UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For
the fiscal year ended
December
31, 2007
|
OR
|
[ ]
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
|
|
For
the transition period from
____________
to
________________
|
Commission File Number 0-29359
GOAMERICA,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
|
|
22-3693371
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S.
Employer Identification No.)
|
|
|
|
433
Hackensack Avenue, Hackensack, New Jersey
|
|
07601
|
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
Registrants telephone number, including area code
(201) 996-1717
Securities registered pursuant to Section 12(b) of the Act:
|
Title
of each class
|
|
Name
of Each Exchange on Which Registered
|
|
|
|
None
|
|
|
Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title
of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes: ________
No: ___X___
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes: ________
No: ___X___
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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer _____ Accelerated
Filer ______ Non-accelerated
filer _____X_____
Smaller reporting
company _________
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: ________
No: ___X___
The aggregate market value of the voting common equity of the registrant held by non-affiliates (for this purpose, persons and entities other
than executive officers, directors, and 5% or more shareholders) of the registrant, as of the last business day of the registrants most recently completed second fiscal quarter (June 30, 2007), was $11,078,740.
Indicate the number of shares outstanding of each of the registrants classes of common stock as of March 24, 2008:
Class
|
|
Number of Shares
|
Common Stock, $0.01 par value
|
|
9,159,092
|
Documents Incorporated by Reference:
The following documents are incorporated by reference into the Annual Report on Form 10-K: Portions of the registrants definitive Proxy Statement for its 2008 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.
TABLE OF CONTENTS
|
|
Item
|
|
|
|
Page
|
PART I
|
|
1.
|
|
Business of the Company
|
|
3
|
|
|
1A.
|
|
Risk Factors
|
|
19
|
|
|
1B.
|
|
Unresolved Staff Comments
|
|
33
|
|
|
2.
|
|
Properties
|
|
33
|
|
|
3.
|
|
Legal Proceedings
|
|
33
|
|
|
4.
|
|
Submission of Matters to a Vote of Security Holders
|
|
34
|
|
|
4A.
|
|
Executive Officers of the Registrant
|
|
36
|
PART II
|
|
5.
|
|
Market for the Registrants Common Equity, Related Stockholder
|
|
|
|
|
|
|
Matters and Issuer Purchases of Equity Securities
|
|
38
|
|
|
6.
|
|
Selected Consolidated Financial Data
|
|
39
|
|
|
7.
|
|
Managements Discussion and Analysis of Financial Condition and
|
|
|
|
|
|
|
Results of Operations
|
|
41
|
|
|
7A.
|
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
54
|
|
|
8.
|
|
Financial Statements and Supplementary Data
|
|
55
|
|
|
9.
|
|
Changes in and Disagreements with Accountants on Accounting
|
|
|
|
|
|
|
and Financial Disclosure
|
|
55
|
|
|
9A.
|
|
Controls and Procedures
|
|
55
|
|
|
9B.
|
|
Other Information
|
|
56
|
PART III
|
|
10.
|
|
Directors, Executive Officers and Corporate Governance
|
|
57
|
|
|
11.
|
|
Executive Compensation
|
|
57
|
|
|
12.
|
|
Security Ownership of Certain Beneficial Owners and
|
|
|
|
|
|
|
Management and Related Stockholder Matters
|
|
57
|
|
|
13.
|
|
Certain Relationships and Related Transactions, and Director
|
|
|
|
|
|
|
Independence
|
|
57
|
|
|
14.
|
|
Principal Accountant Fees and Services
|
|
58
|
PART IV
|
|
15.
|
|
Exhibits and Financial Statement Schedules
|
|
58
|
SIGNATURES
|
|
|
|
|
|
59
|
EXHIBIT INDEX
|
|
|
|
60
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULE
|
|
F-1
|
|
|
|
INTRODUCTORY NOTE
Each reference in this Annual Report to GoAmerica, the Company or We, or any variation thereof, is a reference to GoAmerica, Inc. and its subsidiaries, unless the context requires otherwise.
Many of GoAmericas product/service names referred to herein are trademarks, service marks or tradenames of GoAmerica. This Annual Report also includes references to trademarks and tradenames of other companies. The GoAmerica and Wynd Communications names and logos and the names of proprietary products and services offered by us are trademarks, registered trademarks, service marks or registered service marks of GoAmerica. i711 and the i711 logo, and ClickRelay are registered trademarks, and i711.com, i711 Wireless, i711 Call Me, One-Click Call Back, Relay and Beyond, and Clear Mobile are among the trademarks and/or service marks of GoAmerica.
FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties. Such 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. There are many factors that may cause actual results to differ materially from those contemplated by such forward-looking statements. In addition to the factors disclosed by us under the caption RISK FACTORS and elsewhere in this document, the following factors concerning GoAmerica, among others, could cause our actual results to differ materially and adversely
statements: (i) our ability to integrate our recent acquisitions into our existing businesses and operations; (ii) our ability to respond to the rapid technological change of the telecommunications relay service (known as TRS) and/or wireless data industries and offer new or enhanced services; (iii) our dependence on wireline and wireless carrier networks and technology platforms supporting our relay services; (iv) our ability to respond to increased competition in the TRS and/or wireless data industries; (v) our ability to generate revenue growth; (vi) our ability to increase or maintain gross margins, profitability, liquidity and capital resources; and (vii) difficulties inherent in predicting the outcome of regulatory processes. Such risks and others are more fully described in the Risk Factors set forth in Item 1A of this Annual Report. Our actual results could differ materially from the results expressed in, or implied by, such forward-looking statements.
2
PART I
Item 1. Business of the Company.
General; Recent Events
GoAmerica, Inc. (GoAmerica or the Company) is a provider of communications services for people who are deaf, hard-of-hearing, or
speech-disabled. The Companys vision is to improve the quality of life of its customers by being their premier provider of high quality, innovative communication services that break down communications
barriers. For more information on the Company or its services, visit
http://www.goamerica.com
or contact GoAmerica directly at TTY 201-527-1520, voice 201-996-1717, Internet Relay by visiting
http://www.i711.com
, or video phone by connecting to hovrs.tv.
On January 10, 2008, the Company acquired (1) certain assets of the Telecommunications Relay Services (TRS) division of MCI
Communications Services, Inc. (Verizon), a leading provider of relay services transactions, and (2) Hands On Video Relay Services, Inc., a California-based provider of video relay and interpreting services.
Background on Telecommunications Relay Services
Introduction
Telecommunications relay service (or telerelay service) refers to a range of communications services that enable persons with hearing or
speech disabilities the functionality to place and receive telephone calls. It is available in all 50 states, the District of Columbia, Puerto Rico and the U.S. territories for both local and long distance calls.
The Americans with Disabilities Act of 1990 (the ADA) requires the Federal Communications Commission (the FCC) and each of the
states to ensure that telerelay service is available to persons with hearing or speech disabilities 24 hours per day and federal and state policy-makers have determined that it should be free of charge to eligible users. Therefore, service
providers are wholly reimbursed for such services from either a federal (for state-to-state calls) or a state (for in-state calls) reimbursement fund.
3
Broadly speaking, there are two categories of telerelay services. The first is the traditional telecommunications relay service that relies
exclusively on a telephone-typewriter device. The second, more recent variety, is Internet-based services. Telerelay service uses operators, called communications assistants, to facilitate telephone calls between people with hearing
and speech disabilities and hearing individuals. A telerelay service call may be initiated by either a person with a hearing or speech disability, or a person without any such disability. When a person with a hearing or speech disability
initiates such a call, the person uses a telephone-typewriter or an Internet-based device that permits text (such as a computer or a wireless device) to contact a relay center, and gives a communications assistant the telephone
number of the party he or she wishes to call. The communications assistant in turn places an outbound traditional voice call to that person. The communications assistant then serves as a link for the call, voicing to the
called party the text that the communications assistant received from the initiating party, and vice versa.
Conversations are relayed in real-time and communications assistants are not permitted to disclose to any third person not involved in the
call the content of any conversation. Like hearing callers, relay callers are not limited by the type, length or nature of their calls.
An overview of the various forms of telerelay service is provided below.
Traditional
Telecommunications Relay Service
Traditional telerelay service enables a person with a hearing or speech disability to utilize a text-telephone or captioned telephone device (historically
referred to as a telephone typewriter, or a TTY device), to initiate calls to, and receive calls from, hearing enabled persons.
In order to make such a call, a speech- or hearing-disabled person dials a toll-free number established by the state in which the call originates. The
call is then routed to a calling center authorized by the state. Except for California, which contracts with multiple providers, states typically contract with one provider to operate the calling center. That provider handles all traditional
telerelay calls received by the calling center, both in-state calls, and state-to-state calls. In-state calls are reimbursed from a state fund at state approved rates. State-to-state calls are reimbursed from a federal fund at
FCC-approved rates. We refer to this federal fund as the federal TRS fund. States typically select the chosen provider as a result of a public bid process.
4
Key aspects of traditional telerelay service include:
-
State telecommunications relay service providers are selected through an open bid
process.
-
A state contract generally provides a reasonably consistent revenue stream to the
winning telecommunications
provider for three to seven years.
-
Current state reimbursement rates range from $0.75 to $1.90 per minute
(compared to the
2007-2008 reimbursement rate for traditional state-to-state
telecommunications relay service of $1.592 per conversation minute, except for
speech-to-speech service, the rate for which is $2.723 per conversation minute).
-
Similar to traditional state-to-state telerelay service, in-state traditional telerelay
service traffic is declining
due to consumer preference for Internet-based telerelay
service.
Internet-Based Telerelay Service
Internet-based forms of telerelay service have developed over the last decade. They are currently treated by the FCC as if they are state-to-state calls
(even when a call is in-state), and such calls are thus regulated by the FCC and service providers are reimbursed via the federal TRS fund. Internet-based telerelay services include the following types of service:
Internet Protocol Relay (IP relay)
IP relay is a text-based form of
telerelay service that uses the Internet, rather than traditional telephone lines, for the leg of the call between the person with a hearing or speech disability and the communications assistant. In all other respects, IP relay calls are
handled in the same manner as text-to-voice traditional telerelay service calls. The user utilizes a computer or other web-enabled device to communicate with the communications assistant rather than a
text-telephone device. IP relay currently represents the most widely used form of Internet-based telerelay service. The current IP relay reimbursement rate is $1.293 per conversation minute. This rate will remain in effect through the 2009-2010 reimbursement year, subject to annual adjustments described in the Funding Mechanisms section below.
Video Relay Service (VRS)
Video relay service is an Internet-based form of
telerelay service that enables persons whose primary language is American Sign Language (ASL) to communicate with a communications assistant in ASL using video conferencing equipment. The user accesses the
communications assistant over an Internet-based device such as a webcam or videophone. The communications assistant receives the ASL communication, and then voices that communication to the hearing party,
and vice versa. Video relay service allows conversations to flow in near real-time and in a faster and more natural manner than text-based telerelay service. Video relay service currently represents the fastest growing form of
telerelay service. According to its May 1, 2007 annual report to the FCC, the National Exchange Carriers Association, or NECA, forecasts 2007 video relay service traffic to increase more than 32% over 2006, from
approximately 44.3 million conversation minutes in 2006 to approximately 58.6 million conversation minutes in 2007. The current VRS reimbursement rate is tiered according to VRS call volumes (measured by monthly minutes of use), at the following rates: (1) for the first 50,000 monthly minutes, $6.77 per minute; (2) for monthly minutes between 50,001 and 500,000, $6.50 per minute; and (3) for monthly minutes above 500,000, $6.30 per minute.
This rate will remain in effect through the 2009-2010 reimbursement year, subject to annual adjustments described in the Funding Mechanisms section below.
5
Operational and Performance Requirements
Telerelay service providers must offer service that meets certain mandatory minimum standards set by the FCC. These
include:
-
The communications assistant answering or placing a telerelay service call must
stay with the call for a
minimum of ten minutes to avoid disruptions to the user
(15 minutes for speech-to-speech calls).
-
Most forms of telerelay service must be available 24 hours a day, seven days a
week.
-
Telerelay service providers must answer 85% of all calls within ten seconds. As
of January 2007, the FCC requires that
video relay service providers answer 80%
of all video relay service calls within 120 seconds.
-
Telerelay service providers must make best efforts to accommodate a telerelay
service users requested
communications assistant gender.
-
Communications assistants are prohibited from intentionally altering or disclosing
the content of a relayed
conversation and generally must relay all conversation
verbatim unless the user specifically requests summarization.
-
Telerelay service providers must ensure user confidentiality and communications
assistants (with a
limited exception for speech-to-speech) may not keep records of
the contents of any conversation.
-
The conversation must be relayed in real-time.
-
Communications assistants must provide a minimum typing speed for IP relay
calls and video
relay service communications assistants must be qualified
interpreters.
-
For most forms of telerelay service, the provider must be able to handle
emergency (911) calls and relay
them to the appropriate emergency services.
Funding Mechanisms
In-State
. As noted above, in-state traditional telerelay services are paid for by that
states universal service fund. Each state utilizes its own unique funding formula and mechanism, which can include assessments on carriers operating in the state, assessments built into local or state
telecommunications rates, or taxes administered by the state. Rates are generally set on a multi-year basis.
6
State-To-State
. State-to-state telerelay services (which include all IP relay and video
relay service regardless of the locations of the persons initiating or receiving a call), are paid for out of the federal TRS fund which was established by the FCC and which is administered by NECA, a non-profit entity described below. The
federal TRS fund receives funds from an assessment the FCC imposes upon all state-to-state telecommunications carriers, which presently number more than 5,800. The carriers generally pass these assessments on
to their customers via a monthly surcharge which is represented as a percentage of a customers monthly state-to-state charges. The FCC establishes an annual per-minute reimbursement rate for each form of
telerelay service and authorizes NECA to administer payments to relay service providers from the federal TRS fund.
The federal TRS fund was established by the FCC in July 1993. Initially only state-to-state traditional telerelay service minutes were reimbursable.
Over the years the FCC has authorized the reimbursement of additional forms of relay services and currently reimburses service providers for traditional telerelay service, IP relay service, speech-to-speech service, captioned telephone service (both traditional and IP)(CAPTEL) and VRS. Currently the
Company does not provide the CAPTEL service.
The federal TRS fund is administered by NECA, a non-profit organization created in 1984 by telecommunications companies to administer
the fees that long distance companies pay to access local telephone networks. NECA was appointed as the fund administrator for telerelay services by the FCC in 1993 for a two-year term, and reappointed in 1995 and 1998 to four-year
terms. Beginning in 2003, NECAs appointment as fund administrator was extended on a month-to-month basis.
The federal TRS fund has experienced significant growth, from $90 million for the 2002-2003 funding period to $553.4 million for the 2007-2008 funding period (with $430 million of that amount, or nearly 75%, to be used to fund VRS alone). The growth in fund size is attributable in large part to FCC decisions recognizing new forms of telerelay service, such as IP relay and VRS, and to increased consumer demand for these
services.
7
In addition to the Company, the following service providers currently receive reimbursement payments from the federal TRS
fund:
-
Ameritech
-
AT&T
-
Communications Access Center for the
Deaf and Hard-of-Hearing (VRS only)
-
CSDVRS
-
Hamilton Telecommunications
-
Hands On Video Relay Services (VRS
only)
-
Healinc Telecom LLC
-
Kansas Relay Services, Inc.
-
MCI
-
Nordia
-
Snap!VRS
-
Sorenson Communications (Internet
and VRS only)
-
Sprint
In
previous years, NECA would collect and review projected cost and minutes of use data
submitted by telerelay service providers to determine annual reimbursement rates for the
various forms of telerelay service. The rates would be effective for the fiscal year
ending June 30. Active relay service providers would submit to NECA their respective
expenses for the previous two years as well as projections for the upcoming two years.
NECA would review the information to develop a methodology for calculating an average
cost per service minute across all providers of each particular form of telerelay
service. The proposed per minute reimbursement rates would then be submitted to the FCC,
which made a final determination regarding the level of new rates.
8
In
November 2007, the FCC released an order that substantially modified the cost recovery
mechanism for all forms of state-to-state telerelay service in the following ways:
Traditional telerelay,
speech-to-speech service, and CAPTEL
. Reimbursement rates for these services will now be
calculated according to a Multi-state Average Rate Structure (MARS) plan, which uses a
weighted average of competitively bid reimbursement rates for various types of in-state
telerelay service. Each January, NECA will require each state telerelay administrator
and each provider of the relevant state-to-state telerelay services to submit certain
data related to provision and compensation of those services. NECA will then compute the
weighted average reimbursement rate based on the data provided and submit it to the FCC,
which will make a final determination regarding the reimbursement rate by June 30 of that
year. The following rates apply for the remainder of the 2007-2008 reimbursement year:
(1) for traditional telerelay service, $1.592 per minute; (2) for speech-to-speech
service, $2.723 per minute; and (3) for CAPTEL (both traditional and IP), $1.629 per
minute.
IP Relay
. Reimbursement rates for
IP relay will now be established for three-year periods under a price capplan.
The FCC will establish a base reimbursement rate for the period, and that reimbursement
rate will be adjusted for each year of that period based on (1) an established inflation
factor (the Gross Domestic Product Price Index); (2) exogenous costs (costs beyond the
control of telerelay providers that are not reflected in the inflation adjustment); and
(3) an efficiency factor (an annual rate reduction of 0.5%). The current
three-year reimbursement rate of $1.293 per minute will continue (as adjusted) through
the 2009-2010 reimbursement year.
