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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File No. 0-29359
GoAmerica, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
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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)
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(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: X No:
--- ---
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of July 31, 2000:
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<CAPTION>
Class Number of Shares
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Common Stock, $.01 par value 51,378,758
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GOAMERICA, INC.
TABLE OF CONTENTS
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Page
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PART I. FINANCIAL INFORMATION..................................................................... 1
Item 1. Financial Statements (unaudited).................................................... 1
Condensed Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999......... 2
Condensed Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 2000 and 1999............................................................. 3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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........................................................................... 8
General............................................................................. 8
Results of Operations............................................................... 8
Liquidity and Capital Resources..................................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................... 11
PART II. OTHER INFORMATION......................................................................... 12
Item 2. Changes in Securities and Use of Proceeds........................................... 12
Item 5. Other Information................................................................... 13
Item 6. Exhibits and Reports on Form 8-K.................................................... 14
SIGNATURES.............................................................................................. 15
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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GOAMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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JUNE 30, DECEMBER 31,
2000 1999
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(unaudited)
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ASSETS
Current assets:
Cash and cash equivalents............................................... $ 154,215,174 $ 6,343,793
Accounts receivable, net................................................ 1,347,072 541,865
Merchandise inventories................................................. 824,899 589,307
Prepaid expenses........................................................ 4,984,552 439,255
Other current assets.................................................... 117,961 32,200
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Total current assets......................................................... 161,489,658 7,946,420
Property, equipment and leasehold improvements, net.......................... 3,946,399 959,243
Goodwill and intangible assets, net.......................................... 44,957,939 --
Deferred costs............................................................... -- 510,748
Other assets................................................................. 480,824 340,273
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$ 210,874,820 $ 9,756,684
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LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable........................................................ $ 3,105,597 $ 3,837,715
Accrued expenses........................................................ 6,475,925 1,460,936
Capital lease obligations............................................... 115,072 157,854
Deferred income......................................................... 22,395 64,300
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Total current liabilities.................................................... 9,718,989 5,520,805
Other liabilities............................................................ 357,975 139,274
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 none in 2000; $10,500,000 liquidation preference ............... -- 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 2000; $26,000,000 liquidation preference.... -- --
Stockholders' equity (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, $.01 par value, authorized: 100,000,000 shares in 1999 and
200,000,000 shares in 2000; issued and outstanding: 23,687,184 in 1999
and 51,378,758 in 2000.................................................. 513,788 236,872
Additional paid-in capital.............................................. 251,957,524 5,483,655
Deferred employee compensation.......................................... (9,443,383) (7,067,533)
Accumulated deficit..................................................... (42,230,073) (15,311,712)
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Total stockholders' equity (deficit)......................................... 200,797,856 (16,658,718)
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$ 210,874,820 $ 9,756,684
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The accompanying notes are an integral part of these financial statements.
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GOAMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
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2000 1999 2000 1999
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REVENUES:
Subscriber ............................... $ 1,287,789 $ 208,953 $ 2,118,324 $ 347,373
Equipment ................................ 762,936 224,869 1,368,527 376,363
Other .................................... 4,105 80,564 8,646 145,428
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2,054,830 514,386 3,495,497 869,164
COSTS AND EXPENSES:
Cost of subscriber revenue ............... 1,384,338 679,617 2,466,398 907,779
Cost of equipment revenue ................ 1,002,558 220,708 1,893,195 411,497
Sales and marketing ...................... 8,509,153 534,012 13,331,886 852,858
General and administrative ............... 8,226,971 997,388 14,910,606 1,537,453
Depreciation and amortization ............ 147,237 42,598 235,284 95,441
Amortization of goodwill and other
intangibles ............................ 75,028 -- 87,528 --
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19,345,285 2,474,323 32,924,897 3,805,028
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Loss from operations .......................... (17,290,455) (1,959,937) (29,429,400) (2,935,864)
Interest income, net .......................... 2,322,898 13,388 2,511,039 28,035
------------ ------------ ------------ ------------
Net loss ...................................... $(14,967,557) $ (1,946,549) $(26,918,361) $ (2,907,829)
Beneficial conversion feature and accretion of
redemption value of mandatorily redeemable
convertible preferred stock ................ (608,831) -- (30,783,931) --
------------ ------------ ------------ ------------
Net loss applicable to common stockholders .... $(15,576,388) $ (1,946,549) $(57,702,292) $ (2,907,829)
============ ============ ============ ============
Basic net loss per share applicable to common
stockholders ............................... $ (0.34) $ (0.09) $ (1.65) $ (0.14)
Diluted net loss per share applicable to common
stockholders ............................... $ (0.34) $ (0.09) $ (1.65) $ (0.13)
============ ============ ============ ============
Weighted average shares used in computation of
basic net loss per share applicable to
common stockholders ........................ 45,948,316 21,327,776 34,916,673 21,327,776
Weighted average shares used in computation of
diluted net loss per share applicable to
common stockholders ........................ 45,957,031 21,762,800 34,933,114 21,762,800
</TABLE>
The accompanying notes are an integral part of these financial statements.
