SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File No. 0-29359
GoAmerica, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3693371
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
401 Hackensack Avenue, Hackensack, New Jersey 07601
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(Address of Principal Executive Offices) (Zip Code)
(201) 996-1717
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(Registrant's Telephone Number,
Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: No: X*
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Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of April 30, 2000:
Class Number of Shares
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Common Stock, $.01 par value 47,204,808
*Registrant became subject to the filing requirements of the Securities Exchange
Act of 1934, as amended, on April 6, 2000, when its Registration Statement on
Form 8-A became effective.
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GOAMERICA, INC.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION............................................ 1
Item 1. Financial Statements (unaudited)............................ 1
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999...................................... 2
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999................. 3
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999................. 4
Notes to Condensed Consolidated Financial Statements........... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 7
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 12
PART II. OTHER INFORMATION................................................ 13
Item 2. Changes in Securities and Use of Proceeds................... 13
Item 5. Other Information........................................... 14
Item 6. Exhibits and Reports on Form 8-K............................ 14
SIGNATURES................................................................ 15
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
GOAMERICA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
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(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .......................... $ 21,334,846 $ 6,343,793
Accounts receivable, net ........................... 749,013 541,865
Merchandise inventories ............................ 702,489 589,307
Prepaid expenses and other ......................... 2,190,214 471,455
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Total current assets ................................... 24,976,562 7,946,420
Property, equipment and leasehold improvements, net .... 2,038,177 959,243
Deferred costs ......................................... 1,345,446 510,748
Investment in DataRover Mobile Systems, Inc. ........... 255,700 255,700
Other assets ........................................... 198,407 84,573
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$ 28,814,292 $ 9,756,684
============ ============
Liabilities, redeemable convertible preferred stock
and stockholders' deficit
Current liabilities:
Accounts payable ................................... $ 4,631,944 $ 3,837,715
Accrued expenses ................................... 2,012,531 1,460,936
Capital lease obligations .......................... 101,005 157,854
Deferred income .................................... 39,526 64,300
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Total current liabilities .............................. 6,785,006 5,520,805
Other liabilities ...................................... 191,501 139,274
Commitments and contingencies
Series A redeemable convertible preferred stock,
$.01 par value, authorized: 10,500 shares in 1999
and 2000; issued and outstanding: 10,500 shares in
1999 and 2000; $10,500,000 liquidation preference ... 27,375,679 20,755,323
Series B redeemable convertible preferred stock,
$.01 par value, authorized: none in 1999 and
648,057 shares in 2000; issued and outstanding:
none in 1999 and 648,057 shares in 2000;
$26,000,000 liquidation preference ................... 23,554,744 --
Stockholders' deficit:
Preferred stock, $.01 par value, authorized:
5,000,000 shares in 1999 and 4,351,943 shares in
2000; issued and outstanding: none in
1999 and 2000 ...................................... -- --
Common stock, $.01 par value, authorized:
100,000,000 shares in 1999 and 200,000,000
shares in 2000; issued and outstanding:
23,687,184 in 1999 and 23,982,048 in 2000 .......... 239,821 236,872
Additional paid-in capital ......................... 8,403,890 5,483,655
Deferred employee compensation ..................... (10,473,833) (7,067,533)
Accumulated deficit ................................ (27,262,516) (15,311,712)
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Total stockholders' deficit ............................ (29,092,638) (16,658,718)
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$ 28,814,292 $ 9,756,684
============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
GOAMERICA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months
Ended March 31,
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2000 1999
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<S> <C> <C>
Revenues:
Subscriber ................................... $ 830,535 $ 138,420
Equipment .................................... 605,591 151,494
Other ........................................ 4,541 64,864
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1,440,667 354,778
Costs and expenses:
Cost of subscriber revenue ................... 1,082,060 228,162
Cost of equipment revenue .................... 890,637 190,789
Sales and marketing .......................... 4,822,733 318,846
