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UNITED STATES
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 September 30, 2002
Commission File No. 0-29359
GoAmerica, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3693371
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
433 Hackensack Avenue, Hackensack, New Jersey 07601
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(Address of Principal Executive Offices) (Zip Code)
(201) 996-1717
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(Registrant's Telephone Number,
Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes: |X| No: |_|
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of October 31, 2002:
Class Number of Shares
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Common Stock, $.01 par value 53,946,057
GOAMERICA, INC.
TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION ......................................................................... 1
Item 1. Financial Statements (unaudited) ........................................................ 1
Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 ........ 2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2002 and 2001 ............................................................. 3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
2002 and 2001 ........................................................................... 4
Notes to Condensed Consolidated Financial Statements ........................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ... 9
General ..................................................................................... 9
Critical Accounting Policies and Estimates .................................................. 9
Results of Operations ....................................................................... 10
Liquidity and Capital Resources ............................................................. 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk .............................. 14
Item 4. Controls and Procedures ................................................................. 15
PART II. OTHER INFORMATION ............................................................................. 16
Item 1. Legal Proceedings ....................................................................... 16
Item 2. Changes in Securities and Use of Proceeds ............................................... 16
Item 6. Exhibits and Reports on Form 8-K ........................................................ 16
SIGNATURES .................................................................................................. 17
- i -
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- 1 -
GOAMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
September 30, December 31,
2002 2001
----------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents .......................................... $ 10,237 $ 34,977
Accounts receivable, net ........................................... 6,468 8,672
Merchandise inventories, net ....................................... 2,916 7,967
Prepaid expenses and other current assets .......................... 834 2,373
------------ ------------
Total current assets .................................................... 20,455 53,989
Restricted cash ......................................................... 948 1,396
Property, equipment and leasehold improvements, net ..................... 5,849 14,158
Goodwill, net ........................................................... 6,193 14,593
Trade names and other intangible assets, net ............................ 1,651 2,950
Other assets ............................................................ 1,343 699
------------ ------------
$ 36,439 $ 87,785
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable ................................................... $ 6,078 $ 9,676
Accrued expenses ................................................... 6,851 7,565
Deferred revenue ................................................... 2,160 2,805
Other current liabilities .......................................... 361 651
------------ ------------
Total current liabilities ............................................... 15,450 20,697
Other liabilities ....................................................... 379 675
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized: 200,000,000 shares in
2002 and 2001; issued: 53,946,057 in 2002 and 53,709,803 in 2001 ... 539 537
Additional paid-in capital ......................................... 269,177 269,053
Deferred employee compensation ..................................... (1,035) (2,842)
Accumulated deficit ................................................ (248,071) (200,335)
------------ ------------
Total stockholders' equity .............................................. 20,610 66,413
------------ ------------
$ 36,439 $ 87,785
============ ============
The accompanying notes are an integral part of these financial statements.
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GOAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------------------------------------
2002 2001 2002 2001
---------------------------------------------------------------------
Revenues:
Subscriber ................................ $ 7,375 $ 7,926 $ 23,260 $ 20,371
Equipment ................................. 1,631 2,484 5,660 7,463
Other ..................................... 94 207 202 552
------------ ------------ ------------ ------------
9,100 10,617 29,122 28,386
Costs and expenses:
Cost of subscriber airtime ................ 4,827 6,948 16,765 15,519
Cost of network operations ................ 791 897 2,409 2,599
Cost of equipment revenue ................. 2,547 3,334 6,809 13,056
Sales and marketing ....................... 1,988 5,038 6,817 21,050
General and administrative ................ 6,927 11,964 22,801 30,366
Research and development .................. 963 993 2,863 3,322
Depreciation and amortization ............. 1,212 824 3,613 2,097
Amortization of goodwill and .............. 433 4,537 1,299 13,611
other intangibles
Impairment of long-lived assets ........... 13,695 -- 13,695 --
------------ ------------ ------------ ------------
33,383 34,535 77,071 101,620
------------ ------------ ------------ ------------
Loss from operations .......................... (24,283) (23,918) (47,949) (73,234)
Interest income, net .......................... 26 519 213 2,840
------------ ------------ ------------ ------------
Net loss ...................................... $ (24,257) $ (23,399) $ (47,736) $ (70,394)
============ ============ ============ ============
Basic net loss per share ...................... $ (0.45) $ (0.44) $ (0.89) $ (1.33)
Diluted net loss per share .................... $ (0.45) $ (0.44) $ (0.89) $ (1.33)
============ ============ ============ ============
Weighted average shares used in computation
of basic net loss per share ................. 53,917,005 53,380,096 53,804,041 52,810,677
Weighted average shares used in computation
of diluted net loss per share ............... 53,944,004 53,517,845 53,831,040 53,233,057
The accompanying notes are an integral part of these financial statements.