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GOAMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED JUNE 30,
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2000 1999
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OPERATING ACTIVITIES
Net loss............................................................. $ (26,918,361) $ (2,907,829)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization...................................... 322,812 113,841
Provision for losses on accounts receivable........................ 139,902 --
Non-cash employee compensation..................................... 11,060,832 --
Non-cash rent expense.............................................. 72,620 --
Changes in operating assets and liabilities:
Increase in accounts receivable.................................. (706,325) (152,860)
Increase in inventory............................................ (148,873) (15,944)
Increase in prepaid expenses and other assets.................... (4,736,690) (140,009)
(Decrease)/increase in accounts payable.......................... (1,641,037) 1,161,124
Increase/(decrease) in accrued expenses.......................... 2,217,086 (77,425)
(Decrease)/increase in deferred income........................... (41,905) 3,595
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Net cash used in operating activities................................ (20,379,939) (2,015,507)
INVESTING ACTIVITIES
Purchase of property, equipment and leasehold improvements........... (2,900,721) (294,160)
Acquisition of business, net of acquired cash........................ (237,181) --
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Net cash used in investing activities................................ (3,137,902) (294,160)
FINANCING ACTIVITIES
Proceeds from sale of common stock and stock purchase warrants, net.. 146,843,058 71,439
Proceeds from sale of preferred stock................................ 24,637,100 7,345,865
Payments made on capital lease obligations........................... (90,936) --
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Net cash provided by financing activities............................ 171,389,222 7,417,304
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Increase in cash and cash equivalents................................ 147,871,381 5,107,637
Cash and cash equivalents at beginning of period..................... 6,343,793 1,960,954
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Cash and cash equivalents at end of period........................... $ 154,215,174 $ 7,068,591
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NON-CASH FINANCING ACTIVITIES
Common stock issued in connection with sale of preferred stock....... $ 3,402,243 $ --
Common stock and stock options issued in connection with acquisition. $ 43,481,773 $ --
Common stock issued in connection with cashless warrant exercise..... $ 3,087,600 $ --
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The accompanying notes are an integral part of these financial statements.
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GOAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
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 and include the results of GoAmerica, Inc. (the
"Company") and its wholly-owned subsidiaries. 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 the Company's 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 June 30, 2000 and the results of its
operations and its cash flows for the three and six month periods ended June 30,
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
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
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 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 was 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 -- ACQUISITION
On June 28, 2000, the Company acquired Wynd Communications Corporation
("Wynd"), a privately owned company headquartered in San Luis Obispo,
California. The total purchase price of approximately $43
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million was satisfied by the issuance of 3,964,975 shares of Common Stock and
the payment of approximately $319,000 in merger related costs. Of the Common
Stock issued 396,498 shares will be held in escrow for a period of 1 year. In
addition, outstanding options to acquire Wynd shares were converted into options
to purchase 477,722 shares of the Company's Common Stock.
The acquisition has been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated, on a
preliminary basis, to the assets acquired and liabilities assumed based on
estimates of fair market values at the date of acquisition. The cost of the
acquisition exceeded the fair value of the acquired net assets by approximately
$45 million which has been recorded as goodwill and is being amortized on a
straight line basis over 4 years.
The financial statements include the results of operations of Wynd
since the date of acquisition.
NOTE 5 -- 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. The weighted average number of shares utilized in
arriving at basic earnings per share reflect an adjustment for 8,715 and 4,357
common shares for the three and six month periods ended June 30, 2000,
respectively, for shares held in escrow as a result of the Wynd acquisition (see
note 4). 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.