General and administrative ................... 6,683,635 540,065
Depreciation and amortization ................ 100,547 52,843
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13,579,612 1,330,705
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Loss from operations ............................. (12,138,945) (975,927)
Interest income, net ............................. 188,141 14,647
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Net loss ......................................... $(11,950,804) $ (961,280)
Beneficial conversion feature and accretion of
redemption value of mandatorily redeemable
convertible preferred stock .................... (30,175,100) (961,280)
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Net loss applicable to common stockholders ....... $(42,125,904) $ (961,280)
============ ============
Basic net loss per share applicable to common
stockholders.................................... $ (1.76) $ (0.05)
Diluted net loss per share applicable to common
stockholders ................................... $ (1.76) $ (0.04)
============ ============
Weighted average shares used in computation of
basic net loss per share applicable to common
stockholders ................................... 23,885,029 21,327,776
Weighted average shares used in computation of
diluted net loss per share applicable to
common stockholders ............................ 23,909,198 21,762,800
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
GOAMERICA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months
Ended March 31,
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2000 1999
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<S> <C> <C>
Operating activities
Net loss ........................................... $(11,950,804) $ (961,280)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .................... 100,547 52,843
Non-cash employee compensation ................... 5,050,380 --
Non-cash rent expense ............................ 52,227 --
Changes in operating assets and liabilities:
Increase in accounts receivable ................. (207,148) (8,613)
Increase in inventory ........................... (113,182) (14,785)
Increase in prepaid expenses and other assets ... (1,845,093) (100,102)
Increase in accounts payable .................... 794,229 490,509
Increase/(decrease) in accrued expenses ......... 551,595 (339,998)
(Decrease)/increase in deferred income .......... (24,774) 1,421
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Net cash used in operating activities .............. (7,592,023) (880,005)
Investing activities
Purchase of property, equipment and leasehold
improvements ....................................... (1,166,981) (85,051)
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Net cash used in investing activities .............. (1,166,981) (85,051)
Financing activities
Proceeds from sale of common stock and stock
purchase warrants ................................ 4,504 71,439
Proceeds from sale of preferred stock .............. 24,637,100 --
Deferred financing costs ........................... (834,698) --
Payments made on capital lease obligations ......... (56,849) --
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Net cash provided by financing activities .......... 23,750,057 71,439
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Increase/(decrease) in cash and cash equivalents ... 14,991,053 (893,617)
Cash and cash equivalents at beginning of period ... 6,343,793 1,960,954
------------ ------------
Cash and cash equivalents at end of period ......... $ 21,334,846 $ 1,067,337
============ ============
Non Cash financing activities
Common stock issued in connection with sale of
preferred stock .................................. $ 3,402,243 $ --
The accompanying notes are an integral part of these financial statements.
</TABLE>
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GOAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 -- Basis of Presentation:
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The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote
disclosures required in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. In the
opinion of GoAmerica, Inc.'s (the "Company") management, the accompanying
unaudited financial statements contain all adjustments (consisting only of
normal recurring adjustments) which the Company considers necessary for the fair
presentation of the Company's financial position as of March 31, 2000 and the
results of its operations and its cash flows for the three-month periods ended
March 31, 2000 and 1999. These financial statements should be read in
conjunction with the Company's audited financial statements for the year ended
December 31, 1999, which were included as part of the Company's Registration
Statement on Form S-1 (Registration No. 333-94801), as declared effective by the
Securities and Exchange Commission (the "Commission") on April 6, 2000.
Results for the interim period are not necessarily indicative of results
that may be expected for the entire year.
Note 2 -- Initial Public Offering:
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On April 12, 2000, the Company consummated an initial public offering of
10,000,000 shares of its Common Stock at a price to the public of $16.00 per
share, all of which shares were issued and sold by the Company. Upon closing of
the initial public offering, all issued and outstanding shares of Series A
Preferred Stock and Series B Preferred Stock were converted to shares of Common
Stock. See Note 3.
The net proceeds received by the Company upon the consummation of such
offering, pending specific application, were invested in short-term,
investment-grade, interest-bearing instruments.
