SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K/A
AMENDMENT NO. 1
TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 31, 2000
--------------------------------
GOAMERICA, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-29359 22-3693371
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
433 Hackensack Avenue
Hackensack, New Jersey 07601
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 996-1717
------------------------------
401 Hackensack Avenue, Hackensack, New Jersey 07601
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
As reported in the Current Report on Form 8-K filed September 15, 2000 by
GoAmerica, Inc. ("GoAmerica"), on August 31, 2000, GoAmerica consummated the
acquisition of all of the issued and outstanding capital stock of Hotpaper.com,
Inc., a Delaware corporation ("Hotpaper"). In the acquisition, GoAmerica
Acquisition II Corp., a Delaware corporation and wholly-owned subsidiary of
GoAmerica, merged with and into Hotpaper (the "Merger") and Hotpaper became a
wholly-owned subsidiary of GoAmerica.
In the Merger, the former stockholders of Hotpaper received an aggregate
of 1,006,111 newly-issued shares of GoAmerica Common Stock, $0.01 par value
(after deducting fractional share amounts and paying the former Hotpaper
stockholders cash in lieu thereof), in exchange for a portion of the outstanding
shares of Hotpaper capital stock. In addition, one stockholder of Hotpaper
received a cash payment of $750,000 in exchange for a portion of his shares of
Hotpaper capital stock, such portion equaling the balance of the total
outstanding shares of Hotpaper capital stock. As further consideration,
GoAmerica assumed each issued and outstanding option for the purchase of Common
Stock of Hotpaper and converted each such option into options to acquire an
aggregate of 81,651 shares of GoAmerica Common Stock under GoAmerica's 1999
Stock Plan.
GoAmerica hereby files this Form 8-K/A to file the following financial
statements and related pro forma financial statements required pursuant to Item
7 of Form 8-K with respect to the Merger:
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Audited Financial Statements of Hotpaper.com, Inc. (A Development Stage
Enterprise) as of and for the years ended December 31, 1999 and 1998
Independent Auditors' Report of Frank, Rimerman & Co. LLP
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
Interim Unaudited Condensed Financial Statements of Hotpaper.com, Inc.
Condensed Balance Sheet as of June 30, 2000
Condensed Statements of Operations for the period from April 11,
1995 (Inception) to June 30, 2000 and the six month periods ended
June 30, 2000 and 1999
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<PAGE>
Condensed Statements of Cash Flows for the period from April 11,
1995 (Inception) to June 30, 2000 and the six month periods ended
June 30, 2000 and 1999
Notes to Interim Unaudited Condensed Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Consolidated Financial Statements of GoAmerica,
Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 2000.
Unaudited Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1999.
Unaudited Pro Forma Consolidated Statements of Operations for the
six months ended June 30, 2000.
Notes to Unaudited Pro Forma Consolidated Financial Statements.
(c) EXHIBITS
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<PAGE>
(a) Financial Statements of Business Acquired.
HOTPAPER.COM, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
Financial Statements
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
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<PAGE>
Independent Auditors' Report
The Board of Directors of
Hotpaper.com, Inc.
We have audited the accompanying balance sheets of Hotpaper.com, Inc. (a
development stage enterprise) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ending and for the period from April 11, 1995 (inception) through
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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. 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 financial position of Hotpaper.com, Inc. (a
development stage enterprise) as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended and for the period
from April 11, 1995 (inception) to December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred losses and net cash outflows from
operations since inception. The Company will need to raise additional financing
to sustain its operations during the development stage. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As discussed in Note 6 to the financial statements, subsequent to year end, the
Company was served with a lawsuit. The Company and its legal counsel are unable
to determine what amount, if any, will be required to extinguish this matter.
Frank, Rimerman & Co. LLP
July 14, 2000
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Balance Sheets
December 31,
1999 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 933,119 $ 5,677
Accounts receivable ........................... 7,495 --
----------- -----------
Total current assets ....................... 940,614 5,677
Restricted Cash .................................. 175,000 --
Property and Equipment, net ...................... 152,289 2,413
Deposits ......................................... 13,569 --
----------- -----------
$ 1,281,472 $ 8,090
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses ......... $ 309,113 $ 68,488
Line of credit ................................ -- 4,763
Note payable .................................. -- 1,073
----------- -----------
Total current liabilities .................. 309,113 74,324
Commitments and Contingency (Note 6)
Stockholders' Equity (Deficit):
LLC Units ..................................... -- (66,234)
Series A convertible preferred stock, $0.001
par value (aggregate liquidation preference
of $2,000,000) .............................. 9,336 --
Common stock, $0.001 par value ................ 7,750 --
Additional paid-in capital .................... 2,376,268 --
Deferred stock-based compensation ............. (358,198) --
Deficit accumulated during the
development stage ........................... (1,062,797) --
----------- -----------
Total stockholders' equity (deficit) ....... 972,359 (66,234)
----------- -----------
$ 1,281,472 $ 8,090
=========== ===========
See Notes to Financial Statements
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Statements of Operations
April 11,
1995
(Inception) Year Year
Through Ended Ended
December December December
31, 1999 31, 1999 31, 1998
----------- ----------- -----------
Subscription revenues ............. $ 12,145 $ 12,145 $ --
Other revenues .................... 117,137 6,294 54,251
----------- ----------- -----------
Total revenues ................ 129,282 18,439 54,251
----------- ----------- -----------
Operating expenses:
General and administrative ..... 704,317 600,674 32,503
Research and development ....... 210,149 210,149 --
Marketing ...................... 223,375 223,375 --
----------- ----------- -----------
Income (Loss) from operations.. (1,008,559) (1,015,759) 21,748
----------- ----------- -----------
Other income (expense):
Interest, net ................. (13,278) 25,196 (14,032)
----------- ----------- -----------
Net income (loss) ............. $(1,021,837) $ (990,563) $ 7,716
=========== =========== ===========
See Notes to Financial Statements
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<PAGE>
<TABLE>