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GOAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
-------------------------------
2002 2001
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Operating activities
Net loss .................................................................................. $ (47,736) $ (70,394)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ........................................................... 3,613 2,097
Amortization of goodwill and intangible assets .......................................... 1,299 13,611
Impairment of long-lived assets ......................................................... 13,695 --
Provision for losses on accounts receivable ............................................. 2,690 1,605
Non-cash employee compensation .......................................................... 1,807 3,330
Non-cash rent expense ................................................................... 29 51
Non-cash marketing charges .............................................................. -- 1,821
Write-down of investment ................................................................ -- 287
Changes in operating assets and liabilities:
Increase in accounts receivable ....................................................... (486) (5,724)
Decrease (increase) in merchandise inventories ........................................ 5,051 (634)
Decrease (increase) in prepaid expenses and other assets .............................. 1,093 (1,066)
Decrease in accounts payable .......................................................... (3,598) (3,970)
(Decrease) increase in accrued expenses ............................................... (763) 2,425
(Decrease) increase in deferred revenue ............................................... (645) 165
------------ ------------
Net cash used in operating activities ..................................................... (23,951) (56,396)
Investing activities
Purchase of property, equipment and leasehold improvements ................................ (349) (5,604)
Acquisition of business, net of acquired cash ............................................. -- (82)
------------ ------------
Net cash used in investing activities ..................................................... (349) (5,686)
Financing activities
Proceeds from sale of common stock and stock purchase warrants, net ....................... 126 216
Purchase of treasury stock ................................................................ -- (49)
Payments made on capital lease obligations ................................................ (566) (497)
------------ ------------
Net cash used in financing activities ..................................................... (440) (330)
------------ ------------
Decrease in cash and cash equivalents ..................................................... (24,740) (62,412)
Cash and cash equivalents at beginning of period .......................................... 34,977 114,411
------------ ------------
Cash and cash equivalents at end of period ................................................ $ 10,237 $ 51,999
============ ============
Non-cash investing and financing activities
Acquisition of equipment through capital leases ........................................... $ -- $ 211
Issuance of common stock purchase warrants in exchange for sales and marketing services ... $ -- $ 765
The accompanying notes are an integral part of these financial statements.
- 4 -
GOAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share data)
Note 1 - Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States 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 accounting principles generally accepted in the
United States 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 except as otherwise
disclosed herein) which the Company considers necessary for the fair
presentation of its financial position as of September 30, 2002 and the results
of its operations and its cash flows for the three and nine month periods ended
September 30, 2002 and 2001. These financial statements should be read in
conjunction with the Company's audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2001.
The Company operates in a highly competitive environment subject to rapid
technological change and emergence of new technology. Although management
believes its services are transferable to emerging technologies, rapid changes
in technology could have an adverse financial impact on the Company.
The Company is highly dependent on third-party providers for wireless
communication services.
The Company has incurred significant operating losses since its inception
and as of September 30, 2002 has an accumulated deficit of $248.1 million. As of
September 30, 2002, the Company had $10.2 million in cash and cash equivalents
($8.0 million at October 31, 2002), exclusive of $948 in restricted cash
supporting certain letters of credit. In execution of the 2002 operating plan,
during the first nine months of 2002, the Company took steps to reduce its
annual payroll by more than 20% and took further actions to reduce sales and
marketing expenses. In addition, on September 25, 2002, the Company formed a
comprehensive strategic alliance with EarthLink, Inc. ("EarthLink") by entering
into a series of agreements. Pursuant to the agreements, among other things,
EarthLink will purchase all of the Company's Cellular Digit Packet Data (CDPD)
subscribers as well as certain of the Company's Cingular and Motient network
subscribers (See Note 5). Additionally, EarthLink will provide billing, customer
support and network services to most subscribers of the Company's technology.
Upon complete implementation of these agreements, the Company anticipates
further reducing its payroll, administrative, sales and marketing expenses. In
the event management is unable to achieve its plans or complete its
implementation of the EarthLink agreements, additional further cost reductions
may be required. There can be no assurance that the Company will achieve its
2002 operating plan or implementation of its strategic alliance in a timely
manner.
Results for the interim period are not necessarily indicative of results
that may be expected for the entire year.
Note 2 - Significant Accounting Policies:
Recent Accounting Pronouncements
In May 2000, the Emerging Issues Task Force, or EITF, reached a consensus
on EITF 00-14, "Accounting for Certain Sales Incentives", which provides
guidance on accounting for discounts, coupons, rebates and free products, as
well as the classification of these discounts, coupons, rebates and free
products in the statement of operations. The Company adopted the provisions of
EITF 00-14 effective April 1, 2001. The adoption of the consensus resulted in
the reclassification of certain sales incentives as a reduction of subscriber
revenues. All prior period results reflect such reclassification. Prior to April
1, 2001, such incentives were recorded entirely as reductions to equipment
revenue. The adoption of this consensus had no impact on total revenues or on
net loss.
On August 1, 2001, the Financial Accounting Standards Board, or FASB,
issued Statement of Financial Accounting Standards, or SFAS, No. 144,
"Accounting For Impairment of Long Lived Assets". The Company adopted this
pronouncement effective January 1, 2002. SFAS No. 144 prescribes the accounting
for long-lived assets (excluding goodwill) to be disposed of by sale. SFAS No.
144 retains the requirement of SFAS No. 121 to measure long-lived assets
classified as held for sale at the lower of their carrying value or fair market
value less the cost to sell. Therefore, discontinued operations are no longer
measured on a net realizable basis, and
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future operating results are no longer recognized before they occur. The impact
of adopting SFAS No. 144 had no effect on the results of operations or financial
position of the Company.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS 146 requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan, which is generally before
an actual liability has been incurred. Adoption of SFAS 146 is required with the
beginning of fiscal year 2003. The Company does not anticipate a significant
impact on its results of operations from adopting this Statement.
Note 3 - Earnings Per Share:
The Company computes net loss per share under the provisions of SFAS No.
128, "Earnings per Share" ("SFAS 128"), and 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 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 anti-dilutive. Basic earnings per share is computed by dividing
loss 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 reflects an adjustment to exclude 26,999 common shares for
the three and nine month periods ended September 30, 2002, and 137,749 and
422,380 common shares for the three and nine month periods ended September 30,
2001, respectively, for outstanding shares held in escrow as a result of the
Company's acquisitions during 2001 and 2000. Diluted earnings per share is
determined in the same manner as basic earnings per share except that the number
of shares does not include the adjustment for escrowed shares and is increased
assuming exercise of dilutive stock options and warrants using the treasury
stock method. 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 issued for nominal
consideration) have been excluded from the calculation of diluted earnings per
share.
