of co-
marketing programs that make use of brand loyalties and existing customer
relationships.
For example, in November 1999, we announced a preferred partnership
arrangement with Avis-Rent-a-Car, the second largest car rental company in the
United States. Under this arrangement, our customers will be able to access the
Avis reservation system through Go.Web. We anticipate that this service will be
commercially available in the second quarter of 2000. We also have a marketing
agreement with Lexis-Nexis, a leading provider of information to the legal
profession, to provide wireless access to Lexis.com services using a co-branded
service called "Law On The Go". In January 2000, we entered into a co-marketing
agreement with DLJ direct Inc. in which we agreed to market DLJ direct as a
featured Web-based online trading company. DLJ direct agreed to market
GoAmerica as a featured wireless data services company. We intend to link to
each other's website during the second quarter of 2000. GoAmerica subscribers
will have the opportunity to open a DLJ direct account and wirelessly trade
securities through Go.Web. In addition to service providers, we have also
developed joint marketing relationships with several manufacturers of wireless
devices which we believe will benefit from being able to market our value-added
services. For example, we have a preferred service provider agreement with
Novatel Wireless, a leading supplier of wireless modems for the CDPD networks,
and a reseller and joint marketing agreement with Sierra Wireless, the
manufacturer of Aircard 300, a wireless PC Card for the CDPD networks.
Wireless Carrier and Other Relationships
We have assembled a strategic combination of relationships with wireless
network operators, application developers and mobile device manufacturers.
American Mobile. American Mobile's ARDIS network serves approximately 425
metropolitan areas in the United States, encompassing approximately 11,000
cities and towns. We offer our subscribers access to the
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ARDIS network. American Mobile also resells our Go.Web service, as a part of
American Mobile's suite of services, to its customers through its distribution
channels.
AT&T Wireless Services. AT&T Wireless' cellular digital packet data, CDPD,
network is the largest CDPD network in the United States. We offer access to
the AT&T nationwide CDPD network to our subscribers.
Bell Atlantic Mobile. Bell Atlantic has the largest regional CDPD network
covering the New England and Mid Atlantic states. We offer the Bell Atlantic
regional CDPD network to our subscribers and receive sales leads from the Bell
Atlantic Mobile data sales force.
BellSouth Wireless Data. BellSouth's Mobitex network covers approximately
80% of the United States population and approximately 93% of the urban business
population. We have been offering the BellSouth nationwide Mobitex network to
our subscribers since 1996. We also have a software license to the BellSouth
Interactive Paging Service gateway.
Phone.com. Phone.com has developed software technology that runs on phones
that combine voice and data. We first licensed and deployed their technology in
1997. We were the first non-cellular carrier to license their UPlink software
and were the first company in North America to deploy their WAP compliant
gateway.
Research in Motion. RIM is the manufacturer of the RIM 950 interactive
pager, the RIM 850 wireless handheld device and the RIM Blackberry device. We
have a distribution agreement with RIM and co-market the Go.Web service on the
Blackberry device.
Technology and Operations
Service Infrastructure
Wireless Internet Connectivity Center. We operate a secure network
operations center at our headquarters in Hackensack, New Jersey. This Wireless
Internet Connectivity Center is connected to multiple Tier-1 Internet backbone
providers such as UUNET/MCI Worldcom, Sprint, and AT&T via redundant high-
capacity, high-speed leased T-1 telecommunications lines as well as fixed
location frame-relay circuits. These circuits connect to our customers' data
sources and to the wireless data networks we use. Our Wireless Internet
Connectivity Center is supported by a switched fiber optic backbone provided by
Cisco Systems. The center is equipped with proven, industry standard equipment,
including Cisco and Paradyne networking equipment, Sun Sparc Enterprise UNIX
servers, high-end clustered Compaq servers, Network Appliance NFS Servers and
Clarion Raid Arrays. We believe our Wireless Internet Connectivity Center is
capable of meeting the capacity demands and security standards for services we
developed or are developing for our customers. We staff the center from 8:00
a.m. to 11:00 p.m. Eastern time on weekdays. In addition, our technical staff
monitor network traffic, service quality, and security 24 hours a day, seven
days a week. We intend to continue to invest in improved network monitoring
software and hardware systems.
In order to provide our subscribers with the highest availability of
services we are building a completely redundant data center facility which is
expected to be operational during the second quarter of 2000. This facility
will become our primary Wireless Internet Connectivity Center. This data center
will have a back-up power supply, redundant communications connection and will
be monitored 24 hours a day, seven days a week.
Wireless Networks. Through our relationships with third-party provider-owned
wireless networks, our subscribers are able to wirelessly access the Internet
in most major metropolitan areas in the continental United States via a local
wireless network. We purchase access to wireless networks through services
agreements with a variety of carriers including BellSouth Wireless Data, AT&T
Wireless Services, Bell Atlantic Mobile and American Mobile. Using a
combination of third-party wireless network providers enables us to provide
wireless Internet access and services on a nationwide basis while managing the
timing and magnitude of our capital
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expenditures. We employ a strategy of using different third-party network
providers in locations where it is most economical to do so. We periodically
reevaluate the economics of this strategy and, if warranted, move subscribers
to different networks.
Software Technology
Our strategy is to develop solutions using existing technologies and
industry standards in proprietary ways to continue to deliver customer-
friendly wireless Internet services and dynamic applications, as well as
allowing our partners to develop wireless applications with standard
development tools.
Our Software Technology
We have developed a proprietary services platform, Go.Web, that we believe
is a competitive advantage because it enables our subscribers to access and
personalize the Internet from virtually any leading wireless device. Go.Web
also allows qualified developers to introduce standard Web-based applications
for virtually any wireless device or network. As a result of our Go.Web
development efforts, our engineering staff has acquired substantial wireless
and Web formatting expertise, which will enable us to develop solutions
quickly as new wireless devices are introduced. In addition, our proprietary
compression technology and enhanced wireless transport protocol included in
our software provides bandwidth efficiency and maximizes data transmission
speeds. We also have employed industry standard SSL, or secure sockets layer,
and our internally developed encryption technologies to ensure security
through our Internet gateway.
We developed our software technology to better serve our customers and
provide the following features:
. simplify installation;
. provide a convenient and intuitive starting place for subscribers;
. enhance the efficiency of our support services; and
. provide state-of-the-art wireless applications.
Licensed Software Technology
BellSouth Wireless Data--The BellSouth Interactive Paging Service (IPS) is
based on server software that has been licensed by GoAmerica. We are one of a
limited number of companies that have deployed their own IPS gateway. This
service provides two-way messaging on devices such as the RIM interactive
pagers.
Phone.com--Phone.com has developed software technology that runs on phones
that combine voice and data. They have created a page display language, HDML,
to show Web content on small screen devices, and now support the WAP standard.
We have licensed and deployed this technology and provide services to cellular
carriers and individual customers.
Telcordia--Telcordia, formerly Bellcore, has developed software technology
that supports Microsoft Windows platforms such as laptops and CE devices. We
presently use this technology primarily to support our subscribers using
Windows platforms to enable access to our GoAmerica services.
Customer Service and Billing
We provide customer service, billing and product fulfillment at our
customer service center. Our customer service program provides our subscribers
with the ability to contact us through toll free telephone, Web, or email.
Through our goamerica.net Web site, subscribers can access answers to
Frequently Asked Questions and information about our services 24 hours a day.
Through our Web site and customer service representatives, we verify that a
potential subscriber will have wireless network coverage where such customer
plans to use the service. For subscribers who order directly from us, we
maintain an inventory of mobile devices and wireless
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modems which we buy from third-party manufacturers and resellers. We load and
configure custom software on mobile devices, activate wireless modems and
perform quality assurance checks. We then pack, ship and track the product
until the subscriber receives it. For customers who already own a mobile
device, we provide only the wireless modem and software application. Our
subscribers are able to deal directly with us for all repair, replacement and
warranty issues for devices we provide to them.
As of January 31, 2000, we had 16 customer service and technical support
representatives who handle inquiries about our services, device features and
wireless communications. Our customer service and technical support personnel
are available weekdays from 8:00 a.m. until 11:00 p.m. Eastern time. We
expanded our customer service center hours during the first quarter of 2000 and
plan further expansion. We also intend to expand our ecommerce Web site
capabilities to include self provisioning, on-line billing, and interactive
customer care during the second half of 2000. We provide corporate or
individual customer billing for all subscription fees, devices and modems, and
other fees.
Competition
The market for our wireless Internet services is becoming increasingly
competitive. The widespread adoption of industry standards in the wireless data
communications market may make it easier for new market entrants and existing
competitors to introduce services that compete against ours. We developed our
solutions using standard industry development tools. Many of our agreements
with wireless carriers, wireless handheld device manufacturers and data
providers are non-exclusive. Our competitors may use the same products and
services in competition with us. With time and capital, it would be possible
for competitors to replicate our services. We expect that we will compete
primarily on the basis of the functionality, breadth, quality and price of our
services.
Many of our existing and potential competitors have substantially greater
financial, technical, marketing and distribution resources than we do. Please
refer to "Risk Factors--We may face increased competition which may negatively
impact our prices for our services or cause us to lose business opportunities"
for a listing of some our current and potential competitors. Additionally, many
of these companies have greater name recognition and more established
relationships with our target customers. Furthermore, these competitors may be
able to adopt more aggressive pricing policies and offer customers more
attractive terms than we can. In the event such companies decide to compete
directly with us, such relationships will likely be terminated, which may have
a material adverse effect on our business and reduce our market share or force
us to lower prices to unprofitable levels.
Intellectual Property Rights
We have not yet obtained patents on our technology that would preclude or
inhibit competitors from using our technology. We have, however, recently filed
a patent application on certain aspects of our Go.Web technology. The
application is presently pending in the United States Patent and Trademark
Office. We rely on a combination of patent, copyright, trademark, service mark,
trade secret laws, unfair competition law and contractual restrictions to
establish and protect certain proprietary rights in our technology and
intellectual property. We have applied for registration of our GoAmerica names
and marks in the United States Patent and Trademark Office and in trademark
offices in jurisdictions throughout the world, including but not limited to,
U.S. federal trademark applications for the marks "GoAmerica", "Go.Web" and
"Law on the Go". The steps taken by us to protect our intellectual property may
not prove sufficient to prevent misappropriation of our technology or to deter
independent third-party development of similar technologies. In addition, the
laws of certain foreign countries may not protect our technologies or
intellectual property rights to the same extent as do the laws of the United
States. We also rely on certain technologies that we license from third
parties. These third-party technology licenses may not continue to be available
to us on commercially attractive terms. The loss of the ability to use such
technology could require us to obtain the rights to use substitute technology,
which could be more expensive or offer lower quality or performance, and
therefore have a material adverse effect on our business, financial condition
or results of operations. Third parties could claim infringement by us with
respect to current or future technology. We expect that we and other
participants in our markets will be
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increasingly subject to infringement claims as the number of services and
competitors in our industry segment grows. Any such claim, whether meritorious
or not, could be time consuming, result in costly litigation, cause service or
installation interruptions or require us to enter into royalty or licensing
agreements. Such royalty or licensing agreements might not be available on
terms acceptable to us or at all. As a result, any such claim could have a
material adverse effect upon our business, financial condition or results of
operations. We received a claim in November 1999, on behalf of ROTIS
Technologies Corporation, that our technology relating to the wireless
provision of stock quotes infringes a patent relating to a price quotation
system, which patent expires on September 25, 2001. We believe that such claim
is not material and without merit. We intend to defend such claim vigorously.
Such claim is, however, in its preliminary stages and no specific claim for
damages has been asserted. Therefore, no assurance can be made that such claim
could not become material in the future. We also received in January 2000 an
offer from NTP Incorporated to enter into negotiations to obtain a license
under one or more of NTP's patent properties relating to wireless email
systems. We are in the process of reviewing NTP's patents.
Government Regulation
We are not currently subject to direct federal, state or local government
regulation, other than regulations that apply to businesses generally. The
wireless network carriers we contract with to provide airtime are subject to
regulation by the Federal Communications Commission. Changes in FCC regulations
could affect the availability of wireless coverage these carriers are willing
or able to sell to us. We could also be adversely affected by developments in
regulations that govern or may in the future govern the Internet, the
allocation of radio frequencies or the placement of cellular towers. Also,
changes in these regulations could create uncertainty in the marketplace that
could reduce demand for our services or increase the cost of doing business as
a result of costs of litigation or increased service delivery cost or could in
some other manner have a material adverse effect on our business, financial
condition or results of operations.
We currently do not collect sales or other taxes with respect to the sale of
services or products in states and countries where we believe we are not
required to do so. We do collect sales and other taxes in the states in which
we have offices and are required by law to do so. One or more jurisdictions
have sought to impose sales or other tax obligations on companies that engage
in online commerce within their jurisdictions. A successful assertion by one or
more jurisdictions that we should collect sales or other taxes on our products
and services, or remit payment of sales or other taxes for prior periods, could
have a material adverse effect on our business, financial condition or results
of operations.
Any new legislation or regulation, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to our business, could
have an adverse effect on our business.
Facilities
Our principal offices are located in Hackensack, New Jersey in a 20,300
square-foot leased facility. Our primary lease on approximately 15,900 square
feet of such space expires in May 2007. In addition, in December 1999, we
entered into a facilities maintenance agreement with Data General pursuant to
which we will operate a network operating center at their facility in New York
City. Such facility will initially provide redundant data backup for our
current network operating center located at our headquarters in Hackensack. We
anticipate that our New York facility will serve as our primary network
operating center by mid-2000. We believe that our facilities will be adequate
to meet our requirements for the foreseeable future and that suitable
additional space will be available if needed.
Employees
As of January 31, 2000, we had a total of 57 full-time employees. None of
our employees is covered by a collective bargaining agreement. We believe that
our relations with our employees are good.
Legal Proceedings
We are not currently subject to any material legal proceedings. However, we
may from time to time become a party to various legal proceedings arising in
the ordinary course of our business.
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MANAGEMENT
Directors and Executive Officers
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Aaron Dobrinsky......... 36 Chairman of the Board, President and Chief Executive Officer and Director
Joseph Korb............. 48 Executive Vice President and Director
Francis Elenio.......... 34 Chief Financial Officer, Treasurer and Secretary
Robi Blumenstein(1)(2).. 43 Director
Adam Dell............... 30 Director
Alan Docter(2).......... 56 Director
Mark Kristoff(1)........ 38 Director
Zachary Prensky(1)...... 26 Director
Nelson Schwab III....... 55 Director
Andrew Seybold(2)....... 53 Director
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
All directors currently hold office until the next annual meeting of
stockholders or until their successors have been elected and qualified. Our
Certificate of Incorporation provides that upon closing of this offering the
terms of office of the members of the board of directors will be divided into
three classes as set forth below. All executive officers are elected annually
by the board of directors and serve at the discretion of the board of directors
and until their successors are elected and qualified. There are no family
relationships between any of our directors or executive officers.
Aaron Dobrinsky founded GoAmerica in 1996 and has served as our Chairman of
the Board, President and Chief Executive Officer and as a director since our
inception in 1996. Prior to founding the company, from February 1996 to July
1996, Mr. Dobrinsky served as Executive Vice President of Mineral Trading Corp.
Prior to that, Mr. Dobrinsky served most recently as Senior Vice President of
American International Ore Corporation from 1990 to February 1996. Mr.
Dobrinsky also serves on the board of directors of DataRover Mobile Systems,
Inc.
Joseph Korb joined GoAmerica in 1997 as Executive Vice President and has
been a director since October 1996. Prior to joining us, Mr. Korb served in
various capacities, including Vice President of Product Management and Business
Development at RAM Mobile Data (now BellSouth Wireless Data) from 1992 to 1996.