VRS
. Reimbursement rates for VRS
will continue to be based on providers projected costs and minutes of use, but the
rates will now be established for three-year periods, subject to an annual rate reduction
of 0.5%. However, the FCC will no longer use a single weighted average reimbursement
rate for all VRS providers. Instead, it has adopted a tiered reimbursement structure for
VRS based on call volumes (measured by minutes of use), with the following current rates:
(1) for the first 50,000 monthly minutes, $6.77 per minute; (2) for monthly minutes
between 50,001 and 500,000, $6.50 per minute; and (3) for monthly minutes above 500,000,
$6.30 per minute. These current three-year reimbursement rates will continue (as
adjusted) through the 2009-2010 reimbursement year.
Non-Rate
Government Regulation
GoAmerica is certificated by the FCC to provide IP relay and VRS and to receive reimbursement from the federal TRS fund. Consistent with
that certification, GoAmerica must adhere to certain operational and performance standards, discussed above.
9
Our Business
Integrated
Products and Services Offered
After the Companys January 10, 2008 acquisitions of Verizons TRS division and Hands On, we currently have five lines of business:
-
Internet
Text Relay Services Internet text relay services enable deaf or hard
of hearing
callers
to use a Web-connected computer or wireless handheld device to place
calls,
which
are connected to a relay operator. The relay operator calls the voice number
and
then
verbally speaks the text message typed by the deaf caller to the hearing
recipient,
and
types the hearing partys responses back to the deaf party. The Company
provides
versions
of this service under the IP-Relay brand acquired from Verizon TRS and
the
existing
i711 brand from GoAmerica.
-
Video
Relay Services (VRS) Using VRS, a deaf caller begins a
call by
communicating
directly with a sign language interpreter over a live video connection,
either
on a webcam-equipped PC or a set-top videophone; the interpreter places
the call
on
the deaf persons behalf, and translates the callers sign language into audible
speech
for
the hearing person, and back into sign language for the deaf caller. The Company
provides
versions of this service primarily under the Hands On Video Relay Services
(HOVRS)
and i711 brands. In addition, the Company offers a white label solution
by
providing
the infrastructure and interpreting services for video relay services offered
by
Sprint
and AT&T.
-
Community
Interpreting Services Certified sign language interpreters provide
interpreting
services in situations where relay services may not be available or ideal,
such
as
a doctor appointment or in-person business meeting.
-
Wireless
Devices and Services The Company provides wireless devices, such
as the T-
Mobile
Sidekick, or other devices that are hearing-aid compatible, and value-added
wireless
services customized for deaf or hard of hearing consumers.
-
State Telecommunications Relay Services Traditional relay service enables a person
with a hearing or speech
disability to use a text-telephone device (historically referred to
as a telephone typewriter, or a TTY device), to initiate calls to, and receive calls from,
hearing persons. The Company has contracts to provide these services in California,
Tennessee, and the District of
Columbia.
10
Relay
Services
Our i711.com text and VRS permit deaf consumers to contact a TRS operator to place a live telephone call to a hearing party by using
certain wireless handheld devices, or personal computers. Generally, TRS enables standard voice telephone users to talk to people who have difficulty hearing or speaking on the telephone by having a relay operator (also referred to as
Communications Assistants or CAs) interpret for both parties via text-to-voice interpretation or in the case of VRS, a sign language-to-voice interpretation. VRS generally enables individuals who use American Sign
Language to use video equipment to make calls by communicating with a CA, who interprets the initial message into either speech or text and signs back the hearing partys response.
We launched our i711.com VRS in December 2006, joining our text-based IP relay services, which can be accessed using various technologies, including
wireless handhelds such as the RIM Blackberry and T-Mobile Sidekick, our i711.com Internet portal, and a new service we made available in December 2006 called i711 Call Me, which permits hearing parties to contact
deaf consumers through a personal toll-free number that is directed to our relay platform.
Our text relay service communicates with Nordia, Inc.s technology platform and CAs to facilitate calls. i711.com VRS uses sign
language interpreters to facilitate calls through a commercial arrangement with Visual Language Interpreting, Inc. We developed our i711.com web portal and service with distinctive calling features and a community
orientation in order to be a user friendly, familiar and preferred Internet-based relay service.
As a result of our acquisition of the assets of Verizons TRS division in January 2008, we now provide traditional telerelay service (both in-state and
state-to-state) under contracts from three jurisdictions California, Tennessee and the District of Columbia. In recent years, traditional telerelay service revenue has experienced a steady decline due to product substitution as
state telerelay service customers switch to Internet-based relay services (IP relay and VRS).
11
Hands On Products and Services
Our Hands On subsidiary, acquired in January 2008, currently provides customers with the following products related to the VRS business and
community interpreter business:
VRS
Core Services
|
|
Description
|
Dlink
Video Phone
|
|
Hands
On deployed and installed new video phone
|
(new)
|
|
|
|
|
|
|
|
Video
Phone
|
|
The
addition of Hands On VRS to a competitors video phones
|
(converts)
|
|
|
|
|
|
|
|
VideoSign
2.5
|
|
PC
application to initiate and receive point to point (P2P) and VRS
calls
|
(PC)
|
|
|
|
|
|
|
Hands
OnWidget
|
|
Dashboard
widget (mini-application) for Apple MacIntosh OS X
|
|
|
|
(Tiger
only) to imitate VRS calls.
|
|
|
|
|
Hands
OnIM
|
|
|
A
simple way to initiate VRS calls via iChat (Mac) or AIM 5.5 or
better
(PC).
|
|
|
|
|
Spanish
Language
|
|
The
ability to interpret between ASL and spoken Spanish
|
to
ASL
|
|
|
|
|
|
|
Business
VRS
|
|
Web
button to initiate a VRS call from an ASL user to a business
|
Web
Button
|
|
|
|
|
|
|
|
VRS
Ancillary
|
|
|
Services
|
|
|
|
Voice
to
Video
|
|
Ability
to receive calls from a hearing person to VRS user
|
(V2V)
|
|
|
|
|
|
|
|
Video
Mail
|
|
|
Ability
to record an ASL video message (aka voicemail)
|
|
|
|
|
VPChat
|
|
|
Allows
customers to text-chat with the VI over a VP session
|
|
|
|
|
Community
|
|
|
|
Interpreting
|
|
|
|
On-Site
ASL
|
|
Providing
on-site live ASL interpreters
|
Interpreting
|
|
|
|
|
12
Hands On is headquartered in Rocklin (Sacramento area), California, and currently maintains call centers in Rocklin, Oakland, San Diego, Long Beach
and Temecula, California; Vancouver, Washington; Salem/Portland, Oregon; and, through subcontractor relationships, in Orlando, Florida and San Juan, Puerto Rico. Hands On is also in the process of opening call centers in Las Vegas, Nevada;
Honolulu, Hawaii; Seattle, Washington; Tampa, Florida; Richmond, Virginia; Chicago, Illinois; Atlanta, Georgia and Madison Wisconsin.
Hands On is also a provider of community interpreter services. Typically, Hands Ons customers contact the company to schedule an
interpreter and then Hands On will assign a qualified interpreter to meet the customers needs. Hands On currently concentrates its services in the Northern California region, but can provide nationwide, 24-hour a day, sign language
interpreting services through its network of interpreters.
Wireless
Subscription Services
Our wireless subscription services operate over the T-Mobile wireless data network and currently consist primarily of two offerings: 1) the resale of
recurring monthly data-only services for deaf or hard of hearing customers; and 2) our value added services called Wireless Toolkit; a collection of services including AAA Roadside Assistance, TTY/TDD messaging, and access to Insight
Cinemas captioned movie information. Our Wireless Toolkit is a software application that runs on popular versions of the RIM BlackBerry and the T-Mobile Sidekick. We anticipate that the resale of recurring data-only services
will cease on or about March 31, 2008. During 2006, we ceased offering our WyndTell services, which operated on older wireless networks using devices no longer manufactured by RIM. We also currently provide our proprietary software technology
called Go.Web on a limited basis. As our business emphasis and product development efforts are focused on servicing the deaf and hard of hearing markets, we have not continued to invest in Go.Web.
The financial contribution of Wireless Subscription Services to the Company continues to decline, and we do not foresee devoting significant resources to
this business during 2008 and beyond.
Wireless
Devices and Activations
Through our master dealer agreement with T-Mobile, we sell wireless communications devices and earn commissions through the direct
and indirect acquisition of subscribers on behalf of this network provider.
13
Marketing & Outreach
Part of our obligations under our regulatory certification is that we conduct on-going outreach and educational activities designed to make consumers;
both hearing and deaf, aware of telecommunications relay services.
To accomplish this objective, we have a combination of full-time staff and independent contractors located throughout the United States who
meet with consumers in large and small groups primarily to educate them about the services offered by the Company.
To further educate consumers about our services we will often attend local tradeshows and advertise in appropriate online and print venues aimed at
deaf and hard of hearing audiences.
Sales
For services such as our wireless equipment sales or interpreting services, we use both direct and indirect channels of distribution to reach our
customers.
Direct Distribution.
Direct distribution methods consist of those channels
in which our personnel actively assist the customers with placing orders, currently comprised of our sales professionals and our online shopping portal designed for people who are deaf or hard of hearing, or hearing customers who are
looking to arrange in-person interpreting services. Our telesales representatives respond to queries generated as a result of website visits and our marketing efforts, which usually contain our toll-free sales telephone and TTY
numbers.
Indirect Distribution.
Indirect distribution methods consist of those
channels where our distribution alliance partners take the order directly from the customers or refer customers to one of our direct sales representatives. With indirect distribution, we capture new business through dealers and value
added resellers.
Dealers offer our wireless products and services to their customers and are paid a commission for each sale. A dealers commission
may consist of a one-time bounty only or may include a small percentage of revenues generated by their customers. Dealers are not responsible for billing or supporting the customer.
14
Competition
The relay services market consists of well-funded competitors such as AT&T Inc., Sprint Nextel Corp., Hamilton Telecommunications
and Sorenson Communications, Inc. (Sorenson). Each of these companies offers text relay services similar to the services the Company offers, and they may deploy similar enhancements and marketing
tactics to attract the attention of prospective users. Each of the providers referred to above also offers VRS. Sorenson currently is the largest provider of VRS in the United States.
The market for our wireless services is becoming increasingly competitive. The widespread adoption of industry standards in the wireless services
market may make it easier for new market entrants and existing competitors to introduce services that compete against ours.
With time and capital, it would be possible for competitors to replicate the services currently provided by the Company. The Company
competes primarily on the basis of the functionality, breadth and the quality of our services.
Many of our existing and potential competitors have substantially greater financial, technical, marketing and distribution resources than
GoAmerica; however, few of such competitors focus on deaf or hard-of-hearing customers to the same degree as we do. Despite any lack of a similar focus on the part of our competitors, many of these companies
may have greater name recognition and may be able to adopt more aggressive approaches to the market than can GoAmerica. Competitive pressures may have a material adverse effect on our business and reduce
our market share.
Technology and Operations
Service Infrastructure
We use reliable third-party information technology firms to host many of our service applications. This data center strategy for our network
connectivity and server hosting provides our customers with the highest levels of reliability while lowering our overall cost structure. We believe our providers facilities are capable of meeting the capacity demands and
security standards for services we have developed or are developing for our customers. Technical personnel continually monitor network traffic, service quality and security.
Call Center Operations
For our text relay services we continue to partner with Stellar Nordia to handle the call center operations; which includes recruiting, training, and on-going
management of the call centers consistent with our quality and service standards.
For our video relay services, we handle call center operations internally and with a limited number of independent interpreting agencies who supply
qualified interpreters to assist with call handling functions. In the case of VRS call centers, we identify potential locations for the center, complete the build out and then recruit, staff, and manage the on-going operations of each
center.
15
Software Technology
For our i711.com text- and video- based relay services business, we have developed a standards-based, services platform that enables our
customers to place relay calls using different access methods. The platform consists of a combination of proprietary and licensed technology elements. The i711.com relay services platform currently allows access
from web browsers, AOLs AIM instant messaging clients (text relay only), calls initiated from hearing parties through a toll free number, and wireless devices. The architecture of our i711 relay services platform
allows us to add new access methods and value added services to the platform. The platform also allows for the addition of entirely new services to be added in the future. Our i711 relay services platform offers deaf or hard of
hearing users a secure, fast, reliable and user friendly relay platform through our use of Secure Socket Layer, or SSL, efficient coding practices, system redundancy and user centric design principles.
For our wireless subscription business, we deploy a combination of licensed technology and custom built software. This technology gives our
customers access to wireless messaging and information services specifically geared toward the needs of the deaf and hard of hearing users. We have developed and run gateway technology to connect wireless devices to a variety of
traditional TTY devices as well as our proprietary TTY-based applications.
The same Internet-based text relay platform that we use for our i711 services will be used for the integration of the TRS assets acquired from
MCI / Verizon.
Our Hands On subsidiary uses an internally developed technology platform to provide its services in combination with some licensed technology and
has proprietary PC software called VIDEOSIGN which is used by consumers to access our VRS through computers.
For our Go.Web business, we use our proprietary wireless services platform that enables our customers to securely access most types of Web-based
data from many leading wireless devices.
Licensed Software Technology
Video
Relay Service
Our VRS service offerings operate in conjunction with internally developed and licensed technology which allows numerous users to interface
simultaneously with the service.
Customer
Service, Billing and Fulfillment
We provide tier-1 customer support for users of all our products and services. We use a combination of internally developed and licensed applications
to make sure we follow up with customers who are having technical or service related issues with our offerings.
We provide corporate or individual customer billing for all customers of our wireless and interpreting services. For Go.Web, EarthLink provides the
majority of customer support and billing under a revenue sharing arrangement.
16
For product fulfillment, we maintain an inventory of mobile devices and video camera equipment which we buy from third-party
manufacturers and resellers.
Research and Development
Our ability to meet our customers expectations depends on a number of factors, including our ability to identify and respond to
emerging technological trends in our target markets, develop and maintain competitive products, enhance our existing products by adding features and functionality that differentiate them from those of our
competitors and bring products to market on a timely basis and at competitive prices. Consequently, we have made, and we intend to continue to make, investments in research and development, subject to our
capital constraints.
Intellectual Property Rights
We have not yet obtained patents on our technology that would preclude or inhibit competitors from using our technology. In February 2001, we filed a
patent application on certain aspects of our Go.Web technology. The application is presently pending in the United States Patent and Trademark Office and has been filed internationally. Certain aspects of our various technologies rely on
perpetual, royalty-free, worldwide licenses under third party patents relating to wireless products and services. We rely on a combination of patent, copyright, trademark, service mark, trade secret laws, unfair competition law
and contractual restrictions to establish and protect certain proprietary rights in our technology and intellectual property. We have received or applied for registration of certain of our GoAmerica, Wynd, and i711.com names and
marks in the United States Patent and Trademark Office.
The steps taken by us to protect our intellectual property may not prove sufficient to prevent misappropriation of our technology or to deter
independent third party development of similar technologies. In addition, the laws of certain foreign countries may not protect our technologies or intellectual property rights to the same extent as do the laws of the United
States.
We also rely on certain technologies that we license from third parties. These third party technology licenses may not continue to be available to us
on commercially attractive terms. The loss of the ability to use such technology could require us to obtain the rights to use substitute technology, which could be more expensive or offer lower quality or performance, and
therefore have a material adverse effect on our business, financial condition or results of operations. Third parties could claim infringement by us with respect to current or future technology. We expect that we and other
participants in our markets will be increasingly subject to infringement claims as the number of services and competitors in our industry segment grows. Any such claim, whether meritorious or not, could be
time consuming, result in costly litigation, cause service or installation interruptions or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements might not be available on terms
acceptable to us or at all. As a result, any such claim could have a material adverse effect upon our business, financial condition or results of operations.
17
Government Regulation
See Background on Telecommunications Relay Services for a description of how our business is regulated. Since June 2006, we have been certified by
the FCC to offer IP- and video-based forms of relay service and receive reimbursement directly from the federal TRS Fund. Consistent with this certification, to remain compliant we must adhere to certain technical,
operational and performance standards described above.
The network carriers and third party providers we contract with to provide services are subject to regulation by the FCC and possibly one or more states.
Changes in FCC regulations could affect the availability of our services and the network carriers and third party providers willingness or ability to sell to us. We could also be adversely affected by developments in regulations
that govern or may in the future govern the Internet, the allocation of radio frequencies or the placement of cellular towers. Also, changes in these regulations could create uncertainty in the marketplace that could reduce
demand for our services or increase the cost of doing business as a result of costs of litigation or increased service delivery cost or could in some other manner have a material adverse effect on our business, financial
condition or results of operations.
We currently do not collect sales or other taxes with respect to the sale of services or products in states and countries where we believe we are not required
to do so. We do collect sales and other taxes in the state in which we have an office and are required by law to do so. One or more jurisdictions have sought to impose sales or other tax obligations on companies that engage in online
commerce within their jurisdictions. A successful assertion by one or more jurisdictions that we should collect sales or other taxes on our products and services, or remit payment of sales or other taxes for prior periods,
could have a material adverse effect on our business, financial condition or results of operations.
Any new legislation or regulation that may be adopted by the United States Congress to regulate the Internet, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to our business, could have a material adverse effect on our business.
Employees
As of March 1, 2008, the Company had a total of 393 full-time or full-time equivalent employees. None of our employees is covered by a
collective bargaining agreement. We believe that our relations with our employees are good.
18
Item 1A. Risk Factors
Risks Particular To GoAmerica
We must integrate three businesses that previously operated independently: GoAmerica, Verizions TRS division and Hands On. We cannot assure you that we will be able to
integrate and manage these businesses effectively.