Note 4 - Goodwill and Other Intangible Assets:
Effective July 1, 2001, the Company adopted SFAS No. 141, "Business
Combinations", and effective January 1, 2002, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets". SFAS No.141 requires business
combinations initiated after July 1, 2001 to be accounted for using the purchase
method of accounting. It also specifies the types of intangible assets that are
required to be recognized and reported separate from goodwill. Under SFAS No.
142, goodwill and other intangible assets with indefinite lives are no longer
amortized but are reviewed for impairment annually, or more frequently if
impairment indicators arise. During the first half of 2002, the Company
completed the first of the required impairment tests of goodwill and indefinite
lived intangible assets as of January 1, 2002, and no adjustment to the carrying
value of goodwill was required at that time. During the third quarter of 2002,
the Company identified indicators of impairment, including recent changes in the
Company's 2002 and 2003 operating and cash flow forecasts, and changes in its
strategic plans for certain of its acquired businesses, which required that the
Company evaluate the appropriateness of the carrying value of its long-lived
assets, principally goodwill recorded upon the acquisitions of Wynd
Communications Corporation ("Wynd") and Hotpaper.com, Inc. ("Hotpaper"). A
write-down of goodwill totaling $8.4 million was recorded during the third
quarter of 2002, reflecting the amount by which the carrying amount of the
respective reporting units exceeded their respective fair values as determined
utilizing estimates of future discounted cash flows.
- 6 -
The following tables reflect unaudited pro forma results of operations of
the Company, giving effect to SFAS No. 142 as if it were adopted on January 1,
2000:
Three Months Ended September 30, Nine Months Ended September 30,
2002 2001 2002 2001
------------------------------- -------------------------------
Net loss, as reported $ (24,257) $ (23,399) $ (47,736) $ (70,394)
Add back: amortization expense, net of tax -- 3,199 -- 9,596
------------------------------- -------------------------------
Pro forma net loss $ (24,257) $ (20,200) $ (47,736) $ (60,798)
=============================== ===============================
Basic net loss per common stockholders:
As reported $ (0.45) $ (0.44) $ (0.89) $ (1.33)
Pro forma $ (0.45) $ (0.38) $ (0.89) $ (1.15)
Diluted net loss per common stockholders:
As reported $ (0.45) $ (0.44) $ (0.89) $ (1.32)
Pro forma $ (0.45) $ (0.38) $ (0.89) $ (1.14)
Years Ended December 31,
2001 2000
-------------------------------
Net loss, as reported $ (120,271) $ (95,299)
Add back: amortization expense, net of tax 12,794 4,691
-------------------------------
Pro forma net loss $ (107,477) $ (90,608)
===============================
Basic net loss per common stockholders:
As reported $ (2.27) $ (2.19)
Pro forma $ (2.03) $ (2.09)
Diluted net loss per common stockholders:
As reported $ (2.25) $ (2.18)
Pro forma $ (2.01) $ (2.07)
The following table summarizes the activity in Goodwill for the periods
indicated:
Nine Months Ended
September 30,
2002 2001
----------------------------
Beginning balance, net $ 14,593 $ 40,117
Impairment charge (8,400) --
Amortization -- (9,596)
----------------------------
Ending balance, net $ 6,193 $ 30,521
============================
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The following table summarizes Other Intangibles subject to amortization
at the dates indicated:
September 30, 2002 December 31, 2001
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
----------------------------------------------------------------------------------
Trade Names $ 4,572 $ (3,558) $ 1,014 $ 4,572 $ (3,282) $ 1,290
Technology 3,017 (2,695) 322 3,017 (2,557) 460
Customer Lists 2,258 (1,943) 315 2,258 (1,808) 450
Patents 1,000 (1,000) -- 1,000 (250) 750
----------------------------------------------------------------------------------
$ 10,847 $ (9,196) $ 1,651 $ 10,847 $ (7,897) $ 2,950
==================================================================================
Amortization expense for Other Intangibles totaled $433,000 and $1.3
million for the three months ended September 30, 2002 and 2001, respectively,
and $1.3 million and $4.0 million for the nine months ended September 30, 2002
and 2001, respectively. Aggregate amortization expense for intangible assets is
estimated to be:
Three Months Ending December 31, 2002: $ 183
Years Ending December 31, 2003: 733
2004: 551
2005: 184
Note 5 - Strategic Alliance with EarthLink, Inc.:
On September 25, 2002, the Company formed a comprehensive strategic
alliance with EarthLink by entering into a series of agreements pursuant to
which, among other things (i) EarthLink will purchase all of the Company's CDPD
subscribers as well as certain of the Company's Cingular and Motient network
subscribers (collectively, the "transferred subscribers"); (ii) EarthLink will
purchase the Company's rights under a credit for $1.4 million of inventory from
a hardware manufacturer, receiving the Company's equipment pricing at a
discount; (iii) the Company and EarthLink will market each other's wireless
services in exchange for commissions and/or recurring revenue shares; (iv)
EarthLink will provide billing, customer support and network services to most
subscribers of the Company's technology; and (v) the Company and EarthLink will
collaborate on developing new applications and extensions of existing
technology, including EarthLink-branded wireless data services, as well as new
technologies.
As a result of this strategic alliance, the Company expects to receive
between $3.2 million and $4.3 million in cash between the fourth quarter of 2002
and the first quarter of 2003, subject to adjustment based upon the number of
former GoAmerica subscribers that remain EarthLink subscribers through a certain
transition period. Subscriber revenue associated with the transferred
subscribers was $14.7 million, $12.5 million and $17.4 million with the related
costs of subscriber airtime of $12.4 million, $12.7 million and $18.6 million
for the nine months ended September 30, 2002 and 2001 and for the year ended
December 31, 2001, respectively. During the third quarter of 2002, the Company
recognized an accounting charge totaling $872 relating to headcount reductions,
inventory valuation and other items stemming from this transaction, as well as
other cost reduction initiatives. The charge related to headcount reductions has
been recorded within selling, general and administrative costs and amounted to
approximately $306, of which approximately $230 was paid during the third
quarter of 2002. The inventory valuation charge in the amount of $566 was
recorded as part of cost of equipment revenue.