<CAPTION>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity (Deficit)
For the Period April 11, 1995 (Inception) through December 31, 1999
Deficit
Accumulated
Series A Additional Deferred During the
LLC Preferred Common Paid-In Stock-Based Development
Capital Stock Stock Capital Compensation Stage Total
----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of LLC interests
in April 1995 for cash .......... $ 10,000 $ -- $ -- $ -- $ -- $ -- $ 10,000
Contributions ............... 1,825 -- -- -- -- -- 1,825
Distributions ............... (30,839) -- -- -- -- -- (30,839)
Net income .................. 1,509 -- -- -- -- -- 1,509
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 ........ (17,505) -- -- -- -- -- (17,505)
Contributions ............... 2,025 -- -- -- -- -- 2,025
Distributions ............... (16,044) -- -- -- -- -- (16,044)
Net loss .................... (27,018) -- -- -- -- -- (27,018)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 ........ (58,542) -- -- -- -- -- (58,542)
Contributions ............... 10,599 -- -- -- -- -- 10,599
Distributions ............... (9,437) -- -- -- -- -- (9,437)
Net loss .................... (13,481) -- -- -- -- -- (13,481)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 ........ (70,861) -- -- -- -- -- (70,861)
Contributions ............... 7,800 -- -- -- -- -- 7,800
Distributions ............... (10,889) -- -- -- -- -- (10,889)
Net income .................. 7,716 -- -- -- -- -- 7,716
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 ........ (66,234) -- -- -- -- -- (66,234)
(Balance carried forward)
(continued)
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Statement of Stockholders' Equity (Deficit)
For the Period April 11, 1995 (Inception) through December 31, 1999
Deficit
Accumulated
Series A Additional Deferred During the
LLC Preferred Common Paid-In Stock-Based Development
Capital Stock Stock Capital Compensation Stage Total
----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 ........ $ (66,234) $ -- $ -- $ -- $ -- $ -- $ (66,234)
(Balance brought forward)
Net loss, January 1, 1999 to
June 14, 1999 .................. (11,693) -- -- -- -- -- (11,693)
Issuance of 6,000,000 shares of
common stock at $0.001 on
June 14, 1999 in connection
with the conversion of LLC to
"C" corporation ................ 77,927 -- 6,000 -- -- (83,927) --
Issuance of 1,750,000 shares of
common stock in June 1999 at
$0.001 for cash ................ -- -- 1,750 -- -- -- 1,750
Issuance of 9,336,448 shares of
Series A convertible
preferred stock in June 1999,
at $0.214 per share (net of
$24,853 of stock issue costs)... -- 9,336 -- 1,965,811 -- -- 1,975,147
Deferred stock-based
compensation ................... -- -- -- 410,457 (410,457) -- --
Amortization of stock-based
compensation ................... -- -- -- -- 52,259 -- 52,259
Net loss, June 15, 1999 to
December 31, 1999 .............. -- -- -- -- -- (978,870) (978,870)
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ -- $ 9,336 $ 7,750 $ 2,376,268 $ (358,198) $(1,062,797) $ 972,359
=========== =========== =========== =========== =========== =========== ===========
See Notes to Financial Statements
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
April 11,
1995
(Inception) Year Year
to Ended Ended
December December December
31, 1999 31, 1999 31, 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................. $(1,021,837) $ (990,563) $ 7,716
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation .............................................. 20,763 12,859 4,910
Stock-based compensation .................................. 52,259 52,259 --
Changes in operating assets and liabilities:
Accounts receivable ..................................... (7,495) (7,495) --
Accounts payable and accrued expenses ................... 309,113 240,625 (7,982)
----------- ----------- -----------
Net cash provided by (used in) operating activities .. (647,197) (692,315) 4,644
Cash flows from investing activities:
Purchase of property and equipment ............................ (173,052) (162,735) --
Restricted cash time deposit .................................. (175,000) (175,000) --
Deposits ...................................................... (13,569) (13,569) --
----------- ----------- -----------
Net cash used in investing activities ................ (361,621) (351,304) --
Cash flows from financing activities:
Proceeds from line of credit, net of repayments ............... -- (4,763) 4,763
Proceeds from term loan, net of repayments .................... -- (1,073) (832)
Issuance of convertible preferred stock ....................... 2,000,000 2,000,000 --
Payment of stock issuance costs ............................... (24,853) (24,853) --
Issuance of common stock for cash ............................. 1,750 1,750 --
LLC distributions ............................................. (67,209) -- (10,889)
LLC contributions ............................................. 32,249 -- 7,800
----------- ----------- -----------
Net cash provided by financing activities ............ 1,941,937 1,971,061 842
----------- ----------- -----------
Net increase in cash ................................. 933,119 927,442 5,486
Cash and cash equivalents, beginning ............................ -- 5,677 191
----------- ----------- -----------
Cash and cash equivalents, ending ............................... $ 933,119 $ 933,119 $ 5,677
=========== =========== ===========
Supplemental disclosures of cash flow information:
Franchise taxes paid .......................................... $ 5,500 $ 4,700 $ --
=========== =========== ===========
Interest paid ................................................. $ 43,500 $ 5,000 $ 14,000
=========== =========== ===========
Supplemental disclosures of non-cash financing activities:
Conversion of LLC common units to capital stock ............ $ 77,927 $ 77,927 $ --
=========== =========== ===========
Deferred stock-based compensation .......................... $ 410,457 $ 410,457 $ --
=========== =========== ===========
See Notes to Financial Statements
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</TABLE>
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(1) NATURE OF BUSINESS, MANAGEMENT'S PLANS REGARDING THE FINANCING OF
FUTURE LOSSES, AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
Document Automation Systems LLC was incorporated under the laws of the
State of California as a Limited Liability Corporation (LLC) on April 11,
1995. On May 28, 1999 Hotpaper.com, Inc. (the Company) was incorporated as
a C Corporation under the laws of the State of Delaware. On June 9, 1999,
the LLC was merged into the Company. The Company intends to design and
sell software services that will automate the creation of word processing
documents over the internet.
Following incorporation, the Company has been principally engaged in
recruiting members of management, performing preliminary research, and
raising sufficient cash to commence its operating activities. Through
December 31, 1999, the Company has raised equity capital of $1,750 through
the issuance of common stock and $2,000,000 through issuance of Series A
convertible preferred stock.
Management's Plans Regarding the Financing of Future Losses
-----------------------------------------------------------
The Company has incurred net losses and net cash outflows from operations
since inception. In order for the Company to continue as a going concern,
it will need to raise additional financing.