The weighted average number of shares utilized in arriving at diluted earnings
per share presented reflect adjustments for 435,024 common shares for the three
and six months ended June 30, 1999, respectively, and 12,084 common shares for
the six months ended June 30, 2000 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 6 -- STOCK OPTION PLANS AND OTHER STOCK-BASED COMPENSATION
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 $6,081,000 during the six
months ended June 30, 2000. As of June 30, 2000 unamortized deferred
compensation expense amounted to approximately $9,443,000.
On April 5, 2000, an employee of the Company exercised a warrant to
purchase up to 320,000 shares of the Company's Common Stock on a cashless basis
in accordance with the terms of the original warrant agreement. As a result, the
Company recorded pursuant to APB No. 25 compensation expense of approximately
$4,980,000 representing the difference between the exercise price thereof and
the market value of the Common Stock at the date of exercise and issued to the
employee 192,975 shares of Common Stock.
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NOTE 7 -- SUBSEQUENT EVENT
On July 25, 2000, the Company entered into a product purchase and
distribution agreement with Dell Products L.P. ("Dell Products") with a term of
one year. In conjunction with the agreement, the Company is to issue to Dell
Ventures, L.P. ("Dell Ventures"), an affiliate of Dell Products and Dell USA
L.P. ("Dell"), a warrant to purchase approximately 564,000 shares of the
Company's Common Stock at a price of $16 per share. As of August 1, 2000 and
without giving effect to the warrant issuance, Dell, together with affiliated
entities, owns approximately 5.0% of the outstanding Common Stock of the
Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
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.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Subscriber revenue. Subscriber revenue increased 516%, from $209,000
for the three months ended June 30, 1999 to $1,288,000 for the three months
ended June 30, 2000. The increase primarily was due to having larger subscriber
levels. Our subscriber base increased from 2,866 subscribers at June 30, 1999 to
18,367 subscribers at June 30, 2000, including 4,734 subscribers of Wynd
Communications Corporation, which the Company acquired on June 28, 2000. Average
revenue per subscriber (ARPU) increased from $30.98 for the three months ended
June 30, 1999 to $38.45 for the three months ended June 30, 2000. This was
primarily due to a higher concentration of subscribers in unlimited plans and
was partially offset by an increase in service only activations. We expect the
number of our subscribers to increase as a result of our expanded sales and
marketing efforts.
Equipment revenue. Equipment revenue increased 239%, from $225,000 for
the three months ended June 30, 1999 to $763,000 for the three months ended June
30, 2000. This increase primarily was due to an increase in the number of the
mobile devices sold during the three months ended June 30, 2000 compared to the
three months ended June 30, 1999.
Other revenue. Other revenue decreased from $81,000 for the three
months ended June 30, 1999 to $4,000 for the three months ended June 30, 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 104%,
from $680,000 for the three months ended June 30, 1999 to $1.4 million for the
three months ended June 30, 2000. This increase primarily
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was due to an increase in our subscriber base and a related increase in airtime
usage during the three months ended June 30, 2000 compared to the three months
ended June 30, 1999. Our cost of subscriber revenue consists primarily of
wireless airtime costs. Our negative gross margin for the three months ended
June 30, 2000 improved over prior periods due primarily to our placement of
subscribers in more competitive carrier plans. 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 354%,
from $221,000 for the three months ended June 30, 1999 to $1.0 million for the
three months ended June 30, 2000. This increase primarily was due to an increase
in the number of mobile devices sold during the three months ended June 30, 2000
compared to the three months ended June 30, 1999.
Sales and marketing. Sales and marketing expenses increased from
$534,000 for the three months ended June 30, 1999 to $8.5 million for the three
months ended June 30, 2000. This increase primarily was due to increased
advertising costs paid to third parties and the salaries and benefits, including
$584,000 in stock-based compensation, for 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 $997,000 for the three months ended June 30, 1999 to $8.2 million
for the three months ended June 30, 2000. This increase primarily was due to the
addition of salaries and benefits, including $5.4 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 $13,000 for the three
months ended June 30, 1999 to $2.3 million for the three months ended June 30,
2000. Such income primarily was due to increased cash balances as a result of
the consummation of our initial public offering and private placement financings
completed during 2000.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Subscriber revenue. Subscriber revenue increased 510%, from $347,000
for the six months ended June 30, 1999 to $2.1 million for the six months ended
June 30, 2000. The increase primarily was due to having larger subscriber
levels. Our subscriber base increased from 2,866 subscribers at June 30, 1999 to
18,367 subscribers at June 30, 2000, including 4,734 subscribers of Wynd
Communications Corporation, which the Company acquired on June 28, 2000. Average
revenue per subscriber (ARPU) increased from $27.10 for the six months ended
June 30, 1999 to $36.23 for the six months ended June 30, 2000. This was
primarily due to a higher concentration of subscribers in unlimited plans and
was partially offset by an increase in service only activations. We expect the
number of our subscribers to increase as a result of our expanded sales and
marketing efforts.