Prior to that, Mr. Korb served as Vice President at Citibank, N.A. where he
served as Director of Technology in an electronic products development group.
Mr. Korb currently serves as a board member and Vice President of Portable
Computing and Communications Association, an industry trade association.
Francis Elenio joined GoAmerica in January 1999 as Chief Financial Officer
and has also served as our Treasurer and Secretary since December 1999. Prior
to joining us, Mr. Elenio served as Corporate Controller of Bogen
Communications, Inc. from June 1997 to January 1999. Prior to that, Mr. Elenio
served most recently as Vice President of Finance and Administration and
Corporate Controller of KTI, Inc. from 1991 to 1997. He previously was a Senior
Accountant with Ernst & Young LLP and is a Certified Public Accountant in New
Jersey.
Robi Blumenstein joined our board of directors in June 1999 as the designee
of CIBC WMV Inc. Mr. Blumenstein currently is a principal of Marsh & McLennan
Capital Inc. and co-head of the Marsh & McLennan Capital Communications and
Information Fund I. From January 1994 to February 2000, Mr. Blumenstein was a
Managing Director of CIBC Capital Partners, the merchant banking arm of CIBC
World Markets. Mr. Blumenstein joined CIBC World Markets in 1994. Mr.
Blumenstein is a member of the board of
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directors of a number of privately held companies. Prior to joining CIBC
Capital Partners, Mr. Blumenstein worked at First City Capital Corporation and
as an attorney at Tory, Tory, DesLauriers & Binnington.
Adam Dell joined our board of directors in February 2000 as the designee of
Dell USA L.P. Mr. Dell is the managing partner of Impact Venture Partners,
L.P., which was founded in November 1999. Prior to that, Mr. Dell most recently
was a partner with Crosspoint Venture Partners, since October 1998, and a
Senior Associate with Enterprise Partners, focused on ecommerce, enterprise
software and networking and communication infrastructure. Prior to that, he was
a Senior Associate with Winstead, Sechrest and Minick. Mr. Dell is also an
adjunct professor at Columbia Business School.
Alan Docter joined our board of directors in October 1996 at the time of his
initial investment in GoAmerica. Since 1990, Mr. Docter has been an early-stage
investor in technology companies, including M.A.I.D. plc (now The Dialog
Corporation), ViaWeb (sold to Yahoo!), Butterfly V.L.S.I. Ltd. (sold to Texas
Instruments) and Invino Corp. (sold to Youth Stream Media Networks). He has
served as Vice Chairman of Considar, Inc., an international metals trading
company, since he co-founded such company in 1986. Mr. Docter also serves on
the board of directors of a number of privately held companies.
Mark Kristoff joined our board of directors in June 1998. Since 1991, Mr.
Kristoff has been President and Chief Operating Officer of Considar, Inc., an
international metals trading company. Since 1990, Mr. Kristoff also has been an
early-stage investor in many technology companies and serves on the board of
directors of a number of privately held companies.
Zachary Prensky joined our board of directors in June 1998. Since October
1998, Mr. Prensky has been Managing Director of Investment Banking for
Wellfleet Partners, an investment banking firm based in New York City. Prior to
that, Mr. Prensky served as Chief Executive Officer and Chairman of Zackfoot
Investments LLC which he founded in 1997. Zackfoot invested and facilitated a
round of private equity financing by GoAmerica in 1998. Mr. Prensky served as
Chief Financial Officer of Ram Caterers from October 1995 to May 1997. From
July 1993 to October 1995, Mr. Prensky served as President of Zackfoot Software
which developed software packages for the footwear industry. Mr. Prensky has
been an early-stage investor in technology companies, including Register.com,
HomeworkCentral.com, Liveprint.com, Inc., DataRover Mobile Systems, Inc.,
Livemind, Inc. and Aluminium.com, Inc.
Nelson Schwab III joined our board of directors in January 2000, as the
designee of Forstmann Little & Co. Equity Partnership-VI, L.P. Mr. Schwab was a
co-founder of Carousel Capital, a merchant banking firm, and has been a
Managing Director of such firm since its inception in 1996. He was Chairman and
Chief Executive Officer of Paramount Parks Inc., owner of amusement theme
parks, from 1992 until 1995. He also serves on the board of directors of
Burlington Industries, First Union National Bank of North Carolina, Summit
Properties, Inc. and several private companies.
Andrew Seybold joined our board of directors in December 1999. Mr. Seybold
has extensive experience as a consultant, systems designer and product analyst
in the communications and computer industries. Since 1983, Mr. Seybold has
served as publisher, Editor-in-Chief and in various management positions with
Pinecrest Press, Inc. which publishes "Andrew Seybold's Outlook on
Communications and Computing."
Key Employees
Our key employees are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Ellen Flora.................. 31 Vice President of Operations
Jesse Odom................... 34 Vice President of Network Operations and
Technology
David Gantman................ 58 Vice President of Strategic Marketing
Peter Varvara................ 46 Vice President of Marketing Communications
Martin May................... 53 Director of Alternate Distribution and Carrier
Relations
Joshua Rochlin............... 33 Director of Business Development
Joseph Strempel.............. 32 Director of Direct Sales and Telemarketing
</TABLE>
40
<PAGE>
Ellen Flora joined GoAmerica in October 1999 as Vice President of
Operations. Prior to joining us, Ms. Flora served in various capacities,
including most recently as Business Development Manager for the Communications
Industry Group at Electronic Data Systems from October 1993 to October 1999.
Jesse Odom joined GoAmerica in 1996 as Vice President of Network Operations.
Prior to joining GoAmerica, Mr. Odom served as Vice President of Network
Engineering at American International Ore Corporation from 1991 to 1996.
David Gantman joined GoAmerica in January 2000 as Vice President of
Strategic Marketing of GoAmerica Marketing, Inc., our wholly-owned subsidiary.
Mr. Gantman has served as President of Strategem Plus, Inc. since January 1995
and served as Executive Vice President of NW Ayer, Inc. from 1984 until January
1995.
Peter Varvara joined GoAmerica in January 2000 as Vice President of
Marketing Communications of GoAmerica Marketing, Inc., our wholly-owned
subsidiary. Mr. Varvara has served as President of Customer Strategies
Worldwide LLC since February 1998 and served as Executive Vice President of NW
Ayer, Inc. from 1982 until February 1998.
Martin May joined GoAmerica in December 1999 as Director of Alternate
Distribution and Carrier Relations. Prior to joining us, Mr. May served as a
director of sales for BellSouth Wireless Data from November 1993 to December
1999.
Joshua Rochlin joined GoAmerica in December 1999 as Director of Business
Development. Prior to joining us, Mr. Rochlin was the founder and Chief
Executive Officer of MyCalendar.com LLC from January 1999 to December 1999. Mr.
Rochlin previously served as an associate for the law firm of Rubin Baum from
February 1995 to December 1998. Mr. Rochlin has served as a director of Hydron
Technologies, Inc. since January 2000.
Joseph Strempel joined GoAmerica in January 1998 and currently serves as
Director of Direct Sales and Telemarketing. Prior to joining us, Mr. Strempel
served in various sales positions, and most recently as a Wireless Data Account
Executive, with Bell Atlantic Mobile (formerly NYNEX) from January 1993 to
December 1997.
Board Committees
The board of directors has a compensation committee, which approves salaries
and incentive compensation for our executive officers and administers our stock
option plans and our employee stock purchase plan. The compensation committee
is made up of Robi Blumenstein, Alan Docter and Andrew Seybold. The board of
directors also has an audit committee, which reviews the results and scope of
the audit and other services provided by our independent accountants. The audit
committee is made up of Robi Blumenstein, Mark Kristoff and Zachary Prensky.
Board Composition
We currently have nine directors. Our certificate of incorporation provides
that, effective upon the closing of this offering, the terms of office of the
members of the board of directors will be divided into three classes: Class A,
whose term will expire at the annual meeting of stockholders to be held in
2001; Class B, whose term will expire at the annual meeting of stockholders to
be held in 2002; and Class C, whose term will expire at the annual meeting of
stockholders to be held in 2003. The Class A directors are Messrs. Kristoff,
Prensky and
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<PAGE>
Seybold, the Class B directors are Messrs. Blumenstein, Korb and Schwab and the
Class C directors are Messrs. Dobrinsky, Dell and Docter. At each annual
meeting of stockholders after this initial classification, the successors to
directors whose term will then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election.
Our bylaws permit the board of directors to increase or decrease the size of
the board of directors. Any additional directorships resulting from an increase
in the number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of one-third of the total number
of directors. This classification of the board of directors may have the effect
of delaying or preventing changes in control or management of GoAmerica.
Directors' Compensation
Each non-employee, non-investor director serving on our board of directors
will receive annual compensation of $20,000. In addition, each independent
director, upon election to the board of directors, will receive options to
purchase up to 64,000 shares of our common stock. On December 31, 1999, Mr.
Seybold was granted options to purchase 64,000 shares at $1.31 per share,
subject to vesting. Each director who is a stockholder of the Company and who
serves on the board of directors as a representative of another individual,
entity or group of stockholders will receive options to purchase up to 32,000
shares of our common stock. On December 31, 1999, Messrs. Blumenstein, Docter,
Kristoff and Prensky each received options to purchase 32,000 shares at $1.31
per share, subject to vesting. All future option grants shall have an exercise
price equal to the fair market value of our common stock on the date of grant
and shall vest at a rate of one-third per year, from the date of grant. Each
director will be reimbursed by us for his or her reasonable expenses incurred
in connection with his or her participation in our board of directors meetings.
Mr. Schwab and Mr. Dell each received options to purchase 32,000 shares of
common stock in February 2000 at an exercise price of $15.00 per share.
Executive Compensation
The following table sets forth certain information concerning compensation
that we paid for services in all capacities awarded to, earned by or paid to
our chief executive officer and each of our other executive officers whose
aggregate compensation exceeded $100,000 during the three years ended December
31, 1999 (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- -------------
Name and Principal Position(s) Salary Bonus Stock Options
------------------------------ ---------- --------- -------------
<S> <C> <C> <C> <C>
Aaron Dobrinsky, Chairman of the
Board, President and Chief Executive
Officer.............................. 1999 $ 150,000 $ 50,000 80,000
1998 93,750 -- --
1997 105,000 -- --
Joseph Korb, Executive Vice
President............................ 1999 $ 150,000 $ 50,000 80,000
1998 93,750 -- --
1997 -- -- --
Francis Elenio, Chief Financial
Officer, Treasurer and Secretary..... 1999 $ 95,833 $ 20,000 240,000
1998 -- -- --
1997 -- -- --
</TABLE>
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<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth information for the fiscal year ended
December 31, 1999 with respect to each grant of stock options to the Named
Executive Officers:
Option Grants During Year Ended December 31, 1999
<TABLE>
<CAPTION>
Individual Grants(/1/) Potential Realizable
-------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Shares Options Exercise Potential Realizable Price Appreciation for
Underlying Granted to Price Value at Initial Option Term(/3/)
Options Employees in Per Expiration Offering Price of -----------------------
Name Granted 1999(/2/) Share Date $16.00 Per Share 5% 10%
- ---- ---------- ------------ -------- ---------- -------------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Aaron Dobrinsky......... 80,000 3.6% $0.56 08/02/04 $1,235,200 $ 1,588,640 $2,016,453
Joseph Korb............. 80,000 3.6% $0.56 08/02/04 $1,235,200 $ 1,588,640 $2,016,453
Francis Elenio.......... 240,000 10.8% $0.56 08/02/09 $3,705,600 $6,119,955 $9,824,971
</TABLE>
- --------
(1) Each of these options was granted pursuant to the 1999 Stock Option Plan of
GoAmerica Communications Corp. and is subject to the terms of such plan. In
connection with our reorganization, such options are exercisable into
shares of our common stock. All these options vested immediately.
(2) In 1999, we granted options to purchase an aggregate of 2,216,008 shares of
common stock to our employees. The percentage calculation excludes options
to purchase 192,000 shares of common stock granted to our non-employee
directors during 1999.
(3) Amounts represent hypothetical values that could be achieved for the
respective options if exercised at the end of the option term. These values
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date based on the initial offering price of $16.00 per
share. These assumptions are not intended to forecast future appreciation
of our stock price. The potential realizable value computation does not
take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.
1999 Year-End Option Values
<TABLE>
<CAPTION>
Number of Options at Value of In-the-
December 31, Money
1999 Options(/1/)
------------------------ -------------------
Name Vested Unvested Vested Unvested
- ---- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C>
Aaron Dobrinsky..................... 80,000 -- $1,235,200 $ --
Joseph Korb......................... 80,000 -- 1,235,200 --
Francis Elenio...................... 240,000 -- 3,705,600 --
</TABLE>
- --------
(1) The value of the options is determined by subtracting the exercise price
per share from the initial public offering price per share offered hereby,
multiplied by the number of shares underlying the options.
There were no options exercised during the year ended December 31, 1999.
GoAmerica Communications Corp. 1999 Stock Option Plan
The GoAmerica Communications Corp. 1999 Stock Option Plan was adopted by the
board of directors of GoAmerica Communications Corp. and became effective on
August 3, 1999. Such plan was approved by the stockholders of GoAmerica
Communications Corp. effective on such date. On December 9, 1999 the board of
directors of GoAmerica Communications Corp. determined that, upon the closing
of our reorganization, no additional awards would be issued under the 1999
Stock Option Plan. As of the closing of our reorganization, the outstanding
options to purchase 1,916,000 shares of common stock of GoAmerica
Communications Corp. became, by their terms, options to purchase 1,916,000
shares of GoAmerica, Inc. common stock, otherwise in accordance with the terms
and conditions of the 1999 Stock Option Plan. Accordingly, our board of
directors has reserved 1,916,000 shares of our common stock for issuance upon
exercise of these options. The
43
<PAGE>
outstanding option under the 1999 Stock Option Plan are governed by the
compensation committee of our board of directors subject to the terms of the
1999 Stock Option Plan.
All the options granted under the 1999 Stock Option Plan were made to
employees of GoAmerica Communications Corp. and are non-qualified stock
options. All such options terminate not more than ten years from the date of
grant, subject to earlier termination upon or after a fixed period following
each optionee's death, disability or termination of employment with us. The
vesting provisions of each outstanding option was determined by the board of
directors of GoAmerica Communications Corp. and such options are not generally
assignable or otherwise transferable except by will or as per the laws of
descent and distribution. In the event of certain changes in control, and in
such other circumstances as set forth in the 1999 Stock Option Plan, the
administrator shall, in its equitable discretion, make adjustments in the terms
and conditions of any then outstanding stock options.
GoAmerica, Inc. 1999 Stock Plan
The 1999 Stock Plan was adopted by our board of directors on December 9,
1999 and approved by our stockholders on December 31, 1999. The 1999 Stock Plan
was effective as of December 9, 1999 and shall remain in effect until
terminated by our board of directors. The total number of shares of common
stock with respect to which awards may be granted under this plan is 4,800,000,
which amount shall be adjusted in accordance with the terms of the plan and to
an amount equal to twenty percent of the shares of our common stock outstanding
on December 31, 2000, and each December 31 thereafter. In no event shall such
annual adjustment decrease the shares available for issuance. Those eligible to
receive stock option grants under the 1999 Stock Plan include our employees,
directors and consultants. The 1999 Stock Plan is administered by the
compensation committee of our board of directors. As of December 31, 1999,
there were outstanding options to purchase 524,008 shares of common stock under
our 1999 Stock Plan. We also issued options to purchase an additional 1,559,400
shares of Common Stock under our 1999 Stock Plan in 2000, through the date of
this Prospectus. Of such options, 848,000 were issued during January with an
exercise price of $5.02 per share and the remaining options were issued during
February and March with exercise prices of $15.00 per share.