Subsequent to year-end, the Company raised bridge loans of approximately
$2,500,000 through the issuance of convertible debt. The Company
anticipates using this capital to continue to develop and market its
product. As discussed in Note 7, management plans to raise additional
equity capital through the sale of convertible preferred stock in 2000,
and believes this funding will provide sufficient capital to sustain the
business. However, there can be no assurance the Company will be able to
raise additional capital. This uncertainty raises substantial doubt as to
the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might be necessary if the
Company were unable to continue as a going concern.
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
Significant Accounting Policies
-------------------------------
Basis of Presentation:
As planned operations had not commenced as of December 31, 1999, the
Company has reported its results of operations in accordance with
Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Companies."
Revenue Recognition:
Revenue is recognized when earned in accordance with American Institute of
Certified Public Accountants Statements of Position 97-2 and 98-4,
Software Revenue Recognition. Accordingly, subscription revenue is
recognized ratable over the contract period.
Website Development Costs:
The Company recognizes website development costs in accordance with
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." As such, the Company expenses all
costs incurred that relate to the planning and post implementation phases
of development. Costs incurred in the development phase will be
capitalized and recognized over the product's estimated useful life. Costs
associated with repair or maintenance of the existing site or the
development of website content will be included in website development
costs. The Company did not capitalize any website development costs
through December 31, 1999. Website development costs have been included in
research and development expense in the accompanying statement of
operations.
Income Taxes:
The Company accounts for income taxes using the liability method. Under
this method, deferred income tax assets and liabilities are recorded based
on the estimated future tax effects of differences between the financial
statement and income tax basis of existing assets and liabilities.
Deferred income taxes are classified as current or noncurrent, based on
the classifications of the related assets and liabilities giving rise to
the temporary differences. A valuation allowance is provided against the
Company's deferred income tax assets when their realization is not
reasonably assured.
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
Other Income:
Other income consists primarily of consulting revenue generated by the
LLC.
Cash and Cash Equivalents:
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less.
Restricted Cash:
Restricted cash relates to certain certificates of deposit held as
collateral for letters of credit relating to security deposits.
Property and Equipment:
Property and equipment are stated at cost. The Company depreciates
property and equipment using the straight-line method over the estimated
useful lives (three years for computer equipment, office furniture and
equipment and two years for software) of the assets. Property and
equipment consist of the following:
December 31,
1999 1998
------------- --------------
Computer equipment........................ $ 146,772 $ 9,829
Software.................................. 18,557 --
Office furniture and equipment............ 7,723 488
------------- --------------
173,052 10,317
Less accumulated depreciation........ 20,763 7,904
------------- --------------
$ 152,289 $ 2,413
============= ==============
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of cash and cash
equivalents. The Company maintains its cash accounts at one financial
institution. Cash balances at this financial institution are in excess of
the $100,000 Federal Deposit Insurance Corporation insurable limit.
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
Stock-Based Compensation:
The Company generally grants stock options to its employees for a fixed
number of shares with an exercise price equal to the fair value of the
shares on the date of grant. As allowed under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123), the Company has elected to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and
related interpretations in accounting for stock awards to employees.
Deferred compensation for options granted to non-employees has been
determined in accordance with SFAS 123 as the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measured. Deferred compensation for options
granted to non-employees is periodically re-measured as the underlying
options vest.
Deferred compensation on sales of restricted stock to employees of the
Company is determined as the difference between the deemed fair market
value of the stock and the price paid. Compensation expense associated
with such sales is amortized on a straight-line basis over the related
service period.
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,
disclosure of contingent assets and liabilities, and reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Comprehensive Income (Loss):
To date, the Company has not had any significant components of other
comprehensive income (loss).
Recent Accounting Pronouncements:
In March 2000, the EITF published its consensus on EITF No. 00-3,
Applications of AICPA Statement of Position 97-2, Software Revenue
Recognition, to Arrangements That
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
Include the Right to Use Software Stored on Another Entity's Hardware.
EITF No. 00-3 states that a software element covered by SOP 97-2 is only
present in a hosting arrangement if the customer has the contractual right
to take possession of the software at any time during the hosting period
without significant penalty and it is feasible for the customer to either
run the software on its own hardware or contract with another party
unrelated to the vendor to host the software. The Company intends to
follow the guidelines established in EITF No. 00-3, however, revenues from
these arrangements have been immaterial to date.
(2) FINANCING ARRANGEMENTS
Line of Credit
--------------
During 1998, the Company entered into credit arrangements for the purchase
of $5,869 of equipment. In 1999, the Company entered into a credit
arrangement for the purchase of $5,855 of equipment. The credit
arrangements included interest at rates ranging from approximately 12.9%
to 16.9% per annum, and were due in equal monthly installments of
principal and interest through June 2000, August 2000, December 2000 and
March 2002. The credit arrangements were prepaid upon the receipt of
financing through the sale of Series A convertible preferred stock.
Borrowings outstanding on the credit arrangements totaled $4,763 at
December 31, 1998.
Note Payable
------------
In 1997 the Company obtained a term loan with a financial institution,
with interest at 15%. The loan was due in equal monthly payments of $60 of
principal and interest through March 2002. During 1999, the Company
prepaid the loan upon the receipt of financing through the sale of Series
A convertible preferred stock. Borrowings outstanding on the loan totaled
$1,073 at December 31, 1998.
(3) INCOME TAXES
Deferred income taxes result from the tax effect of transactions that are
recognized in different periods for financial statement and income tax
reporting purposes. The Company's net deferred income tax assets at
December 31, 1999 were approximately $340,000 and have been fully offset
by a valuation allowance, as their realization is not reasonably assured.
These deferred income tax assets consist primarily of net operating losses
which may be carried forward to offset future income tax liabilities. The
Company has federal and state net operating loss carryforwards of
approximately $880,000 which expire in 2019 and 2007.
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the
stock ownership of a company. If the Company should have an ownership
change, as defined by the tax law, utilization of the carryforwards could
be restricted.
(4) CAPITAL STOCK
Common Stock
------------
The Company is authorized to issue 30,000,000 shares of common stock, at a
par value of $0.001 per share. As of December 31, 1999 the Company had
7,750,000 common shares issued and outstanding. Dividends may not be
declared or paid on the shares of common stock until all accrued and
unpaid dividends due on the convertible preferred stock have been paid.