Note 3 -- Series B Redeemable Convertible Preferred Stock:
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On January 31, 2000, the Company sold 648,057 shares of Series B
Redeemable Convertible Preferred Stock ("Series B Preferred Stock") to various
investors at a purchase price of $40.12 per share resulting in net proceeds of
approximately $24,637,000. The Company recorded an adjustment to net loss
applicable to common stockholders of approximately $21,235,000 relating to the
beneficial conversion feature inherent in the issuance. This amount was
determined based upon the excess of the fair value of the Company's Common Stock
into which the Series B Preferred Stock was immediately convertible less the
initial conversion price
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of $5.02 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
648,057 shares of Series B Preferred Stock. Each share of the Series B Preferred
Stock had a liquidation value of $40.12 per share and converted into shares of
Common Stock at a conversion price of $5.02 per share at the closing of the
Company's initial public offering.
Note 4 -- Earnings Per Share
- ----------------------------
The Company computes net loss per share under the provisions of SFAS No.
128, "Earnings per Share" ("SFAS 128"), and the Commission's Staff Accounting
Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS 128 and SAB 98, basic and diluted 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. The calculation of diluted net loss per share
excludes potential common shares if the effect is antidilutive. Basic earnings
per share is computed by dividing income or loss applicable to common
stockholders 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 and
Series B Preferred Stock. The weighted average number of shares utilized in
arriving at diluted earnings per share presented reflect adjustments for 435,024
common shares and 24,169 common shares in 1999 and 2000, respectively, issuable
pursuant to warrants which were previously 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 issued for nominal
consideration) have been excluded from the calculation of diluted earnings per
share.
Note 5 - Stock Option Plans and Other Stock-Based Compensation
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For certain options granted during 2000, the Company has recorded pursuant
to APB No. 25 approximately $8,457,000 of deferred compensation expense
representing the difference between the exercise price thereof and the deemed
market value of the common stock at the date of grant. This compensation expense
is amortized over the vesting period of each option granted. Amortization of
such deferred compensation amounted to approximately $5,050,000 during the three
months ended March 31, 2000. As of March 31, 2000 unamortized deferred
compensation expense amounted to $10,474,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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General
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GoAmerica, Inc., a Delaware corporation ("We," "Us" or the "Company"), is
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 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 39% and 58% of our total revenue during the three
months ended March 31, 1999 and 2000, 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 currently ranges from
$49.95 to $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 43% and 42% of our total
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revenue during the three months ended March 31, 1999 and 2000, respectively. We
recognize equipment revenue at the time of the shipment of the mobile device to
a subscriber. During the three months ended March 31, 2000, approximately 53% 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 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 for the three months ended March 31, 2000 was approximately $1.1 million
compared to subscriber revenue of $831,000 for such period. Such negative gross
margin has improved over prior periods, due primarily to our placement of
subscribers in more competitive carrier plans. Such gross margin was negatively
impacted, however, by excessive roaming 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.
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
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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 and the first quarter of 2000, 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 the three months
ended March 31, 2000, we incurred an aggregate of $5.1 million in non-cash
employee compensation expense as a result of stock option grants during the last
six months of 1999 and the first quarter of 2000 which were granted at prices
below the deemed fair market value of our common stock.
During 2000, we recorded an adjustment to net loss applicable to common
stockholders of approximately $21,235,000 relating to the beneficial conversion
feature inherent in the issuance of our Series B Preferred Stock. This amount
was determined based upon the excess of the fair value of our common stock into
which the Series B Preferred Stock was immediately convertible less the initial
conversion price of $5.02 per share. In accordance with EITF No. 98-5 Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios this charge was limited to the amount of proceeds
received for the 648,057 shares of Series B Preferred Stock.
Net interest income consists primarily of interest earned on cash and cash
equivalents.
Statements contained in this Form 10-Q that are not based on historical
fact are "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements may be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "estimate," "anticipate," "continue," or similar terms, variations of
such terms or the negative of those terms. Such forward-looking statements
involve risks and uncertainties, including, but not limited to: (i) our limited
operating history; (ii) our need to substantially increase the number of our
subscribers; (iii) our need to improve our systems to monitor our wireless
airtime costs more effectively; (iv) our ability to respond to the rapid
technological change of the wireless data industry; (v) our dependence on
wireless carrier networks; (vi) our need to expand our sales and marketing
activities and build the GoAmerica brand; and (vii) our ability to respond to
increased competition in the wireless data industry. As a
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result of such risks and others expressed from time to time in the Company's
filings with the Commission, the Company's actual results may differ materially
from the results discussed in or implied by the forward-looking statements
contained herein.