On January 10, 2008, GoAmerica acquired (1) certain assets of the Telecommunications Relay Services (TRS) division of MCI
Communications Services, Inc. (Verizon), a leading provider of relay services transactions, and (2) Hands On Video Relay Services, Inc., a California-based provider of video relay and interpreting services. Although the businesses of
these companies are complementary, the integration of the departments, systems business units, operating procedures and information technologies of the three businesses present a significant challenge to
management. We cannot assure you that we will be able to integrate and manage these operations effectively or improve the historical financial performances of GoAmerica, Verizons TRS division, and Hands On. The
failure to successfully integrate these systems and procedures could have a material adverse effect on the results of operations and financial condition of the combined company. The difficulties of combining the
companies operations include:
-
the necessity of coordinating geographically separated organizations;
-
integrating personnel with diverse business backgrounds;
-
integrating the businesses technology and products;
-
combining different corporate cultures;
-
the fact that Hands On has been a privately held company and will now become a
subsidiary of a public
company;
-
retaining key employees;
-
retaining existing customers;
-
maintaining product development schedules;
-
creating uniform standards, controls, procedures, policies and information
systems;
-
integrating sales and business development operations; and
-
preserving important distribution relationships.
In addition, the process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of
the combined companys businesses. The diversion of managements attention and any delays or difficulties encountered in connection with the integration process could have a material adverse effect on our business
and results of operations.
19
The successful integration of Verizons TRS division depends in part on the performance of Stellar Nordia under a managed services agreement it has entered into with
the Company.
The Company is relying on a managed services agreement it has executed with Stellar Nordia to assist it in integrating Verizons TRS division
into the Companys combined operations. Under this agreement, Stellar Nordia is acting as GoAmericas subcontractor, and is assuming facilities, employees, and operational responsibilities at the two primary
call centers associated with Verizons TRS division business. Although we have a good relationship with Stellar Nordia and are confident in its capabilities, if Stellar Nordia is unable to satisfactorily fulfill its obligations under the
managed services agreement, we will be required to provide these services, which would place increased demands on our resources.
As described under Item 1. Business of the Company, NECA could decrease its reimbursement rates in the future, which could materially adversely affect the
Company.
As a provider of telerelay services, the Company is reimbursed monthly from the federal TRS fund for
each IP relay and VRS conversation minute. The current IP relay rate is $1.293 per minute, and although this
rate has been established for three years through the 2009-2010 reimbursement year it is subject to an annual
0.5% reduction (among other fluctuating adjustments that may or may not raise the rates). The current
reimbursement rate for VRS, which is $6.77 per minute for the first 50,000 monthly minutes, $6.50 per minute for
monthly minutes between 50,001 and 500,000, and $6.30 per minute for monthly minutes above 500,000, has also been
established (subject to an annual 0.5% reduction) for the three-year period ending in the 2009-2010 reimbursement
year. Although these three-year reimbursement rate plans provide increased rate stability from year to year,
unanticipated changes to these rates by the FCC or decreases in future three-year reimbursement rates could
materially adversely affect our revenues.
We incurred significant debt in connection with acquiring Verizons TRS division and Hands On. The recent sub-prime mortgage financial crisis has resulted in increased
volatility in the capital markets, which could affect our ability to repay or refinance such indebtedness.
We financed the acquisition of Verizons TRS division through $33.5 million of equity financing and $30 million of senior secured debt
financing. We financed the acquisition of Hands On through $40 million of senior secured debt financing and $5 million of equity financing. The recent sub-prime mortgage financial crisis has resulted in increased
volatility in the capital markets. We cannot predict the effect such volatility, if it continues or increases, will have on our stock price in general or on our ability to repay or refinance the indebtedness we incurred in connection with these
acquisitions.
20
If the growth of the VRS market is less than what we anticipate, the Companys financial results could be adversely affected.
We anticipate significant growth in the VRS market, which currently represents the fastest growing form of telerelay service. If actual growth in this
market is less than what we anticipate, the Companys financial results could be adversely affected.
If we cannot attract and retain interpreters, our ability to provide VRS could be adversely affected.
The success of our VRS business depends on the availability of highly specialized interpreters. To the extent we are not able to attract and retain these
interpreters, our ability to provide V RS could be adversely affected.
We have historically incurred losses and these losses will continue in the foreseeable future.
GoAmerica has never earned a profit. We had net losses of $3.8 million, $2.0 million and $4.4 million for the years ended
December 31, 2007, 2006 and 2005, respectively. While we believe our acquisitions of Verizons TRS division and Hands On will enable us to achieve scale in IP relay and VRS in a quicker-to-market and more cost effective manner
than would be the case if GoAmerica were to grow these businesses, particularly the VRS business, organically, we can give no assurance that we will attain the type of revenue enhancements and cost savings necessary to achieve or sustain
our revenue or profit goals.
We may not achieve or sustain our revenue or profit goals, and our ability to do so depends on the factors specified elsewhere in Risk Factors as well as on a number of
factors outside of our control, including the extent to which:
-
our
competitors announce and develop, or to the extent permitted by
applicable
regulations
lower the prices of, competing services;
-
wireless
network carriers, data providers and manufacturers of mobile devices
dedicate
resources to selling our services or increase the costs of, or limit
the use of,
services
or devices that we purchase from them; and
-
The Federal Communications Commission reduces the per-minute reimbursement
rates for
relay services significantly.
As a result, we may not be able to increase revenue or achieve profitability on a quarterly or annual basis.
21
We may be unable to execute our business strategy.
Our business strategy is centered on the pursuit of certain priorities, centered on the offering of services to deaf or hard of hearing customers. These
priorities and the principal risks associated with each priority include:
-
Development
and marketing of new communications services, including branded
Internet
Protocol and Video Relay Services
.
To remain competitive in our primary
marketing
areas, we must continue to offer innovative products and services. We
will
be
limited in the extent to which we can focus upon technological development
by
capital
constraints, by the time that it takes to commercialize product
and service
concepts
and by the steps that may be taken by our competitors. In our rapidly
changing
environment, developments that appear to present significant advantages
may
become more broadly available or surpassed before we are able to
benefit from
our
development efforts. In recent years, our shortage of liquidity has required
us to
reduce
the amount of resources devoted to marketing.
-
Providing superior customer experience using in-house and outsourced support
functions.
Our business model will be materially adversely affected if we are unable
to offer a superior relay
service user experience and customer support to the users of
our relay services with high quality transmissions and highly competent
communications assistants handling their calls. In order to improve our operating
margins, we intend to cause
more of our relay calls to be handled in lower cost
countries outside of the U.S. To the extent we rely on third party technologies and
interpreters, the user experience with our services is highly dependent on their
respective performance. In the past, capital constraints have limited
our customer
support functions.
If we do not respond effectively to these risks, our business could be significantly and adversely affected.
We may need additional funds which, if available, could result in increased interest expenses or additional dilution to our stockholders. If additional funds are needed and are
not available, our business could be negatively impacted.
If we continue to operate unprofitably, if unanticipated contingencies arise or if new business opportunities are presented to us, it will be necessary for us
to raise additional capital either through public or private equity or debt financing to primarily finance the execution of our anticipated strategic initiatives. If our plans or assumptions change or are inaccurate regarding new lines of
business within our target market, timeliness and effectiveness of implementation of new services we expect to offer, and/or weakness or lack of appreciable growth in our core business, we may be required to seek additional
capital.
22
As a result of the acquisitions of Verizons TRS division and Hands On, control of the Company is concentrated in Clearlake Capital Group, L.P. and its
affiliates and certain former stockholders of Hands On, who own in the aggregate, assuming all of the Companys outstanding Series A Preferred Stock is converted into common stock, approximately 87.2% of the outstanding
shares of common stock of the Company. If funds are raised in the future through the issuance of equity securities, the percentage ownership of our then-current stockholders will be reduced further and the holders of new equity
securities may have rights, preferences or privileges senior to those of the holders of our common stock. If additional funds are raised through a bank credit facility or the issuance of debt securities, the holder of such
indebtedness would have rights senior to the rights of common stockholders and the terms of such indebtedness could impose restrictions on our operations. If we need to raise additional funds, we may not be able to do so on
terms favorable to us, or at all.
If additional capital is required but is not available on acceptable terms or at all, we may be required to sell or otherwise dispose of portions of
our business in order to sustain our operations and implement our new business plan. We may not be able to effect such sales on satisfactory terms, or at all.
We may acquire or make investments in companies or technologies that could cause loss of value to our stockholders and disruption of our business.
Subject to our capital constraints, we intend to continue to explore opportunities to acquire companies or technologies in the future, principally as
enhancements to our offerings of products and services to our deaf and hard of hearing customers. Entering into an acquisition entails many risks, any of which could adversely affect our business, including:
-
failure
to integrate the acquired assets and/or companies with our current business;
-
the
price we pay may exceed the value we eventually realize;
-
loss
of share value to our existing stockholders as a result of issuing equity
securities
as
part or all of the purchase price;
-
potential
loss of key employees from either our current business or the acquired
business;
-
entering
into markets in which we have little or no prior experience;
-
diversion
of managements attention from other business concerns;
-
assumption
of unanticipated liabilities related to the acquired assets; and
-
the business or technologies we acquire or in which we invest may have limited
operating histories, may
require substantial working capital, and may be subject to
many of the same risks we are.
23
We have limited resources and we may be unable to support effectively our operations.
We must continue to develop and expand our systems and operations in order to remain competitive. Our need to continually innovate has
placed, and we expect it to continue to place, significant strain on our managerial, operational and financial resources. We may be unable to develop and expand our systems and operations or implement our business plan for
one or more of the following reasons:
-
we
may not be able to retain at reasonable compensation rates qualified
engineers and
other
employees necessary to expand our capacity on a timely basis;
-
we
may not be able to dedicate the capital necessary to effectively develop
and
expand
our systems and operations; and
-
we may not be able to expand our customer service, billing and other related support
systems.
If we cannot manage our operations effectively, our business and operating results will suffer. Additionally, any failure on our part to develop and
maintain our services if we experience rapid growth could significantly adversely affect our reputation and brand name which could reduce demand for our services and adversely affect our business, financial condition and operating
results.
Our business prospects depend in part on our ability to maintain and improve our services as well as to develop new services.
We believe that our business prospects depend in part on our ability to maintain and improve our current services and to develop new services. Our
services will have to achieve market acceptance, maintain technological competitiveness and meet an expanding range of customer requirements. As a result of the complexities inherent in our service offerings,
major new services and service enhancements require long development and testing periods. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new services
and service enhancements. Additionally, our new services and service enhancements may not achieve market acceptance.
24
If we do not respond effectively and on a timely basis to rapid technological change, our business could suffer.
The communications industry is characterized by rapidly changing technologies, industry standards, customer needs and competition, as well
as by frequent new product and service introductions. We must respond to technological changes affecting both our customers and suppliers. We may not be successful in developing and marketing, on a timely and cost-effective
basis, new services that respond to technological changes, evolving industry standards or changing customer requirements. Our success will depend, in part, on our ability to accomplish all of the following in a timely and
cost-effective manner:
-
effectively
use and integrate new technologies;
-
continue
to develop our technical expertise;
-
enhance
our engineering and system design capabilities;
-
develop
applications for new networks and services;
-
develop
services that meet changing customer needs;
-
influence
and respond to emerging industry standards and other changes; and
-
advertise and market our services.
We depend upon carriers networks. If we do not have continued access to sufficient capacity on reliable networks, our business will suffer.
Our success partly depends on our ability to buy sufficient capacity on or offer our services over the networks of carriers and on the reliability and security
of their systems. We depend on these companies to provide uninterrupted and bug free service and would be adversely affected if they failed to provide the required capacity or needed level of service. In addition, although we
have some forward price protection in our existing agreements with certain carriers, we could be adversely affected if carriers were to increase the prices of their services significantly.
25
We depend on third parties for sales of certain of our products and services which could result in variable and unpredictable revenues.
We rely substantially on the efforts of others to sell many of our communications products and services. Should our relationships with
distribution parties cease or be less successful than anticipated, our business, results of operations, and financial condition would be materially adversely affected. While we monitor the activities of our distributors and resellers, we
cannot control how those who sell and market our products and services perform and we cannot be certain that their performance will be satisfactory. If the number of customers we obtain through these efforts is substantially
lower than we expect for any reason, this would have a material adverse effect on our business, operating results and financial condition.
We depend on retaining key personnel. The loss of our key employees and the inability to recruit talented new personnel could materially adversely affect our
business.
Due to the technical nature of our services and the dynamic market in which we compete, our performance depends on retaining and hiring
certain key employees, including technically proficient personnel. Competitors and others have recruited our employees in recent years as we have found it necessary to implement cost controls that have reduced the
attractiveness of employment with us. An important part of our compensation to our key employees is in the form of stock option and/or restricted stock grants. The uncertainty associated with our stock price may
make it difficult for us to attract and retain qualified personnel.
Systems failures could harm our business by injuring our reputation or causing relay service users to use competitors services or lead to claims of
liability for unsecured transmission of data.
Our existing network services are dependent on near immediate, continuous feeds from various sources. The ability of our subscribers to quickly
access data requires timely and uninterrupted connections with our network carriers. Any significant disruption from our backup landline feeds could result in delays in our subscribers ability to receive such information. In
addition, our systems could be disrupted by unauthorized access, computer viruses and other accidental or intentional actions. A significant barrier to the growth of electronic commerce has been the need for secure and reliable
transmission of confidential information. We may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by such breaches. If a third party were able to misappropriate our
subscribers personal or proprietary information or credit card information, we could be subject to claims, litigation or other potential liabilities that could materially adversely impact our business. There can be no
assurance that our systems will operate appropriately if we experience a hardware or software failure. A failure in our systems could cause delays in transmitting data and, as a result, we may lose customers or face
litigation that could materially adversely affect our business.
26
An interruption in the supply of products and services that we obtain from third parties could cause a decline in sales of our services.
In designing, developing and supporting our services, we rely on carriers, mobile device manufacturers, content providers and software providers.
These suppliers may experience difficulty in supplying us products or services sufficient to meet our needs or they may terminate or fail to renew contracts for supplying us these products or services on terms we find
acceptable. Any significant interruption in the supply of any of these products or services could cause a decline in sales of our services, unless and until we are able to replace the functionality provided by these products and services. We also
depend on third parties to deliver and support reliable products, enhance their current products, develop new products on a timely and cost-effective basis and respond to emerging industry standards and other technological
changes.
We may face increased competition which may negatively impact our prices for our services or cause us to lose business opportunities.
The market for our services is becoming increasingly competitive. The widespread adoption of industry standards may make it easier for
new market entrants and existing competitors to introduce services that compete against ours. We developed our solutions using standard industry development tools. Many of our agreements with carriers, device
manufacturers and data providers are non-exclusive. Our competitors may use the same products and services in competition with us. With time and capital, it would be possible for competitors to replicate our
services and offer similar services at a lower price. We compete primarily on the basis of the functionality, breadth, quality and price of our services. Our current and potential competitors include:
-
relay
providers such as AT&T, Sprint Nextel, Sorenson, Hamilton and
Communications
Services for the Deaf; and
-
wireless carriers, such as Cingular, Sprint Nextel and T-Mobile, and distributors such
as RACO, WirelessRain and
Venecom
Many of our existing and potential competitors have substantially greater financial, technical, marketing and distribution resources than we do.
Additionally, many of these companies have greater name recognition and more established relationships with our target customers. Furthermore, these competitors may be able to adopt more aggressive
pricing policies and offer customers more attractive terms than we can. In addition, we have established strategic relationships with many of our potential competitors. In the event such companies decide to compete
directly with us, such relationships would likely be terminated, which could have a material adverse effect on our business and reduce our market share or force us to lower prices to unprofitable levels.
27
Our intellectual property rights may not be adequately protected under the current state of the law.
We rely primarily on trade secret laws, copyright law, trademark law, unfair competition law and confidentiality agreements to protect our
intellectual property. To the extent that our technology is not adequately protected by intellectual property law, other companies could develop and market similar products or services which could materially adversely affect our
business.
We may be sued by third parties for infringement of their proprietary rights and we may incur defense costs and possibly royalty obligations or lose the right to use
technology important to our business.
The telecommunications and software industries are characterized by protection and vigorous enforcement of applicable intellectual property
rights. As the number of participants in our market increases, the possibility of an intellectual property claim against us increases. Any intellectual property claims, with or without merit, could be time
consuming and expensive to litigate or settle and could divert management attention from administering our business. A third party asserting infringement claims against us or our customers with respect to our
current or future products may materially adversely affect us by, for example, causing us to enter into costly royalty arrangements or forcing us to incur settlement or litigation costs.
We may be subject to liability for transmitting certain information, and our insurance coverage may be inadequate to protect us from this
liability.
We may be subject to claims relating to information transmitted over systems we develop or operate. These claims could take the
form of lawsuits for defamation, negligence, copyright or trademark infringement or other actions based on the nature and content of the materials. Although we carry general liability insurance, our insurance may not
cover potential claims of this type or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liability that may be imposed.
28
Our quarterly operating results are subject to significant fluctuations and, as a result, period-to-period comparisons of our results of operations are not necessarily
meaningful.
Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors. These factors include:
-
the demand for and market acceptance of our services;
-
downward price adjustments by our competitors on services they offer that are similar
to ours;
-
changes in the mix of services sold by our competitors;
-
technical difficulties or network downtime;
-
the ability to meet any increased technological demands of our customers; and
-
economic conditions specific to our industry.
Therefore, our operating results for any particular quarter may differ materially from our expectations or those of security analysts and
may not be indicative of future operating results. The failure to meet expectations may cause the price of our common stock to decline.
If we fail to manage growth effectively, our business could be disrupted which could harm our operating results.