Unvested common stock issued to certain officers of the Company are
subject to a right of repurchase by the Company at the original issuance
price. At December 31, 1999, 5,534,375 shares of outstanding common stock
were subject to re-purchase at a weighted average price of $0.001 per
share.
Deferred compensation, amounting to $372,750 relates to 1,750,000 shares
of common stock sold to an officer of the Company in June 1999 at $0.001
per share. Amortization of such deferred compensation amounted to $46,594
for the year ended December 31, 1999.
Convertible Preferred Stock
---------------------------
The Company is authorized to issue 11,000,000 shares of convertible
preferred stock, at a par value of $0.001 per share. In June 1999 the
Company issued 9,336,448 shares of Series A convertible preferred stock at
approximately $0.214 per share.
The rights, preferences, privileges and restrictions for the Series A
convertible preferred stock are as follows:
(a) Series A holders are entitled to receive dividends prior to and in
preference to dividends declared on common stock at an annual rate
of $0.017 per share, when and if declared by the Board of Directors.
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(b) The holders of Series A have liquidation preferences before any
distribution or payment is made to holders of common stock equal to
approximately $0.214 per share. The aggregate liquidation preference
of Series A shares outstanding at December 31, 1999 is $2,000,000.
(c) Series A shares are convertible into common stock at the option of
the holder, by dividing $0.214 by the Conversion Price in effect at
the time of conversion ($0.214 at December 31, 1999), subject to
adjustment for dilution. The shares are convertible at the option of
the holder, at any time after the date of issuance.
(d) Each share of preferred stock is entitled to one vote for each share
of common stock into which such preferred stock could then be
converted, on all matters submitted to a vote of the stockholders of
the Company. In addition, the holders of Series A, voting as a
class, must approve certain actions with a simple majority.
(e) Each share of preferred stock is automatically converted into shares
of common stock, upon the completion of a qualifying initial public
offering in which the proceeds to the Company exceed $15,000,000.
(5) STOCK OPTION PLAN
On June 18, 1999 the Company adopted the 1999 Equity Incentive Plan (the
"Plan"). The Plan provides for the granting of options to purchase up to
8,000,000 shares of common stock.
Under the Plan, the Board of Directors may grant incentive stock options
to employees and non-statutory stock options to employees, directors, and
consultants. The exercise price of an option cannot be less than the fair
market value of one share of common stock on the date of grant for
incentive stock options or 85% of the fair market value of one share of
common stock for non-statutory stock options (not less than 110% of the
fair market value for stockholders owning greater than 10% of all classes
of stock) as determined by the Board of Directors. Options expire after
ten years (five years for stockholders owning greater than 10% of all
classes of stock). The Plan grants the Board of Directors the discretion
to determine when the options granted thereunder shall become exercisable.
Options granted under the plan generally vest over a four year period.
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<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
Under the Plan, in the event of the termination of a participant's
employment or the proposed transfer of such shares to a third party, the
Company has the right to repurchase the stock under terms specified in the
Plan agreement.
Stock option activity under the Plan is as follows:
Options Outstanding
--------------------------
Weighted
Average
Options Number Exercise
Available of Shares Price
---------- ----------- ----------
Outstanding, December 31, 1998... -- -- $ --
Authorized..................... 8,000,000 -- --
Restricted stock grant......... (1,750,000) -- --
Granted........................ (172,500) 172,500 0.0214
Cancelled...................... 25,000 (25,000) 0.0214
---------- ----------- ----------
Outstanding, December 31, 1999... 6,102,500 147,500 $ 0.0214
========== =========== ==========
Exercisable, December 31, 1999. 8,334 $ 0.0214
=========== ==========
The weighted-average remaining contractual life of options outstanding at
December 31, 1999 was 9.82 years.
The Company applies Accounting Principles Board (APB) Opinion No. 25
and related interpretations in accounting for its Plan. The Company
has adopted the disclosure-only provisions of Statement of Financial
Accounting Standard No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123). For certain options granted during 1999, the Company
has recorded, pursuant to APB. No. 25, $37,707 of deferred compensation
expense representing the difference between the exercise price and the
fair market value of the common stock at the date of grants. This
compensation expense is amortized over the vesting period of each
option granted. Amortization of such deferred compensation amounted to
$5,665 for the year ended December 31, 1999.
SFAS No. 123 requires the disclosure of pro forma net income had the
Company adopted the fair value method. The fair value of stock-based
awards to employees has been calculated using the minimum value method
with the following weighted-average assumptions: expected life of 4 years,
risk-free rate of 5.92% and no dividends during the expected term. The
minimum value method, which is allowed under SFAS No. 123 for
privately-held companies, assumes zero volatility in the Company's stock
price. The fair value of stock-based awards to non-employees has been
calculated using the Black-
- 17 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
Scholes option pricing model with the following weighted average
assumptions: expected life of 10 years, risk-free rate of 6.46%, no
dividends during the expected term and 80% volatility. Had awards been
amortized to expense over the estimated service period of the employees or
non-employees, the effect on the reported net loss would not have been
material.
(6) COMMITMENTS AND CONTINGENCY
Facility Lease
--------------
The Company leases its office facilities in San Francisco, California
under an operating lease agreement which expires in December 2002. Under
terms of the lease the Company is responsible for certain insurance,
property taxes and maintenance expenses. In January 2000, the Company
entered into a sub-lease agreement for a portion of its San Francisco
office lease expiring in July 2000. The sub-lease requires monthly
payments of $17,633 which will be offset against rental expense for 2000
and reduces the future minimum rental payments. Rent expense was
approximately $62,000 for the year ended December 31, 1999 ($7,000 for the
year ended December 31, 1998 and $86,000 for the period from inception
through December 31, 1999).
Future minimum rental payments, net of sub-lease payments, are as follows:
2000................................ $ 318,000
2001................................ 423,000
2002................................ 388,000
--------------
$ 1,129,000
==============
Contingency
-----------
A former employee of the Company filed a suit in 2000 calling for
unspecified damages arising from alleged wrongful termination during 1999.
The Company and its legal counsel are unable to determine what amount, if
any, will be required to extinguish this matter. Therefore, no amounts
have been accrued for this matter on the accompanying balance sheet.