Equipment revenue. Equipment revenue increased 264%, from $376,000 for
the six months ended June 30, 1999 to $1.4 million for the six months ended June
30, 2000. This increase primarily was due to an increase in the number of the
mobile devices sold during the six months ended June 30, 2000 compared to the
six months ended June 30, 1999.
Other revenue. Other revenue decreased from $145,000 for the six months
ended June 30, 1999 to $9,000 for the six months ended June 30, 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.
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Cost of subscriber revenue. Cost of subscriber revenue increased 172%,
from $908,000 for the six months ended June 30, 1999 to $2.5 million for the six
months ended June 30, 2000. This increase primarily was due to an increase in
our subscriber base and a related increase in airtime usage during the six
months ended June 30, 2000 compared to the six months ended June 30, 1999. Our
cost of subscriber revenue consists primarily of wireless airtime costs. Our
negative gross margin for the six months ended June 30, 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 360%,
from $411,000 for the six months ended June 30, 1999 to $1.9 million for the six
months ended June 30, 2000. This increase primarily was due to an increase in
the number of mobile devices sold during the six months ended June 30, 2000
compared to the six months ended June 30, 1999.
Sales and marketing. Sales and marketing expenses increased from
$853,000 for the six months ended June 30, 1999 to $13.3 million for the six
months ended June 30, 2000. This increase primarily was due to increased
advertising costs paid to third parties and the salaries and benefits, including
$1.2 million in stock-based compensation, for 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 six months ended June 30, 1999 to $14.9
million for the six months ended June 30, 2000. This increase primarily was due
to the addition of salaries and benefits, including $9.9 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 $28,000 for the six
months ended June 30, 1999 to $2.5 million for the six months ended June 30,
2000. Such income primarily was due to increased cash balances as a result of
the consummation of our initial public offering and private placement financings
completed during 2000.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception through June 30, 2000, we financed our operations
primarily through private placements of our equity securities and our redeemable
convertible preferred stock. 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. As of June 30, 2000, we had $154.2 million in cash and cash equivalents
and $151.8 million of working capital.
Net cash used in operating activities was $20.4 million. The principal
use of cash in such period was to fund our losses from operations.
Net cash used in investing activities was $3.1 million for the six
months ended June 30, 2000. Cash used in investing activities for the six months
ended June 30, 2000 was principally for purchases of property, equipment and
leasehold improvements.
Net cash provided by financing activities was $171.4 million for the
six months ended June 30, 2000. Cash provided by financing activities in this
period was primarily attributable to net proceeds from our initial public
offering as well as additional private sales of our equity securities. The net
proceeds received by the
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Company upon the consummation of such offerings, pending specific application,
were invested in short-term, investment-grade, interest-bearing instruments.
As of June 30, 2000, our principal commitments consisted of obligations
outstanding under operating leases. As of June 30, 2000, future minimum payments
for non-cancelable operating leases having terms in excess of one year amounted
to $4.5 million, of which approximately $539,000 is payable for the remainder of
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.
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.
FORWARD LOOKING STATEMENTS
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; (vii) our ability to respond to
increased competition in the wireless data industry; and (viii) our ability to
integrate acquired businesses. As a 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.
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.
In December 1999, the Commission issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financial Statements". This SAB
provides the Commission's views in applying generally accepted accounting
principles to selected revenue recognition issues. We are required to adopt the
provisions of this SAB no later than the fourth quarter of 2000. We are in the
process of evaluating this SAB and have not yet determined the future impact on
our consolidated financial statements.
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 June 30, 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.
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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.
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<PAGE> 15
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Changes in Securities
The following information relates to all securities sold by the Company
within the second quarter of 2000 which were not registered under the securities
laws at the time of grant, issuance and/or sale:
1. Option Grants
On April 7, 2000, the Company granted stock options pursuant to its
1999 Stock Plan which were not registered securities under the Securities Act of
1933, as amended (the "Securities Act"). All such stock options were granted at
an exercise price of $16.00 per share, the then current fair market value of the
Common Stock. The aggregate number of shares of Common Stock underlying such
stock option grants totaled 494,500.