Note 6 - Asset Impairment Charge:
During the third quarter of 2002, the Company evaluated the carrying value
of certain software and equipment which will be idled upon the transition of
certain activities to EarthLink. As a result of this evaluation, the Company
wrote off assets with a carrying value of $5.3 million. This charge was included
in Impairment of long-lived assets in the Condensed Consolidated Statements of
Operations for the Three and Nine Months Ended September 30, 2002.
- 8 -
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 wireless data and Internet solutions provider addressing the productivity and
communications needs of business customers. Utilizing our proprietary Go.Web(TM)
technology, our solutions enable corporations to improve the productivity of
their workers by enabling secure wireless access to corporate data on many
wireless computing devices and over many wireless data networks.
Historically, we have derived our revenue primarily from the sale of basic
and value-added 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 e-commerce system as well
as our billing system. We have invested additional capital in the development of
our software applications Go.Web and Mobile Office(R) as well as other software
applications. We have provided mobile devices made by third parties to our
customers at prices below our costs for such devices. We also expect to continue
to incur sales and marketing and administrative expenses. We have incurred
operating losses since our inception and expect to continue to incur operating
losses for at least the next several quarters. Therefore, we will need to
significantly improve our overall gross margins, further reduce our selling,
general and administrative expenses to become profitable and sustain
profitability on a quarterly or annual basis. As a result of our strategic
alliance with EarthLink, Inc., or EarthLink, we anticipate overall revenue to
decline while gross margins will significantly increase and selling, marketing
and administrative expenses will continue to decline. Upon transition of certain
subscribers to EarthLink, we will continue to generate revenues from three
primary sources, (i) recurring service revenue; (ii) software revenue; and (iii)
activation bounties. Additionally, we will substantially reduce our costs of
subscriber airtime and operating costs as a result of our strategic alliance
with EarthLink.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and the related disclosure of contingent
assets and liabilities. On an on-going basis, management evaluates its estimates
and judgments, including those related to revenue recognition, allowance for
doubtful accounts, inventory valuation and recoverability of our intangible
assets. Management bases its estimates and judgments on historical experience
and on various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Management believes the following critical accounting policies, among
others, affect its more significant judgments and estimates used in the
preparation of its condensed consolidated financial statements. Historically, we
have derived our revenue primarily from the sale of basic and value-added
wireless data services and the sale of related mobile devices. Subscriber
revenue consists primarily of monthly charges for access and usage and is
recognized as the services are provided. We also charge our CDPD subscribers a
per kilobyte fee for using a mobile device outside of a designated geographical
area, or roaming; such fees are recognized as revenue when collected. We also
generally charge a non-refundable activation fee upon initial subscription. To
the extent such fees exceed the related costs, they are deferred and recognized
ratably over the life of the related service contracts which is generally six
months, one year or two years. Equipment revenue is recognized upon shipment to
the end user. We also provide mobile devices to our customers at prices below
our costs as incentives for customers to enter into service agreements. Such
incentives are recorded as a reduction to subscriber and equipment revenue, at
the time of sale, allocated based upon the relative fair value of the equipment
and services provided. We estimate the collectibility of our trade receivables.
A considerable amount of judgment is required in assessing the ultimate
realization of these receivables including analysis of historical collection
rates and the current credit-worthiness of significant customers. Significant
changes in required reserves have been recorded in recent periods and may occur
in the future due to the current market conditions. We write down inventory for
estimated excess or obsolete inventory equal to the difference between the cost
of inventory and the estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be
required. In assessing the recoverability of our goodwill and other intangibles,
we must make assumptions regarding estimated future cash flows. If such
assumptions change in the future, we may be required to record impairment
charges for these assets not previously recorded. During 2002, we adopted
Statement of Financial Accounting Standard No. 142, "Goodwill and Other
Intangible Assets," and have completed the required impairment tests of
goodwill, and have recorded an adjustment to the carrying value of goodwill.
- 9 -
Results of Operations
Three months ended September 30, 2002 Compared to Three months ended September
30, 2001
Subscriber revenue. Subscriber revenue decreased 7%, to $7.4 million for
the three months ended September 30, 2002 from $7.9 million for the three months
ended September 30, 2001. The decrease was primarily due to subscribers electing
to be placed in lower average monthly revenue per user, or ARPU, offerings as
opposed to full service offerings. Our subscriber base decreased to 103,541
subscribers at September 30, 2002 from 108,446 subscribers at September 30,
2001. We expect the number of our overall subscribers will decrease as a result
of our planned sale of our CDPD subscribers, as well as a portion of our
Cingular and Motient network subscribers, to EarthLink during the fourth quarter
2002. As of September 30, 2002, we had approximately 14,000 CDPD subscribers.
Our ARPU decreased to $23.22 for the three months ended September 30, 2002 from
$25.27 for the three months ended September 30, 2001. The decline in ARPU was
due to an increase in the number of new subscribers from the sale of our Go.Web
value added services, which generally have a lower ARPU than our full-service
offerings. During the fourth quarter of 2001, we began charging our customers a
per kilobyte fee for roaming. Amounts billed to subscribers for roaming that
have been recognized as revenue have been insignificant to date.