- 18 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
(7) SUBSEQUENT EVENTS
Bridge Financing Arrangement
----------------------------
In March 2000, the Company issued a convertible note payable for
$1,000,000 available in three draws, two in March and one in May 2000. The
note bears interest at 8% annually and is convertible into shares of
Series B stock if the Company issues Series B stock with gross proceeds to
the Company of at least $3,000,000. In the event the Company does not
issue Series B stock within a period of four months from the initial draw,
all outstanding principal and unpaid accrued interest will be convertible
into shares of Series A convertible preferred stock based on a price of
$0.214 per share.
In connection with the issuance of the convertible note payable, the
Company issued a warrant to purchase $100,000 of Series B convertible
preferred stock at a price equal to what is paid by investors. Additional
warrants are issuable at the rate of 5% of the outstanding loan balance
per month. Warrants are exercisable through March 10, 2005. In the event
the Company does not issue Series B convertible preferred stock within a
period of four months from the initial draw, the warrants will be
exercisable for Series A convertible preferred stock based on a price of
$0.214 per share.
Stock Authorization
-------------------
In March 2000, the Company increased the number of authorized shares by
8,000,000 shares of common and 8,000,000 shares of preferred.
Pending Acquisition and Bridge Financing Arrangement
----------------------------------------------------
On July 3, 2000, the Company signed a letter of intent with a prospective
corporate acquirer for the sale of all of the Company's issued and
outstanding shares of capital stock for approximately $750,000 in cash and
such number of shares of common stock of the acquirer which, when
multiplied by the average closing price of the common stock for the ten
days immediately preceding the closing date, shall have an aggregate
market value of $9,250,000.
In connection with the proposed acquisition, in July 2000, the prospective
corporate acquirer loaned the Company $1,500,000. Under the terms of the
loan, the Company has immediate access to $500,000 and $1,000,000 has been
placed into an escrow account. Amounts held in escrow may be drawn down by
the Company as additional cash is required. The note bears interest at the
prime rate for the first twelve months and prime
- 19 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
plus 5% thereafter and is due upon the earlier of July 2001 or a
subsequent round of equity financing. In addition, the note is convertible
into shares of Series B convertible preferred stock upon a round of equity
financing with gross proceeds to the Company of at least $4,000,000 and a
post-financing valuation of the Company of at least $10,000,000. In
connection with this loan, the Company has granted the prospective
corporate acquirer an exclusive right to distribute all wireless
applications arising from the Company's technology throughout North
America for as long as the loan has an outstanding balance.
- 20 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Condensed Balance Sheet
June 30, 2000
-------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents .................... $ 41,046
Accounts receivable, net ..................... 27,299
Prepaid expenses and other current assets .... 64,305
-----------
Total current assets ..................... 132,650
Restricted cash ................................ 175,000
Property and equipment, net .................... 239,041
Deposits ....................................... 32,096
-----------
$ 578,787
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank overdraft ............................... $ 108,054
Accounts payable and accrued expenses ........ 505,134
Convertible note payable ..................... 962,266
Deferred revenue ............................. 25,000
Capital lease obligation, current portion .... 11,179
-----------
Total current liabilities ................ 1,611,633
-----------
Capital lease obligation, less current portion . 5,572
Commitments and Contingencies
Stockholders equity (Deficit):
Series A convertible preferred stock ......... 9,336
Common stock ................................. 7,755
Additional paid-in capital ................... 3,278,046
Deferred stock-based compensation ............ (843,347)
Deficit accumulated during the development . (3,490,208)
stage
-----------
Total stockholders' equity (deficit) ..... (1,038,418)
-----------
$ 578,787
===========
See accompanying notes to condensed financial statements.
- 21 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Condensed Statement of Operations
April 11,
1995
(Inception) Six Months Six Months
Through Ended Ended
June 30, June 30, June 30,
2000 2000 1999
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
Subscription revenues ........ $ 24,441 $ 12,296 $ --
Other revenues ............... 117,137 -- 6,344
----------- ----------- -----------
Total revenues ......... 141,578 12,296 6,344
Operating expenses:
General and administrative . 1,989,028 1,284,711 42,935
Research and development ... 626,259 416,110 --
Marketing .................. 692,194 468,819 --
----------- ----------- -----------
Loss from operations ... (3,165,903) (2,157,344) (36,591)
Other income (expense):
Other ...................... 1,121 1,121 --
Interest, net .............. (284,466) (271,188) (4,034)
----------- ----------- -----------
Net loss ............... $(3,449,248) $(2,427,411) $ (40,625)
=========== =========== ===========
See accompanying notes to condensed financial statements.