If we are successful in implementing our business plan and experience growth in our business, it will be necessary for us to expand our workforce and
to train, motivate and manage additional employees and/or contractors as the need for additional personnel arises. Our personnel, systems, procedures and controls may not be adequate to support our future operations. Any
failure to effectively manage future growth could have a material adverse effect on our business.
We are vulnerable to circumstances outside of our control which could seriously disrupt our business.
Our software, as well as any ancillary hardware, is vulnerable to damage or interruption from:
-
fire, flood, and other natural disasters;
-
power loss, computer systems failures, Internet and telecommunications or data
network failure, operator
negligence, improper operation by or supervision of
employees, physical and electronic loss of data or security breaches,
misappropriation, and similar events; and
-
computer viruses.
Any disruption in the operation of our software, the loss of employees knowledgeable about such software, or our failure to continue to effectively
modify and upgrade such software could interrupt our operations or interfere with our ability to provide service to our customers, which could result in reduced sales and affect our operations and financial performance.
29
Risks Particular To Our Industry
The market for our services is new and highly uncertain.
The market for communications services serving deaf and hard-of-hearing persons has grown rapidly in recent years and the number and variety
of competitive services is significant. Maintaining FCC certification has a material impact on our financial results. Current barriers to market acceptance of these services include cost, reliability, functionality and ease of
use. Based on these factors and competitive aspects of the market, we cannot be certain of initial or continuing market acceptance of our services. If the market for our services does not grow or grows slower than we currently
anticipate, our business, financial condition and operating results could be materially adversely affected.
New laws and regulations that impact our industry could materially adversely affect our business.
As described elsewhere in Risk Factors, aspects of our relay business are subject to direct regulation and decisions by the FCC which could materially
adversely affect our business. In addition, the carriers who supply us with network access are subject to regulation by the FCC and regulations that affect them could materially adversely affect our business. Our business could suffer
significantly depending on the extent to which our activities or those of our customers or suppliers are regulated.
In particular, the FCC recently issued an order requiring telerelay service providers to provide
appropriate call routing for emergency calls (E911) within 30 days of the orders publication in the Federal
Register, and if the Company is unable to comply with this requirement by the compliance deadline, we may be
subject to materially adverse FCC action. In addition, the FCCs November 19, 2007 declaratory ruling may be
interpreted to prohibit some or all of the Companys marketing activities and direct customer contact. On March
17, 2008, the Company filed a petition for review in the United States Court of Appeals for the District of
Columbia Circuit challenging this declaratory ruling. However, if the Companys challenge is unsuccessful, our
potential inability to market our services or to contact our customers could materially adversely affect our
revenues.
We currently do not collect sales or other taxes with respect to the sale of services or products in states and countries where we believe we are not required to do so.
We do collect sales and other taxes in the State in which we have an office and are required by law to do so. One or more jurisdictions have sought to
impose sales other tax obligations on companies that engage in online commerce within their jurisdictions. A successful assertion by one or more jurisdictions that we should collect sales or other taxes on our products and
services, or remit payment of sales and other taxes for prior periods, could have a material adverse effect on our business, financial condition or results of operations.
Any new legislation or regulation that may be adopted by the United States Congress to regulate the Internet, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to our business, could have a material adverse effect on our business.
30
The steps taken by us to protect our intellectual property may not prove sufficient to prevent misappropriation of our technology or to deter independent third party
development of similar technologies. In addition, the laws of certain foreign countries may not protect our technologies or intellectual property rights to the same extent as do the laws of the United States. We also rely on
certain technologies that we license from third parties and these third party technologies may not continue to be available to us on commercially attractive terms.
The loss of the ability to use certain technology or intellectual property could require us to obtain the rights to use substitute technology, which could be
more expense or offer lower quality or performance, and therefore have a material adverse effect on our business, financial condition or results of operations. Third parties could claim infringement by us with respect to
current or future technology. We expect that we and other participants in our markets will be increasingly subject to infringement claims as the number of services and competitors in our industry segment grows. Any such
claim, whether meritorious or not, could be time consuming, result in costly litigation, cause service or installation interruptions or require us to enter into royalty or licensing agreements. Such royalty or licensing
agreements might not be available on terms acceptable to us or at all. As a result, any such claim could have a material adverse effect on our business, financial condition or results of operations.
Risks Particular To Stock Price
Our stock price, like that of many technology companies, has been and may continue to be volatile.
We expect that the market price of our common stock will fluctuate as a result of variations in our quarterly operating results and other factors
beyond our control. These fluctuations may be exaggerated if the trading volume of our common stock is low. In addition, due to the technology-intensive and emerging nature of our business, the market price of our
common stock may rise and fall in response to a variety of factors, including:
-
announcements of technological or competitive developments;
-
acquisitions or strategic alliances by us or our competitors;
-
the gain or loss of a significant customer or order;
-
changes in estimates of our financial performance or changes in recommendations by
securities analysts
regarding us or our industry; or
-
general market or economic conditions.
This risk may be heightened because our industry is new and evolving, characterized by rapid technological change and susceptible to the introduction of
new competing technologies or competitors.
31
In addition, equity securities of many technology companies have experienced significant price and volume fluctuations. These price and
volume fluctuations often have been unrelated to the operating performance of the affected companies. Volatility in the market price of our common stock could result in securities class action litigation. This type of
litigation, regardless of the outcome, could result in substantial costs and a diversion of managements attention and resources.
As mentioned elsewhere under Risk Factors, the recent sub-prime mortgage crisis has resulted in volatility in the capital markets, and we
cannot predict the effect such volatility, if it continues or increases, will have on our stock price.
Ownership of our common stock is concentrated in a few holders who are in a position to control substantially all significant corporate transactions we may
consider.
As a result of the acquisitions of Verizons TRS division and Hands On, control of the Company is concentrated in Clearlake Capital Group, L.P. and its
affiliates and certain former stockholders of Hands On, who own in the aggregate, assuming all of the Companys outstanding Series A Preferred Stock is converted into common stock, approximately 87.2% of the outstanding
shares of common stock of the Company. As a result of their stock ownership, these stockholders are in a position to control substantially all significant corporate transactions we may consider in the future.
Our ability to issue additional shares of preferred stock and common stock in the future may be construed as having an anti-takeover effect.
The issuance in the future of additional authorized shares of preferred stock or common stock, which our restated certificate of incorporation
permits us to do, may have the effect of diluting the earnings per share and book value per share, as well as the stock ownership and voting rights, of the currently outstanding shares of our common stock. In addition, the
existence of authorized, but unissued, shares of our preferred stock and common stock may be construed as having an anti-takeover effect. We could, subject to the boards fiduciary duties and applicable law, issue such authorized
shares to purchasers who might oppose a hostile takeover bid. Such a use of these additional authorized shares could render more difficult, or discourage, an attempt to acquire control of us through a transaction opposed by the
board.
We do not intend to pay dividends on our common stock.
We have never paid or declared any cash dividends on our common stock or other securities and intend to retain any future earnings to finance the
development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares
unless they sell them. Holders of our Series A Preferred Stock receive cumulative dividends. To the extent that such dividends are not paid in cash to the holders of Series A Preferred Stock, further dilution may occur to our holders
of common stock upon the conversion of the accrued and unpaid dividends into shares of common stock.
32
Item
1B. Unresolved Staff Comments
Not
applicable.
Item
2. Properties.
We own no real property. We lease office space located at 433 Hackensack Avenue in Hackensack, New Jersey, consisting of approximately 10,000 square
feet that we lease through December 2009 and Rocklin, California, consisting of approximately 23,800 square feet that we lease through July 2009. We also lease small suites in Schaumburg, Illinois, Oakland, San Diego, Long Beach and Temecula, California, Vancouver, Washington, Salem/Portland, Oregon and Washington, D.C., each
less than 2,500 square feet, as call centers for our video relay service. We believe that our current facilities or other readily available facilities are adequate to support our existing operations
.
Item 3. Legal Proceedings.
On September 22, 2004, Boundless Depot, LLC (Boundless Depot) and Scott Johnson, one of two Boundless Depot shareholders, sued GoAmerica and Wynd
Communications in the Superior Court of the State of California for the County of Los Angeles, claiming damages of one million dollars for GoAmericas refusal to pay Boundless Depot unattained contingent consideration,
consisting of cash and/or GoAmerica Common Stock, with respect to the Asset Purchase Agreement dated as of February 8, 2003 (the Deafwireless Agreement), pursuant to which GoAmerica and Wynd Communications
acquired certain Deafwireless assets. The total value of such contingent consideration, if all contingencies had been fully met and amounts paid immediately thereupon, would not have exceeded $211,000; however, we do not
believe any of the contingent consideration is owed to Boundless Depot or either of its shareholders since conditions of the Deafwireless Agreement were not met and we incurred costs for which we are entitled to receive
reimbursement from Boundless Depot or offset against any amounts that may become payable to Boundless Depot. Upon petition by GoAmerica and Wynd Communications, the Court has ordered this matter into
arbitration, which was scheduled for February 2006 and later deferred due to settlement discussions. The plaintiffs have not moved to reschedule the arbitration proceeding. We intend to defend this action vigorously and may elect to
pursue counterclaims.
33
On May 2, 2005, we entered into a loan agreement with Hands On Video Relay Services, Inc., a Delaware corporation, and Hands On Sign Language Services, Inc., a California corporation
(collectively, Hands On). Pursuant to that agreement, all amounts that we advanced to Hands On were secured, initially, by the assets acquired with such funds with interest at a defined prime rate. On July 6, 2005, we entered into a
merger agreement with the Hands On Entities and their principal shareholders (collectively, Hands On). On March 7, 2006, we announced our determination not to pursue the proposed merger with Hands On. As a result of
the merger agreement termination, Hands Ons repayment obligations under the loan agreement began July 1, 2006. After we received all such payments due through September 30, 2006, Hands On ceased making
payments due. In December 2006, we commenced litigation against Hands On, seeking recovery of approximately $562,000. In April 2007, we executed a settlement agreement and mutual release related to our
litigation with Hands On in exchange for an immediate $400,000 cash payment, termination of litigation, mutual release of all loan- and merger-related claims (asserted and otherwise), and other consideration.
On January 10, 2008, the Company acquired Hands On (see Item 1. Business of the Company).
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on December 13, 2007. The matters voted upon at the Annual Meeting and the voting results were as
follows:
(a)
Shares
were voted as follows with respect to proposal 1(a), the acquisition by
GoAmerica
|
of
Verizons TRS division:
|
|
|
|
|
|
|
|
|
|
|
|
For:
1,696,414
|
|
Against:
35,748
|
|
Abstentions:
3,134
|
|
Broker
Non-Votes:
661,268
|
|
|
|
(b)
Shares
were voted as follows with respect to proposal 1(b), the adoption of the
TRS
|
amended
and restated certificate of incorporation:
|
|
|
|
|
|
|
|
|
|
For:
1,695,974
|
|
Against:
36,126
|
|
Abstentions:
3,195
|
|
Broker
Non-Votes:
661,269
|
|
|
|
(c)
Shares
were voted as follows with respect to proposal 2(a), GoAmericas
acquisition of
|
Hands
On pursuant to a merger agreement:
|
|
|
|
|
|
|
|
|
|
For:
1,690,339
|
|
Against:
42,027
|
|
Abstentions:
2,930
|
|
Broker
Non-Votes:
661,268
|
|
|
|
(d)
Shares
were voted as follows with respect to proposal 2(b), the adoption of the
Hands On
|
amended
and restated certificate of incorporation:
|
|
|
|
|
|
|
|
|
|
For:
1,694,878
|
|
Against:
36,384
|
|
Abstentions:
4,033
|
|
Broker
Non-Votes:
661,269
|
34
(e) Shares
were voted as follows with respect to proposal 2(c), the issuance of 967,118
shares of Series A Preferred Stock to partially fund the Hands On merger:
For:
296,228
|
|
Against:
0
|
|
Abstentions:
0
|
|
Broker Non-Votes:
0
|
(f)
Shares were voted as follows with respect to proposal 3, the approval of certain
amendments to the Companys 2005 Equity Compensation
Plan:
For:
1,463,183
|
|
Against:
231,300
|
|
Abstentions:
40,812
|
|
Broker
Non-Votes:
661,269
|
(g)
With respect to proposal 4(a), the following number
of shares were voted for, and the following number of shares withheld authority
for, the following persons for election of two Class A directors:
Director
|
|
For
|
|
Authority
Withheld
|
Joseph
Korb
|
|
2,365,410
|
|
31,154
|
Janice
Dehesh
|
|
2,362,115
|
|
34,449
|
(h)
Shares were voted as follows with respect to proposal
4(b), the election of Behdad Eghbali as a Series A Preferred Stock director:
For:
296,228
|
|
Authority
Withheld:
0
|
(i)
Shares were voted as follows with respect to proposal 5, the possible adjournment
of the annual meeting if necessary to solicit additional proxies if there
are insufficient votes at the time of the meeting to approve the proposals
related to the acquisition of Verizons TRS division or the Hands On merger:
For:
2,346,214
|
|
Against:
41,846
|
|
Abstentions:
8,504
|
|
Broker
Non-Votes:
0
|
35
Accordingly, all proposals were approved. Upon the Companys closings on January 10, 2008 of its asset purchase of the Verizon Telecommunications Relay Services (TRS) division and its merger with Hands On Video Relay Services, Inc., Sue Decker, Joseph Korb, Janice Dehesh and David Lyons submitted their resignations from GoAmericas board of directors, and Steven C. Chang, Steven Eskenazi, Bill McDonagh and Edmond Routhier were appointed to GoAmericas board of directors. King Lee resigned from, and Christopher Gibbons was appointed to, the board on March 20, 2008. Accordingly, GoAmericas board of directors currently consists of Aaron Dobrinsky, Daniel R. Luis, Behdad Eghbali, Steven C. Chang, Steven Eskenazi, Bill McDonagh, Edmond Routhier and Christopher Gibbons.
Item 4A. Executive Officers of the Registrant
The following table identifies the current executive officers of the Company:
NAME
|
|
AGE
|
|
CAPACITIES
IN
WHICH SERVING
|
|
IN
CURRENT
POSITION
SINCE
|
Daniel
R. Luis
|
|
41
|
|
Chief
Executive Officer and Director
|
|
2003
|
Edmond
Routhier
|
|
40
|
|
President, Vice Chairman
|
|
2008
|
Donald
Barnhart
|
|
50
|
|
Senior
V.P., and Secretary
|
|
2004
|
Jesse
Odom
|
|
41
|
|
Senior
Vice President
|
|
2000
|
Daniel Luis joined our Board of Directors in January 2003 at the time he was elected our Chief Executive Officer. He previously served as our President and Chief Operating Officer from May 2002 until January 2003. Mr. Luis is also President and Chief Executive Officer of Wynd Communications Corporation, which became a wholly owned subsidiary of GoAmerica in June 2000. Mr. Luis joined Wynd in 1994 and has held his current positions with Wynd since 1998.
Edmond Routhier joined Hands On as its President on September 2006. Prior to joining Hands On, Mr. Routhier was Managing Member of Caymus Investment Group, which makes private equity and debt investments. Mr. Routhier served as the chief executive officer of Sportsuniverse, Inc., an application service provider for a patented channel management software solution, from 1997 to 1999. In 1999, Sportsuniverse, Inc. was acquired by Fogdog.com, which went public in December 1999. Prior to joining Sportsuniverse, Inc. and Fogdog.com, from 1992 to 1997, Mr. Routhier was founder and chief executive officer of RockN Tacos, Inc., the parent company of RockN Tacos, JuiceGym and Rojoz Restaurants. RockN Tacos, Inc. was sold in 1997.
36
Donald Barnhart joined GoAmerica in 1999 and became its Vice President and Controller in 2000. He was appointed Chief Financial Officer in March 2004
and served in that capacity until January 2008. Mr. Barnhart currently serves as Senior Vice President. Prior to joining GoAmerica, Mr. Barnhart was employed by Bogen Communications (a telecommunications
manufacturer) as its Accounting Manager and operated his own accounting and consulting firm. Mr. Barnhart is a CPA in New Jersey and is a graduate of Rutgers University.
Jesse Odom joined GoAmerica in 1996 as Vice President of Network Operations. He was appointed Chief Technology Officer in November 2000 and
served in that capacity until January 2008. Mr. Odom currently serves as Senior Vice President.
None of our executive officers is related to any other executive officer or to any director of the Company.
37
PART II
Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for our Common Stock
Our common stock traded on the Nasdaq National Market from our initial public offering in April 2000 until August 28, 2002, at which time our listing moved to the Nasdaq Capital Market, where it continues to trade under the symbol GOAM.
The following table sets forth the high and low sales prices for our common stock for the quarters indicated as reported on the Nasdaq National Market and Nasdaq Capital Market.
|
Quarter
Ended
|
|
High
|
Low
|
|
|
|
|
|
March
31, 2006
|
|
$5.46
|
|
$3.31
|
|
|
June
30, 2006
|
|
$5.68
|
|
$2.75
|
|
|
September
30, 2006
|
|
$3.71
|
|
$2.75
|
|
|
December
31, 2006
|
|
$10.87
|
|
$3.09
|
|
|
March
31, 2007
|
|
$10.30
|
|
$6.10
|
|
|
June
30, 2007
|
|
$6.93
|
|
$5.06
|
|
|
September
30, 2007
|
|
$6.16
|
|
$4.86
|
|
|
December
31, 2007
|
|
$7.24
|
|
$5.23
|
|
As of March 24, 2008, the approximate number of holders of record of our common stock was 100 and the approximate number of beneficial holders of our common stock was approximately 15,000.