Subject to the provisions of the 1999 Stock Plan, the administrator of the
1999 Stock Plan has the discretion to determine the optionees and/or grantees,
the type of options to be granted, the vesting provisions, the terms of the
grants and other related grant provisions. The exercise price of an incentive
stock option may not be less than the fair market value per share of the common
stock on the date of grant or, in the case of an optionee who beneficially owns
10% or more of the voting power of all classes of our capital stock, not less
than 110% of the fair market value per share on the date of grant. The exercise
price of a non-qualified stock option may not be less than 85% of the fair
market value per share of the common stock on the date of grant. Fair market
value is determined by the plan administrator in good faith. We anticipate that
following consummation of this offering, fair market value shall be determined
in accordance with the closing sales price of our common stock as quoted on the
Nasdaq National Market. The 1999 Stock Plan also allows for the grant of
restricted stock and other awards, in the discretion of the plan administrator.
Incentive stock options granted under the 1999 Stock Plan terminate not more
than ten years from the date of grant, subject to earlier termination upon or
after a fixed period following the optionee's death, disability or termination
of employment with us. The term of non-qualified option grants is not limited,
provided that the term of any options, including incentive stock options and
non-qualified options, granted to a holder of more than 10% of the capital
stock may be no longer than five years. Options granted under the 1999 Stock
Plan will vest in the manner determined by the plan administrator. Options are
not assignable or otherwise transferable except by will or as per the laws of
descent and distribution. In the event of certain mergers, a reorganization, or
consolidation of us with or into another corporation or the sale of all or
substantially all our assets or all of our capital stock in which the successor
corporation does not assume outstanding options or issue equivalent options,
our board of directors is required to provide accelerated vesting of
outstanding options.
Employee Stock Purchase Plan
Our Employee Stock Purchase Plan provides our employees with an opportunity
to purchase our common stock through accumulated payroll deductions and at a
discount from fair market value. The plan was approved
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<PAGE>
by our board of directors on December 9, 1999 and was approved by our
stockholders on December 31, 1999. The plan became effective on December 9,
1999. The total number of shares of common stock with respect to which
purchases may be made under the plan is 4,000,000, which amount shall be
adjusted in accordance with the terms of the plan. The Employee Stock Purchase
Plan will be administered by our compensation committee.
Eligible employees may purchase up to a maximum fair market value of $25,000
for all purchases ending within the same calendar year under this plan. Our
employees are eligible to participate if they are employed by us for at least
20 hours per week and for more than five months in any calendar year and do not
own 5% or more of our voting stock. The initial offering period under the plan
will commence on the date that the registration statement with respect to this
offering is declared effective by the Securities and Exchange Commission and
ends on or about December 31, 2000. It is currently contemplated that new
offering periods will commence every six months thereafter. The purchase price
per share for our common stock under the plan will be equal to the lower of 85%
of the fair market value of our common stock on the first or last day of each
purchase period. Employees may end their participation under the plan at any
time prior to the exercise date of any one purchase period and, generally, such
participants shall be automatically terminated upon termination of employment.
In the event we are the surviving corporation in any merger, reorganization or
other business combination, options to purchase shares issued under the plan
shall be assumed. A dissolution or liquidation or a merger or consolidation in
which we are not the surviving entity will cause each option then outstanding
to terminate. Generally, our board of directors can amend, modify or terminate
the plan at any time provided the rights of plan participants are not impaired.
The plan terminates on December 31, 2004 unless earlier terminated by our board
of directors.
Employment Agreements, Non-Competition, Non-Disclosure and Invention Assignment
Agreements
Mr. Dobrinsky is a party to an agreement with us effective December 31, 1999
under which he serves as our Chairman of the Board, President and Chief
Executive Officer at a base salary of $225,000, subject to annual adjustment.
Mr. Korb is a party to an agreement with us effective December 31, 1999 under
which he serves as our Executive Vice President at a base salary of $225,000,
subject to annual adjustment. Mr. Elenio is a party to an agreement with us
effective December 31, 1999 under which he serves as our Chief Financial
Officer, Treasurer and Secretary at a base salary of $150,000, subject to
annual adjustment. Mr. Odom is a party to an agreement with us effective
December 31, 1999 under which he serves as our Vice President, Network
Operations and Technology at a base salary of $125,000, subject to annual
adjustment, with a minimum bonus of $25,000. The Compensation Committee may
award any or all of these individuals additional bonus payments or option
grants in its discretion. The initial term of each such agreement is for three
years and renews annually for one year periods thereafter. In the event Mr.
Dobrinsky, Mr. Korb or Mr. Elenio is terminated without cause, resigns for good
reason or, in the case of each of Mr. Dobrinsky and Mr. Korb, is not reelected
to our board of directors, he shall be entitled to severance in an amount to
include all payments that otherwise would have been paid to him through the end
of the then current term of the agreement. However, in no event shall such
severance amount be less than such employee's then current one year annual base
salary, or if such termination occurs after the third anniversary of the
effective date of such employee's agreement, such amount shall be no less than
such employee's then current annual salary plus one-twelfth of such annual
salary for each year of employment commenced beyond such anniversary date. If
Mr. Odom is terminated without cause or resigns for good reason, we must pay
Mr. Odom salary and benefits for a period of six months from the date of such
termination or resignation. In the event any of the foregoing employees dies or
is terminated for disability, he or his representative shall be entitled to
continued payments of base salary for a period of one year plus, in the case of
termination for disability, certain other benefits. Each of Mr. Dobrinsky and
Mr. Korb will also receive $800 per month in automobile allowances and will be
reimbursed for additional automobile expenses incurred in connection with their
duties. In addition, each of Mr. Dobrinsky and Mr. Korb also is the beneficiary
of a term life insurance policy in his respective name, in the face amount of
up to $1.0 million, for which we pay the premiums. Each employment agreement
also contains certain non-competition, non-solicitation, invention assignment
and confidentiality provisions and also requires that we maintain standard
directors and officers insurance of no less than $10.0 million.
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<PAGE>
We require that all employees sign an agreement with us pursuant to which
they agree to maintain the confidentiality of our proprietary information, to
assign any inventions to us, and to agree not to solicit our customers,
suppliers or employees away from us.
Compensation Committee Interlocks and Insider Participation
Until our board of directors formed its compensation committee on December
9, 1999, the compensation of our executive officers during 1999 was determined
by the entire board of directors. The compensation committee consists of
Messrs. Blumenstein, Docter and Seybold. There are no compensation committee
interlocks.
Since our inception in 1996, we consummated several rounds of private equity
financing. Certain of these transactions included issuances of our capital
stock to individuals who serve on our board of directors. In addition, certain
individuals were granted options or issued warrants to purchase shares of our
common stock.
Robi . CIBC WMV Inc. purchased 7,500 shares of Series A Preferred
Blumenstein Stock on June 25, 1999 for an aggregate of $7.5 million. Mr.
Blumenstein serves on our board of directors as the
representative of CIBC WMV Inc. Such shares of Series A
Preferred Stock shall convert into an aggregate of 5,741,632
shares of common stock upon completion of this offering.
. Granted options to purchase 32,000 shares of common stock at
an exercise price of $1.31 per share on December 31, 1999.
One third of such options shall vest on each of the first,
second and third anniversaries from the date of grant.
Aaron . Purchased 8,533,280 shares of common stock on August 8, 1996
Dobrinsky for an aggregate of $533.33 upon founding of GoAmerica.
. Granted options to purchase 80,000 shares of common stock at
an exercise price of $0.56 per share on August 3, 1999. All
such options vested immediately.
. Granted options to purchase 160,000 shares of common stock
at an exercise price of $5.02 per share on January 6, 2000.
All of such options vested immediately.
Alan Docter . Purchased 800,000 shares of common stock on October 15, 1996
for an aggregate of $250,000.
. Purchased, on January 31, 1998, 141,440 shares of common
stock and warrants to purchase 26,560 shares of common stock
at an exercise price of $1.23 per share, for an aggregate of
$130,000.
. Purchased, on September 22, 1998, 536,672 shares of common
stock and warrants to purchase 398,576 shares of common
stock at an exercise price of $1.51 per share, for an
aggregate of $500,000. Such warrants were issued in
connection with Mr. Docter's assistance in our equity
financing efforts.
. Received warrants to purchase 53,664 shares of common stock
on May 15, 1999 at an exercise price of $.00125 per share in
connection with the May 1999 Agreement set forth below.
. Purchased 130,816 shares of common stock pursuant to certain
pre-emptive rights on November 30, 1999 for an aggregate of
$136,703.
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<PAGE>
. Purchased 320 shares of Series A Preferred Stock pursuant to
certain pre-emptive rights on November 30, 1999 for an
aggregate of $320,000. Such shares of Series A Preferred
Stock shall convert into an aggregate of 244,984 shares of
common stock upon completion of this offering.
. Granted options to purchase 32,000 shares of common stock at
an exercise price of $1.31 per share on December 31, 1999.
One third of such options shall vest on each of the first,
second and third anniversaries from the date of grant.
Joseph Korb . Purchased 4,266,720 shares of common stock on October 7,
1996 for an aggregate of $266.67.
. Granted options to purchase 80,000 shares of common stock at
an exercise price of $0.56 per share on August 3, 1999. All
such options vested immediately.
. Granted options to purchase 160,000 shares of common stock
at an exercise price of $5.02 per share on January 6, 2000.
All of such options vested immediately.
Mark Kristoff . Purchased 160,000 shares of common stock on October 15, 1996
for an aggregate of $50,000.
. Purchased 156,336 shares of common stock on September 22,
1998 for an aggregate of $150,000.
. Received warrants to purchase 15,632 shares of common stock
on May 15, 1999 at an exercise price of $.00125 per share in
connection with the May 1999 agreement set forth below.
. Granted options to purchase 32,000 shares of common stock at
an exercise price of $1.31 per share on December 31, 1999.
One third of such options shall vest on each of the first,
second and third anniversaries from the date of grant.
Zachary . Zackfoot Investment LLC purchased 9,600 shares of common
Prensky stock for a purchase price of $10,686 and received 49,568
shares of common stock and warrants to purchase 139,504
shares of common stock at an exercise price of $1.51 per
share on May 28, 1998 in connection with Zackfoot Investment
LLC's assistance in our equity financing efforts. Mr.
Prensky was Chief Executive Officer and Chairman of Zackfoot
Investment LLC.
. Zackfoot Investment LLC purchased 3,200 shares of common
stock for a purchase price of $3,562 and received 3,328
shares of common stock and warrants to purchase 51,760
shares of common stock at an exercise price of $1.93 per
share on June 30, 1998 in connection with Zackfoot
Investment LLC's assistance in our equity financing efforts.
. Zackfoot Investment LLC received warrants to purchase 9,848
shares of common stock on May 19, 1999 at an exercise price
of $.00125 per share in connection with the May 1999
agreement set forth below.
. Granted options to purchase 32,000 shares of common stock at
an exercise price of $1.31 per share on December 31, 1999.
One third of such options shall vest on each of the first,
second and third anniversaries from the date of grant.
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<PAGE>
We also entered into a financial services consulting agreement with CIBC
World Markets Corp. pursuant to which CIBC was engaged to evaluate certain
potential financial and strategic initiatives. Mr. Blumenstein is the designee
of CIBC WMV, Inc. on our Board of Directors. In exchange for such services, we
paid a retainer fee of $50,000 to CIBC World Markets Corp. In connection with
the issuance and sale of our Series B Preferred Stock in January 2000, we paid
CIBC World Markets, Inc. $780,000 in cash and issued 226,816 shares of our
common stock. CIBC paid a finder's fee to a third party. For all future
transactions for which CIBC is entitled to compensation, if any, we have agreed
to pay a transaction fee in the amount of 6% of gross proceeds raised in such a
financing transaction, excluding this offering. Such payment for services, if
any, will be made one-half in cash and one-half in our equity securities. This
agreement will terminate upon the closing of this offering.
The May 1999 Agreements with Certain Prior Investors
In May 1999, each of GoAmerica, Aaron Dobrinsky, Joseph Korb and certain
prior investors, including Zackfoot Investments LLC, of which Mr. Prensky was a
managing director, and Alan Docter, entered into various agreements, including
a settlement agreement and release. The settlement agreement and release
resulted from claims by such investors that they were entitled to additional
securities of GoAmerica, at no additional cost, as a result of the issuance of
certain GoAmerica securities and the granting of certain rights by GoAmerica to
subsequent third party investors on terms and conditions alleged to be more
favorable, than were provided to the investors making such claims, including
the valuation of securities purchased. All parties entered the settlement
agreement and release without admission of any liability or wrongdoing. In
connection with the May 1999 agreements, we agreed to issue to such investors
warrants to purchase an aggregate of 549,000 shares of common stock and each of
Messrs. Dobrinsky and Korb agreed to issue to such investors options to
purchase an aggregate of 75,880 and 37,968 shares of the common stock held by
each of them respectively. As a result of such agreements, we recorded a non-
cash charge of approximately $297,000 during 1999. We anticipate that all such
options and warrants will be exercised as of the consummation of this offering.
Key Person Insurance
We maintain, and are the beneficiary of, life insurance policies on the life
of Aaron Dobrinsky in the aggregate amount of $3.0 million. We have applied for
similar life insurance on the life of Joseph Korb in the amount of $3.0 million
for which we will be the beneficiary. There can be no assurance that such
insurance on Mr. Korb will be obtained. We do not intend to maintain key person
life insurance on any of our other executive officers or key personnel.
Limitation of Liability and Indemnification of Directors and Officers
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
. any breach of their duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
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Our certificate of incorporation and bylaws provide that we shall indemnify
our directors, officers, employees and agents to the fullest extent permitted
by law. We believe that indemnification under our bylaws covers at least
negligence and gross negligence on the part of indemnified parties. Upon the
completion of this offering, we expect to have director and officer liability
insurance in the minimum amount of $25,000,000 with respect to claims made
against our directors and officers, including matters arising under the
Securities Act.
We have also entered into written agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in our
bylaws. These agreements, among other things, provide for indemnification of
our directors and executive officers for judgments, fines, settlement amounts
and expenses, including attorneys' fees, incurred by any of these persons in
any action or proceeding, including any action by or in the right of GoAmerica,
Inc. arising out of that person's services as our director or executive
officer, or as a director or executive officer of any of our subsidiaries or
any other company or enterprise to which such person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
There is no pending litigation or proceeding involving any of our directors,
officers, employees or agents where indemnification will be required or
permitted. We are not aware of any pending or threatened litigation or
proceeding that might result in a claim for such indemnification.
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CERTAIN TRANSACTIONS
Transactions involving each of Robi Blumenstein, Aaron Dobrinsky, Alan
Docter, Joseph Korb, Mark Kristoff and Zachary Prensky are included under the
heading Compensation Committee Interlocks and Insider Participation. Those
transactions occurred while each such individual was serving on our board of
directors and, in the case of Mr. Dobrinsky, while he was also serving as our
president and chief executive officer.
Francis Elenio, our chief financial officer, treasurer and secretary, was
granted options to purchase 240,000 shares of GoAmerica Communications Corp.
common stock for $0.56 per share on August 3, 1999 in his capacity as an
officer of GoAmerica Communications Corp. In connection with our reorganization
on December 31, 1999, all such options are now exercisable into shares of our
common stock. Mr. Elenio also was granted options to purchase 80,000 shares of
common stock for $5.02 per share on January 6, 2000. All such options are
immediately exercisable.
In July 1998, we entered into a consulting arrangement with Andrew Seybold
Group LLC, pursuant to which we are obligated to pay Mr. Seybold's firm $3,000
per month for consulting services and expertise relating to the wireless data
and communications industry. On December 31, 1999, our compensation committee
granted Mr. Seybold options to purchase 64,000 shares of our common stock at
$1.31 per share in connection with his services to be rendered as a member of
our board of directors. One third of such options shall vest on each of the
first, second and third anniversaries from the date of grant.