- 22 -
<PAGE>
<TABLE>
<CAPTION>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows
April 11,
1995
(Inception) Six Months Six Months
Through Ended Ended
June 30, June 30, June 30,
2000 2000 1999
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash Flows from Operating activities:
Net loss ................................. $ (3,449,248) $ (2,427,411) $ (40,625)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization .......... 63,363 42,600 2,500
Stock-based compensation ............... 168,637 116,378 --
Amortization of discount on
convertible note payable .............. 262,406 262,406 --
Changes in operating assets and
liabilities:
Accounts receivable .................... (27,299) (19,804) (4,824)
Prepaid expenses and other current ..... (64,305) (64,305) --
assets
Accounts payable and accrued ........... 505,134 196,021 (16,380)
expenses
Deferred revenue ....................... 25,000 25,000 --
----------- ----------- -----------
Net cash used in operating .......... (2,516,312) (1,869,115) (59,329)
activities
Cash Flows from Investing Activities:
Purchase of property and equipment ....... (281,713) (108,661) (6,835)
Restricted cash time deposits ............ (175,000) -- --
Deposits ................................. (32,096) (18,527) --
----------- ----------- -----------
Net cash used in investing .......... (488,809) (127,188) (6,835)
activities
Cash Flows from Financing Activities:
Increase in bank overdraft ............... 108,054 108,054 --
Repayment of line of credit .............. -- -- (4,059)
Repayment of term loan ................... -- -- (1,073)
Proceeds from note payable ............... 1,000,000 1,000,000 --
Payments under capital lease ............. (3,940) (3,940) --
obligations
Issuance of convertible preferred ........ 2,000,000 -- 1,600,000
stock
Payment of stock issuance costs .......... (24,853) -- (20,266)
Issuance of common stock for cash ........ 1,866 116 1,750
LLC distributions ........................ (67,209) -- --
LLC contributions ........................ 32,349 -- --
----------- ----------- -----------
(continued)
- 23 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows
April 11,
1995
(Inception) Six Months Six Months
Through Ended Ended
June 30, June 30, June 30,
2000 2000 1999
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net cash provided by financing
activities ......................... 3,046,167 1,104,230 1,576,352
----------- ----------- -----------
Net increase (decrease) in cash ..... 41,046 (892,073) 1,510,188
Cash and cash equivalents, beginning ........ -- 933,119 5,677
----------- ----------- -----------
Cash and cash equivalents, ending ........... $ 41,046 $ 41,046 $ 1,515,865
=========== =========== ===========
Supplemental Disclosures of Cash Flow
Information:
Franchise taxes paid ..................... $ 5,500 $ 7,700 --
=========== =========== ===========
Interest paid ............................ $ 43,600 $ 100 $ 4,034
=========== =========== ===========
Supplemental Disclosures of Non-Cash
Financing Activities:
Conversion of LLC common units to
capital stock .......................... $ 77,927 $ -- $ --
=========== =========== ===========
Recognition of deferred stock-based
compensation and increase in
additional paid-in-capital ............. $ 1,011,985 $ 601,528 $ 372,750
=========== =========== ===========
Acquisition of equipment under
capital lease .............. ........... $ 20,691 $ 20,691 $ --
=========== =========== ===========
Discount to convertible note payable
for issuance of warrants to
purchase preferred stock ............... $ 300,140 $ 300,140 $ --
=========== =========== ===========
See accompanying notes to condensed financial statements.
- 24 -
</TABLE>
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and include the results of Hotpaper.com,
Inc. (the Company). 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 six month periods
ended June 30, 2000 and June 30, 1999. Results for the interim period are
not necessarily indicative of results that may be expected for the entire
year.
As there has not been significant revenues received from planned
operations as of June 30, 2000, the Company has reported its results of
operations in accordance with Statement of Financial Accounting
Standards No. 7, "Accounting and Reporting by Development Stage
Companies."
2. BRIDGE FINANCING ARRANGEMENT
In March 2000, the Company issued a convertible note payable for
$1,000,000 available in three draws, two in March and one in May 2000. The
note bears interest at a stated rate of 8% annually and is convertible
into shares of Series B stock if the Company issues Series B stock with
gross proceeds to the Company of at least $3,000,000. In the event the
Company does not issue Series B stock within a period of four months from
the initial draw, all outstanding principal and unpaid accrued interest
will be convertible into shares of Series A convertible preferred stock
based on a price of $0.214 per share. Borrowings outstanding on the note
payable totaled $1,000,000 at June 30, 2000.
In connection with the issuance of the convertible note payable, the
Company issued a warrant to purchase $100,000 of Series B convertible
preferred stock at a price equal to what is paid by investors. Additional
warrants are issuable at the rate of 5% of the outstanding loan balance
per month. Warrants are exercisable through March 10, 2005. In the event
the Company does not issue Series B convertible preferred stock within a
period of four months from the initial draw, the warrants will be
exercisable for Series A convertible preferred stock based on a price of
$0.214 per share. The Company has
- 25 -
<PAGE>
HOTPAPER.COM, INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
recorded the estimated fair value of the warrants issued in connection
with the convertible note payable. As a result, the note has been reduced
by a $300,140 discount, which is being amortized to interest expense over
the term of the note. The effective interest rate, including amortization
of the discount, is 149% compounded monthly. The unamortized discount
amounted to $37,734 at June 30, 2000.
3. SALE TO GOAMERICA, INC.
On August 31, 2000, all of the issued and outstanding shares of the
Company were sold to GoAmerica, Inc. (GoAmerica) in exchange for $750,000
and 1,006,111 shares of GoAmerica common stock. In connection with the
acquisition, GoAmerica also assumed all issued and outstanding options for
the purchase of the Company's common stock and converted each such option
into options to acquire shares of GoAmerica common stock.
- 26 -
<PAGE>
b) Pro Forma Financial Information (unaudited).
GOAMERICA, INC.
Introduction to the Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements give
effect to the acquisition by GoAmerica, Inc. (the "Company") of Hotpaper.com,
Inc. ("Hotpaper") on August 31, 2000 and Wynd Communications Corporation
("Wynd") on June 28, 2000. The unaudited pro forma condensed consolidated
financial statements are based upon the historical financial statements of the
respective companies. The unaudited pro forma condensed consolidated balance
sheet assumes that the acquisition of Hotpaper took place on June 30, 2000. The
unaudited historical consolidated balance sheet of the Company as of June 30,
2000 includes Wynd. The unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1999 and the six months ended June
30, 2000 assume that the acquisitions took place on January 1, 1999.
The unaudited pro forma consolidated financial statements, including the
notes thereto should be read in conjunction with the Company's audited financial
statements for the years 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 and the Company's unaudited financial statements as of and for
the six months ended June 30, 2000, which were included in the Company's
Quarterly Report on Form 10-Q filed with the Commission. None of the pro forma
consolidated financial statements included herein purport to be indicative of
the Company's financial position or results of operations that would have
occurred had the transaction been completed as of or at the beginning of the
periods presented, nor do such statements purport to indicate the Company's
financial condition or results of operations at any future date or for any
future period.
The pro forma adjustments are based upon a preliminary valuation of
Hotpaper's and Wynd's assets and liabilities. The final allocation of the
purchase price will be determined based upon a determination of the fair value
of the tangible and identifiable intangible assets acquired and liabilities
assumed of Hotpaper and Wynd. The actual results of operations will differ,
perhaps significantly from the unaudited pro forma amounts reflected because of
a variety of factors, including access to additional information and changes in
value not currently identified.
- 27 -
<PAGE>
<TABLE>
<CAPTION>
GOAMERICA, INC.