The following table gives information about the Companys Common Stock that may be issued upon the exercise of options, warrants and rights under the GoAmerica, Inc. 1999 Stock Plan, the GoAmerica Communications Corp. 1999 Stock Option Plan and the GoAmerica, Inc. 2005 Equity Compensation Plan as of December 31, 2007. These plans were the Companys only equity compensation plans in existence as of December 31, 2007.
|
|
|
|
|
|
(c)
Number
of Securities
Remaining
Available
for
Future
Issuance Under Equity
Compensation
Plans
(Excluding
Securities
Reflected
in
Column
(a))
|
|
|
(a)
Number
Of Securities to be
Issued
Upon Exercise of
Outstanding
Options,
Warrants
and Rights
|
|
(b)
Weighted-Average
Exercise
Price
of Outstanding
Options,
Warrants and
Rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plans
|
|
|
|
|
|
|
Approved
by
|
|
|
|
|
|
|
Shareholders
|
|
165,149
|
|
$44.01
|
|
1,632,500
|
|
|
|
|
|
|
|
Equity
Compensation Plans
|
|
|
|
|
|
|
Not
Approved by
|
|
|
|
|
|
|
Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
165,149
|
|
$44.01
|
|
1,632,500
|
38
Related Stockholder Matters
We have never declared or paid any cash dividends on our common stock. We intend to retain earnings, if any, to fund future growth and the operation
of our business. Holders of our Series A Preferred Stock are entitled to receive cumulative dividends. To the extent that such dividends are not paid in cash to the holders of Series A Preferred Stock the accrued and unpaid dividends can be
converted into shares of common stock.
Item 6. Selected Consolidated Financial Data.
The selected consolidated financial data set forth below with respect to our statement of operations data for the years ended December 31, 2007, 2006
and 2005, and with respect to the consolidated balance sheet data at December 31, 2007 and 2006 are derived from and are qualified by reference to our audited consolidated financial statements and related notes thereto presented
elsewhere herein. Our selected consolidated statement of operations data for the years ended December 31, 2004 and 2003 and consolidated balance sheet data as of December 31, 2005, 2004 and 2003 are derived from audited
consolidated financial statements not included in this Annual Report on Form 10-K. The selected consolidated financial data set forth below should be read in conjunction with, and is qualified in its entirety by, our audited consolidated
financial statements and related notes thereto and Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations, which are included elsewhere in this Annual Report on Form 10-K.
39
|
Years Ended
December 31,
|
|
(In thousands,
except for share and per share data)
|
|
2007
|
2006
|
2005
|
2004
|
2003
|
Consolidated Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Relay
services
|
$16,325
|
|
$ 8,695
|
|
$
1,261
|
|
$
|
|
$
|
|
Subscriber
|
1,106
|
|
1,190
|
|
2,348
|
|
5,588
|
|
10,108
|
|
Commissions
|
711
|
|
2,454
|
|
755
|
|
|
|
|
|
Equipment
|
431
|
|
429
|
|
442
|
|
181
|
|
1,042
|
|
Other
|
52
|
|
8
|
|
125
|
|
260
|
|
728
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
18,625
|
|
12,776
|
|
4,931
|
|
6,029
|
|
11,878
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
Cost
of relay services
|
10,538
|
|
5,320
|
|
|
|
|
|
|
|
Cost
of subscriber revenue
|
1,068
|
|
845
|
|
967
|
|
2,539
|
|
2,669
|
|
Cost
of equipment revenue
|
944
|
|
536
|
|
585
|
|
260
|
|
1,152
|
|
Cost
of network operations
|
116
|
|
110
|
|
231
|
|
733
|
|
1,828
|
|
Sales
and marketing
|
2,293
|
|
2,494
|
|
1,166
|
|
597
|
|
1,072
|
|
General
and administrative
|
7,405
|
|
4,589
|
|
4,777
|
|
5,411
|
|
9,617
|
|
Research
and development
|
547
|
|
359
|
|
363
|
|
507
|
|
1,209
|
|
Depreciation
and amortization of fixed assets
|
356
|
|
362
|
|
485
|
|
804
|
|
1,912
|
|
Amortization
of other intangibles
|
|
|
|
|
639
|
|
682
|
|
1,081
|
|
Impairment
of goodwill
|
|
|
|
|
|
|
|
|
193
|
|
Impairment
of other long-lived assets
|
|
|
|
|
|
|
|
|
1,202
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
23,267
|
|
14,615
|
|
9,213
|
|
11,533
|
|
21,935
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
(4,642)
|
|
(1,839
|
)
|
(4,282
|
)
|
(5,504
|
)
|
(10,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
Terminated
merger costs
|
|
|
(490
|
)
|
|
|
|
|
-
|
|
Gain
on sale of subscribers
|
|
|
|
|
|
|
|
|
1,756
|
|
Settlement
losses, net
|
(162
|
)
|
|
|
|
|
1,494
|
|
85
|
|
Interest
(expense) income, net
|
(106
|
)
|
169
|
|
160
|
|
(944
|
)
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
(268
|
)
|
(321
|
)
|
160
|
|
550
|
|
1,566
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit from income
taxes
|
(4,910
|
)
|
(2,160
|
)
|
(4,122
|
)
|
(4,954
|
)
|
(8,491
|
)
|
Income tax benefit, net
|
1,210
|
|
789
|
|
764
|
|
732
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
(3,700
|
)
|
(1,371
|
)
|
(3,358
|
)
|
(4,222
|
)
|
(8,207
|
)
|
Loss from discontinued operations
|
|
|
(589
|
)
|
(1,014
|
)
|
(222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(3,700
|
)
|
(1,960
|
)
|
(4,372
|
)
|
(4,444
|
)
|
(8,207
|
)
|
Preferred dividends
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common
stockholders
|
$
(3,750
|
)
|
$(1,960
|
)
|
$(4,372
|
)
|
$ (4,444
|
)
|
$
(8,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share-basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
$ (1.68
|
)
|
$
(0.65
|
)
|
$
(1.61
|
)
|
$ (2.37
|
)
|
$(12.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
$
|
|
$
(0.28
|
)
|
$
(0.48
|
)
|
$
(0.12
|
)
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
share
|
$
(1.68
|
)
|
$ (0.93
|
)
|
$ (2.09
|
)
|
$
(2.49
|
)
|
$(12.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in
computation of basic and diluted net loss per share
|
2,239,080
|
|
2,105,184
|
|
2,093,445
|
|
1,785,403
|
|
678,240
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
As
of December 31,
|
|
(In
thousands)
|
|
2007
|
2006
|
2005
|
2004
|
2003
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$2,368
|
|
$3,870
|
|
$4,804
|
|
$7,098
|
|
$568
|
|
Working capital (deficit)
|
(3,918
|
)
|
3,617
|
|
4,810
|
|
8,530
|
|
(2,656
|
)
|
Total assets
|
18,298
|
|
13,879
|
|
14,075
|
|
17,986
|
|
12,965
|
|
Total stockholder
s
equity
|
9,552
|
|
11,061
|
|
12,498
|
|
16,814
|
|
7,142
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The results shown in this Annual Report on Form 10-K are not necessarily indicative of the results we will achieve in any future periods.
Overview
GoAmerica
®
is a communications service provider, offering solutions primarily for consumers who are deaf, hard of hearing and/or speech impaired, including Internet relay services, wireless subscription and value added services, and wireless devices and accessories. On January 10, 2008, the Company acquired (1) certain assets of the Telecommunications Relay Services (TRS) division of MCI Communications Services, Inc. (Verizon), a leading provider of relay services transactions, and (2) Hands On Video Relay Services, Inc., a California-based provider of video relay and interpreting services. Our i711.com
telecommunications relay service was launched in March 2005 and enables people who are deaf or hard of hearing to
call and
converse with hearing parties by using a computer, wireless handheld device or similar unit, through an operator that interprets text to voice and vice versa. In addition, during December 2006, we began offering our i711 Video Relay Service (VRS), the newest member of the i711.com family of relay services. i711 VRS enables people who are deaf to use sign language to communicate with hearing people using a Windows computer, a web camera, and a broadband Internet connection. We sell wireless devices and services directly to customers and indirectly through sub-dealers. We have a dealer agreement with T-Mobile whereby we sell devices and earn a commission, also called a bounty, upon activation of the device with an associated service rate plan. GoAmerica continues to support customers who use our proprietary software technology called Go.Web
.
In September 2006, we entered into an agreement to sell GoAmerica Marketing, Inc., dba GA Prepaid (GA Prepaid), our prepaid calling card division, effective as of August 31, 2006. The sale closed on October 2, 2006.
41
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. We have incurred operating losses since our inception. We will need to significantly improve our overall gross margins, and further reduce our selling, general and administrative expenses, as a percentage
of revenue, to become profitable and sustain profitability on a quarterly or annual basis. We will seek to accomplish this through the successful integration of our acquired businesses.
We began providing relay services in March 2005. Revenue from relay services is recognized as revenue when services are provided or earned. Relay services
revenue accounted for approximately 87.7%, 68.1% and 25.6% of our total revenue during 2007, 2006 and 2005, respectively. In June 2006, the FCC granted certification allowing us to bill a third party administrator directly for service
usage as opposed to submitting through a third party provider as in prior periods.
Our subscriber revenue primarily consists of monthly service fees, which we recognize as revenue when the services are provided to the subscriber.
Subscriber revenue accounted for approximately 5.9%, 9.3% and 47.6% of our total revenue during 2007, 2006 and 2005, respectively. This revenue historically has declined as a percentage of total revenue due to the introduction and growth of our
relay services and declines in our subscriber base. We anticipate subscription revenues to decline further as we do not intend to concentrate marketing efforts on these services.
Revenue from commissions is recognized upon activation of subscribers on behalf of third party wireless network providers. Commission
revenue accounted for approximately 3.8%, 19.2% and 15.3% of our total revenue during 2007, 2006 and 2005, respectively. Declines in revenue from commissions is a result of our increased focus on relay service
offerings.
We also typically sell third-party mobile devices in conjunction with a service agreement to a new subscriber. Equipment revenue accounted for
approximately 2.3%, 3.4% and 9.0% of our total revenue during 2007, 2006 and 2005, respectively. We recognize equipment revenue at the time of the shipment of the mobile device to a subscriber.
In addition, we historically have generated other revenue which consists of consulting services relating to the development and implementation of
wireless data systems for certain corporate customers. We did not generate revenues from professional services during 2007 and do not anticipate generating revenues from professional services during 2008.
42
Our sales and marketing expenses consist primarily of compensation and related costs for marketing personnel, advertising and
promotions, travel and entertainment and other related costs. We expect sales and marketing expenses to increase during 2008 as compared to 2007 as we expand our user base for both our video and telecommunication relay
services through our January 10, 2008 acquisitions. Our general and administrative expenses consist primarily of compensation and related costs for general corporate and business development, along with rent and other related
costs. We expect general and administrative expenses to increase. Our research and development expenses consist primarily of compensation and related costs and professional service fees. Depreciation and amortization
expenses consist primarily of depreciation expenses arising from equipment purchased for our network operations center and other property and equipment purchases.
Net interest expense consists primarily of interest incurred on debt and is partially offset by interest earned on cash and cash equivalents. We expect net
interest expense to increase during 2008 as a result of the debt raised by the Company to partially fund our January 10, 2008 acquisitions.
Critical Accounting Policies and Estimates
Managements Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States of America. 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 and note receivable and recoverability of our goodwill and other 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.
43
Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements. Recently, we have derived our revenue primarily from relay services. Revenue from relay services is recognized as revenue when services are provided or earned.
Subscriber revenue consists primarily of monthly charges for access and usage and is recognized as the services are provided. Equipment revenue is recognized upon shipment to the end user. Revenue from commissions
is recognized upon activation of subscribers on behalf of third party wireless network providers. We estimate the collectibility of our trade and note 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 current market conditions. In assessing the recoverability of our goodwill, other intangibles and other long-lived assets, 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.
44
Results of Operations
The following table sets forth, for the years ended December 31, 2007, 2006, and 2005, the percentage relationship to net revenues of certain items included in the Companys consolidated statements of operations.
(In thousands)
|
2007
|
2006
|
2005
|
|
|
|
$
|
%
|
$
|
%
|
$
|
%
|
Revenues:
|
|
|
|
Relay
services
|
$16,325
|
|
87.7
|
|
$ 8,695
|
|
68.0
|
|
$ 1,261
|
|
25.6
|
|
Subscriber
|
1,106
|
|
5.9
|
|
1,190
|
|
9.3
|
|
2,348
|
|
47.6
|
|
Commissions
|
711
|
|
3.8
|
|
2,454
|
|
19.2
|
|
755
|
|
15.3
|
|
Equipment
|
431
|
|
2.3
|
|
429
|
|
3.4
|
|
442
|
|
9.0
|
|
Other
|
52
|
|
0.3
|
|
8
|
|
0.1
|
|
125
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,625
|
|
100.0
|
|
12,776
|
|
100.0
|
|
4,931
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
Cost
of relay services
|
10,538
|
|
56.6
|
|
5,320
|
|
41.7
|
|
|
|
|
|
Cost
of subscriber revenue
|
1,068
|
|
5.7
|
|
845
|
|
6.6
|
|
967
|
|
19.6
|
|
Cost
of equipment revenue
|
944
|
|
5.1
|
|
536
|
|
4.2
|
|
585
|
|
11.9
|
|
Cost
of network operations
|
116
|
|
0.6
|
|
110
|
|
0.9
|
|
231
|
|
4.7
|
|
Sales
and marketing
|
2,293
|
|
12.3
|
|
2,494
|
|
19.5
|
|
1,166
|
|
23.6
|
|
General
and administrative
|
7,405
|
|
39.8
|
|
4,589
|
|
35.9
|
|
4,777
|
|
96.8
|
|
Research
and development
|
547
|
|
2.9
|
|
359
|
|
2.8
|
|
363
|
|
7.4
|
|
Depreciation
and amortization
|
356
|
|
1.9
|
|
362
|
|
2.8
|
|
485
|
|
9.8
|
|
Amortization
of other intangibles
|
|
|
|
|
|
|
|
|
639
|
|
13.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,267
|
|
124.9
|
|
14,615
|
|
114.4
|
|
9,213
|
|
186.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
(4,642
|
)
|
(24.9
|
)
|
(1,839
|
)
|
(14.4
|
)
|
(4,282
|
)
|
(86.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
Terminated merger costs
|
|
|
|
|
(490
|
)
|
(3.8
|
)
|
|
|
|
|
Settlement losses
|
(162
|
)
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
Interest income (expense), net
|
(106
|
)
|
(0.6
|
)
|
169
|
|
1.3
|
|
160
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
(268
|
)
|
(1.5
|
)
|
(321
|
)
|
(2.5
|
)
|
160
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit from income
taxes
|
(4,910
|
)
|
(26.4
|
)
|
(2,160
|
)
|
(16.9
|
)
|
(4,122
|
)
|
(83.6
|
)
|
Income tax benefit, net
|
1,210
|
|
6.5
|
|
789
|
|
6.2
|
|
764
|
|
15.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
(3,700
|
)
|
(19.9
|
)
|
(1,371
|
)
|
(10.7
|
)
|
(3,358
|
)
|
(68.1
|
)
|
Loss from discontinued operation
|
|
|
|
|
(589
|
)
|
(4.6
|
)
|
(1,014
|
)
|
(20.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(3,700
|
)
|
(19.9
|
)
|
(1,960
|
)
|
(15.3
|
)
|
(4,372
|
)
|
(88.7
|
)
|
Preferred dividends
|
(50
|
)
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common stockholders
|
$(3,750
|
)
|
(20.2
|
)
|
$(1,960
|
)
|
(15.3
|
)
|
$(4,372
|
)
|
(88.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
The following table sets forth the period over period percentage increases or decreases of certain items included in the Companys consolidated statements of operations.