In January 2000, we issued and sold an aggregate of 648,057 shares of Series
B Convertible Preferred Stock to Dell USA L.P., Carousel Capital Partners,
L.P., Forstmann Little & Co. Equity Partnership - VI, L.P. and Impact Venture
Partners, L.P. Mr. Schwab, a managing director of Carousel Capital Partners,
serves as the designee of Forstmann Little on our board of directors. Adam
Dell, managing partner of Impact Venture Partners, was elected to our board of
directors in February 2000 as the designee of Dell USA L.P. Each of Mr. Dell
and Mr. Schwab was granted options in February 2000 to purchase 32,000 shares
of common stock at $15.00 per share. One third of such options shall vest on
each of the first, second and third anniversaries from the date of grant.
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PRINCIPAL STOCKHOLDERS
The following table sets forth as of February 28, 2000, as adjusted to give
effect to the sale of common stock offered hereby, certain information
regarding beneficial ownership of our common stock by:
. each person or group of affiliated persons we expect to be the
beneficial owner of more than 5% of the outstanding shares of common
stock;
. each director;
. each Named Executive Officer;
. and all directors and Named Executive Officers as a group.
The address for each officer is c/o GoAmerica, Inc., 401 Hackensack Avenue,
Hackensack, New Jersey 07601.
<TABLE>
<CAPTION>
Percentage(/2/)
--------------------------------
Name Shares(/1/) Prior to Offering After Offering
- ---- ----------- ----------------- --------------
<S> <C> <C> <C>
Aaron Dobrinsky(/3/)............. 8,425,248 22.5% 17.8%
Dobrinsky Family Holdings,
L.P.(/4/)....................... 4,092,624 11.0 8.7
Dobrinsky Business Holdings,
L.P.(/4/)....................... 2,455,560 6.6 5.2
CIBC WMV Inc.(/5/)............... 5,741,632 15.5 12.2
Robi Blumenstein(/6/)............ -- -- --
Joseph Korb(/7/)................. 4,332,752 11.6 9.2
Korb Business Holdings,
L.P.(/8/)....................... 2,046,376 5.5 4.3
Dell USA L.P.(/9/)............... 2,592,224 7.0 5.5
Adam Dell(/10/).................. 598,208 1.6 1.3
Alan Docter(/11/)................ 2,684,872 7.1 5.6
Mark Kristoff(/12/).............. 331,968 * *
Francis Elenio(/13/)............. 320,000 * *
Zachary Prensky(/14/)............ 218,320 * *
Nelson Schwab(/15/).............. 1,296,112 3.5 2.8
Andrew Seybold................... -- -- --
All executive officers and
directors as a group (10
persons)(/16/).................. 18,207,480 47.2% 37.5%
</TABLE>
- --------
* Less than 1%.
(1) Beneficial ownership includes any shares as to which the individual or
entity has sole or shared voting power or investment power and also any
shares which the individual or entity has a right to acquire within 60
days after February 28, 2000 through the exercise of any stock options or
warrants. We have also assumed the conversion of all outstanding shares of
Preferred Stock into shares of our common stock upon completion of this
offering. The inclusion herein of such shares, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of such shares. Unless otherwise indicated, each person
or entity named in the table has sole voting power and investment power
with respect to all shares of capital stock listed as owned by such person
or entity.
(2) Applicable percentage of ownership is based on an aggregate of 37,136,760
shares of common stock outstanding on February 28, 2000 (including
8,038,304 shares of common stock to be issued upon conversion of all
outstanding shares of Series A Preferred Stock and 5,184,456 shares of
common stock issuable upon conversion of our Series B Preferred Stock upon
completion of the offering) and an aggregate of 47,136,760 shares of
common stock outstanding after the completion of this offering.
(3) Includes 240,000 shares subject to options that are immediately
exercisable. Also includes 4,092,624 shares held by Dobrinsky Family
Holdings, L.P. and 2,455,560 shares held by Dobrinsky Business Holdings,
L.P.
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(4) Mr. Dobrinsky has voting and dispositive power with respect to the shares
of common stock held by Dobrinsky Family Holdings, L.P. and Dobrinsky
Business Holdings, L.P.
(5) Represents 5,741,632 shares to be issued in connection with the conversion
of 7,500 shares of Series A Preferred Stock upon completion of this
offering. Excludes 226,816 shares of common stock issued to CIBC World
Markets, Inc. for services rendered in connection with the Series B
Preferred Stock Financing.
(6) Mr. Blumenstein is the designee of CIBC WMV, Inc. on our board of
directors. Mr. Blumenstein does not have the power to vote or direct the
vote of and to dispose or direct the disposition of the shares owned by
CIBC WMV Inc. Accordingly, Mr. Blumenstein expressly disclaims beneficial
ownership of such shares.
(7) Includes 240,000 shares subject to options that are immediately
exercisable. Also includes 2,046,376 shares held by Korb Business
Holdings, L.P.
(8) Mr. Korb has voting and dispositive power with respect to the shares of
common stock held by Korb Business Holdings, L.P.
(9) Represents 2,592,224 shares of common stock to be issued in connection
with the conversion of the Series B Preferred Stock.
(10) Represents 598,208 shares of common stock to be issued in connection with
the conversion of the Series B Preferred Stock owned by Impact Venture
Partners, L.P., of which Mr. Dell serves as managing partner. Mr. Dell
expressly disclaims beneficial ownership of such shares except with
respect to his proportionate interest in the limited partnership.
(11) Includes 244,984 shares to be issued in connection with the conversion of
320 shares of Series A Preferred Stock upon completion of this offering.
Also includes 478,800 shares subject to warrant agreements that are
immediately exercisable.
(12) Includes 15,632 shares subject to a warrant agreement that is immediately
exercisable.
(13) Represents 320,000 shares subject to options that are immediately
exercisable.
(14) Includes 139,504 shares subject to a warrant agreement in the name of
Zackfoot Investments, LLC that is immediately exercisable.
(15) Represents 1,296,112 shares of common stock to be issued in connection
with the conversion of the Series B Preferred Stock owned by Carousel
Capital Partners, L.P., of which Mr. Schwab serves as a managing director.
Mr. Schwab expressly disclaims beneficial ownership of such shares except
with respect to his proportionate interest in the limited partnership.
(16) See notes 3 through 15.
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DESCRIPTION OF CAPITAL STOCK
General
GoAmerica Communications Corp. was incorporated in Delaware in 1996. In
December 1999, GoAmerica, Inc. was incorporated in Delaware and each of the
stockholders of GoAmerica Communications Corp. exchanged all their outstanding
shares of common stock and preferred stock of that company for newly issued
shares of GoAmerica, Inc. with equivalent rights and preferences. As a result,
GoAmerica Communications Corp. became a wholly-owned subsidiary of GoAmerica,
Inc. In addition, each outstanding warrant and option to purchase shares of
common stock of GoAmerica Communication Corp. is now exercisable for shares of
common stock of GoAmerica, Inc.
Upon consummation of this offering, our authorized capital stock will
consist of 200,000,000 shares of common stock, par value $0.01 per share, and
4,351,943 shares of undesignated preferred stock, par value $0.01 per share. At
December 31, 1999, after giving effect to the conversion of all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock upon
consummation of this offering, 47,136,760 shares of common stock were
outstanding and held by 77 stockholders. The following statements are brief
summaries of certain provisions with respect to our capital stock contained in
our certificate of incorporation and bylaws, copies of which have been filed as
exhibits to our registration statement. See "Where You Can Find More
Information." The following summary is qualified in its entirety by reference
to such documents.
Common Stock
The holders of our common stock are entitled to one vote for each share held
of record upon such matters and in such manner as may be provided by law.
Subject to preferences applicable to any outstanding shares of preferred stock,
the holders of common stock are entitled to receive ratably dividends, if any,
as may be declared by the board of directors out of funds legally available for
dividend payments. In the event we liquidate, dissolve or wind up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
the preferred stock. Holders of common stock have no preemptive rights or
rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock.
Preferred Stock
The preferred stock is issuable from time to time in one or more series and
with such designations, preferences and other rights for each series as shall
be stated in the resolutions providing for the designation and issue of each
such series adopted by our board of directors. The board of directors is
authorized by our Certificate of Incorporation to determine, among other
things, the voting, dividend, redemption, conversion, exchange and liquidation
powers, rights and preferences and the limitations thereon pertaining to such
series. The board of directors, without stockholder approval, may issue
preferred stock with voting and other rights that could adversely affect the
voting power of the holders of the common stock and that could have certain
anti-takeover effects. We have no present plans to issue any shares of
preferred stock. The ability of the board of directors to issue preferred stock
without stockholder approval could have the effect of delaying, deferring or
preventing a change in control of us or the removal of existing management.
Warrants
At December 31, 1999, we had outstanding warrants to purchase an aggregate
of 1,276,800 shares of our common stock. The weighted average exercise price of
the warrants is $1.17 per share. Any warrant may be exercised by applying the
value of a portion of the warrant, which is equal to the number shares issuable
under the warrant being exercised multiplied by the fair market value of a
share of our common stock, less the per share exercise price, in lieu of
payment of the exercise price per share. Of such warrants, an aggregate of
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848,912 will expire in 2001, an aggregate of 42,880 will expire in 2003, an
aggregate of 65,008 will expire in 2004, and an aggregate of 320,000 will
expire in 2008.
Delaware Anti-Takeover Law and Our Certificate of Incorporation and Bylaw
Provisions
Provisions of Delaware law and our certificate of incorporation and bylaws
could make it difficult for a third party to acquire us and to remove our
incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of GoAmerica to negotiate
first with our board of directors. We believe that the benefits of increased
protection of our ability to negotiate with the proponent of an unfriendly or
unsolicited acquisition proposal outweigh the disadvantages of discouraging
such proposals because, among other things, negotiation could result in an
improvement of the terms of the proposal.
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates corporate acquisitions. In general, Section 203 prohibits a publicly-
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:
. the board of directors approved the transaction in which such
stockholder became an interested stockholder prior to the date the
interested stockholder attained such status;
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
. on or subsequent to such date the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
corporation's voting stock not owned by the interested stockholder.
A "business combination" generally includes a merger, sale of assets or
stock, or other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
Our certificate of incorporation provides that, effective upon the closing
of this offering, the terms of office of the members of the board of directors
will be divided into three classes: Class A, whose term will expire at the
annual meeting of stockholders to be held in 2001, Class B, whose term will
expire at the annual meeting of stockholders to be held in 2002, and Class C,
whose term will expire at the annual meeting of stockholders to be held in
2003. At each annual meeting of stockholders after the initial classification,
the successors to directors whose term will then expire will be elected to
serve from the time of election and qualification until the third annual
meeting following election. Our bylaws permit the board of directors to
increase or decrease the size of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors. This classification
of the board of directors may have the effect of delaying or preventing changes
in control or management of GoAmerica.
Furthermore, our certificate of incorporation and bylaws also provide that:
. the affirmative vote of the holders of at least 80% of the voting power
of all outstanding shares of the capital stock of GoAmerica shall be
required to adopt, amend or repeal any provision of our bylaws;
. upon the closing of this offering, stockholders of GoAmerica may not
take any action by written consent;
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. upon the closing of this offering, special meetings of stockholders may
be called only by our president, the chairman of our board of directors
or a majority of our board of directors and business transacted at any
such special meeting shall be limited to matters relating to the
purposes set forth in the notice of such special meeting;
. our board of directors, when evaluating an offer related to a tender or
exchange offer or other business combination, is authorized to give due
consideration to any relevant factors, including the social, legal and
economic effects upon employees, suppliers, customers, creditors, the
community in which we conduct business, and the economy of the state,
region and nation; and
. the affirmative vote of the holders of at least 80% of the voting power
of all outstanding shares of the capital stock of GoAmerica shall be
required to amend the above provisions or the limitations on director
liability.
The Delaware statute, the undesignated authorized preferred stock and the
foregoing provisions of our certificate of incorporation and our bylaws may
discourage certain types of transactions involving an actual or potential
change in control of GoAmerica and could have the effect of delaying, deterring
or preventing a change in control of GoAmerica. In addition, in the event of
certain mergers, a reorganization or consolidation of GoAmerica with or into
another corporation or the sale of all or substantially all of our assets or
all of our capital stock wherein the successor corporation does not assume
outstanding options or issue equivalent options, our board of directors is
required to accelerate vesting of options outstanding under our 1999 Stock
Plan.
Registration Rights
In October 1996, we entered into a registration rights agreement pursuant to
which we granted registration rights to stockholders covering an aggregate of
5,501,216 shares of our common stock. Messrs. Docter and Kristoff are among
such stockholders. Pursuant to the October 1996 registration rights agreement,
at any time beginning six months after the effective date of this offering, the
stockholders of at least a majority of such registrable shares of common stock
have the right, subject to certain restrictions set forth therein, to require
that we register, at our expense, on no more than two occasions any or all of
their shares of common stock covered by such agreement.
The October 1996 registration rights agreement also provides that, if at any
time we propose to register any of our common stock under the Securities Act
for sale to the public on either a Form S-1, Form S-2 or Form S-3 Registration
Statement, those stockholders party to the agreement have unlimited piggyback
registration rights at our expense, subject to certain restrictions, including
the right of the managing underwriter in such offering to limit the amount of
securities registered by such stockholders.
In January 1998, we issued warrants to purchase 16,320 shares of our common
stock and such shares have registration rights similar to the registration
rights set forth in the October 1996 registration rights agreement.
In June 1999, we entered into a registration rights agreement pursuant to
which we granted registration rights to stockholders covering an aggregate of
7,655,512 shares of our common stock that will be issued upon the consummation
of this offering and the automatic conversion of their shares of Series A
Preferred Stock. This number of shares also included shares of Series A
Preferred Stock sold in August 1999. CIBC WMV is one of the stockholders party
to this agreement. Pursuant to the June 1999 registration rights agreement, at
any time beginning 180 days after the effective date of this offering, the
stockholders of at least 67% of such shares have the right, subject to certain
restrictions set forth in the June 1999 registration rights agreement, to
request that we register, at our expense, any or all of their shares.
The June 1999 registration rights agreement also provides that, if at any
time we propose to register any of our common stock under the Securities Act
for sale to the public, the stockholders party to this agreement have unlimited
piggyback registration rights at our expense, subject to certain restrictions,
including the right
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<PAGE>
of the managing underwriter to limit the amount of securities registered by
such stockholders. In addition, the 1999 Registration Rights Agreement provides
that under certain circumstances, stockholders party thereto may register up to
fifty percent of the number of shares available to be sold in any secondary
offering of our common stock.
In January 2000, we entered into a registration rights agreement in which we
granted registration rights to stockholders covering an aggregate of 5,184,456
shares of our common stock that will be issued upon the automatic conversion of
their shares of Series B Preferred Stock upon the completion of this offering.
Dell USA L.P., Impact Venture Partners, L.P., Carousel Capital Partners, L.P.
and Forstmann Little Equity Partnership-VI, L.P. are the stockholders party to
this agreement. The January 2000 registration rights agreement provides that at
any time beginning 180 days after the effective date of this offering, the
stockholders of at least 50% of such shares have the right, subject to certain
restrictions, to request that we register, at our expense, any or all of their
shares.
The January 2000 registration rights agreement also provides that, if at any
time we propose to register any of our common stock under the Securities Act
for sale to the public, the stockholders party to this agreement have unlimited
piggyback registration rights at our expense, subject to certain restrictions,
including the right of the managing underwriter to limit the amount of
securities registered by such stockholders. In the event that the holders of
our Series B Preferred Stock, Series A Preferred Stock and Common Stock desire
to register their shares together and there is a need to reduce the number of
shares registered, the Series B Preferred Stock stockholders will have priority
over other stockholders for the registration of their shares. This agreement
also provides that under certain circumstances, these stockholders may register
all of their shares available to be sold in any secondary offering of our
common stock.