Equipment revenue. Equipment revenue decreased to $1.6 million for the
three months ended September 30, 2002 from $2.5 million for the three months
ended September 30, 2001. This decrease was primarily due to lower sales of
mobile devices. As a result of our strategic alliance with EarthLink, we
anticipate that equipment revenue will further decline as we will primarily sell
mobile devices through our subsidiary, Wynd Communications Corporation, or Wynd.
Other revenue. Other revenue, which consists primarily of revenue derived
from consulting services, decreased to $94,000 for the three months ended
September 30, 2002 from $207,000 for the three months ended September 30, 2001.
This decrease was primarily due to our decision not to pursue consulting
projects and consulting services to third parties during 2002. We anticipate
that consulting services will increase as a result of our recent strategic
alliance with EarthLink in which we will collaborate on developing new
applications and extensions of existing technology, including EarthLink-branded
wireless data services, as well as new technologies.
Cost of subscriber airtime. Cost of subscriber airtime decreased 31%, to
$4.8 million for the three months ended September 30, 2002 from $6.9 million for
the three months ended September 30, 2001. This decrease was primarily due to a
decrease in roaming costs to $520,000 for the three months ended September 30,
2002 from $1.9 million for the three months ended September 30, 2001 and a
decrease in our subscriber base. We expect roaming costs will be eliminated as
we execute our planned sale of CDPD subscribers during the fourth quarter 2002.
We expect the number of subscribers and related use of our services to decrease
as a result of our planned sale of CDPD subscribers, as well as a portion of our
Cingular and Motient network subscribers during the fourth quarter 2002, which
will result in decreased costs of subscriber airtime.
Cost of network operations. Cost of network operations decreased slightly
to $791,000 for the three months ended September 30, 2002 from $897,000 for the
three months ended September 30, 2001. We expect cost of network operations to
remain relatively constant.
Cost of equipment revenue. Cost of equipment revenue decreased 24%, to
$2.5 million for the three months ended September 30, 2002 from $3.3 million for
the three months ended September 30, 2001. This decrease primarily was due to
lower sales of mobile devices and was partially offset by a non-cash inventory
charge of $566,000 recorded during the third quarter of 2002 to value a portion
of our remaining inventory at the lower of cost or market. The non-cash
inventory charge primarily related to wireless modems supporting laptop models
for which sales were lower than expected. As a result of our strategic alliance
with EarthLink, we anticipate that the cost of equipment revenue will further
decline as we will primarily sell mobile devices through Wynd.
Sales and marketing. Sales and marketing expenses decreased 61%, to $2.0
million for the three months ended September 30, 2002 from $5.0 million for the
three months ended September 30, 2001. This decrease primarily was due to
decreased advertising costs paid to third parties as well as decreased salaries
and benefits for personnel performing sales and marketing activities. We expect
sales and marketing expenses to further decline as a result of leveraging our
strategic alliance with EarthLink and other partners.
General and administrative. General and administrative expenses decreased
42%, to $6.9 million for the three months ended September 30, 2002 from $12.0
million for the three months ended September 30, 2001. This decrease primarily
was due to decreased salaries and benefits for personnel performing business
development and general corporate activities and decreased infrastructure
buildout and was partially offset by the outsourcing of our customer and
technical support centers. We expect general and administrative expenses to
further decline as a result of our planned outsourcing of billing, customer
support and network services resulting from our strategic alliance with
EarthLink.
- 10 -
Research and development. Research and development expense remained
constant at $1.0 million for the three months ended September 30, 2002 as
compared to the three months ended September 30, 2001. We expect research and
development expenses to remain constant as we continue to develop and maintain
our Go.Web technology.
Amortization of goodwill and other intangibles. Amortization of goodwill
and other intangibles decreased for the three months ended September 30, 2002 to
$433,000 from $4.5 million for the three months ended September 30, 2001. This
decrease primarily was due to the adoption of Statement of Financial Accounting
Standard No. 142, "Goodwill and Other Intangible Assets" on January 1, 2002,
which no longer requires goodwill and certain intangible assets to be amortized,
but instead tested for impairment at least annually. In addition, the decrease
reflects the impact of reduced amortization of Other Intangibles as a result of
the impairment charge recorded during the fourth quarter of 2001.
Impairment of long-lived assets. During the third quarter of 2002, we
identified certain indicators of impairment including recent changes in the
Company's 2002 and 2003 operating and cash flow forecasts, and changes in our
strategic plans for certain of our acquired businesses which required that we
evaluate the appropriateness of the carrying value of our long-lived assets,
principally goodwill recorded upon the acquisitions of Wynd and Hotpaper.com,
Inc., or Hotpaper. A write-down of goodwill totaling $8.4 million was recorded
during the third quarter of 2002, reflecting the amount by which the carrying
amount of the respective reporting unit exceeded their respective fair values.
In addition, as a result of our recent strategic alliance with EarthLink, we
evaluated the carrying value of certain software and equipment which will be
idled upon the transition of certain activities to EarthLink. As a result of
this evaluation, during the third quarter of 2002, we wrote-off assets with a
carrying value of $5.3 million.
Interest income. Interest income decreased to $26,000 for the three months
ended September 30, 2002 from $519,000 for the three months ended September 30,
2001. This decrease primarily was due to the use of cash to fund our losses from
operations and infrastructure buildout.
Nine months ended September 30, 2002 Compared to Nine months ended September 30,
2001
Subscriber revenue. Subscriber revenue increased 14%, to $23.3 million for
the nine months ended September 30, 2002 from $20.4 million for the nine months
ended September 30, 2001. The increase was due to having an increased average
subscriber base during the period. Our subscriber base decreased to 103,541
subscribers at September 30, 2002 from 108,446 subscribers at September 30,
2001. Our average monthly revenue per user, or ARPU, decreased to $23.75 for the
nine months ended September 30, 2002 from $29.00 for the nine months ended
September 30, 2001. The decline in ARPU was due to an increase in the number of
new subscribers from the sale of our Go.Web value added services, which
generally have a lower ARPU than our full-service offerings. During the fourth
quarter of 2001, we began charging our customers a per kilobyte fee for roaming.