|
Years Ended December
31,
|
Years Ended December
31,
|
(In thousands)
|
Change
|
Change
|
|
2007
|
2006
|
$
|
%
|
2006
|
2005
|
$
|
%
|
Revenues:
|
|
|
|
|
Relay
services
|
$ 16,325
|
|
$ 8,695
|
|
$
7,630
|
|
87.8
|
|
$ 8,695
|
|
$ 1,261
|
|
$
7,434
|
|
589.5
|
|
Subscriber
|
1,106
|
|
1,190
|
|
(84
|
)
|
(7.1
|
)
|
1,190
|
|
2,348
|
|
(1,158
|
)
|
(49.3
|
)
|
Commissions
|
711
|
|
2,454
|
|
(1,743
|
)
|
(71.0
|
)
|
2,454
|
|
755
|
|
1,699
|
|
225.0
|
|
Equipment
|
431
|
|
429
|
|
2
|
|
0.5
|
|
429
|
|
442
|
|
(13
|
)
|
(2.9
|
)
|
Other
|
52
|
|
8
|
|
44
|
|
550.0
|
|
8
|
|
125
|
|
(117
|
)
|
(93.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,625
|
|
12,776
|
|
5,849
|
|
45.8
|
|
12,776
|
|
4,931
|
|
7,845
|
|
159.1
|
|
Costs and expenses:
|
|
|
|
|
Cost
of relay services
|
10,538
|
|
5,320
|
|
5,218
|
|
98.1
|
|
5,320
|
|
|
|
5,320
|
|
|
|
Cost
of subscriber revenue
|
1,068
|
|
845
|
|
223
|
|
26.4
|
|
845
|
|
967
|
|
(122
|
)
|
(12.6
|
)
|
Cost
of equipment revenue
|
944
|
|
536
|
|
408
|
|
76.1
|
|
536
|
|
585
|
|
(49
|
)
|
(8.4
|
)
|
Cost
of network operations
|
116
|
|
110
|
|
6
|
|
5.5
|
|
110
|
|
231
|
|
(121
|
)
|
(52.4
|
)
|
Sales
and marketing
|
2,293
|
|
2,494
|
|
(201
|
)
|
(8.1
|
)
|
2,494
|
|
1,166
|
|
1,328
|
|
113.9
|
|
General
and administrative
|
7,405
|
|
4,589
|
|
2,816
|
|
61.4
|
|
4,589
|
|
4,777
|
|
(188
|
)
|
(3.9
|
)
|
Research
and development
|
547
|
|
359
|
|
188
|
|
52.4
|
|
359
|
|
363
|
|
(4
|
)
|
(1.1
|
)
|
Depreciation
and amortization
|
356
|
|
362
|
|
(6
|
)
|
(1.7
|
)
|
362
|
|
485
|
|
(123
|
)
|
(25.4
|
)
|
Amortization
of other intangibles
|
|
|
|
|
|
|
|
|
|
|
639
|
|
(639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,267
|
|
14,615
|
|
8,652
|
|
59.2
|
|
14,615
|
|
9,213
|
|
5,402
|
|
58.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
(4,642
|
)
|
(1,839
|
)
|
(2,803
|
)
|
(152.4
|
)
|
(1,839
|
)
|
(4,282
|
)
|
2,443
|
|
(57.1
|
)
|
|
Other income (expense):
|
|
|
|
|
Terminated merger costs
|
|
|
(490
|
)
|
490
|
|
100.0
|
|
(490
|
)
|
|
|
(490
|
)
|
|
|
Settlement losses
|
(162
|
)
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense),
net
|
(106
|
)
|
169
|
|
(275
|
)
|
(162.7
|
)
|
169
|
|
160
|
|
9
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
(268
|
)
|
(321
|
)
|
53
|
|
16.5
|
|
(321
|
)
|
160
|
|
(481
|
)
|
(300.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before benefit from
income taxes
|
(4,910
|
)
|
(2,160
|
)
|
(2,750
|
)
|
(127.3
|
)
|
(2,160
|
)
|
(4,122
|
)
|
1,962
|
|
(47.6
|
)
|
Income tax benefit,
net
|
1,210
|
|
789
|
|
421
|
|
53.4
|
|
789
|
|
764
|
|
25
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations
|
(3,700
|
)
|
(1,371
|
)
|
(2,329
|
)
|
(169.9
|
)
|
(1,371
|
)
|
(3,358
|
)
|
1,987
|
|
(59.2
|
)
|
Loss from discontinued
operation
|
|
|
(589
|
)
|
589
|
|
100.0
|
|
(589
|
)
|
(1,014
|
)
|
425
|
|
(41.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(3,700
|
)
|
(1,960
|
)
|
(1,740
|
)
|
(88.8
|
)
|
(1,960
|
)
|
(4,372
|
)
|
2,412
|
|
(55.2
|
)
|
Preferred dividends
|
(50
|
)
|
|
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to
common stockholders
|
$ (3,750
|
)
|
$ (1,960
|
)
|
$ (1,790
|
)
|
(91.3
|
)
|
$ (1,960
|
)
|
$(4,372
|
)
|
$
2,412
|
|
(55.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Relay services revenue.
Relay service revenue increased to $16.3 million
for the year ended December 31, 2007 from $8.7 million for the year ended December 31, 2006. This increase was primarily due to our obtaining FCC certification in June 2006, allowing us to bill directly for service usage as opposed to submitting through a third party provider as in prior periods, as well as increased usage of our i711.com telecommunications relay service which was launched in March 2005. In addition, during December 2006, we began offering our i711® Video Relay Service (VRS). We expect relay services revenue to increase as we expand our user base for both our video and telecommunication relay services through our January 10, 2008 acquisition of certain assets of the Telecommunications Relay Services
(TRS) division of MCI Communications Services, Inc. (Verizon), a leading provider of relay services transactions, and Hands On Video Relay Services, Inc., a California-based provider of video relay and interpreting services.
Subscriber revenue.
Subscriber revenue decreased slightly to $1.1 million
for the year ended December 31, 2007 from $1.2 million for the year ended December 31, 2006. This decrease was primarily due to declines in our full service offering subscriber base. We anticipate subscription revenues to decline further as we do not intend to concentrate marketing efforts on these services.
46
Commission revenue.
Commission revenue decreased to
$711,000 for the year ended December 31, 2007 from $2.5 million for the year ended December 31, 2006. This decrease primarily was due to decreased acquisition of subscribers on behalf of wireless network providers
through our indirect distribution channel. We expect commission revenue to decrease as we do not intend to devote significant resources to these services.
Equipment revenue.
Equipment revenue for the year ended December
31, 2007 was $431,000 which approximated equipment revenue for the year ended December 31, 2006. We expect equipment revenue to decrease as a percentage of revenue as we concentrate our efforts on the relay services portion
of our revenue streams.
Other revenue.
Other revenue increased to $52,000 for the year ended
December 31, 2007 from $8,000 for the year ended December 31, 2006.
Cost of relay services revenue.
Cost of relay services revenue increased to
$10.5 million for the year ended December 31, 2007 from $5.3 million for the year ended December 31, 2006. This increase was due to increased third party service fees related to our i711.com
telecommunications relay service and our i711® Video Relay Service (VRS). We began offering VRS during December 2006. Cost of Video Relay Service revenue was $1.2 million for the year ended December 31, 2007. We
expect cost of relay services revenue to increase as we expand our user base for both our video and telecommunication relay services through our January 10, 2008 acquisitions described above.
Cost of subscriber revenue.
Cost of subscriber revenue increased to
$1,068,000 for the year ended December 31, 2007 from $845,000 for the year ended December 31, 2006. This increase was primarily due to increased costs in our text based wireless services. We expect cost of subscriber
revenue to decline as we do not intend to concentrate marketing efforts on these services.
Cost of equipment revenue.
Cost of equipment revenue increased to
$944,000 for the year ended December 31, 2007 from $536,000 for the year ended December 31, 2006. We expect cost of equipment revenue to decrease as we concentrate our efforts on the relay services portion of our
business.
Cost of network operations.
Cost of network operations remained relatively
constant at $116,000 for the year ended December 31, 2007 from $110,000 for the year ended December 31, 2006. We expect our cost of network operations to decline as a percentage of sales during 2008.
Sales and marketing.
Sales and marketing expenses were $2.3
million for the year ended December 31, 2007 which approximated sales and marketing expenses of $2.5 million for the year ended December 31, 2006. We expect sales and marketing expenses to increase during 2008
as we continue to introduce new products and services to the consumer marketplace through our January 10, 2008 acquisitions described above.
47
General and administrative.
General and administrative expenses
increased to $7.4 million for the year ended December 31, 2007 from $4.6 million for the year ended December 31, 2006. This increase primarily was due to increased payments to certain contractors, outside
consultants and professional service providers. We expect general and administrative expenses to increase as a result of our January 10, 2008 acquisitions described above.
Research and development
. Research and development expense increased
to $547,000 for the year ended December 31, 2007 compared to $359,000 for the year ended December 31, 2006. This increase was due to increased personnel performing research and development functions. We expect
research and development expenses to increase as a result of our January 10, 2008 acquisitions described above.
Interest (expense) income, net.
The Company incurred net interest
expense of $106,000 for the year ended December 31, 2007 compared to net interest income, net of $169,000 for the year ended December 31, 2006. This increase was due to interest expense incurred in connection with a
credit agreement more fully described in note 5 to the consolidated financial statements. We expect net interest expense to increase as a result of the debt raised by the Company to partially fund our January 10, 2008 acquisitions
described above. (See note 14 to the consolidated financial statements)
Income tax benefit
. Income tax benefit, which consists of the sale of
certain state Net Operating Loss Carryforwards, was $1,210,000 and $789,000 for the years ended December 31, 2007 and 2006, respectively.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Relay services revenue.
Relay service revenue increased to $8.7 million
for the year ended December 31, 2006 from $1.3 million for the year ended December 31, 2005. This increase was primarily due to our obtaining FCC certification in June 2006, allowing us to bill directly for service usage
as opposed to submitting through a third party provider as in prior periods, as well as increased usage of our i711.com telecommunications relay service which was launched in March 2005. In addition, during December
2006, we began offering our i711® Video Relay Service (VRS).
Subscriber revenue.
Subscriber revenue decreased to $1.2 million for
the year ended December 31, 2006 from $2.3 million for the year ended December 31, 2005. This decrease was primarily due to declines in our full service offering subscriber base, as well as our Go.Web customers.
These declines were partially offset by increased subscribers to our value added WyndPower service.
Commission revenue.
We began earning commission during 2005
from our acquisition of subscribers on behalf of various wireless network providers and recognized $2.5 million for the year ended December 31, 2006 compared to $755,000 of commission revenue for the year ended
December 31, 2005.
48
Equipment revenue.
Equipment revenue decreased to $429,000 for the
year ended December 31, 2006 from $442,000 for the year ended December 31, 2005. This decrease was primarily due to lower sales prices for mobile devices.
Other revenue.
Other revenue decreased to $8,000 for the year ended
December 31, 2006 from $125,000 for the year ended December 31, 2005. This decrease was primarily due to our decision not to pursue certain consulting projects and consulting services to third parties.
Cost of relay services revenue.
Cost of relay services revenue was $5.3
million for the year ended December 31, 2006. This consisted of third party service fees related to our i711.com telecommunications relay service. This was primarily due to our obtaining FCC certification
in June 2006, allowing us to bill directly for service usage as opposed to submitting through a third party provider, on a net basis, as in prior periods. In addition, during December 2006, we began offering our i711® Video Relay
Service (VRS). There was no such corresponding cost in 2005.
Cost of subscriber revenue.
Cost of subscriber revenue decreased to $845,000
for the year ended December 31, 2006 from $967,000 for the year ended December 31, 2005. The decrease was primarily due to having a smaller average subscriber base in the year ended December 31, 2006 than in the
year ended December 31, 2005.
Cost of equipment revenue.
Cost of equipment revenue decreased to
$536,000 for the year ended December 31, 2006 from $585,000 for the year ended December 31, 2005.
Cost of network operations.
Cost of network operations decreased to $110,000
for the year ended December 31, 2006 from $231,000 for the year ended December 31, 2005. This decrease primarily was due to a re-assignment of personnel previously dedicated to performing network operations
activities.
Sales and marketing.
Sales and marketing expenses increased to
$2.5 million for the year ended December 31, 2006 from $1.2 million for the year ended December 31, 2005. This increase primarily was due to our introduction of new products and services to the consumer
marketplace as well as increased payments to third parties as compensation for marketing these products.
General and administrative.
General and administrative expenses
decreased to $4.6 million for the year ended December 31, 2006 from $4.8 million for the year ended December 31, 2005. This decrease primarily was due to decreased payments to certain contractors and
outside consultants.
Research and development
. Research and development expense
remained relatively constant at $359,000 for the year ended December 31, 2006 compared to $363,000 for the year ended December 31, 2005.
Amortization of other intangibles.
Our intangible assets were fully
amortized as of December 31, 2005 and as a result we incurred no amortization expense during the year ended December 31, 2006. Amortization of other intangibles was $639,000 for the year ended December 31,
2005.
49
Interest (expense) income, net.
Interest income, net increased to
$169,000 for the year ended December 31, 2006 from interest income, net of $160,000 for the year ended December 31, 2005.
Income tax benefit
. Income tax benefit, which consists of the sale of
certain State Net Operating Loss Carryforwards, was $789,000 and $764,000 for the years ended December 31, 2006 and 2005, respectively.
Discontinued operations
. The Company recorded a loss from discontinued
operations of $589,000 for the year ended December 31, 2006 compared to $1.0 million for the year ended December 31, 2005. This relates to our prepaid calling card division which was sold.
Liquidity and Capital Resources
We have incurred significant operating losses since our inception and as of December 31, 2007 had an accumulated deficit of $279.0 million.
During 2007, we incurred a net loss of $3.8 million, but provided $148,000 of cash to fund operating activities. As of December 31, 2007 we had $2.4 million in cash and cash equivalents.
On January 10, 2008, we acquired (1) certain assets of the Telecommunications Relay Services (TRS) division of MCI
Communications Services, Inc. (Verizon), a leading provider of relay services transactions, and (2) Hands On Video Relay Services, Inc., a California-based provider of video relay and interpreting services. We have also secured a $15
million unfunded credit revolver which creates additional liquidity for the Company as needed. We currently anticipate that our available cash resources will be sufficient to fund our operating needs for at least the next 12
months.
In conjunction with these transactions, the Company issued an aggregate of 7,736,944 shares of preferred stock, including 290,135 shares issued in August
2007 as described in note 10 to the consolidated financial statements, to an investor group led by Clearlake Capital and approximately 6,700,000 shares of common stock to the stockholders of Hands On.
The Company has also completed debt financing of $40 million in first lien debt and $30 million in second lien debt. To create
additional flexibility to pursue strategic opportunities, the Company has also secured a $15 million unfunded credit revolver which creates additional liquidity for the Company as needed.
We anticipate generating revenues from the five lines of business more fully described in Item 1. We anticipate that these revenues will be
partially offset by increases in sales and marketing expenditures from levels incurred during 2007 as we introduce new products and services to the consumer marketplace and as a result of the acquisitions referred to
above.
Net
cash provided by operating activities for the year ended December 31, 2007
was $148,000. The principle sources of this cash were non cash compensation
expense and increases in operating liabilities which were largely offset by
our loss from operations. Net cash used in operating activities for the
years ended December 31, 2006 and 2005 was $518,000 and $1.7
50
million, respectively. The principal use of cash in each of these periods was to fund our losses from operations.
On May 2, 2005, the Company entered into a loan agreement with Hands On Video Relay Services, Inc., a Delaware corporation, and Hands On Sign Language
Services, Inc., a California corporation (collectively, Hands On). Pursuant to that agreement, all amounts that the Company advanced to Hands On were secured, initially, by the assets acquired with such funds with interest at a
defined prime rate. Hands On had indicated that it did not intend to make any more payments to the Company under the existing terms of the loan agreement and that Hands On was attempting to restructure its
debts and raise new capital. In December 2006, the Company commenced litigation against Hands On, seeking recovery of its loan receivable.
In April 2007, the Company executed a settlement agreement and mutual release related to its litigation with Hands On in exchange for an
immediate $400,000 cash payment, termination of litigation, mutual release of all loan- and merger-related claims (asserted and otherwise), and other consideration and recorded a settlement loss of
$162,000.
Net cash used in investing activities was $2.5 million, $355,000 and $553,000 for the years ended December 31, 2007, 2006 and 2005,
respectively. For the year ended December 31, 2007, we used cash in investment activities principally to fund deferred acquisition costs associated with the acquisitions referred to above, as well as purchases of property, equipment
and leasehold improvements. For the year ended December 31, 2006, we used cash in investment activities principally for purchases of property, equipment and leasehold improvements. For the year ended December
31, 2005, we used cash in investment activities principally as loans to Hands On and expenses related to the proposed merger with Hands On which was terminated during March 2006. During 2008, we expect to use cash in investing
activities principally through capital expenditures.
Net cash provided by/(used in) financing activities was $889,000, ($61,000) and ($62,000) for the years ended December 31, 2007, 2006 and 2005,
respectively. For 2007 this primarily resulted from the issuance of preferred stock (see note 10 to the consolidated financial statements) and from the issuance of debt (see note 5 to the consolidated financial statements)
which were partially offset by proceeds withheld to fund deferred financing and deferred acquisition costs. For 2006 and 2005, this resulted primarily from payments made on lease obligations and was partially offset by the
issuance of Common Stock.
As of December 31, 2007, our principal commitments consisted of obligations outstanding under operating leases. As of December 31,
2007, future minimum payments for non-cancelable operating leases having terms in excess of one year amounted to $1,055,000, of which $420,000 is payable in 2008.
51
The following table summarizes our contractual obligations at December 31, 2007, and the effect such obligations are expected to have on our liquidity and cash flow in future periods.
December 31, (In thousands)
|
|
Total
|
Less
than
1 Year
|
1-3
Years
|
4-5
Years
|
After
5
Years
|
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Lease Obligations
|
|
$ 195
|
|
$ 108
|
|
$ 87
|
|
$
|
|
$
|
|
Operating
Lease Obligations
|
|
1,055
|
|
420
|
|
532
|
|
103
|
|
|
|
Loan
payable
|
|
3,532
|
|
3,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Contractual Cash Obligations
|
|
$4,782
|
|
$4,060
|
|
$619
|
|
$103
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2005, we entered into employment agreements with certain of our key executives which provide for fixed compensation. These agreements generally continue until terminated by the employee or us and, under certain circumstances, provide for salary continuance for a specified period of no more than 1 year.
Changes to Certain Employment Arrangements
.
Donald G. Barnharts prior employment agreement was superseded on January 10, 2008 by an Agreement Regarding Basic Terms of Employment (the Superseding Employment Agreement), pursuant to which Mr. Barnhart will serve the Company as Senior Vice President, Accounting, at a base annual salary of $185,000.
The Superseding Employment Agreement provides that Mr. Barnhart will serve on an at will basis, without a specific term of employment. He will be eligible to receive a bonus, and will receive an option grant of 70,000 shares.
The options will vest at the rate of one-forty-eighth of such shares per month, provided Mr. Barnhart remains employed with the Company on each vesting date. If Mr. Barnharts employment is terminated without Cause or for Good Reason (in each case as defined in the Superseding Employment Agreement), Mr. Barnhart will be entitled to receive 12 months
severance.