Our underwriters have advised our stockholders that they may not participate
in this offering or otherwise exercise any of their registration rights in
connection herewith.
Listing
Our common stock has been approved for quotation on the Nasdaq National
Market under the symbol "GOAM".
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company. The transfer agent's address and telephone number is
40 Wall Street, New York, New York 10005, 718-921-8200.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 47,136,760 shares of common
stock outstanding. Of these shares, the 10,000,000 shares sold in the offering,
plus any additional shares sold upon exercise of the underwriters' over-
allotment option, will be freely transferable by persons other than
"affiliates" of GoAmerica without restriction or further registration under the
Securities Act. The remaining 37,136,760 outstanding shares will be "restricted
securities" (the "Restricted Shares") within the meaning of Rule 144 under the
Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, such as the
exemption afforded by Rule 144.
Each of GoAmerica, our officers and directors, and certain of our
stockholders have entered into "lock-up" agreements with a representative of
the underwriters, providing that, subject to certain exceptions, they will not
offer, sell or otherwise dispose of any shares of common stock, or securities
convertible into or exchangeable for common stock, or enter into any agreement
to do so, for a period of 180 days after the date of this prospectus without
the prior written consent of Bear, Stearns & Co. Inc. acting as a
representative of the underwriters. Bear, Stearns & Co. Inc. may release any of
such shares in its sole discretion at any time and without prior notice.
Following expiration of the "lock-up" period, all the Restricted Shares will
become eligible for sale at various times commencing immediately pursuant to
Rule 144, subject to certain limitations described below. In addition, certain
of the Restricted Shares may be sold upon expiration of the "lock-up" period if
eligible stockholders elect to exercise available registration rights. See
"Description of Capital Stock--Registration Rights."
Rule 144, as currently in effect, provides that an affiliate of GoAmerica or
a person, or persons whose sales are aggregated, who has beneficially owned
Restricted Shares that were issued by GoAmerica or purchased by such person
from a nonaffiliate of GoAmerica at least one year prior to such sale is
entitled to sell, commencing 90 days after the date of this prospectus, within
any three-month period, a number of shares that does not exceed the greater of
1% of the then outstanding shares of common stock (approximately shares of
common stock immediately after this offering) and the average weekly trading
volume in the common stock during the four calendar weeks preceding such sale.
Sales under Rule 144 also are subject to certain manner-of-sale provisions,
notice requirements and the availability of current public information about
us. However, a person who is not an "affiliate" of GoAmerica at any time during
the three months preceding a sale, and who has beneficially owned Restricted
Shares that were issued by GoAmerica or purchased by such person from a
nonaffiliate of GoAmerica at least two years prior to such sale, is entitled to
sell such shares under Rule 144 without regard to the limitations described
above.
As of the date of this prospectus, there were outstanding options and
warrants to purchase an aggregate of 3,716,808 shares of common stock. After
giving effect to vesting provisions limiting the exercisability of all the
outstanding options and the "lock-up" period applicable to certain option
holders, none of these shares will become available for sale in the public
market pursuant to Rules 144 and 701 under the Securities Act until at least
180 days after completion of this offering. Rule 701 relates to the sale of
shares issuable under compensatory stock plans. 1,996,800 of such shares will
become available for resale at the expiration of the "lock-up" period. We
intend to register on a Form S-8 registration statement under the Securities
Act, during the 180-day lock-up period, the resale of 6,716,000 shares of
common stock issuable upon the exercise of outstanding options or reserved for
issuance under the 1999 Stock Plan and the resale of 4,000,000 shares of common
stock to be sold to employees pursuant to our Employee Stock Purchase Plan. See
"Management--GoAmerica, Inc. 1999 Stock Option Plan" and "--Employee Stock
Purchase Plan."
Since there has been no public market for shares of the common stock prior
to this offering, we are unable to predict the effect that sales made pursuant
to Rules 144 or 701 under the Securities Act, or otherwise, may have on the
prevailing market price of the shares of the common stock. Sales of a
substantial amount of the common stock in the public market, or the perception
that such sales could occur, could adversely affect the market prices of our
stock. See "Risk Factors--Future sales of our common stock may negatively
affect our stock price."
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CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
Following is a general discussion of the material U.S. federal income and
estate tax consequences of the ownership and disposition of the common stock
applicable to non-U.S. holders of our common stock. For purposes of this
discussion, a non-U.S. holder is any holder of our common stock that, for U.S.
federal income tax purposes, is not a U.S. person (as defined below). This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant in light of a non-U.S. holder's particular facts
and circumstances, such as being a U.S. expatriate, and does not address any
tax consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended, and administrative
and judicial interpretations thereof, all as in effect on the date hereof, and
all of which are subject to change, possibly with retroactive effect. We have
not and will not seek a ruling from the Internal Revenue Service with respect
to the U.S. federal income and estate tax consequences described below, and as
a result, there can be no assurance that the Internal Revenue Service will not
disagree with or challenge any of the conclusions set forth in this discussion.
For purposes of this discussion, the term U.S. person means:
. a citizen or resident of the United States;
. a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or any political
subdivision thereof;
. an estate whose income is included in gross income for U.S. federal
income tax purposes regardless of its source; or
. a trust whose administration is subject to the primary supervision of a
U.S. court and which has one or more U.S. persons who have the authority
to control all substantial decisions of the trust.
Dividends
A dividend paid to a non-U.S. holder generally will be subject to U.S.
withholding tax either at a rate of 30% of the gross amount of the dividend or
such lower rate as may be specified by an applicable income tax treaty.
Dividends received by a non-U.S. holder that are effectively connected with a
U.S. trade or business conducted by the non-U.S. holder are exempt from that
withholding tax. However, those effectively connected dividends, net of certain
deductions and credits, are taxed at the same graduated rates applicable to
U.S. persons.
In addition to the graduated tax described above, dividends received by a
corporate non-U.S. holder that are effectively connected with a U.S. trade or
business of the corporate non-U.S. holder may also be subject to a branch
profits tax at a rate of 30% or such lower rate as may be specified by an
applicable income tax treaty.
A non-U.S. holder that is eligible for a reduced rate of withholding tax
pursuant to an applicable income tax treaty may be required to submit
documentation to avail itself of that treaty and may be able to obtain a refund
of any excess amounts withheld by GoAmerica by filing an appropriate claim for
refund with the Internal Revenue Service.
Gain On Disposition Of Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income tax
on any gain realized upon the sale or other disposition of our common stock
unless:
. the gain is effectively connected with a U.S. trade or business of the
non-U.S. holder (which gain, in the case of a corporate non-U.S. holder,
must also be taken into account for branch profits tax purposes);
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. the non-U.S. holder is an individual who holds his or her common stock
as a capital asset (generally, an asset held for investment purposes)
and who is present in the United States for a period or periods
aggregating 183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met; or
. we are or have been a "United States real property holding corporation"
for U.S. federal income tax purposes at any time within the shorter of
the five-year period preceding the disposition or the holder's holding
period for its common stock. We believe that we are not and do not
believe that we will become a "United States real property holding
corporation" for U.S. federal income tax purposes.
Backup Withholding and Information Reporting
Generally, we would be required to report annually to the Internal Revenue
Service the amount of dividends, if any, paid on the common stock, the name and
address of the recipient, and the amount, if any, of tax withheld. A similar
report would be sent to the recipient. Pursuant to applicable income tax
treaties or other agreements, the Internal Revenue Service may make its reports
available to tax authorities in the recipient's country of residence.
Dividends paid to a non-U.S. holder at an address within the United States
may be subject to backup withholding at a rate of 31% if the non-U.S. holder
fails to establish that it is entitled to an exemption or to provide a correct
taxpayer identification number and other information to the payer. Backup
withholding will generally not apply to the dividends paid to non-U.S. holders
at an address outside the United States on or prior to December 31, 2000 unless
the payer has knowledge that the payee is a U.S. person. Under recently
finalized Treasury Regulations regarding withholding and information reporting,
payment of dividends to non-U.S. holders at an address outside the United
States after December 31, 2000 may be subject to backup withholding at a rate
of 31% unless such non-U.S. holder satisfies various certification
requirements.
Under current Treasury Regulations, the payment of the proceeds of the
disposition of our common stock to or through the U.S. office of a broker is
subject to information reporting and backup withholding at a rate of 31% unless
the holder certifies its non-U.S. status under penalties of perjury or
otherwise establishes an exemption. Generally, the payment of the proceeds of
the disposition by a non-U.S. holder of our common stock outside the United
States to or through a foreign office of a broker will not be subject to backup
withholding but will be subject to information reporting requirements if the
broker is:
. a U.S. person;
. a "controlled foreign corporation" for U.S. federal income tax purposes;
or
. a foreign person 50% or more of whose gross income for certain periods
is from the conduct of a U.S. trade or business
unless the broker has documentary evidence in its files of the holder's non-
U.S. status and certain other conditions are met, or the non-U.S. holder
otherwise establishes an exemption. Neither backup withholding nor information
reporting generally will apply to a payment of the proceeds of a disposition of
our common stock by or through a foreign office of a foreign broker not subject
to the preceding sentence.
In general, the recently finalized Treasury Regulations, described above, do
not significantly alter substantive withholding and information reporting
requirements but would alter procedures for claiming benefits of an income tax
treaty and change the certifications procedures relating to the receipt by
intermediaries of payments on behalf of the beneficial owner of shares of
common stock. Non-U.S. holders should consult their tax advisors regarding the
effect, if any, of those final Treasury Regulations on an investment in our
common stock. Those final Treasury Regulations are generally effective for
payments made after December 31, 2000.
59
<PAGE>
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.
Estate Tax
An individual non-U.S. holder who owns our common stock at the time of his
or her death or had made certain lifetime transfers of an interest in our
common stock will be required to include the value of our common stock in his
or her gross estate for U.S. federal estate tax purposes, unless an applicable
estate tax treaty provides otherwise.
The foregoing discussion is a summary of the principal U.S. federal income
and estate tax consequences of the ownership, sale or other disposition of our
common stock by non-U.S. holders. Accordingly, investors are urged to consult
their own tax advisors with respect to the income and estate tax consequences
of the ownership and disposition of common stock, including the application and
effect of the laws of any state, local, foreign or other taxing jurisdiction.
60
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated April 6, 2000, each of the underwriters named below, through their
representatives Bear, Stearns & Co. Inc., Chase Securities Inc., U.S. Bancorp
Piper Jaffray Inc., Wit SoundView Corporation and DLJdirect Inc., has severally
agreed to purchase from us the aggregate number of shares of common stock set
forth opposite its name below at the public offering price less the
underwriting discount set forth on the cover page of this prospectus.
<TABLE>
<CAPTION>
Underwriters Number of Shares
- ------------ ----------------
<S> <C>
Bear, Stearns & Co. Inc........................................ 3,100,000
Chase Securities Inc. ......................................... 1,627,500
U.S. Bancorp Piper Jaffray Inc................................. 1,511,250
Wit SoundView Corporation...................................... 1,511,250
DLJdirect Inc.................................................. 150,000
Banc of America Securities LLC................................. 150,000
Deutsche Bank Securities Inc................................... 150,000
Donaldson, Lufkin & Jenrette Securities Corporation............ 150,000
First Union Securities, Inc.................................... 150,000
Fleetboston Robertson Stephens Inc............................. 150,000
Morgan Stanley & Co. Incorporated.............................. 150,000
Salomon Smith Barney Inc....................................... 150,000
Brean Murray & Co., Inc........................................ 150,000
Blaylock & Partners L.P........................................ 75,000
J.C. Bradford & Co............................................. 75,000
Chatsworth Securities LLC...................................... 75,000
Friedman, Billings, Ramsey & Co., Inc.......................... 75,000
Gabelli & Company, Inc......................................... 75,000
Gaines, Berland Inc............................................ 75,000
Gerard Klauer Mattison & Co., LLC.............................. 75,000
Jefferies & Company............................................ 75,000
Jesup & Lamont Securities Corporation.......................... 75,000
Josephthal & Co. Inc........................................... 75,000
Redwine & Company Inc.......................................... 75,000
Sands Brothers & Co., Ltd...................................... 75,000
----------
Total........................................................ 10,000,000
==========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters thereunder are subject to approval of certain legal matters by
their counsel and to various other conditions. Under the underwriting
agreement, the underwriters are obligated to purchase and pay for all of the
above shares of common stock, other than those covered by the over-allotment
option described below, if they purchase any of the shares.
The underwriters propose to initially offer some of the shares directly to
the public at the offering price set forth on the cover page of this prospectus
and some of the shares to dealers at this price less a concession not in excess
of $ 0.67 per share. The underwriters may allow, and dealers may re-allow,
concessions not in excess of $ 0.10 per share on sales to other dealers. After
the initial offering of the shares to the public, the underwriters may change
the offering price, concessions and other selling terms. The underwriters do
not intend to confirm sales to any accounts over which they exercise
discretionary authority.
We have granted the underwriters an option exercisable for 30 days from the
date of the underwriting agreement to purchase up to 1,500,000 additional
shares, at the offering price less the underwriting discount.
61
<PAGE>
The underwriters may exercise this option solely to cover over-allotments, if
any, made in connection with this offering. To the extent underwriters exercise
this option in whole or in part then each of the underwriters will become
obligated, subject to conditions, to purchase a number of additional shares
approximately proportionate to each underwriter's initial purchase commitment
as indicated in the preceding table.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
Our directors, executive officers and stockholders, who collectively hold a
total of 37,204,808 shares of common stock, have agreed, subject to limited
exceptions, not to sell or offer to sell or otherwise dispose of any shares of
common stock or securities convertible into or exercisable or exchangeable for
our common stock, for a period of 180 days after the date of this prospectus
without the prior written consent of Bear, Stearns & Co. Inc., on behalf of the
underwriters.
In addition, we have agreed that for a period of 180 days after the date of
this prospectus we will not offer, sell or otherwise dispose of any shares of
common stock except for the shares offered in this offering and any shares
offered in connection with employee benefit plans, without the consent of Bear,
Stearns & Co. Inc., on behalf of the underwriters.
Prior to the offering, there has been no public market for our common stock.
Consequently, the initial offering price for the common stock has been
determined by negotiations between us and the representatives of the
underwriters. Among the factors considered in these negotiations were:
. our results of operations in recent periods;
. estimates of our business potential;
. an assessment of our management;
. prevailing market conditions; and
. the prices of similar securities of generally comparable companies.
Our common stock has been approved for quotation on the Nasdaq National
Market under the symbol "GOAM." We cannot assure you, however, that an active
or orderly trading market will develop for the common stock or that our common
stock will trade in the public markets subsequent to the offering at or above
the initial offering price.
In order to facilitate the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock during and after the offering. Specifically, the underwriters may
over-allot or otherwise create a short position in the common stock for their
own account by selling more shares of common stock than we have actually sold
to them. The underwriters may elect to cover any short position by purchasing
shares of common stock in the open market or by exercising the over-allotment
option granted to the underwriters. In addition, the underwriters may stabilize
or maintain the price of the common stock by bidding for or purchasing shares
of common stock in the open market and may impose penalty bids, under which
selling concessions allowed to syndicate members or other broker-dealers
participating in the offering are reclaimed if shares of common stock
previously distributed in the offering are repurchased in connection with
stabilization transactions or otherwise. The effect of these transactions may
be to stabilize or maintain the market price at a level above that which might
otherwise prevail in the open market and these transactions may be discontinued
at any time. The imposition of a penalty bid may also affect the price of the
common stock to the extent that it discourages resales. No representation is
made as to the magnitude or effect of these activities.