2. Common Stock Issuances
(a) Acquisition of Wynd Communications Corporation
On June 28, 2000, GoAmerica Acquisition I Corp., a wholly-owned
subsidiary of the Company was merged (the "Wynd Merger") with and into Wynd
Communications Corporation ("Wynd"), and Wynd became a wholly-owned subsidiary
of the Company pursuant to the terms and conditions of the Merger Agreement and
Plan of Reorganization, dated as of June 13, 2000 (previously filed with the
Commission on a Form 8-K on July 13, 2000). In the Wynd Merger, the former
shareholders of Wynd received an aggregate of 3,964,975 newly-issued shares of
the Company's Common Stock (after deducting fractional share amounts and paying
the former Wynd shareholders cash in lieu thereof) in exchange for all
outstanding shares of Wynd capital stock. Additionally, the Company assumed each
issued and outstanding option for the purchase of Common Stock of Wynd and
converted each such option into options to acquire an aggregate of 477,722
shares of the Company's Common Stock under the Company's 1999 Stock Plan.
(b) Option and Warrant Exercises
During the second quarter of 2000, the Company issued shares of Common
Stock pursuant to exercises of stock options granted under the 1999 Stock Plan.
The following table sets forth certain information regarding such issuances
during the quarter:
<TABLE>
<CAPTION>
NUMBER OF SHARES WEIGHTED AVERAGE EXERCISE PRICE
---------------- -------------------------------
<S> <C>
16,000 $1.5625
</TABLE>
During the second quarter of 2000, the Company issued shares of Common
Stock pursuant to the exercise of a warrant to purchase 320,000 shares of the
Company's Common Stock at an exercise price of $.4375 per share. The exercise
was cashless, resulting in the net issuance of 192,975 shares of Common Stock.
The Company did not employ an underwriter in connection with the
issuance of the securities described in this Item 2. The Company believes that
the issuance of the foregoing securities was exempt from registration under
either (i) Section 4(2) of the Securities 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 Securities 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.
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<PAGE> 16
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 June
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. None of such
proceeds have yet been specifically applied.
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.
Amendment of Certificate of Incorporation.
On May 8, 2000, the Company filed an Amended and Restated Certificate
of Incorporation with the Secretary of State of the State of Delaware. Such
filing restated the Certificate of Incorporation to reflect conversion of the
Series A Preferred Stock and the Series B Preferred Stock in connection with the
initial public offering. A copy of the Amended and Restated Certificate of
Incorporation is filed as Exhibit 3.1 hereto and is incorporated by reference
herein.
Subsequent Events.
(a) Resignation of Director.
Effective July 24, 2000, Nelson Schwab III resigned his position as a
member of the Company's Board of Directors to pursue other interests.
(b) Appointment of Director.
On July 24, 2000, Brian D. Bailey was appointed as a Class B Director
of the Company to fill the newly created vacancy. Mr. Bailey is a Managing
Director for the Charlotte-based merchant banking firm Carousel Capital
Partners, L.P. Prior to joining Carousel Capital in April 2000, Mr. Bailey was
an Associate with Forstmann Little & Co. in New York from 1999 to 2000 and a
Principal with the Carlyle Group in Washington, D.C. from 1996 to 1999. He
formerly held investment banking positions at CS First Boston and Bowles
Hollowell Conner & Co. He has also worked in the public sector at both the White
House and the U.S. Small Business Administration. Mr. Bailey received a B.A. in
Mathematics and Economics from the University of North Carolina at Chapel Hill
and an M.B.A. from the Stanford Graduate School of Business.
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<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1- Amended and Restated Certificate of Incorporation, as
filed with the Secretary of State of the State of
Delaware on May 8, 2000.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter ended June 30, 2000, the Company did not file any
Current Reports on Form 8-K with the Securities and Exchange Commission. On July
13, 2000, the Company filed a Current Report of Form 8-K with regard to the Wynd
Merger.
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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: August 7, 2000 By: /s/ Aaron Dobrinsky
---------------------------------------------
Aaron Dobrinsky
President and Chief Executive Officer
(Principal Executive Officer)
DATE: August 7, 2000 By: /s/ Francis J. Elenio
---------------------------------------------
Francis J. Elenio
Chief Financial Officer
(Principal Financial and Accounting Officer)
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