Amounts billed to subscribers for roaming that have been recognized as revenue
have been insignificant to date.
Equipment revenue. Equipment revenue decreased to $5.7 million for the
nine months ended September 30, 2002 from $7.5 million for the nine months ended
September 30, 2001. This decrease was primarily due to lower sales of mobile
devices.
Other revenue. Other revenue, which consists primarily of revenue derived
from consulting services, decreased to $202,000 for the nine months ended
September 30, 2002 from $552,000 for the nine months ended September 30, 2001.
This decrease was primarily due to the our decision not to pursue consulting
projects and consulting services to third parties during 2002.
Cost of subscriber airtime. Cost of subscriber airtime increased 8%, to
$16.8 million for the nine months ended September 30, 2002 from $15.5 million
for the nine months ended September 30, 2001. This increase was primarily due to
an increase in our average subscriber base and a related increase in airtime
usage during the nine months ended September 30, 2002 compared to the nine
months ended September 30, 2001 and was partially offset by a decrease in
roaming costs to $2.2 million for the nine months ended September 30, 2002 from
$5.0 million for the nine months ended September 30, 2001. Additionally, during
the three months ended March 31, 2001, we recorded a $1.9 million one-time
reduction of accruals for certain subscriber-related costs recorded in prior
periods. Excluding the one-time adjustment, cost of subscriber airtime decreased
5%, to $16.8 million for the nine months ended September 30, 2002 from $17.5
million for the nine months ended September 30, 2001.
Cost of network operations. Cost of network operations decreased slightly
to $2.4 million for the nine months ended September 30, 2002 from $2.6 million
for the nine months ended September 30, 2001.
- 11 -
Cost of equipment revenue. Cost of equipment revenue decreased 48%, to
$6.8 million for the nine months ended September 30, 2002 from $13.1 million for
the nine months ended September 30, 2001. This decrease primarily was due to a
non-cash inventory charge of $3.8 million recorded in 2001 to value our
inventory at the lower of cost or market as well as lower sales of mobile
devices and was partially offset by a non-cash inventory charge of $566,000
recorded during the third quarter of 2002. The inventory related charges
primarily related to wireless modems supporting laptop and older PALM OS-based
models for which sales were lower than expected and a charge for a lower of cost
to market adjustment related to other equipment which remained unsold.
Sales and marketing. Sales and marketing expenses decreased 68%, to $6.8
million for the nine months ended September 30, 2002 from $21.1 million for the
nine months ended September 30, 2001. This decrease primarily was due to
decreased advertising costs paid to third parties as well as decreased salaries
and benefits for personnel performing sales and marketing activities.
General and administrative. General and administrative expenses decreased
25%, to $22.8 million for the nine months ended September 30, 2002 from $30.4
million for the nine months ended September 30, 2001. This decrease primarily
was due to decreased salaries and benefits for personnel performing business
development and general corporate activities and decreased infrastructure
buildout and was partially offset by the outsourcing of our customer and
technical support centers.
Research and development. Research and development expense decreased 14%,
to $2.9 million for the nine months ended September 30, 2002 from $3.3 million
for the nine months ended September 30, 2001. This decrease primarily was due to
decreased salaries and benefits for personnel performing research and
development activities.
Amortization of goodwill and other intangibles. Amortization of goodwill
and other intangibles decreased for the nine months ended September 30, 2002 to
$1.3 million from $13.6 million for the nine months ended September 30, 2001.
This decrease primarily was due to the adoption of Statement of Financial
Accounting Standard No. 142, "Goodwill and Other Intangible Assets", on January
1, 2002, which no longer requires goodwill and certain intangible assets to be
amortized, but instead tested for impairment at least annually. In addition, the
decrease reflects the impact of reduced amortization of Other Intangibles as a
result of the impairment charge recorded during the fourth quarter 2001.
Impairment of long-lived assets. During the third quarter of 2002, we
identified certain indicators of impairment including recent changes in the
Company's 2002 and 2003 operating and cash flow forecasts, and changes in our
strategic plans for certain of our acquired businesses which required that we
evaluate the appropriateness of the carrying value of our long-lived assets,
principally goodwill recorded upon the acquisitions of Wynd and Hotpaper. A
write-down of goodwill totaling $8.4 million was recorded during the third
quarter of 2002, reflecting the amount by which the carrying amount of the
respective reporting unit exceeded their respective fair values. In addition, as
a result of our recent strategic alliance with EarthLink, we evaluated the
carrying value of certain software and equipment which will be idled upon the
transition of certain activities to EarthLink. As a result of this evaluation,
during the third quarter of 2002, we wrote-off assets with a carrying value of
$5.3 million.
Interest income. Interest income decreased to $213,000 for the nine months
ended September 30, 2002 from $2.8 million for the nine months ended September
30, 2001. This decrease primarily was due to the use of cash to fund our losses
from operations and infrastructure buildout.
Liquidity and Capital Resources
Since our inception, we financed our operations through private placements
of our equity securities and our redeemable convertible preferred stock, which
resulted in aggregate net proceeds of approximately $18.4 million through
December 31, 1999. During the first quarter of 2000, we issued and sold 648,057
shares of Series B Preferred Stock for net proceeds of approximately $24.6
million. In April 2000, we consummated our initial public offering of 10,000,000
shares of our common stock at a price to the public of $16.00 per share, all of
which were issued and sold for net proceeds of $146.2 million. As of September
30, 2002, we had $10.2 million in cash and cash equivalents and $5.0 million of
working capital.