Unaudited Pro forma Condensed Consolidated Balance Sheet
As of June 30, 2000
Historical
-------------------------------------------------
Pro forma Pro forma
Company Hotpaper Adjustments (a) Consolidated
------------- ------------- --------------- -------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents ........... $ 154,215,174 $ 41,046 $ (750,000) $ 153,506,220
Accounts receivable, net ............ 1,347,072 27,299 -- 1,374,371
Merchandise inventories ............. 824,899 -- -- 824,899
Prepaid expenses and other .......... 5,102,513 64,305 -- 5,166,818
------------- ------------- ------------- -------------
Total current assets ............. 161,489,658 132,650 (750,000) 160,872,308
Restricted cash ........................ -- 175,000 -- 175,000
Property, equipment and leasehold
improvements, net ................... 3,946,399 239,041 -- 4,185,440
Goodwill and intangible assets, net
44,957,939 -- 10,165,619 55,123,558
Other assets ........................... 480,824 32,096 -- 512,920
------------- ------------- ------------- -------------
$ 210,874,820 $ 578,787 $ 9,415,619 $ 220,869,226
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................... $ 3,105,597 $ 108,054 $ -- $ 3,213,651
Accrued expense ..................... 6,475,925 505,134 212,000 7,193,059
Convertible note payable ............ -- 962,266 (962,266) --
Capital lease obligations ........... 115,072 11,179 -- 126,251
Deferred income ..................... 22,395 25,000 -- 47,395
------------- ------------- ------------- -------------
Total current liabilities ........ 9,718,989 1,611,633 (750,266) 10,580,356
Long term liabilities .................. 357,975 5,572 -- 363,547
Commitments and contingencies
Stockholders' equity:
Preferred stock ..................... -- 9,336 (9,336) --
Common stock ........................ 513,788 7,755 (6,749) 514,794
Additional paid-in capital .......... 251,957,524 3,278,046 6,236,789 261,472,359
Deferred employee compensation
(9,443,383) (843,347) 454,973 (9,831,757)
Accumulated deficit ................. (42,230,073) (3,490,208) 3,490,208 (42,230,073)
------------- ------------- ------------- -------------
200,797,856 1,038,418 10,165,885 209,925,323
------------- ------------- ------------- -------------
Total stockholders' equity ....... $ 210,874,820 $ 578,787 $ 9,415,619 $ 220,869,226
============= ============= ============= =============
See Notes Unaudited Pro forma Consolidated Financial Statements.
- 28 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOAMERICA, INC.
Unaudited Pro forma Condensed Statement of Operations
Year Ended December 31, 1999
Historical
-------------------------------------------------
Pro forma Pro forma
Company Wynd Hotpaper Adjustments (a) Consolidated
------------ ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber ........................... $ 1,182,695 $ 1,401,858 $ 12,145 $ -- $ 2,596,698
Equipment ............................ 1,341,356 785,007 -- -- 2,126,363
Other ................................ 206,496 -- 6,294 -- 212,790
------------ ------------ ------------ ------------ ------------
2,730,547 2,186,865 18,439 -- 4,935,851
Costs and expenses:
Cost of subscriber revenue ........... 4,051,182 670,751 -- -- 4,721,933
Cost of equipment sales .............. 1,648,160 793,970 -- -- 2,442,130
Sales and marketing .................. 3,283,021 1,243,000 223,375 -- 4,749,396
General and administrative ........... 4,809,232 1,314,195 810,823 129,458(f) 7,063,708
Depreciation and amortization ........ 275,067 125,376 -- (16,667)(d) 383,776
Amortization of intangibles .......... -- -- -- 14,643,652(b) 14,643,652
Settlement costs ..................... 297,310 -- -- -- 297,310
------------ ------------ ------------ ------------ ------------
14,363,972 4,147,292 1,034,198 14,756,443 34,301,905
------------ ------------ ------------ ------------ ------------
Loss from operations .................... (11,633,425) (1,960,427) (1,015,759) (14,756,443) (29,366,054)
Other income (expense):
Interest income, net ................. 165,137 17,202 25,196 -- 207,535
Other income (expense) ............... -- 47,000 -- (50,000)(c) (3,000)
------------ ------------ ------------ ------------ ------------
Total other income (expense)....... 165,137 64,202 25,196 (50,000) 204,535
------------ ------------ ------------ ------------ ------------
Loss before income taxes and
extraordinary items .................. (11,468,288) (1,896,225) (990,563) (14,806,443) (29,161,519)
Income tax (expense) benefit ......... -- (800) -- -- (800)
------------ ------------ ------------ ------------ ------------
Loss before extraordinary items ......... (11,468,288) (1,897,025) (990,563) (14,806,443) (29,162,319)
Extraordinary gain on extinguishment
of debt ........................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss ................................ $(11,468,288) $ (1,897,025) $ (990,563) $(14,806,443) $(29,162,319)
============ ============ ============
Beneficial conversion feature and
accretion of redemption of
mandatorily redeemable convertible
preferred stock ...................... (10,463,472) (10,463,472)
------------ ------------
Net loss applicable to common
stockholders ......................... $(21,931,760) $(39,625,791)
============ ============
Earnings per common share:
Basic ................................ $ (1.02) $ (1.52)
Diluted .............................. $ (1.00) $ (1.47)
Weighted average number of common shares:
Basic ................................ 21,590,259 4,473,979(e) 26,064,238
Diluted .............................. 22,025,283 4,971,088(e) 26,996,371
See Notes to Unaudited Pro forma Consolidated Financial Statements.
- 29 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOAMERICA, INC.