A prospectus in electronic format is available on an Internet Web site
maintained by Wit SoundView Corporation's affiliate, Wit Capital Corporation.
In addition, other dealers purchasing shares from Wit
62
<PAGE>
SoundView in this offering have agreed to make a prospectus in electronic
format available on Web sites maintained by each of these dealers. An
electronic prospectus is also available on the Web site maintained by DLJdirect
Inc. Other than the prospectus in electronic format, the information on these
Web sites and any information contained on any other Web site maintained by Wit
Capital or DLJdirect Inc. is not part of this prospectus or the registration
statement of which this prospectus forms a part, has not been approved or
endorsed by us or any underwriter in its capacity as underwriter and should not
be relied upon by investors.
Wit SoundView and DLJdirect Inc. intend to conduct an electronic
distribution of some or all of the GoAmerica shares allocated to each such firm
through their respective Web sites. Each firm will distribute the GoAmerica
shares pursuant to their respective procedures.
Other than their respective participation as underwriters in this offering,
none of the underwriters has any relationship with GoAmerica, or any of its
founders or significant stockholders, except as follows. In January 2000,
GoAmerica and DLJdirect Inc. entered into a co-marketing arrangement pursuant
to which each party features the services of the other. There are no payment or
fee obligations which arise from this co-marketing relationship.
The underwriters have reserved for sale, at the initial public offering
price, up to 600,000 shares of common stock for employees, directors and other
persons associated with us who express an interest in purchasing these shares
of common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent these persons
purchase reserved shares. Any reserved shares not purchased by these persons
will be offered by the underwriters to the general public on the same terms as
the other shares offered in this offering.
The underwriters may, from time to time, engage in transactions with, and
perform services for, us in the ordinary course of their business.
The following table shows the underwriting discount to be paid to the
underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of common stock.
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share.......................................... $ 1.12 $ 1.12
Total.............................................. $11,200,000 $12,880,000
</TABLE>
Other expenses of this offering (including the registration fees and the
fees of financial printers, counsel and accountants) payable by us are expected
to be approximately $1.4 million.
63
<PAGE>
LEGAL MATTERS
The validity of the shares of the common stock offered hereby will be passed
upon by Buchanan Ingersoll Professional Corporation, Princeton, New Jersey.
Certain legal matters in connection with the offering will be passed upon for
the underwriters by Sidley & Austin, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999, and for each of the three years in
the period ended December 31, 1999 as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
John D. Hilcher, CPA, independent auditor, has audited the financial
statements of the business segment ZAP.IT for the period beginning January 1,
1998 and ended July 14, 1998 as set forth in his report. We have included these
financial statements in the prospectus and elsewhere in the registration
statement in reliance on John D. Hilcher's report, given on his authority as an
expert in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act, with respect to the shares of
common stock offered hereby. This prospectus does not contain all the
information which is in the registration statement. We refer to the
registration statement and to the exhibits and schedules filed with the
Registration Statement for further information with respect to us and the
shares of common stock offered in this prospectus. Statements contained herein
as to the content of any contract or other document are materially complete.
However, reference is made to the copy of such contract or other document filed
as an exhibit to the registration statement, and each such statement is
qualified in its entirety by such reference.
The registration statement and the exhibits and schedules thereto may be
inspected without charge at the Public Reference Room of the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such documents may be obtained from the
Public Reference Room of the Commission at prescribed rates. This material also
may be obtained on the Commission's website at http://www.sec.gov. Information
regarding the operation of the Public Reference Room may be obtained by calling
the Commission at 1(800) SEC-0330.
We intend to furnish our stockholders with annual reports containing
financial statements certified by our independent accountants and make
available quarterly reports containing unaudited financial information for the
first three quarters of each year.
64
<PAGE>
GOAMERICA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GoAmerica, Inc.
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1998 and 1999..................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1997, 1998 and 1999.................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
ZAP.IT Business Segment
Report of Independent Auditors........................................... F-19
Statement of Operations from Business Segment for the period beginning
January 1, 1998 and ended July 14, 1998................................. F-20
Statement of Cash Flows from Business Segment for the period beginning
January 1, 1998 and ended July 14, 1998................................. F-21
Notes to Financial Statements of Business Segment........................ F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
GoAmerica, Inc.
We have audited the accompanying consolidated balance sheets of GoAmerica,
Inc. and subsidiary, as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GoAmerica,
Inc. and subsidiary at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
MetroPark, New Jersey
February 23, 2000, except for the third paragraph of Note 14, as to which the
date is March 17, 2000
F-2
<PAGE>
GOAMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Pro forma
Stockholders'
December 31, Equity
------------------------- -------------
December 31,
1999
1998 1999 (Note 13)
----------- ------------ -------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents........... $ 1,960,954 $ 6,343,793
Accounts receivable, less allowance
for doubtful accounts of $20,000 in
1998 and $75,000 in 1999........... 199,021 541,865
Merchandise inventories............. 66,222 589,307
Prepaid expenses and other.......... 34,149 471,455
----------- ------------
Total current assets.................. 2,260,346 7,946,420
Property, equipment and leasehold
improvements, net.................... 643,692 959,243
Deferred costs........................ 510,748
Investment in DataRover Mobile
Systems, Inc. ....................... 255,700
Other assets.......................... 105,945 84,573
----------- ------------
$ 3,009,983 $ 9,756,684
=========== ============
Liabilities, redeemable convertible
preferred stock and stockholders'
equity (deficit)
Current liabilities:
Accounts payable.................... $ 165,383 $ 3,837,715
Accrued expenses.................... 604,806 1,460,936
Capital lease obligations........... 157,854
Deferred income..................... 14,508 64,300
----------- ------------
Total current liabilities............. 784,697 5,520,805
Other liabilities..................... 139,274
Commitments and contingencies
Series A redeemable convertible
preferred stock, $.01 par value,
authorized: none in 1998 and 10,500
shares in 1999; issued and
outstanding: none in 1998; 10,500
shares in 1999, and none pro forma
1999, $10,500,000 liquidation
preference........................... 20,755,323 $ --
Stockholders' equity (deficit):
Preferred stock $.01 par value,
authorized: 5,000,000 shares in
1998 and 1999; issued and
outstanding: none in 1998 and 1999;
none pro forma 1999................
Common stock, $.01 par value;
authorized: 40,000,000 in 1998, and
100,000,000 shares in 1999,
respectively; issued and
outstanding: 21,327,776 in 1998 and
23,687,184 shares in 1999,
respectively, and 37,136,760 shares
pro forma 1999..................... 213,278 236,872 371,368
Additional paid-in capital.......... 5,855,432 5,483,655 51,294,482
Deferred employee compensation...... (7,067,533) (7,067,533)
Accumulated deficit................. (3,843,424) (15,311,712) (15,311,712)
----------- ------------ -----------
Total stockholders' equity (deficit).. 2,225,286 (16,658,718) $29,286,605
----------- ------------ ===========
$ 3,009,983 $ 9,756,684
=========== ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
GOAMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Subscriber.......................... $ 114,524 $ 359,364 $ 1,182,695
Equipment........................... 33,431 449,027 1,341,356
Other............................... 24,775 18,264 206,496
----------- ----------- ------------
172,730 826,655 2,730,547
Costs and expenses:
Cost of subscriber revenue.......... 87,551 303,477 4,051,182
Cost of equipment revenue........... 14,960 532,074 1,648,160
Sales and marketing................. 242,708 908,694 3,283,021
General and administrative.......... 841,090 1,549,188 4,809,232
Depreciation and amortization....... 32,384 123,616 275,067
Settlement costs.................... 297,310
----------- ----------- ------------
1,218,693 3,417,049 14,363,972
----------- ----------- ------------
Loss from operations.................. (1,045,963) (2,590,394) (11,633,425)
Interest income..................... 13,685 165,137
----------- ----------- ------------
Net loss.............................. $(1,045,963) $(2,576,709) $(11,468,288)
=========== ===========
Beneficial conversion feature and
accretion of redemption value of
mandatorily redeemable convertible
preferred stock...................... (10,463,472)
------------
Net loss applicable to common
stockholders......................... $(21,931,760)
============
Basic net loss per share applicable to
common stockholders.................. $ (0.07) $ (0.14) $ (1.02)
Diluted net loss per share applicable
to common stockholders............... $ (0.06) $ (0.14) $ (1.00)
=========== =========== ============
Weighted average shares used in
computation of basic net loss per
share applicable to common
stockholders......................... 16,083,028 18,391,368 21,590,259
Weighted average shares used in
computation of diluted net loss per
share applicable to common
stockholders......................... 16,518,052 18,826,392 22,025,283
Pro forma basic net loss per share
(unaudited).......................... $ (0.45)
Pro forma diluted net loss per share
(unaudited).......................... -- -- $ (0.45)
============
Weighted average shares used in
computation of pro forma
basic net loss per share
(unaudited).......................... -- -- 25,257,560
Weighted average shares used in
computation of pro forma diluted net
loss per share (unaudited)........... -- -- 25,692,584
</TABLE>
See accompanying notes.
F-4
<PAGE>
GOAMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Period from January 1, 1997 to December 31, 1999
<TABLE>
<CAPTION>
Total
Common Stock Additional Deferred Stockholders'
------------------- Paid-in Employee Accumulated Equity
Shares Amount Capital Compensation Deficit (Deficit)
---------- -------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 16,000,000 160,000 $ 840,000 $ -- $ (220,752) $ 779,248
Issuance of common
stock................. 409,440 4,095 410,905 415,000
Net loss............... (1,045,963) (1,045,963)
---------- -------- ----------- ----------- ------------ ------------
Balance at December 31,
1997................... 16,409,440 164,095 1,250,905 -- (1,266,715) 148,285
Sale of common stock
and stock purchase
warrants.............. 4,918,336 49,183 4,604,527 4,653,710
Net loss............... (2,576,709) (2,576,709)
---------- -------- ----------- ----------- ------------ ------------
Balance at December 31,
1998................... 21,327,776 213,278 5,855,432 -- (3,843,424) 2,225,286
Sale of common stock... 1,875,416 18,754 1,999,322 2,018,076
Issuance of common
stock upon exercise of
warrants.............. 483,992 4,840 (4,235) 605
Non-cash capital
contribution by
principal shareholders
in connection with
settlement
agreements............ 148,572 148,572
Issuance of warrants to
purchase common stock
in connection with
settlement
agreements............ 148,738 148,738
Deferred non-cash
employee
compensation.......... 7,799,298 (7,799,298) --
Amortization of non-
cash deferred employee
compensation.......... 731,765 731,765
Beneficial conversion
feature and accretion
of redemption value of
redeemable convertible
preferred stock....... (10,463,472) (10,463,472)
Net loss............... (11,468,288) (11,468,288)
---------- -------- ----------- ----------- ------------ ------------
Balance at December 31,
1999................... 23,687,184 $236,872 $ 5,483,655 $(7,067,533) $(15,311,712) $(16,658,718)
========== ======== =========== =========== ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE>
GOAMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Operating activities
Net loss............................... $(1,045,963) $(2,576,709) $(11,468,288)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization......... 32,384 123,616 275,067
Provision for losses on accounts
receivable........................... 5,000 15,000 215,297
Non-cash employee compensation........ 731,765
Non-cash settlement costs............. 297,310
Non-cash rent expense................. 139,274
Changes in operating assets and
liabilities:
Increase in accounts receivable....... (10,492) (199,651) (558,141)
Increase in merchandise inventories... (6,420) (3,202) (523,085)
(Increase) decrease in prepaid
expenses and other assets............ 59,319 (78,316) (432,601)
Increase (decrease) in accounts
payable.............................. 80,817 (20,125) 3,672,332
Increase (decrease) in accrued
expenses............................. 82,501 510,303 856,130
Increase in deferred income........... 14,508 49,792
----------- ----------- ------------
Net cash used in operating activities.. (802,854) (2,214,576) (6,745,148)
Investing activities
Purchase of property, equipment and
leasehold improvements................ (179,877) (297,769) (387,116)
Acquisition of DTS assets.............. (200,000)
Investment in DataRover Mobile Systems,
Inc................................... (255,700)
----------- ----------- ------------
Net cash used in investing activities.. (179,877) (497,769) (642,816)
Financing activities
Proceeds from sale of common stock and
stock purchase warrants............... 415,000 4,653,710 2,018,681
Proceeds from sale of preferred stock.. 10,291,851
Deferred financing costs............... (510,748)
Payments made on capital lease
obligations........................... (28,981)
----------- ----------- ------------
Net cash provided by financing
activities............................ 415,000 4,653,710 11,770,803
----------- ----------- ------------
Increase (decrease) in cash and cash
equivalents........................... (567,731) 1,941,365 4,382,839
Cash and cash equivalents at beginning
of period............................. 587,320 19,589 1,960,954
----------- ----------- ------------
Cash and cash equivalents at end of
period................................ $ 19,589 $ 1,960,954 $ 6,343,793
=========== =========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, December 31, 1998 and December 31, 1999
1. Description of Business
GoAmerica, Inc. (the "Company") offers wireless access to the internet and
corporate intranet systems to customers located in the United States. The
Company has formed strategic relationships with wireless carriers, software
providers, and hardware manufacturers who provide the mobile computer user
wireless communications, services and devices that complement the Company's
services. The Company also distributes wireless communication devices,
principally to customers of its wireless services.
The Company operates in a highly competitive environment subject to rapid
technological change and emergence of new technology. Although management
believes its services are transferable to emerging technologies, rapid changes
in technology could have an adverse financial impact on the Company.
The Company is highly dependent on third-party providers for wireless
communication services.
On December 31, 1999, the stockholders of GoAmerica Communications Corp.,
the predecessor to GoAmerica, Inc., exchanged all of the outstanding common and
Series A Preferred shares of GoAmerica Communications Corp. for the same number
of shares of similar securities of GoAmerica, Inc., and as a result, GoAmerica
Communications Corp. became a wholly-owned subsidiary of GoAmerica, Inc. All
outstanding options and warrants of GoAmerica Communications Corp. were
exchanged into similar securities of GoAmerica, Inc. Prior to December 31,
1999, GoAmerica, Inc. had no operations, assets or liabilities. This corporate
reorganization was accounted for as an exchange of shares between entities
under common control and no changes were made to the historical cost basis of
GoAmerica Communications Corp.'s net assets.
In December 1999, the Company Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission for an
initial public offering of the Company's common stock.
Basis of Consolidation
As noted above, GoAmerica Communications Corp. became a wholly-owned
subsidiary of GoAmerica, Inc. effective December 31, 1999. The accompanying
consolidated financial statements reflect the results of operations of
GoAmerica Communications Corp. through December 31, 1999. All significant
intercompany balances and transactions are eliminated in consolidation.
2. Significant Accounting Policies
Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of
three month or less when purchased.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, and the reported amounts of certain expenses
during the reporting periods. Actual results could differ from those estimates.
F-7
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
Merchandise Inventories
Merchandise inventories, principally wireless devices, are stated at the
lower of cost (first-in, first-out) basis or market. The inventory of the
Company is subject to rapid technological changes which could have an adverse
impact on its realization in future periods. In addition, there are a limited
number of suppliers of the Company's inventory.
Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives of the related assets ranging from three to seven years. Expenditures for
maintenance and repairs are charged to expense as incurred.
Investment in DataRover Mobile Systems, Inc.
The investment in DataRover Mobile Systems, Inc. ("DataRover") consists of
the Company's investment in Series B Preferred Stock of DataRover, a private
company engaged in the hand-held mobile computing business. The investment is
accounted for on a cost basis as the Company's ownership is less than 5% of the
total outstanding shares of DataRover at December 31, 1999; the Company does
not exercise significant influence over DataRover; and the DataRover stock does
not have a readily determinable fair value.