- 12 -
We have incurred significant operating losses since our inception and as
of September 30, 2002 have an accumulated deficit of $248.1 million. During the
nine months ended September 30, 2002, we incurred a net loss of $47.7 million
and used $24.0 million of cash to fund operating activities. As of September 30,
2002 we had $10.2 million in cash and cash equivalents ($8.0 million at October
31, 2002), exclusive of $948,000 in restricted cash supporting certain letters
of credit. In execution of our 2002 operating plan, during the first nine months
of 2002, we took steps to reduce our annual payroll by more than 20% and took
further actions to reduce sales and marketing expenses. In the event we are
unable to achieve our plans, additional further cost reductions may be required.
In addition, on September 25, 2002, we formed a comprehensive strategic alliance
with EarthLink by entering into a series of agreements. Pursuant to the
agreements, among other things, EarthLink will purchase all of the Company's
Cellular Digit Packet Data, or CDPD subscribers as well as certain of our
Cingular and Motient network subscribers. Additionally, EarthLink will provide
billing, customer support and network services to most subscribers of our
technology. Upon complete implementation of these agreements, we anticipate
generating revenues from three primary sources, (i) recurring service revenue;
(ii) software revenue; and (iii) activation bounties, as well as reducing our
costs of subscriber airtime, and further reducing our payroll, administrative
and sales and marketing expenses. Presuming a timely implementation of our
recent strategic alliance with EarthLink during the fourth quarter of 2002,
coupled with continued cost cutting initiatives, we currently anticipate that
our available cash resources will be sufficient to fund our operating needs for
at least the next 6 to 9 months. In the event that we are unable to successfully
implement our strategic alliance with EarthLink, continue cost cutting
initiatives or we incur unanticipated expenses, we may require additional
financing. At this time, we do not have any bank credit facility or other
working capital credit line under which we may borrow funds for working capital
or other general corporate purposes.
Net cash used in operating activities decreased to $24.0 million for the
nine months ended September 30, 2002 from $56.4 million for the nine months
ended September 30, 2001. This decrease primarily was due to decreased losses
from operations as well as maintaining decreased levels of mobile device
inventories.
Net cash used in investing activities was $349,000 for the nine months
ended September 30, 2002 as compared to $5.7 million for the nine months ended
September 30, 2001. Cash used in investing activities was principally for
purchases of property, equipment and leasehold improvements.
Net cash used by financing activities was $440,000 for the nine months
ended September 30, 2002 as compared to $330,000 for the nine months ended
September 30, 2001. Cash used in financing activities for the nine months ended
September 30, 2002 was principally for repayment of capital leases and was
partially offset by proceeds from the exercise of stock options.
As of September 30, 2002, our principal commitments consisted of
obligations outstanding under operating leases. As of September 30, 2002, future
minimum payments for non-cancelable operating leases having terms in excess of
one year amounted to $10.9 million, of which approximately $2.3 million is
payable for the next twelve months.
The following table summarizes GoAmerica's contractual obligations at
September 30, 2002, and the effect such obligations are expected to have on its
liquidity and cash flow in future periods.
Less than 1
September 30, (In thousands) Total Year 1-3 Years 4-5 Years After 5 Years
Contractual Obligations:
Capital Lease Obligations $ 577 $ 432 $ 145 $ -- $ --
Operating Lease
Obligation 10,921 2,309 3,193 2,611 2,808
------- ------- ------- ------- -------
Total Contractual Cash
Obligation $11,498 $ 2,741 $ 3,388 $ 2,611 $ 2,808
======= ======= ======= ======= =======
Other Commercial Commitments:
Standby Letter of Credit $ 906 $ 300 $ 606 $ -- $ --
------- ------- ------- ------- -------
Total Commercial Commitment $ 906 $ 300 $ 606 $ -- $ --
======= ======= ======= ======= =======
- 13 -
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 ability to successfully implement our strategic
alliance with EarthLink; (iii) our dependence on EarthLink to provide billing,
customer and technical support to our subscribers; (iv) our ability to respond
to the rapid technological change of the wireless data industry and offer new
services; (v) our dependence on wireless carrier networks; (vi) our ability to
respond to increased competition in the wireless data industry; (vii) our
ability to integrate acquired businesses and technologies; (viii) our ability to
leverage strategic alliances to generate revenue growth; (ix) our ability to
increase or maintain gross margins, profitability, liquidity and capital
resources; (x) our ability to manage expanded operations; (xi) our ability to
divest our CDPD subscribers in a timely manner to EarthLink; and (xii) our
estimate of our ability to fund our operating needs through available cash
reserves. As a result of such risks and others expressed from time to time in
our filings with the Securities and Exchange Commission, our actual results may
differ materially from the results discussed in or implied by the
forward-looking statements contained herein.
Recent Accounting Pronouncements
In May 2000, the Emerging Issues Task Force, or EITF, reached a consensus
on EITF 00-14, "Accounting for Certain Sales Incentives", which provides
guidance on accounting for discounts, coupons, rebates and free products, as
well as the classification of these discounts, coupons, rebates and free
products in the statement of operations. We adopted the provisions of EITF 00-14
effective April 1, 2001. The adoption of the consensus resulted in the
reclassification of certain sales incentives as a reduction of subscriber
revenues. All prior period results reflect such reclassification. Prior to April
1, 2001, such incentives were recorded entirely as reductions to equipment
revenue. The adoption of this consensus had no impact on total revenues or on
net loss.
On August 1, 2001, the Financial Accounting Standards Board, or FASB,
issued Statement of Financial Accounting Standards, or SFAS, No. 144,
"Accounting For Impairment of Long Lived Assets". We are required to adopt this
pronouncement beginning January 1, 2002. SFAS No. 144 prescribes the accounting
for long-lived assets (excluding goodwill) to be disposed of by sale. SFAS No.