Jesse Odoms prior employment
agreement was superseded on January 10, 2008 by an Agreement
Regarding Basic Terms of Employment (the Second Superseding Employment Agreement), pursuant to which Mr. Odom will serve the Company as
Senior Vice President, Technology, at a base annual salary of $200,000.
The Second Superseding Employment Agreement provides that Mr. Odom will serve on an at will basis, without a specific term of employment.
He will be eligible to receive a bonus, and will receive an option grant of 100,000 shares. The options will vest at the rate of one-forty-eighth
of such shares per month, provided Mr. Odom remains employed with the Company on each vesting date.
If Mr. Odoms employment is terminated without Cause or for Good Reason (in each case as defined in the Superseding Employment Agreement),
Mr. Odom will be entitled to receive 12 months severance.
52
On March 20, 2008, the Company entered into new employment agreements with Daniel R. Luis, its Chief Executive Officer, and with Edmond Routhier, its
President and Vice Chairman of the Board (collectively, the Executives). Each employment agreement is substantially the same and they are more fully described in note 14 to the consolidated financial statements.
Effective November 1, 2007, Wayne D. Smith resigned from all of his positions with the Company. Mr. Smith will receive one years
severance, continuing medical benefits, and all restrictions remaining on restricted stock grants of the Companys Common Stock previously made to him have lapsed. Mr. Smith will be entitled to receive a
bonus, relating to 2007, in an amount equal to any bonus that may be paid to any other executive officer of the Company.
As of December 31, 2007, we had net operating loss carryforwards of approximately $185.2 million for federal income tax purposes that
will expire through 2024. The state tax benefit during 2007 of $1.2 million is attributable to our sale of certain state net operating loss carryforwards. For financial reporting purposes, a valuation allowance has been recognized to offset
the deferred tax assets related to these carryforwards. Due to limitations imposed by the Tax Reform Act of 1986, and as a result of a significant change in our ownership in 1999, 2004, and again in 2008, the utilization of net
operating loss carryforwards that arose prior to such ownership changes are subject to an annual limitation. In addition, we acquired additional operating losses through our acquisitions in 2000 of Wynd and Hotpaper. We believe that an
ownership change has occurred with respect to these entities. The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before such change. We
have not performed a detailed analysis to determine the amount of the potential limitations including those that may result from our January 2008 acquisitions.
Recent Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes an interpretation of FASB Statement No. 109, which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects
of the recognition and measurement related to accounting for income taxes. This interpretation is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material effect on the
Companys financial condition or results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes
a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. SFAS No. 157 was effective for financial
statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged, but the issuance of FASB Staff Position SFAS No. 157-2 has delayed the effective date to fiscal years beginning after November
15, 2008 as it relates to non-financial assets and non-financial liabilities. Any amounts recognized upon adoption as a cumulative effect adjustment will be recorded to the opening balance of retained earnings in the year of adoption.
The adoption of SFAS No. 157 is not expected to have a material effect on the Companys financial condition or results of operations.
53
In February 2007, the FASB issued SFAS No. 159, Establishing the Fair Value Option for Financial Assets and Liabilities to permit all entities
to choose to elect to measure eligible financial instruments and certain other items at fair value. The decision whether to elect the fair value option may occur for each eligible item either on a specified election date or
according to a preexisting policy for specified types of eligible items. However, that decision must also take place on a date on which criteria under SFAS 159 occurs. Finally, the decision to elect the fair value option shall be made
on an instrument-by-instrument basis, except in certain circumstances. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.
SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157,
Fair Value Measurements.
The adoption of SFAS No. 159 is not expected to have a material effect on the Companys financial condition or
results of operations.
In December 2007, the FASB issued SFAS 141 (revised 2007),
Business
Combinations
(SFAS 141(R)), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS 141(R applies to fiscal
years beginning on or after December 18, 2008. Earlier adoption is prohibited. The Company is currently evaluating the impact of adopting SFAS 141(R) on its results of operations and financial condition.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51
. SFAS 160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated financial statements. Among other requirements, this statement requires consolidated net income to be reported at amounts that include the
amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and
to the noncontrolling interest. SFAS 160 applies to fiscal years beginning on or after December 18, 2008. Earlier adoption is prohibited. The Company is currently evaluating the impact of adopting SFAS 160 on its results of operations
and financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We believe that we have limited exposure to financial market risks, including changes in interest rates. At December 31, 2007, all of our
available excess funds were 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 $24,000 based on cash and cash equivalent balances at December 31, 2007. We currently hold no derivative instruments and do not earn foreign-source income.
54
Item
8.
Financial
Statements and Supplementary Data.
|
The financial statements and the notes thereto which contain supplementary data required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. A list of the financial statements filed herewith is found at Item 15. Exhibits and Financial Statement Schedules.
Item
9. Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Not
applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us (including our consolidated subsidiaries) in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules a
nd forms and is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We based our evaluation on criteria set forth in Internal Control Integrated Framework issued by the committee of Sponsoring Organizations of the Treadway Commission (COSO).
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting in the fiscal year ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
55
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers
and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States and includes those policies and procedures that:
-
Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and
dispositions of our assets;
-
Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial
statements in accordance with accounting principles
generally accepted in the United States, and that our receipts and expenditures are
being made only in accordance with authorizations of our management and members
of our board of directors; and
-
Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition
of our assets that could have a material
effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Item 9B. Other Information
None
56
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
We maintain a code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, and to
persons performing similar functions. A copy of this code of ethics is posted on our Web site accessible at
http://www.goamerica.com/Company_info/ethics_execs.php
. We intend to post any amendment to, or waiver from, any provision in our
code of ethics that applies to such officers on our website.
We will provide information that is responsive to this Item 10 in our definitive proxy statement or in an amendment to this Annual
Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 10 by reference.
Item 11. Executive Compensation.
We will provide information that is responsive to this Item 11 regarding compensation paid to our executive officers in our definitive proxy
statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 11 by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
We will provide information that is responsive to this Item 12 regarding ownership of our securities by some beneficial owners and our directors
and executive officers in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this
Item 12 by reference.
Item 13.
Certain Relationships and Related Transactions
.
We will provide information that is responsive to this Item 13 regarding transactions with related parties in our definitive proxy statement or
in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 13 by reference.
57
Item 14. Principal Accountant Fees and Services.
We will provide information that is responsive to this Item 14 regarding accounting fees and services in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 14 by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
The following documents are filed as part of this report:
(a) (1)
|
Consolidated Financial Statements and (2) Consolidated Financial Statement Schedule
|
|
|
Reference is made to the Index to Consolidated Financial Statements and Financial Statement Schedule on Page F-1.
|
|
|
All other schedules have been omitted because the required information is not present or is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the Consolidated Financial Statements or Notes thereto.
|
|
(b)
|
Exhibits.
|
|
|
Reference
is made to the Exhibit Index on Page 60.
|
58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 28th day of March, 2008.
|
GOAMERICA,
INC.
|
|
By:
|
/s/
Daniel R. Luis
|
|
|
Daniel
R. Luis,
|
|
|
Chief
Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/
Aaron Dobrinsky
|
|
Chairman
of the Board
|
|
March
28, 2008
|
|
|
|
|
Aaron
Dobrinsky
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Daniel R. Luis
|
|
Chief
Executive Officer
|
|
March
28, 2008
|
|
|
|
(Principal
Executive Officer)
|
Daniel
R. Luis
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Edmond Routhier
|
|
President and Vice Chairman
|
|
March
28, 2008
|
|
|
|
|
Edmond
Routhier
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Donald G. Barnhart
|
|
Senior
Vice President
|
|
March
28, 2008
|
|
|
|
(Principal
Accounting Officer)
|
Donald
G. Barnhart
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Behdad Eghbali
|
|
Director
|
|
March
28, 2008
|
|
|
|
|
Behdad
Eghbali
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Steven Chang
|
|
Director
|
|
March
28, 2008
|
|
|
|
|
Steven
Chang
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Bill McDonagh
|
|
Director
|
|
March
28, 2008
|
|
|
|
|
Bill
McDonagh
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Steve Eskenazi
|
|
Director
|
|
March
28, 2008
|
|
|
|
|
Steve
Eskenazi
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Christopher Gibbons
|
|
Director
|
|
March
28, 2008
|
|
|
|
|
Christopher
Gibbons
|
|
|
|
|
|
59
EXHIBIT
INDEX
ITEM 15(b)
Exhibit
No.
|
Description
of Exhibit
|
|
|
2.1
|
Asset
Purchase Agreement, dated as of August 1, 2007, by and between MCI
Communications Services, Inc. and GoAmerica Relay Services
Corp. (formerly Acquisition 1 Corp.) (Incorporated by reference to
Annex A to GoAmericas Definitive Proxy Materials filed with the SEC
on November 9, 2007)
|
|
2.2
|
Amended
and Restated Stock Purchase Agreement, dated as of September 12,
2007, by and between GoAmerica and the Investors parties thereto (Incorporated
by reference to Annex B to GoAmericas Definitive Proxy Materials filed
with the SEC on November 9, 2007)
|
|
2.3
|
Agreement
and Plan of Merger, dated as of September 12, 2007, by and among
GoAmerica, HOVRS Acquisition Corporation, Hands On Video Relay Services,
Inc. and Bill M. McDonagh, as Stockholder Representative, as amended
(Incorporated by reference to Annex D to GoAmericas Definitive Proxy
Materials filed with the SEC on November 9, 2007)
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of GoAmerica, Inc., as filed
with the Secretary of State of the State of Delaware on January 10, 2008
(Incorporated by reference to Exhibit 3.1 to GoAmericas Current Report
on Form 8-K filed with the Securities and Exchange Commission
on January 16, 2008)
|
|
3.2
|
Amended
and Restated By-laws of GoAmerica, Inc. (as amended and restated
through February 11, 2008) (Incorporated by reference to Exhibit 3.2 to
GoAmericas Current Report on Form 8-K filed with the Securities
and Exchange Commission on February 15, 2008)
|
|
4.1
|
Warrant
Certificate, dated as of November 14, 2003, issued to Stellar Continental
LLC (Incorporated by reference to GoAmericas Current Report on
Form 8-K filed with the Securities and Exchange Commission
on November 24, 2003)
|
|
4.2
|
Warrant
to Purchase Common Stock of GoAmerica, Inc., issued to Derek
Caldwell as nominee for Sunrise Securities Corp. (Incorporated by reference
to GoAmericas Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 24, 2003)
|
|
4.3
|
Warrant
to Purchase Common Stock of GoAmerica, Inc., issued to Amnon
Mandelbaum as nominee for Sunrise Securities Corp. (Incorporated
by reference to GoAmericas Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 24,
2003)
|
|
10.1
|
Form
of Invention Assignment and Non-Disclosure Agreement by and between
GoAmerica and its employees (Incorporated by reference to GoAmericas
Registration Statement on Form S-1) (File No. 333-94801)
|
|
10.2
|
Form
of Indemnification Agreement by and between GoAmerica and
each of its directors and executive officers (Incorporated by reference
to GoAmericas Registration Statement on Form S-1) (File
No. 333-94801)
|
|
60
Exhibit
No.
|
Description
of Exhibit
|
|
|
10.3
|
Amended
and Restated Employment Agreement by and between GoAmerica,
Inc. and Daniel R. Luis, dated as of November 8, 2005 (Incorporated
by reference to GoAmericas Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on November
14, 2005)
|
|
10.4
|
Employment
Agreement by and between GoAmerica and Aaron Dobrinsky, dated
as of May 6, 2002 (Incorporated by reference to GoAmericas Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission
on August 2, 2002) (File No. 000-29359), as amended by Amendment
No. 1, dated as of March 10, 2004 (Incorporated by reference to GoAmericas
Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 10, 2004)
|
|
10.5
|
Amended
and Restated Employment Agreement by and between GoAmerica
and Jesse Odom, dated as of November 8, 2005 (Incorporated by
reference to GoAmericas Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on November 14,
2005)
|
|
10.6
|
Amended
and Restated Employment Agreement by and between GoAmerica
and Donald G. Barnhart, dated as of November 8, 2005 (Incorporated
by reference to GoAmericas Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on November
14, 2005)
|
|
10.7
|
Employment
Agreement by and between GoAmerica and Wayne D. Smith, dated
as of November 8, 2005 (Incorporated by reference to GoAmericas
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on November 14, 2005)
|
|
10.8
|
GoAmerica
Communications Corp. 1999 Stock Option Plan (Incorporated by reference
to GoAmericas Registration Statement on Form S-1) (File
No. 333- 94801)
|
|
10.9
|
GoAmerica,
Inc. 1999 Stock Plan (Incorporated by reference to GoAmericas Registration
Statement on Form S-1) (File No. 333-94801)
|
|
10.10
|
GoAmerica,
Inc. Employee Stock Purchase Plan (Incorporated by reference to GoAmericas
Registration Statement on Form S-1) (File No. 333-94801)
|
|
10.11
|
GoAmerica,
Inc. Amended and Restated 2005 Equity Compensation Plan (Incorporated
by reference to Annex I to GoAmericas Definitive Proxy Materials filed
with the SEC on November 9, 2007)
|
|
10.12
|
Lease
Agreement dated as of August 1, 2004, by and between GoAmerica
Communications Corp. and Stellar Continental LLC, as amended
by Amendment No. 1, dated as of August 1, 2004 (Incorporated by
reference to GoAmericas Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 2005)
(File No. 000-29359)
|
|
10.13
|
Purchase
Agreement, dated as of December 19, 2003, by and between GoAmerica,
Inc. and the Investors set forth therein (Incorporated by reference to GoAmericas
Current Report on Form 8-K filed with the Securities and Exchange Commission
on December 24, 2003)
|
|
61
Exhibit
No.
|
Description
of Exhibit
|
|
|
10.14
|
Registration
Rights Agreement, dated as of December 19, 2003, by and between
GoAmerica, Inc. and the Investors set forth therein (Incorporated by
reference to GoAmericas Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 24,
2003)
|
|
10.15
|
Short
Term Loan Agreement between Hands On Video Relay Services, Inc.
and Hands On Sign Language Services, Inc., and GoAmerica, Inc., entered
into on May 2, 2005 (Incorporated by reference to GoAmericas
Quarterly Report on Form 10-Q filed on May 12, 2005)
|
|
10.16
|
First
Lien Credit Agreement, dated as of January 10, 2008, by and among
GoAmerica as borrower, the lenders party thereto, Churchill Financial
LLC, as administrative agent and Ableco Financial LLC, as collateral
agent (Incorporated by reference to Exhibit 10.1 to GoAmericas Current
Report on Form 8-K filed with the SEC on January 16, 2008)
|
|
10.17
|
Second
Lien Credit Agreement, dated as of January 10, 2008, by and among
GoAmerica, as borrower, the lenders party thereto and Clearlake Capital
Group, L.P., as administrative agent (Incorporated by reference to
Exhibit 10.2 to GoAmericas Current Report on Form 8-K filed with
the SEC on January 16, 2008)
|
|
10.18
|
First
Lien Guaranty and Security Agreement, dated as of January 10, 2008,
among GoAmerica, as borrower, and each grantor from time
to time party thereto and Ableco Financial LLC, as collateral agent
(Incorporated by reference to Exhibit 10.3 to GoAmericas Current Report
on Form 8-K filed with the SEC on January 16, 2008)
|
|
10.19
|
Second
Lien Guaranty and Security Agreement, dated as of January 10, 2008,
among GoAmerica, as borrower, and each grantor from time
to time party thereto and Clearlake Capital Group, L.P., as administrative
agent (Incorporated by reference to Exhibit 10.4 to GoAmericas Current
Report on Form 8-K filed with the SEC on January 16, 2008)
|
|
10.20
|
Intercreditor
Agreement, dated as of January 10, 2008, by and among Churchill
Financial, LLC, Ableco Financial LLC and Clearlake Capital Group, L.P.
(Incorporated
by reference to Exhibit 10.5 to GoAmericas Current Report on Form
8-K filed with the SEC on January 16, 2008)
|
|
10.21
|
Amended
and Restated Investor Rights Agreement, dated as of January 10, 2008,
by and among GoAmerica, certain Clearlake entities and certain
former shareholders of Hands On Video Relay Services, Inc. (Incorporated
by reference to Exhibit 10.6 to GoAmericas Current Report on Form
8-K filed with the SEC on January 16, 2008)
|
|
10.22
|
Lock-Up
and Registration Rights Agreement, dated January 10, 2008, among
GoAmerica and certain former stockholders of Hands On Video Relay
Services, Inc. (Incorporated by reference to Exhibit 10.7 to GoAmericas
Current Report on Form 8-K filed with the SEC on January 16, 2008)
|
|
10.23
|
Agreement
Regarding Basic Terms of Employment between GoAmerica
and Donald G. Barnhart
|
|
62
Exhibit
No.
|
Description
of Exhibit
|
|
|
10.24
|
Agreement
Regarding Basic Terms of Employment between GoAmerica
and Jesse Odom
|
|
10.25
|
Executive Employment Agreement, dated March 19, 2008, between GoAmerica and Daniel R. Luis (Incorporated by reference to Exhibit 10.1 to GoAmerica
s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 24, 2008)
|
|
|
10.26
|
Executive Employment Agreement, dated March 19, 2008, between GoAmerica and Edmond Routhier (Incorporated by reference to Exhibit 10.2 to GoAmerica
s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 24, 2008)
|
|
|
21.1
|
List
of subsidiaries of GoAmerica, Inc. (filed herewith)
|
|
23.1
|
Consent
of WithumSmith+Brown, P.C. (filed herewith)
|
|
31.1
|
Certification
pursuant to Rule 13a-14(a) or 15d-14(a) (filed herewith)
|
|
31.2
|
Certification
pursuant to Rule 13a-14(a) or 15d-14(a) (filed herewith)
|
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350 (filed herewith)
|
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350 (filed herewith)
|
|
|
Certain
schedules and exhibits to the documents listed in this index are not
being filed herewith or have not been previously filed 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.
|
63
GOAMERICA,
INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
|
|
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
|
F-3
|
Consolidated
Statements of Operations for the years ended December 31, 2007,
|
|
|
2006
and 2005
|
|
F-4
|
Consolidated
Statements of Stockholders Equity for the years ended December
31,
|
|
|
2007,
2006 and 2005
|
|
F-5
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2007,
|
|
|
2006
and 2005
|
|
F-6
|
Notes
to Consolidated Financial Statements
|
|
F-7
|
Financial
Statement Schedule:
|
|
|
Valuation
and Qualifying Accounts and Reserves for the years ended
|
|
|
December
31, 2007, 2006 and 2005
|
|
F-36
|
All
other schedules have been omitted because the required information
is not present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in the
Consolidated Financial Statements or Notes thereto.