Results of Operations
- ---------------------
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Subscriber revenue. Subscriber revenue increased 500%, from $138,000 for
the three months ended March 31, 1999 to $831,000 for the three months ended
March 31, 2000. The increase primarily was due to having a larger subscriber
base in the three months ended March 31, 2000 than in the three months ended
March 31, 1999. Our subscriber base increased from 2,036 subscribers at March
31, 1999 to 8,698 subscribers at March 31, 2000. We expect the number of our
subscribers to increase as a result of our expanded sales and marketing efforts.
Equipment revenue. Equipment revenue increased 300%, from $151,000 for the
three months ended March 31, 1999 to $606,000 for the three months ended March
31, 2000. This increase primarily was due to an increase in the number of the
mobile devices sold during the three months ended March 31, 2000 compared to the
three months ended March 31, 1999.
Other revenue. Other revenue decreased from $65,000 for the three months
ended March 31, 1999 to $5,000 for the three months ended March 31, 2000. This
decrease primarily was due to the performance of a single systems integration
consulting project during the 1999 period. We have not pursued consulting
projects and 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 374%,
from $228,000 for the three months ended March 31, 1999 to $1.1 million for the
three months ended March 31, 2000. This increase primarily was due to an
increase in our subscriber base and a related increase in airtime usage during
the three months ended March 31, 2000 compared to the three months ended March
31, 1999. Our cost of subscriber revenue consists primarily of wireless airtime
costs. Our negative gross margin for the three months ended March 31, 2000
improved over prior periods due primarily to our placement of subscribers in
more competitive carrier plans. Such gross margins were negatively impacted,
however, by extensive roaming usage by a few subscribers. We expect the number
of subscribers and related use of our services to increase which will result in
increased costs of subscriber revenue.
Cost of equipment revenue. Cost of equipment revenue increased 367%, from
$191,000 for the three months ended March 31, 1999 to $891,000 for the three
months ended March 31, 2000. This increase was primarily due to an increase in
the number of mobile devices sold during the three months ended March 31, 2000
compared to the three months ended March 31, 1999.
Sales and marketing. Sales and marketing expenses increased from $319,000
for the three months ended March 31, 1999 to $4.8 million for the three months
ended March 31, 2000. This increase was primarily due to increased advertising
costs paid to third parties and the salaries and benefits, including $615,000 in
stock-based compensation, for personnel performing
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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 $540,000 for the three months ended March 31, 1999 to $6.7 million for the
three months ended March 31, 2000. This increase was primarily due to the
addition of salaries and benefits, including $4.4 million in 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.
Interest income. Interest income increased from $15,000 for the three
months ended March 31, 1999 to $188,000 for the three months ended March 31,
2000. Such income was primarily due to increased cash balances as a result of
our private placement financings completed in 1999 and 2000.
Liquidity and Capital Resources
- -------------------------------
Since our inception through March 31, 2000, we financed our operations
primarily through private placements of our equity securities and our redeemable
convertible preferred stock. As of March 31, 2000, we had $21.3 million in cash
and cash equivalents and $18.2 million of working capital.
Net cash used in operating activities was $7.6 million. The principal use
of cash in such period was to fund our losses from operations.
Net cash used in investing activities was $1.2 million for the three
months ended March 31, 2000. Cash used in investing activities for the three
months ended March 31, 2000 was for purchases of property, equipment and
leasehold improvements.
Net cash provided by financing activities was $23.8 million for the three
months ended March 31, 2000. Cash provided by financing activities in this
period was primarily attributable to proceeds from additional private sales of
our equity securities, including the issuance and sale of 648,057 shares of
Series B Preferred Stock for net proceeds of approximately $25.2 million.
As of March 31, 2000, our principal commitments consisted of obligations
outstanding under operating leases. As of March 31, 2000, future minimum
payments for non-cancelable operating leases having terms in excess of one year
amounted to $3.9 million, of which $638,000 is payable for the remainder 2000.