144 retains the requirement of SFAS No. 121 to measure long-lived asset
classified as held for sale at the lower of its carrying value or fair market
value less the cost to sell. Therefore, discontinued operations are no longer
measured on a net realizable basis, and future operating results are no longer
recognized before they occur. The impact of adopting SFAS No. 144 had no effect
on our results of operations or financial position.
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. Under previous guidance, certain exit costs were accrued upon
management's commitment to an exit plan, which is generally before an actual
liability has been incurred. Adoption of SFAS 146 is required with the beginning
of fiscal year 2003. We do not anticipate a significant impact on its results of
operations from adopting this Statement.
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 September 30, 2002, all of our available
excess funds are cash or cash equivalents. The value of our cash and cash
equivalents is not materially affected by changes in interest rates. A
hypothetical change in interest rates of 1.0% would result in an annual change
in net loss of approximately $0.1 million based on cash and cash equivalent
balances at September 30, 2002. We currently hold no derivative instruments and
do not earn foreign-source income.
- 14 -
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures.
Based on their evaluation of our disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of
1934) as of a date within 90 days of the filing date of this Quarterly Report on
Form 10-Q, our chief executive officer and chief financial officer have
concluded that our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms and are operating in an effective manner.
Changes in internal controls.
There have been no significant changes made in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of our most recent evaluation.
- 15 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On February 15, 2002, Eagle Truck Lines Inc. (a/k/a Air Eagle, Inc.) filed suit
against GoAmerica, Inc. ("GoAmerica") in the Superior Court of the State of
California for the County of Los Angeles for breach of contract seeking payment
of $590,000, plus damages, expenses, interest and costs of suit. This action was
removed to the United States District Court for the Central District of
California pursuant to a motion brought by GoAmerica and is currently pending in
that court. Air Eagle alleges that GoAmerica, as successor in interest to Flash
Creative Management, Inc. ("Flash"), failed to perform its obligations under a
time and materials consulting contract dated July 2, 1999 (the "Contract"), by
and between Flash and Air Eagle. On June 3, 2002, GoAmerica filed an amended
answer and counterclaim, denying the allegations of the complaint and seeking
payment from Air Eagle of an amount not less than $589,993.60, plus expenses,
interest and costs of suit based on Air Eagle's failure to pay for services
rendered by Flash and GoAmerica under the Contract. The Company intends to
defend this action and pursue its counterclaim vigorously. In a separate but
related matter, on July 31, 2002, GoAmerica filed suit against Flash and certain
former officers and shareholders of Flash (the "Flash Defendants") in the United
States District Court for the District of New Jersey for violations of federal
and state securities laws and common law fraud in connection with the sale of
the assets of Flash to GoAmerica. In October 2002, each of the Flash Defendants
filed answers to GoAmerica's complaint denying all of the Company's charges,
with one of the Flash Defendants adding counterclaims against the Company and
certain named officers alleging, among other things, fraudulent
misrepresentation, violations of state securities law and unjust enrichment in
excess of $1 million. The other Flash Defendants have moved to amend their
answer to include substantially similar counterclaims against the Company and
Company officer defendants. The Company intends to vigorously pursue its claims
against Flash Defendants and defend against the counterclaims asserted.
Item 2. Changes in Securities and Use of Proceeds
Changes in Securities
On July 29, 2002, we granted Stock Options to various employees pursuant
to our 1999 Stock Plan. All of such Stock Options were granted at an exercise
price of $0.33 per share, the then current fair market value of the Common
Stock, with four year vesting. The aggregate number of shares of common stock
underlying such stock option grants totaled 110,000.
Use of Proceeds
On April 6, 2000, the Commission declared effective our Registration
Statement on Form S-1 (No. 333-94801) as filed with the Commission in connection
with our 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, now CSFBdirect. Pursuant to such Registration Statement, on April 12,
2000 we consummated the issuance and sale of an aggregate of 10,000,000 shares
of our Common Stock, for a gross aggregate offering price of $160 million. We
incurred underwriting discounts and commissions of approximately $11.2 million.
In connection with such offering, we incurred total expenses of approximately
$2.6 million. As of September 30, 2002, approximately $10.2 million of the
$146.2 million in net proceeds received by us upon consummation of such
offering, pending specific application, were invested in short-term,
investment-grade, interest-bearing instruments. The remaining $136.0 million of
the net proceeds have been specifically applied as follows: (i) $5.1 million for
the acquisition of other businesses; (ii) $35.7 million for sales and marketing
expenses; (iii) $10.8 million for the purchase of capital assets; and (iv) $84.4
million for working capital needs.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
99.1 Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
During the quarter ended September 30, 2002, we did not file any
Current Reports on Form 8-K with the Commission.
- 16 -
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: November 14, 2002 By: /s/ Aaron Dobrinsky
--------------------------------------------
Aaron Dobrinsky
Chief Executive Officer
(Principal Executive Officer)
DATE: November 14, 2002 By: /s/ Francis J. Elenio
--------------------------------------------
Francis J. Elenio
Chief Financial Officer
(Principal Financial and Accounting Officer)
- 17 -
CERTIFICATION
I, Aaron Dobrinsky, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GoAmerica, Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly Report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this Quarterly Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Aaron Dobrinsky
-----------------------------------------------
Aaron Dobrinsky
Chairman and Chief Executive Officer
November 14, 2002
- 18 -
CERTIFICATION
I, Francis J. Elenio, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GoAmerica, Inc.;
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
Quarterly Report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly Report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this Quarterly Report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Francis J. Elenio
--------------------------------------
Francis J. Elenio
Chief Financial Officer
November 14, 2002
- 19 -
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
- 20 -