Unaudited Pro forma Condensed Statement of Operations
Six Months Ended June 30, 2000
Historical
-------------------------------------------
Pro forma Pro forma
Company Wynd Hotpaper Adjustments Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber ............................... $ 2,118,324 $ 1,186,740 $ 12,296 $ -- $ 3,317,360
Equipment ................................ 1,368,527 500,757 -- -- 1,869,284
Other .................................... 8,646 2,409 -- -- 11,055
------------ ------------ ------------ ------------ ------------
3,495,497 1,689,906 12,296 -- 5,197,699
Costs and expenses:
Cost of subscriber revenue ............... 2,466,398 540,357 -- -- 3,006,755
Cost of equipment sales .................. 1,893,195 647,887 -- -- 2,541,082
Sales and marketing ...................... 13,331,886 971,035 468,819 -- 14,771,740
General and administrative ............... 14,910,606 1,108,622 1,700,821 64,729(f) 17,784,778
Depreciation and amortization ............ 235,284 73,136 -- (25,000)(d) 283,420
Amortization of intangibles .............. 87,528 -- -- 7,259,301(b) 7,346,829
------------ ------------ ------------ ------------ ------------
32,924,897 3,341,037 2,169,640 7,299,030 45,734,604
------------ ------------ ------------ ------------ ------------
Loss from operations ........................ (29,429,400) (1,651,131) (2,157,344) (7,299,030) (40,536,905)
Other income (expense):
Interest income, net ..................... 2,511,039 -- (271,188) 271,188(g) 2,511,039
Other income (expense) ................... -- (10,344) 1,121 -- (9,223)
------------ ------------ ------------ ------------ ------------
Total other income (expense)........... 2,511,039 (10,344) (270,067) 271,188 2,501,816
------------ ------------ ------------ ------------ ------------
Loss before income taxes and
extraordinary items ...................... (26,918,361) (1,661,475) (2,427,411) (7,027,842) (38,035,089)
Income tax (expense) benefit ............. -- (800) -- -- (800)
------------ ------------ ------------ ------------ ------------
Loss before extraordinary items ............. (26,918,361) (1,662,275) (2,427,411) (7,027,842) (38,035,889)
Extraordinary gain on extinguishment
of debt ............................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss .................................... $(26,918,361) $ (1,662,275) $ (2,427,411) $ (7,027,842) $(38,035,889)
============ ============ ============
Beneficial conversion feature and
accretion of redemption of
mandatorily redeemable convertible
preferred stock .......................... (30,783,931) (30,783,931)
------------ ------------
Net loss applicable to common
stockholders ............................. $(57,702,292) $(68,819,820)
============ ============
Earnings per common share:
Basic .................................... $ (1.65) $ (1.75)
Diluted .................................. $ (1.65) $ (1.72)
Weighted average number of common shares:
Basic .................................... 34,916,673 4,469,622 (e) 39,386,295
Diluted .................................. 34,933,114 4,971,088 (e) 39,904,202
See Notes to Unaudited Pro forma Consolidated Financial Statements.
- 30 -
</TABLE>
<PAGE>
GOAMERICA, INC.
Notes to Unaudited Pro forma Consolidated Financial Statements
1. ACQUISITION
On June 28, 2000, GoAmerica, Inc. (the "Company") acquired Wynd
Communications Corporation ("Wynd"), a privately owned company engaged in
providing wireless telecommunications services for people who are deaf or
hard of hearing. The total purchase price of approximately $43 million
included the fair value of the 3,964,975 shares of the Company's Common
Stock issued to the Wynd Shareholders and the fair value of options to
purchase 477,722 shares of the Company's Common Stock issued upon
conversion of options to acquire Wynd shares. Of the Common Stock issued
396,498 shares will be held in escrow for a period of one year.
On August 31, 2000, the Company acquired Hotpaper.com, Inc. ("Hotpaper"),
a privately owned company engaged in providing Web-based document
automation software, infrastructure and content. The total purchase price
of approximately $11 million included the fair value 1,006,111 shares of
Common Stock issued to the Hotpaper shareholders, cash consideration of
$750,000 and the fair value of options to purchase 81,651 shares of the
Company's Common Stock issued upon conversion of options to acquire
Hotpaper shares. Of the Common Stock issued 100,612 shares will be held in
escrow for a period of one year.
The acquisitions have 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 acquisitions exceeded the fair value of the acquired net assets by
approximately $54 million which has been recorded as goodwill and is being
amortized on a straight line basis over four years for the Wynd
acquisition and three years for the Hotpaper acquisition. The pro forma
adjustments are based upon a preliminary valuation acquired assets and
assumed liabilities. The final allocations of purchase price will be
determined based upon a determination of the fair value of tangible and
identifiable intangible assets acquired and liabilities assumed.
2. PRO FORMA ADJUSTMENTS
For purposes of determining the pro forma effect of the acquisitions of
Wynd and Hotpaper on the Company's financial statements, the following
adjustments have been made:
Balance Sheet as of June 30, 2000:
(a) Represents adjustments to reflect the allocation of the acquisition
and preliminary allocation of the purchase price to the acquired
assets and liabilities of Hotpaper.
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Statement of Operations for the six months ended June 30, 2000 and the
year ended December 31, 1999:
(b) Amortization expense attributable to goodwill recorded as a
result of the acquisitions.
(c) Elimination of a gain recognized on the sale of certain
subscribers to the Company by Wynd.
(d) Elimination of amortization expense recorded by the Company which
relates to the transaction described in (c) above.
(e) Increase in weighted average shares outstanding that were issued in
connection with the acquisitions, excluding shares held in escrow
for basic earnings per share.
(f) Amortization of deferred compensation expense resulting from options
issued in connection with the acquisition of Hotpaper.
(g) Elimination of interest expense on Hotpaper's convertible note
payable which was converted to common stock as a result of the
acquisition.
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<PAGE>
(c) Exhibits.
2.1+ Agreement and Plan of Merger, dated as of August 11, 2000, by
and among GoAmerica, Inc., GoAmerica Acquisition II Corp. and
Hotpaper.com, Inc.*
10.1+ Escrow Agreement, dated as of August 31, 2000, by and among
GoAmerica, Inc., the existing stockholders of Hotpaper.com,
Inc. and American Stock Transfer & Trust Company.
10.2+ Registration Rights Agreement, dated as of August 31, 2000, by
and between GoAmerica, Inc. and the existing stockholders of
Hotpaper.com, Inc.
23.1 Consent of Frank, Rimerman & Co. LLP
99.1+ Press Release, dated August 14, 2000, regarding execution of
the Agreement and Plan of Merger.
99.2+ Press Release, dated September 1, 2000, regarding the
consummation of the acquisition.
+ Previously filed.
* The schedules or exhibits to this document are not being filed herewith
because we believe that the information contained therein is not material. Upon
request therefor, we agree to furnish supplementally a copy of any schedule or
exhibit to the Securities and Exchange Commission.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GOAMERICA, INC.
By: /s/ Aaron Dobrinsky
---------------------------------
Name: Aaron Dobrinsky
Title: Chief Executive Officer
November 14, 2000