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.
Subsequent to the end of the first quarter, on April 12, 2000, the Company
consummated an initial public offering of 10,000,000 shares of its Common Stock
at a price to the public of $16.00 per share, all of such shares were issued and
sold by the Company. The proceeds to the Company from the offering were
approximately $148.8 million before expenses.
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The net proceeds received by the Company upon the consummation of such
offering, pending specific application, were invested in short-term,
investment-grade, interest-bearing instruments.
The Company believes that its existing available cash, including the
proceeds from its initial public offering, will be adequate to satisfy its
current and planned operations for at least the next 24 months. There can be no
assurance, however, that the Company will not require additional financing prior
to such time to fund its operations or possible acquisitions.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
We believe that we have limited exposure to financial market risks,
including changes in interest rates. At March 31, 2000, 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 whose value may be subject to fluctuations in interest rates.
- 12 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- ---------------------------------------------------
Changes in Securities
- ---------------------
The following information relates to all securities of the Company sold by
the Company within the past quarter which were not registered under the
securities laws at the time of grant, issuance and/or sale:
1. The Company has, during the first quarter of 2000, granted stock
options pursuant to its 1999 Stock Plan which, at the time of grant,
had not yet been registered under the securities laws. The following
table sets forth certain information regarding such grants during
the quarter:
Weighted
Average
Date of Number Exercise
Issuance of shares Price
-------- --------- -----
January 6, 2000..... 848,000 $5.02
February 23, 2000... 64,000 $15.00
March 7, 2000....... 647,700 $15.00
The Company did not employ an underwriter in connection with the issuance
of the securities described above. The Company believes that the issuance of the
foregoing securities was exempt from registration under either (i) Section 4(2)
of the Securities Act of 1933, as amended (the "Act"), as transactions not
involving any public offering and such securities having been acquired for
investment and not with a view to distribution, or (ii) Rule 701 under the Act
as transactions made pursuant to a written compensatory benefit plan or pursuant
to a written contract relating to compensation. All recipients had adequate
access to information about the Company.
Use of Proceeds
- ---------------
On April 6, 2000, the Commission declared effective the Company's
Registration Statement (Registration Statement No. 333-94801) as filed with the
Commission in connection with the Company's initial public offering of Common
Stock, which was managed by Bear, Stearns & Co., Inc., Chase H&Q, U.S. Bancorp
Piper Jaffray, Wit SoundView and DLJdirect. Pursuant to such Registration
Statement, on April 12, 2000 the Company consummated the issuance and sale of an
aggregate of 10,000,000 shares of its Common Stock, for a gross aggregate
offering price of $160 million. The Company incurred underwriting discounts and
commissions of approximately $11.2 million. In connection with such offering,
the Company incurred total expenses of approximately $1.4 million. As of April
30, 2000, all of the $148.8 million in net proceeds received by the Company upon
consummation of such offering, pending specific application, were invested in
short-term, investment-grade, interest-bearing instruments.
- 13 -
<PAGE>
ITEM 5. OTHER INFORMATION.
- ----------------------------
Initial Public Offering
- -----------------------
On April 12, 2000, the Company consummated an initial public offering of
10,000,000 shares of its Common Stock at a price to the public of $16.00 per
share, in which all of such shares were issued and sold by the Company.
The net proceeds received by the Company upon the consummation of such
offering, pending specific application, were invested in short-term,
investment-grade, interest-bearing instruments.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -------------------------------------------
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report on Form 10-Q is filed.
- 14 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOAMERICA, INC.
DATE: May 8, 2000 By: /s/ Aaron Dobrinsky
-------------------------------------
Aaron Dobrinsky
President and Chief Executive Officer
(Principal Executive Officer)
DATE: May 8, 2000 By: /s/ Francis J. Elenio
-------------------------------------
Francis J. Elenio
Chief Financial Officer
(Principal Financial and Accounting
Officer)
- 15 -
<PAGE>
<TABLE> <S> <C>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2000 WHICH
ARE INCLUDED IN THE REGISTRANT'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<NAME> GoAmerica, Inc.
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