Deferred Costs
As of December 31, 1999, external costs directly attributable to the planned
initial public offering of GoAmerica, Inc. shares have been deferred. These
costs will be charged against the Company's additional paid- in-capital in
connection with the consummation of its initial public offering.
Revenue and Deferred Revenue
The Company derives subscriber revenue from the provision of wireless
communication services. Subscriber revenue consists of monthly charges for
access and usage and is recognized as the service is provided. Also included in
subscriber revenue are one-time non-refundable activation fees. To the extent
such fees exceed the related costs, they are deferred and recognized ratably
over the life of the related service contracts generally six months or twelve
months. Equipment revenue is recognized upon shipment. Consulting revenue,
included in other revenue, is recognized as the related services are provided.
Cost of Revenues
Cost of subscriber revenue consists principally of airtime costs. Cost of
equipment revenue consists of the cost of equipment sold.
Income Taxes
Deferred income taxes are determined using the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Advertising Costs
Advertising costs are expensed as incurred. During 1997, 1998 and 1999,
advertising expense was approximately $68,000, $203,000 and $1,081,000,
respectively.
F-8
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
Research and Development Costs
Research and development costs are expensed as incurred. During 1998 and
1999, research and development costs totaled approximately $155,000 and
$465,000, respectively. The Company did not incur research and development
costs during 1997.
Stock-Based Employee Compensation
The Company accounts for employee stock-based compensation in accordance
with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees", using an intrinsic value approach to measure compensation
expense, if any. Appropriate disclosures using a fair value based method, as
provided by Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), are also reflected in
the accompanying notes to the financial statements. Options issued to non-
employees are accounted for in accordance with SFAS 123, using a fair value
approach.
Net Loss Available for Common Stockholders
Net loss available for common stockholders represents net loss reduced by
accretion of the redeemable preferred stock to redemption value and an amount
representing beneficial conversion features on preferred stock.
Stock Splits
On April 15, 1998, the Company's Board of Directors declared a 2000 for 1
stock split. Additionally, on February 23, 2000, the Company's Board of
Directors approved an amendment to the Company's certificate of incorporation
to increase the number of common shares authorized from 45,000,000 to
100,000,000. On that same date, the Company's Board of Directors declared an
eight for one stock split to become effective upon the filing of the amendment
to the certificate of incorporation. All share and per share data included in
the financial statements have been retroactively adjusted to reflect the stock
splits, and the amendment to the certificate of incorporation.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. The Company maintains a significant portion of its cash and cash
equivalents with a major regional bank. The Company performs periodic credit
evaluations of its customers but generally does not require collateral.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and Series A redeemable convertible preferred stock approximate their
fair values.
Segment Information
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related Information,"
which establishes standards for the way that a
F-9
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
public enterprise reports information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company
operates in a single segment. The chief operating decision maker allocates
resources and assesses the performance associated with wireless services and
equipment sales on a single segment basis.
Software Development Costs
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AICPA") issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." This SOP is effective for fiscal years beginning
after December 15, 1998. The Company has adopted the provisions of SOP 98-1 as
of January 1, 1999, with no material effect.
All projects are being amortized over their estimated useful lives, which
has been determined by management to be three years. Amortization on the
projects begins when the software is ready for its intended use.
Start-Up Activities
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
up Activities." SOP 98-5, effective for fiscal years beginning after December
15, 1998, provides guidance on the financial reporting of start-up costs and
organization costs. It requires costs of start-up activities and organization
costs to be expensed as incurred. As the Company expensed these costs as
incurred, the adoption of this standard as of January 1, 1999 had no impact on
the Company's results of operations, financial position or cash flows.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivatives and Hedging Activities ("SFAS 133"), which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. SFAS 133,
as amended, is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. As the Company does not currently intend to engage in
derivatives or hedging transactions, the Company does not anticipate any effect
on its results of operations, financial position or cash flows upon the
adoption of SFAS 133.
F-10
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
3. Property, Equipment and Leasehold Improvements
Property, equipment and leasehold improvements consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1999
--------- ----------
<S> <C> <C>
Furniture, fixtures and equipment..................... $ 197,573 $ 328,142
Computer equipment and software....................... 589,142 1,018,443
Leasehold improvements................................ 17,415 31,502
--------- ----------
804,130 1,378,087
Less accumulated depreciation and amortization........ (160,438) (418,844)
--------- ----------
$ 643,692 $ 959,243
========= ==========
</TABLE>
At December 31, 1999, the Company leased equipment with a cost basis of
$186,841 which is included in computer equipment and software. Accumulated
amortization on leased equipment was $1,062.
4. Supplemental Balance Sheet Information
The following table summarizes the activity in the allowance for doubtful
accounts for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
December 31
-----------------------
1997 1998 1999
------ ------- --------
<S> <C> <C> <C>
Balance, beginning of period........................ $ -- $ 5,000 $ 20,000
Provision charged to operations..................... 5,000 15,000 215,000
Amounts written off................................. -- -- 160,000
------ ------- --------
Balance, end of period.............................. $5,000 $20,000 $ 75,000
====== ======= ========
</TABLE>
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1998 1999
-------- ----------
<S> <C> <C>
Inventory purchases..................................... $179,454 $ 85,025
Employee compensation................................... 120,909 213,750
Professional fees....................................... 118,897 233,007
Equipment and leasehold improvement purchases........... -- 125,000
Accrued legal settlement................................ -- 80,000
Marketing expenses...................................... -- 400,000
Carrier services........................................ -- 164,134
Sales and use taxes..................................... 46,581 45,098
Other................................................... 138,965 114,922
-------- ----------
$604,806 $1,460,936
======== ==========
</TABLE>
5. Commitments and Contingencies
The Company leases office facilities under an operating lease which expires
in 2007. The Company has the option to renew the lease for an additional five
year period.
F-11
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
On December 15, 1999, the Company entered into a facilities maintenance
agreement for a new network operating center. This agreement obligates the
Company to make aggregate payments of approximately $1,607,000 through 2004.
Future minimum payments to be made pursuant to noncancelable operating
leases with initial or remaining terms of one year or more as well as the
minimum payments to be made under the facilities maintenance agreement are as
follows:
<TABLE>
<S> <C>
2000............................................................ $ 931,000
2001............................................................ 852,000
2002............................................................ 857,000
2003............................................................ 686,000
2004............................................................ 440,000
Thereafter...................................................... 1,088,000
</TABLE>
During 1997, 1998 and 1999 total rent expense was approximately $44,000,
$60,000 and $287,000, respectively.
At December 31, the Company has accrued approximately $139,000 representing
the difference between the actual rental payments due under the lease and the
rent expense recorded on a straight line basis. This amount is included in
other liabilities.
On December 31, 1999, the Company entered into employment agreements with
certain of its key executives which provide for fixed compensation and bonuses
based upon the Company's operating results, as defined. These agreements
generally continue until terminated by the employee or the Company and, under
certain circumstances, provide for salary continuance for a specified period.
The Company's maximum aggregate liability under the agreements, if all
employees were terminated by the Company, is approximately $1,875,000 at the
inception of the agreements.
During 1999, the Company became a defendant in litigation involving its use
of certain computer software. On April 22, 1999, the Company entered into an
agreement under which it will pay $170,000 during 1999 and 2000 to settle all
claims. The Company recorded a charge to operating results as a result of the
settlement during 1999.
6. Data Transmission Services, Inc.
In July 1998, the Company acquired certain assets and liabilities of a
segment of Data Transmission Services, Inc. ("DTS"), known as ZAP.IT, for
approximately $200,000 which was allocated to the acquired assets and
liabilities based on their respective estimated fair values.
The following unaudited pro forma summary presents the combined results of
operations as if the acquisition described above had occurred as of January 1,
1997, and does not purport to be indicative of the results that would have
occurred had the transaction been completed as of that date or of results that
may occur in the future.
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Net revenues...................................... $ 303,201 $ 889,122
Net loss.......................................... $(3,082,859) $(3,902,552)
Net loss per share--basic......................... $ (0.19) $ (0.21)
Net loss per share--diluted....................... $ (0.19) $ (0.21)
</TABLE>
F-12
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
7. Benefit Plan
The Company has established a defined contribution plan under Section 401(k)
of the Internal Revenue Code which provides for voluntary employee
contributions of up to 15 percent of compensation for employees meeting certain
eligibility requirements. The Company does not contribute to the plan.
8. Series A Redeemable Convertible Preferred Stock
On June 25, 1999, the Company sold 7,500 shares of Series A Redeemable
Convertible Preferred Stock ("Series A Preferred Stock") to various investors
at a purchase price of $1,000 per share, the estimated fair value at such date,
resulting in net proceeds of approximately $7,335,000. On August 30, 1999, the
Company sold an additional 2,500 shares of Series A Preferred Stock to various
investors at a purchase price of $1,000 per share, the estimated fair value at
such date, resulting in net proceeds of approximately $2,457,000. During
November 1999, the Company sold an additional 500 shares of Series A Preferred
Stock. The purchase price of such shares was $1,000 per share, resulting in net
proceeds of $500,000. The Company recorded an adjustment to net loss applicable
to common stockholders of approximately $500,000 relating to the beneficial
conversion feature inherent in the November 1999 issuance. This amount was
determined based upon the excess of the estimated fair value of the Company's
common stock into which the Series A Preferred Stock was immediately
convertible less the initial conversion price of $1.31 per share and in
accordance with EITF No. 98-5 Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
limited to the amount of proceeds received for the 500 shares of Series A
Preferred Stock.
Each share of Series A Preferred Stock has a liquidation value of $1,000 per
share and is convertible into shares of common stock at an initial conversion
price of $1.31 per share, subject to adjustments, under certain circumstances.
Potential adjustments to the initial conversion price would result principally
from the issuance or sale of certain equity instruments, as defined, at less
than the initial conversion price per share by the Company prior to the date of
such conversions. In addition, the initial conversion price is subject to
adjustment in the event of a change in control of the Company, as defined. On
December 9, 1999, the Company's Board of Directors adopted a resolution which
provides for the conversion of the Series A Preferred into common stock upon
the consummation of the Company's initial public offering. To the extent not
previously converted, upon the five year anniversary of the issuance of the
Series A Preferred Stock, a stockholder may request the Company to redeem any
or all shares of Series A Preferred Stock held at their then fair market value,
as defined.
The Series A Preferred Stock pay no dividends; however, such stockholders
are entitled to participate in the event dividends are paid to the holders of
the Company's common stock.
The holders of the Series A Preferred Stock vote together with all other
classes of stock on all actions taken by the stockholders of the Company as a
single class. Each holder of Series A Preferred Stock is entitled to that
number of votes such holder would be entitled to if the holder had converted
the shares of Series A Preferred Stock into shares of common stock.
The holders of the Series A Preferred Stock have registration rights under
an agreement dated June 25, 1999 which provides for the registration of common
stock held by such stockholders within the periods specified by such
agreements.
The holders of the Series A Preferred Stock have anti-dilution rights
granted pursuant to an agreement dated August 30, 1999 which allows such
stockholders to purchase additional securities of the Company upon the issuance
or sale of certain equity instruments, as defined.
F-13
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
9. Stockholders' Equity
In connection with the sale of certain equity securities, the Company
entered into agreements with such stockholders which provided certain rights,
including the right to purchase additional equity securities to maintain their
respective proportionate ownership in the event of subsequent equity issuances
by the Company and certain registration rights in the event the Company was to
complete a qualified initial public offering, as defined. In connection with
the reorganization described in Note 1 above, the stockholders have agreed to
waive certain of these rights through June 30, 2000.
During 1998, in conjunction with the sale of its common stock, the Company
issued to the purchasers of such common stock warrants to purchase an
aggregate of 891,792 shares of the Company's common stock. Exercise prices
under the warrants range from $1.23 per share to $1.93 per share. The warrants
were exercisable at the date of issue and expire at various dates through
January 2003. As of December 31, 1999, all of these warrants remain
outstanding.
In connection with certain equity financings during 1998, two of the
Company's principal shareholders issued to an existing investor in the
Company, warrants to purchase 408,160 currently outstanding shares of the
Company's common stock owned by the principal shareholders at an exercise
price of $.92 per share. Such warrants were exercisable at the date of grant
and expire on February 6, 2003.
During May 1999, the Company issued to certain stockholders warrants to
purchase 113,976 shares of the Company's common stock at a price of $.00125
per share. These warrants were issued to settle the Company's obligations
based upon claims by certain stockholders arising from the sale of certain
common stock. Also, as part of this settlement, two of the Company's principal
stockholders issued options to purchase 113,848 currently outstanding shares
of the Company's common stock owned by the principal stockholders at an
exercise price of $.00125 per share. As a result of these agreements and the
related warrant and option issuances by both the Company and the principal
stockholders, the Company recorded a non-cash charge of $297,310 based on the
estimated fair value of the warrants and options on the date of issuance. Such
fair value was determined to equal the fair value of the underlying common
stock. The options issued by the principal stockholders have been accounted
for as a capital contribution.
In connection with the issuance of certain shares of its common stock
during 1998, the Company agreed to issue additional shares in the event
certain subscriber levels were not achieved. To satisfy its obligation, in May
1999, the Company issued warrants to purchase 435,024 shares of its common
stock at a price of $.00125 per share.
The warrants and options described in the two immediately preceding
paragraphs were exercisable at the date of grant and expire five years from
the date of grant. As of December 31, 1999, 65,008 of these warrants remain
outstanding.
During the fourth quarter of 1999, the Company sold an additional 1,871,008
shares of its common stock to certain existing common stockholders in
connection with the exercise of anti-dilution rights granted to them upon
their initial purchase of common stock. The net proceeds to the Company were
approximately $1,882,255
In December 1999, the Company's Board of Directors adopted the Employee
Stock Purchase Plan to be effective upon completion of the Company's initial
public offering of its common stock. The Company initially reserved 4,000,000
shares of common stock for issuance under the plan.
As of December 31, 1999, the Company had reserved shares of common stock
for issuance as follows:
<TABLE>
<S> <C>
Exercise of common stock options................................... 6,716,000
Exercise of common stock purchase warrants......................... 1,276,800
Employee stock purchase plan....................................... 4,000,000
Conversion of Series A preferred stock............................. 8,038,304
</TABLE>
F-14
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
10. Stock Option Plans and Other Stock-Based Compensation
On August 3, 1999, the Company adopted the GoAmerica Communications Corp.
1999 Stock Option Plan. This plan provided for the granting of awards to
purchase shares of common stock. No further options will be made under the
GoAmerica Communications Corp. 1999 Stock Option Plan.
In December 1999, the Company's Board of Directors adopted the GoAmerica,
Inc. 1999 Stock Plan (the "Plan") as a successor plan to the GoAmerica
Communications Corp. 1999 Stock Option Plan, pursuant to which 4,800,000
additional shares of the Company's common stock have been reserved for issuance
to selected employees, non-employee directors and consultants.
Under the terms of the Plan, a committee of the Company's Board of Directors
may grant options to purchase shares of the Company's common stock to employees
and consultants of the Company at such prices as may be determined by the
committee. The Plan provides for award grants in the form of incentive stock
options and non-qualified stock options. Options granted under the Plan
generally vest annually over 4 years and expire after 10 years.
The following table summarizes activity on a combined basis for the plans
during 1999:
<TABLE>
<CAPTION>
Weighted-
Average
Number of Exercise
Options Price
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1999........................... -- $--
Granted.................................................. 2,440,008 .92
Cancelled................................................ -- --
--------- ----
Outstanding at December 31, 1999......................... 2,440,008 .92
========= ====
Exercisable at December 31, 1999......................... 856,000 .95
========= ====
</TABLE>
The following table summarizes information about fixed price stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Exercisable
--------------------- ------------------------
Weighted-
Average Weighted- Number Weighted-
Range of Number Remaining Average Exercisable at Average
Exercise of Contractual Exercise December 31, Exercise
Prices Shares Life Price 1999 Price
-------- --------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$.25 160,000 9.6 years $ .25 -- $ --
.56 1,096,000 8.9 years .56 480,000 .56
1.06--1.56 1,024,008 9.7 years 1.21 256,000 1.09
1.91--2.44 160,000 9.6 years 2.24 120,000 2.18
</TABLE>
For certain options granted during 1999, the Company has recorded pursuant
to APB No. 25 approximately $7,799,000 of deferred compensation expense
representing the difference between the exercise price thereof and the market
value of the common stock as of the date of grant. This compensation expense is
amortized over the vesting period of each option granted. Amortization of
deferred compensation under the Plan amounted to approximately $732,000 during
the year ended December 31, 1999.
During 1996, the Company granted an employee a warrant to purchase up to
320,000 shares of the Company's common stock at $.44 per share, an amount in
excess of the estimated fair value at the date of grant. The warrant was
exercisable on the date of grant and expires in October 2008. No compensation
expense
F-15
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
would have been recognized had the Company elected to account for such grant
under SFAS No. 123 as the fair value of this warrant at the date of grant
estimated using the minimum value method option pricing model was $0. As of
December 31, 1999, all of this warrant remains outstanding.
The following table discloses, for the year ended December 31, 1999, the
number of options granted, the weighted-average fair values and the weighted-
average exercise prices for those options with exercise prices greater than,
equal to or less than the market price of the common stock on the date of
grant.
<TABLE>
<CAPTION>
Number
of Fair Exercise
Options Value Price
--------- ----- --------
<S> <C> <C> <C>
Exercise price greater than market price............ 160,000 $0.00 $2.24
Exercise price equals market price.................. 288,000 0.22 1.31
Exercise price less than market price............... 1,992,008 4.04 0.76
</TABLE>
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS
No. 123. The fair value for these options was estimated at the date of grant
using the minimum value method option pricing model with the following
assumptions for 1999: weighted-average risk-free interest rate of 6.11%; no
dividends; and a weighted-average expected life of the options of 3 years.
There were no options granted prior to August 1999.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
Year ended
December 31, 1999
-----------------
<S> <C>
Pro forma net loss applicable to common stockholders...... $(22,044,352)
Pro forma loss per share--basic .......................... $ (1.02)
Pro forma loss per share--diluted ........................ $ (1.00)
</TABLE>
The pro forma information above is not likely to be representative of the
effects on reported net loss for future years as options are generally granted
each year and vest over several years.
11. Income Taxes
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
----------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward................... $ 1,542,000 6,087,000
Less valuation allowance........................... (1,536,000) (6,071,000)
----------- ----------
Deferred tax asset................................. 6,000 16,000
Deferred tax liabilities:
Property, equipment and leasehold improvements.... 6,000 16,000
----------- ----------
Net deferred tax asset............................. $ -- $ --
=========== ==========
</TABLE>
F-16
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
A reconciliation setting forth the differences between the effective tax
rate of the Company and the U.S. statutory rate is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1998 1999
--------- ---------- -----------
<S> <C> <C> <C>
Statutory federal income tax (benefit)
at 34%................................ $(355,000) $ (876,000) $(3,855,000)
State income tax (benefit), net of
federal benefit....................... (62,000) (155,000) (680,000)
Increase in valuation allowance........ 417,000 1,031,000 4,535,000
--------- ---------- -----------
Total.................................. $ -- $ -- $ --
========= ========== ===========
</TABLE>
At December 31, 1999, the Company has a federal and state net operating loss
("NOL") carryforward of approximately $15.2 million. The federal NOL
carryforwards expire from 2011 to 2019. The Tax Reform Act of 1986 enacted a
complex set of rules limiting the potential utilization of net operating loss
and tax credit carryforwards in periods following a corporate "ownership
change". In general, for federal income tax purposes, an ownership change is
deemed to occur if the percentage of stock of a loss corporation owned
(actually, constructively and, in some cases, deemed) by one or more "5%
shareholders" has increased by more than 50 percentage points over the lowest
percentage of such stock owned during a three-year testing period. During 1999,
such a change in ownership occurred. As a result of the change, the Company's
ability to utilize certain of its net operating loss carryforwards will be
limited to approximately $1,400,000 of taxable income, per year.
12. Earnings (Loss) Per share
The Company computes net loss per share under the provisions of SFAS No.
128, "Earnings per Share" (SFAS 128), and SEC Staff Accounting Bulletin No. 98
(SAB 98).
Under the provisions of SFAS 128 and SAB 98, basic net loss per share is
computed by dividing the net loss available to common stockholders for the
period by the weighted-average number of shares of Common Stock outstanding
during the period. Diluted earnings per share is determined in the same manner
as basic earnings per share except that the number of shares is increased
assuming exercise of dilutive stock options and warrants using the treasury
stock method and assuming conversion of the Company's Series A Preferred Stock.
In addition, income or loss is adjusted for dividends and other transactions
relating to preferred shares for which conversion is assumed. The weighted
average number of shares utilized in arriving at diluted earnings per share for
all periods presented reflect an adjustment for the 435,024 shares of common
stock issuable pursuant to warrants as described in Note 9 above which were
issued for nominal consideration. As the Company had a net loss, the impact of
the assumed exercise of the stock options, warrants and the assumed preferred
stock conversion is anti-dilutive and as such, these amounts (except for
warrants as described in Note 9 issued for nominal consideration) have been
excluded from the calculation of diluted earnings per share.
13. Unaudited Pro Forma Financial Information
The unaudited pro forma net loss per share assumes the conversion of the
Series A Preferred Stock to Common Stock, at a conversion price of $1.31 as if
it had been converted as the date of issuance, even though the results are
anti-dilutive.
F-17
<PAGE>
GOAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997, December 31, 1998 and December 31, 1999
The following tables present the calculation of basic and diluted net loss
per share and pro forma net loss per share for the year ended December 31,
1999:
<TABLE>
<CAPTION>
Denominator
Numerator (Weighted-
(Net Loss) Average Shares) Per Share
------------ --------------- ---------
<S> <C> <C> <C>
Basic net loss per common share..... $(21,931,760) 21,590,259 $(1.02)
Beneficial conversion feature and
accretion of redemption value of
mandatorily redeemable convertible
preferred stock.................... 10,463,472 -- --
Assumed conversion of shares of
mandatorily redeemable convertible
preferred stock into shares of
common stock at issuance........... -- 3,667,301 --
------------ ---------- ------
Pro forma basic net loss per common
share.............................. $(11,468,288) 25,257,560 $(0.45)
============ ========== ======
Diluted net loss per common share... $(21,931,760) 22,025,283 $(1.00)
Beneficial conversion feature and
accretion of redemption value of
mandatorily redeemable convertible
preferred stock.................... 10,463,472 -- --
Assumed conversion of shares of
mandatorily redeemable convertible
preferred stock into shares of
common stock at issuance........... -- 3,667,301 --
------------ ---------- ------
Pro forma diluted net loss per
common share....................... $(11,468,288) 25,692,584 $(0.45)
============ ========== ======
</TABLE>
The unaudited pro forma stockholders' equity presented on the balance sheet,
assumes the conversion of the Series A Preferred Stock outstanding as of
December 31, 1999 and the conversion of the Series B Preferred Stock issued in
January 2000.
14. Subsequent Events
Sales and Other Issuances of Additional Equity Securities
In January 2000, the Company entered into a definitive stock purchase
agreement to issue and sell 648,057 shares of its newly designated Series B
redeemable convertible preferred stock ("Series B Preferred Stock") for
aggregate net proceeds of approximately $25,190,000. Each share of the Series B
Preferred Stock has a liquidation value of $40.12 per share and is convertible
at any time at the option of the holder into eight shares of common stock,
subject to adjustments, under certain circumstances. The Series B Preferred
Stock is subject to automatic conversion upon the completion by the Company of
a qualified initial public offering, as defined, of its common stock. To the
extent not converted, commencing August 30, 2004 a holder of Series B Preferred
Stock may require the Company to redeem any or all of the shares of Series B
Preferred Stock held at their then fair market value, as defined. The Series B
Preferred Stock pays no dividends; however, such stockholders are entitled to
participate in the event dividends are paid on the Company's common and
preferred stock. The Series B Preferred Stock has voting and registration
rights similar to those of the Company's Series A Preferred Stock. In
connection with the sale of the Series B Preferred Stock, the Company will pay
to its financial advisors certain cash consideration and issue approximately
226,816 shares of its common stock. Based on the beneficial conversion terms of
the Series B Preferred Stock, the Company will record an adjustment to net loss
applicable to common stockholders for approximately $22 million at the date of
issuance which will be accounted for as a beneficial conversion in accordance
with EITF 98-5.
During January 2000, the Company granted a total of 848,000 additional stock
options at an exercise price of $5.02 per share. In connection with these
grants, the Company will record a non-cash compensation charge of approximately
$8,457,000, of which approximately $4,405,000 will be incurred in the first
quarter of 2000.
During the period from February 1, 2000 through March 17, 2000 the Company
granted a total of 711,400 additional stock options to purchase common stock at
an exercise price of $15.00 per share.
F-18
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Management of
GoAmerica Communications Corporation
Hackensack, New Jersey
I have audited the accompanying statements of operations from business
segment and cash flows from business segment of ZAP.IT for the period beginning
January 1, 1998 and ended July 14, 1998. These business segment financial
statements are the responsibility of ZAP.IT's management. My responsibility is
to express an opinion on these business segment financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the business segment financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the business segment
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall business segment financial statement presentation. I
believe that my audit provides a reasonable basis for my opinion.
In my opinion, the business segment financial statements present fairly, in
all material respects, the results of operations and cash flows of ZAP.IT for
the period beginning January 1, 1998 and ended July 14, 1998, in conformity
with generally accepted accounting principles.
The accompanying business segment financial statements have been prepared
from the separate records maintained by the business segment and may not
necessarily be indicative of the conditions that would have existed or the
results of operations if the business segment had been operated as an
unaffiliated company. Portions of certain income and expenses represent
allocations made from its affiliate for items applicable to the affiliate and
its business segment as a whole.
The business segment's affiliate entered into an agreement whereby
substantially all the assets and liabilities of this business segment were sold
to an independent third party.
/s/ John D. Hilcher, CPA
Bloomfield, New Jersey
February 25, 2000
F-19
<PAGE>
ZAP.IT
STATEMENT OF OPERATIONS FROM BUSINESS SEGMENT
<TABLE>
<CAPTION>
For the Period Beginning
January 1, 1998 and
Ended July 14, 1998
------------------------
<S> <C>
Revenues........................................ $ 62,467
Expenses
Cost of sales.................................. 163,169
Selling and administrative expenses............ 1,039,936
Depreciation and amortization.................. 79,165
Loss due to impairment of long-lived assets ... 158,649
-----------
Total expenses.............................. 1,440,919
-----------
Net (Loss) From Business Segment................ $(1,378,452)
===========
</TABLE>
See notes to financial statements.
F-20
<PAGE>
ZAP.IT
STATEMENT OF CASH FLOWS FROM BUSINESS SEGMENT
<TABLE>
<CAPTION>
For the Period Beginning
January 1, 1998 and
Ended July 14, 1998
------------------------
<S> <C>
Cash Flows from Operating Activities from
Business Segment
Net (loss) from business segment................... $(1,378,452)
Adjustments to reconcile net (loss) from
business segment to net cash (used) by
operating activities from business segment:
Loss due to impairment of long-lived assets...... 158,649
Depreciation..................................... 79,165
Allowance for doubtful accounts.................. 4,000
Loss due to prepaid asset write-off.............. 61,992
Loss due to inventory write-off.................. 56,600
Loss due to miscellaneous receivable write-off... 5,000
-----------
Net Cash (Used) By Operating Activities from
Business Segment.................................... (1,013,046)
Cash Flows from Financing Activity from Business
Segment
Divisional advances................................. 1,013,046
-----------
Net Increase in Cash from Business Segment........... $ --
===========
</TABLE>
See notes to financial statements.
F-21
<PAGE>
ZAP.IT
Notes to Financial Statements of Business Segment
July 14, 1998
Note A--Nature of Activities and Organization
ZAP.IT was a business segment of its affiliate, Data Transmission Services,
Inc., offering wireless and E-mail services nationwide.
Note B--Summary of Significant Accounting Policies
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Accordingly, actual results could differ from those
estimates.
Revenue Recognition. Revenue from sales, services and products are
recognized when services are provided or products shipped.
Property and Equipment. Property and equipment are stated at cost.
Depreciation for financial reporting purposes is provided principally on the
straight-line method based upon estimated useful lives. Repairs and maintenance
are charged to expense as incurred.
Impairment of Long-lived Assets. The business segment evaluated the
recoverability of the carrying value of its property and equipment when events
and circumstances indicated that the assets might be impaired and the total of
future undiscounted cash flows were less than the carrying amount of the
property and equipment. Such circumstances existed during the period ended July
14, 1998. Under the circumstances the future cash flows to be generated by the
property and equipment was determined based upon the proceeds from the sale of
such assets to a third party. As a result, the business segment recorded a
$158,649 noncash charge to its Statement of Operations for the period ended
July 14, 1998.
F-22
<PAGE>
ZAP.IT
Notes to Financial Statements of Business Segment--Continued
July 14, 1998
Note C--Related Party Transactions
The business segment financial statements have been prepared from the
separate records maintained by the business segment and may not necessarily be
indicative of the conditions that would have existed or the results of
operations if the business segment had been operated as an unaffiliated
company. Portions of selling, general and administrative expenses, which are
principally comprised of employee salaries and office rental expenses, were
allocated from Data Transmission Services, Inc. to ZAP.IT based upon ZAP.IT's
proportionate level of sales revenue compared to that of Data Transmission
Services, Inc. as a whole. Management believes such allocation methodology is
reasonable and appropriate based upon the nature of such expenses.
Note D--Subsequent Event
The business segment's affiliate, Data Transmission Services, Inc., closed
on an asset purchase agreement on July 14, 1998, whereby the buyer, GoAmerica
Communications, Corp., purchased certain defined assets and assumed certain
defined liabilities of the business segment.
F-23
<PAGE>
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Prospective investors may rely only on the information contained in this pro-
spectus. Neither GoAmerica, Inc. nor any underwriter has authorized anyone to
provide prospective investors different or additional information. This pro-
spectus is not an offer to sell nor is it seeking an offer to buy these securi-
ties in any jurisdiction where the offer or sale is not permitted. The informa-
tion contained in this prospectus is accurate only as of the date of the pro-
spectus, regardless of the time of delivery of this prospectus or of any sale
of these securities.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to in-
form themselves about and to observe the restrictions of that jurisdiction re-
lated to this offering and the distribution of this prospectus.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Financial Data.................................................. 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 27
Management............................................................... 39
Certain Transactions..................................................... 50
Principal Stockholders................................................... 51
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 57
Certain U.S. Tax Consequences to Non-U.S. Holders........................ 58
Underwriting............................................................. 61
Legal Matters............................................................ 64
Experts.................................................................. 64
Where You Can Find More Information...................................... 64
Index to Consolidated Financial Statements............................... F-1
</TABLE>
Until May 1, 2000 (25 days after the date of this prospectus), all dealers
effecting transactions in the common stock, whether or not participating in
this distribution, may be required to deliver a prospectus. This delivery re-
quirement is in addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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10,000,000 Shares
[LOGO OF GOAMERICA/TM/ APPEARS HERE}
Common Stock
---------------
PROSPECTUS
---------------
Bear, Stearns & Co. Inc.
Chase H&Q
U.S. Bancorp Piper Jaffray
Wit SoundView
---------------
DLJdirect Inc.
April 6, 2000
- --------------------------------------------------------------------------------
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