F-1
Report
of Independent Registered Public Accounting Firm
The
Board of Directors,
GoAmerica, Inc.
We
have audited the accompanying consolidated balance sheets of GoAmerica,
Inc. as of December 31, 2007 and 2006, and the related consolidated statements
of operations, stockholders equity and cash flows for each of the years
in the three year period ended December 31, 2007. Our audits also included
the consolidated financial statement schedule for the years ended December
31, 2007, 2006 and 2005 as listed in the index. These consolidated financial
statements and schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
GoAmerica, Inc. as of December 31, 2007 and 2006, and the consolidated
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 2007 in conformity with accounting
principles generally accepted in the United States of America. Also, in
our opinion, such consolidated financial statement schedule referred to
above, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information
set forth therein.
/s/
WithumSmith + Brown, P.C.
New
Brunswick, New Jersey
March 28, 2008
F-2
GOAMERICA,
INC.
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except share and per share data)
|
|
|
|
|
|
December
31,
|
Assets
|
2007
|
|
2006
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
$ 2,368
|
|
|
$ 3,870
|
|
Accounts
receivable, less allowance for doubtful accounts of $292
|
|
|
|
|
|
in
2007 and $157 in 2006
|
1,960
|
|
|
1,891
|
|
Other
receivable
|
|
|
|
48
|
|
Merchandise
inventories, net
|
206
|
|
|
329
|
|
Prepaid
expenses and other current assets
|
220
|
|
|
185
|
|
|
|
|
|
|
|
Total
current assets
|
4,754
|
|
|
6,323
|
|
|
Restricted
cash
|
200
|
|
|
|
|
Property,
equipment and leasehold improvements, net
|
917
|
|
|
755
|
|
Goodwill,
net
|
6,000
|
|
|
6,000
|
|
Deferred
acquisition costs
|
5,060
|
|
|
|
|
Deferred
financing costs
|
1,162
|
|
|
|
|
Other
assets
|
205
|
|
|
801
|
|
|
|
|
|
|
|
Total
assets
|
$18,298
|
|
|
$ 13,879
|
|
|
|
|
|
|
|
Liabilities
and Stockholders Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$ 1,285
|
|
|
$ 559
|
|
Accrued
expenses
|
3,623
|
|
|
1,982
|
|
Accrued
preferred dividends
|
50
|
|
|
|
|
Deferred
revenue
|
94
|
|
|
100
|
|
Loans
payable
|
3,532
|
|
|
|
|
Other
current liabilities
|
88
|
|
|
65
|
|
|
|
|
|
|
|
Total
current liabilities
|
8,672
|
|
|
2,706
|
|
|
Other
long term liabilities
|
74
|
|
|
112
|
|
Commitments
and contingencies
|
|
|
|
|
|
Stockholders
equity:
|
|
|
|
|
|
Preferred
stock, $.01 par value, authorized: 4,351,943 shares in
|
|
|
|
|
|
2007
and 2006;
|
|
|
|
|
|
Series
A issued and outstanding: 290,135 in 2007 and none in 2006;
|
|
|
|
|
|
$1,500,000
liquidation preference
|
3
|
|
|
|
|
Common
stock, $.01 par value; authorized: 200,000,000 in 2007
|
|
|
|
|
|
and
2006; issued: 2,486,668 in 2007 and 2006
|
25
|
|
|
25
|
|
Additional
paid-in capital
|
288,667
|
|
|
286,429
|
|
Deferred
employee compensation
|
|
|
|
|
|
Accumulated
deficit
|
(278,957
|
)
|
|
(275,207
|
)
|
Treasury
stock, at cost, 24,063 shares in 2007 and 2006
|
(186
|
)
|
|
(186
|
)
|
|
|
|
|
|
|
Total
stockholders equity
|
9,552
|
|
|
11,061
|
|
|
|
|
|
|
Total
liabilities and stockholders equity
|
$18,298
|
|
|
$ 13,879
|
|
|
|
|
|
|
|
See
accompanying notes.
|
F-3
GOAMERICA,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except share and per share data)
|
Years
ended December 31,
|
|
|
|
2007
|
2006
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Relay
services
|
$16,325
|
|
$ 8,695
|
|
|
$ 1,261
|
|
Subscriber
|
1,106
|
|
1,190
|
|
|
2,348
|
|
Commissions
|
711
|
|
2,454
|
|
|
755
|
|
Equipment
|
431
|
|
429
|
|
|
442
|
|
Other
|
52
|
|
8
|
|
|
125
|
|
|
|
|
|
|
|
|
|
18,625
|
|
12,776
|
|
|
4,931
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
Cost
of relay services
|
10,538
|
|
5,320
|
|
|
|
|
Cost
of subscriber revenue
|
1,068
|
|
845
|
|
|
967
|
|
Cost
of equipment revenue
|
944
|
|
536
|
|
|
585
|
|
Cost
of network operations
|
116
|
|
110
|
|
|
231
|
|
Sales
and marketing
|
2,293
|
|
2,494
|
|
|
1,166
|
|
General
and administrative
|
7,405
|
|
4,589
|
|
|
4,777
|
|
Research
and development
|
547
|
|
359
|
|
|
363
|
|
Depreciation
and amortization of fixed assets
|
356
|
|
362
|
|
|
485
|
|
Amortization
of other intangibles
|
|
|
|
|
|
639
|
|
|
|
|
|
|
|
|
|
23,267
|
|
14,615
|
|
|
9,213
|
|
|
|
|
|
|
|
|
Loss
from operations
|
(4,642
|
)
|
(1,839
|
)
|
|
(4,282
|
)
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
Terminated
merger costs
|
|
|
(490
|
)
|
|
|
|
Settlement
losses
|
(162
|
)
|
|
|
|
|
|
Interest
(expense) income, net
|
(106
|
)
|
169
|
|
|
160
|
|
|
|
|
|
|
|
|
|
(268
|
)
|
(321
|
)
|
|
160
|
|
|
|
|
|
|
|
|
Loss
before benefit from income taxes
|
(4,910
|
)
|
(2,160
|
)
|
|
(4,122
|
)
|
Income
tax benefit, net
|
1,210
|
|
789
|
|
|
764
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
(3,700
|
)
|
(1,371
|
)
|
|
(3,358
|
)
|
Loss
from discontinued operations
|
|
|
(589
|
)
|
|
(1,014
|
)
|
|
|
|
|
|
|
|
Net
loss
|
(3,700
|
)
|
(1,960
|
)
|
|
(4,372
|
)
|
Preferred
dividends
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss applicable to common stockholders
|
$ (3,750
|
)
|
$(1,960
|
)
|
|
$(4,372
|
)
|
|
|
|
|
|
|
|
Loss
per share-Basic and Diluted:
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
$ (1.68
|
)
|
$ (0.65
|
)
|
|
$ (1.61
|
)
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
$
|
|
$ (0.28
|
)
|
|
$ (0.48
|
)
|
|
|
|
|
|
|
|
Basic
and Diluted net loss per share
|
$ (1.68
|
)
|
$ (0.93
|
)
|
|
$ (2.09
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares used in computation of basic and
|
|
|
|
|
|
|
|
diluted net loss per share
|
2,239,080
|
|
2,105,184
|
|
|
2,093,445
|
|
See
accompanying notes.
F-4
GOAMERICA,
INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
(In thousands,
except share data)
|
Preferred Stock
|
Common Stock
|
|
|
|
Treasury Stock
|
|
|
Number
of shares
|
Amount
|
Number
of shares
|
Amount
|
Additional
paid-in
capital
|
Deferred
employee
compensation
|
Accumulated
deficit
|
Number
of shares
|
Amount
|
Total
stock-holders
equity
|
Balance at January 1, 2005
|
|
|
|
$
|
|
2,117,339
|
|
$21
|
|
$285,854
|
|
$
|
|
$(268,875
|
)
|
24,063
|
|
$ (186
|
)
|
$ 16,814
|
|
Issuance of common stock
pursuant to exercise of
warrants
|
|
|
|
|
|
175
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
2
|
|
Issuance of restricted stock
pursuant to employment
contracts
|
|
|
|
|
|
245,000
|
|
3
|
|
1,281
|
|
(1,284
|
)
|
|
|
|
|
|
|
|
|
Amortization of deferred
employee compensation
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
54
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,372
|
)
|
|
|
|
|
(4,372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
|
|
|
2,362,514
|
|
24
|
|
287,137
|
|
(1,230
|
)
|
(273,247
|
)
|
24,063
|
|
(186
|
)
|
12,498
|
|
Elimination of deferred employee
|
|
compensation against ADPIC
|
|
upon adoption of FAS 123
|
|
|
|
|
|
|
|
|
|
(1,230
|
)
|
1,230
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock to
|
|
directors
|
|
|
|
|
|
92,500
|
|
1
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock to
|
|
consultants
|
|
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
pursuant to exercise of
|
|
options
|
|
|
|
|
|
1,654
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
7
|
|
Stock based consulting expense
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
61
|
|
Stock based
|
|
compensation-employees
|
|
and directors
|
|
|
|
|
|
|
|
|
|
455
|
|
|
|
|
|
|
|
|
|
455
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,960
|
)
|
|
|
|
|
(1,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
|
|
|
2,486,668
|
|
25
|
|
286,429
|
|
|
|
(275,207
|
)
|
24,063
|
|
(186
|
)
|
11,061
|
|
Issuance of preferred stock, net
|
|
of associated costs
|
|
290,135
|
|
3
|
|
|
|
|
|
1,457
|
|
|
|
|
|
|
|
|
|
1,460
|
|
Stock based consulting expense
|
|
|
|
|
|
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
125
|
|
Stock based
|
|
compensation-employees
|
|
and directors
|
|
|
|
|
|
|
|
|
|
656
|
|
|
|
|
|
|
|
|
|
656
|
|
Preferred dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50
|
)
|
|
|
|
|
(50
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,700
|
)
|
|
|
|
|
(3,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
290,135
|
|
$3
|
|
2,486,668
|
|
$25
|
|
$288,667
|
|
$
|
|
$(278,957
|
)
|
24,063
|
|
$ (186
|
)
|
$ 9,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
F-5
GOAMERICA,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
|
Years
ended December 31,
|
|
|
|
2007
|
2006
|
2005
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
Net
loss
|
$(3,700
|
)
|
$(1,960
|
)
|
$(4,372
|
)
|
Adjustments
to reconcile net loss to net cash provided by (used
|
|
|
|
|
|
|
in)
operating activities:
|
|
|
|
|
|
|
Depreciation
and amortization
|
356
|
|
362
|
|
1,124
|
|
Amortization
of debt discount and deferred financing costs
|
35
|
|
|
|
|
|
Gain
on sale of business
|
|
|
(38
|
)
|
|
|
Provision
for losses on accounts receivable
|
407
|
|
156
|
|
318
|
|
Settlement
losses
|
162
|
|
|
|
|
|
Non-cash
stock compensation and expense
|
781
|
|
516
|
|
54
|
|
Write-off
of capitalized terminated merger costs
|
|
|
431
|
|
|
|
Changes
in operating assets and liabilities, net of effects from
|
|
|
|
|
|
|
divestiture
of business:
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
(476
|
)
|
(909
|
)
|
58
|
|
Decrease
in other receivables
|
48
|
|
|
|
732
|
|
Decrease
(increase) in inventory
|
123
|
|
(168
|
)
|
(38
|
)
|
(Increase)
decrease in prepaid expenses and other current
|
|
|
|
|
|
|
assets
|
(35
|
)
|
(94
|
)
|
84
|
|
Increase
(decrease) in accounts payable
|
726
|
|
(206
|
)
|
417
|
|
Increase
in accrued expenses and other liabilities
|
1,727
|
|
1,384
|
|
137
|
|
(Decrease)
increase in deferred revenue
|
(6
|
)
|
8
|
|
(193
|
)
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
148
|
|
(518
|
)
|
(1,679
|
)
|
|
Investing
activities
|
|
|
|
|
|
|
Purchase
of property, equipment and leasehold improvements
|
(518
|
)
|
(320
|
)
|
(114
|
)
|
Deferred
acquisition costs
|
(2,255
|
)
|
|
|
|
|
Proceeds
from sale of business
|
|
|
53
|
|
|
|
Change
in other assets and restricted cash
|
234
|
|
(88
|
)
|
(439
|
)
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
(2,539
|
)
|
(355
|
)
|
(553
|
)
|
|
Financing
activities
|
|
|
|
|
|
|
Proceeds
from the sale of preferred stock
|
427
|
|
|
|
|
|
Proceeds
from the issuance of debt
|
563
|
|
|
|
|
|
Issuance
of common stock, net of related expenses
|
|
|
7
|
|
2
|
|
Payments
made on capital lease obligations
|
(101
|
)
|
(68
|
)
|
(64
|
)
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
889
|
|
(61
|
)
|
(62
|
)
|
|
|
|
|
|
|
|
Decrease
in cash and cash equivalents
|
(1,502
|
)
|
(934
|
)
|
(2,294
|
)
|
Cash
and cash equivalents at beginning of year
|
3,870
|
|
4,804
|
|
7,098
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of year
|
$ 2,368
|
|
$ 3,870
|
|
$ 4,804
|
|
|
|
|
|
|
|
|
See
accompanying notes
.
F-6
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
1.
Description of Business and Basis of Presentation
GoAmerica
®
is a communications service provider, offering solutions primarily
for consumers who are deaf, hard of hearing and/or speech impaired,
including Internet relay services, wireless subscription and value added services,
and wireless devices and accessories. Our i711.com
telecommunications
relay service was launched in March 2005 and enables people who are deaf or
hard of hearing to call and converse with hearing parties by using
a computer, wireless handheld device or similar unit, through an operator
that interprets text to voice and vice versa. In addition, during December
2006, we began offering our i711 Video Relay Service (VRS), the newest member
of the i711.com family of relay services. i711 VRS enables people
who are deaf to use sign language to communicate with hearing people
using a Windows computer, a web camera, and a broadband Internet connection.
Wynd Communications Corporation, a wholly owned subsidiary of GoAmerica,
offers wireless subscription services that operate over the T-Mobile wireless
data network and consist primarily of two offerings: 1) the resale of recurring
monthly data-only services for deaf or hard of hearing customers;
and 2) our value added services called Wireless Toolkit, which consists
of a collection of services, including AAA Roadside Assistance, TTY/TDD messaging,
and access to Insight Cinemas captioned movie information.
We sell wireless devices directly to customers and indirectly through sub-dealers.
We have a dealer agreement with T-Mobile whereby we sell devices and earn
a commission, also called a bounty, upon activation of the device
with an associated service rate plan. GoAmerica continues to support customers
who use our proprietary software technology called Go.Web
.
GoWeb is designed for use mainly by enterprise customers to enable
secure wireless access to corporate data and the Internet on numerous wireless
computing devices. We continue to engineer our technology to operate with
new versions of wireless devices as they emerge.
Until
August 31, 2006, the Company operated two reportable business segments,
Wireless Data Solutions and Prepaid Services. Effective August 31, 2006, the
Company sold GoAmerica Marketing, Inc., dba GA Prepaid (GA Prepaid),
our prepaid calling card division. The sale closed on October 2, 2006 at which
time the Company ceased offering prepaid services as described in
Note 4.
The
Company operates in a highly competitive environment subject
to rapid technological change and the 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 parties for
wireless communication devices and wireless network connectivity.
The
Company has incurred significant operating losses since its inception and,
as of December 31, 2007, had an accumulated deficit of $278,957.
During 2007, the Company incurred a net loss of $3,700, but provided
$148 of cash to fund operating activities. As of December 31, 2007
the Company had $2,368 in cash and cash equivalents.
F-7
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
2.
Significant Accounting Policies
Basis of
Consolidation
The
consolidated financial statements include the accounts of GoAmerica,
Inc. and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
Cash
Equivalents
Cash
equivalents consist of highly liquid investments with an original maturity
of three months or less when purchased.
Use
of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of certain revenues and expenses during the reporting
periods. Actual results could differ from those estimates. Significant
estimates that affect the financial statements include, but are not
limited to: collectibility of accounts and notes receivable and recoverability
of goodwill.
Receivables
and Credit Policies
Accounts
receivable are uncollateralized customer obligations due under normal
trade terms requiring payment within 30 days from the invoice
date. Accounts receivable are stated at the amount billed to the customer.
Interest is not billed or accrued. Accounts receivable in excess of 90 days
old are considered delinquent. Payments of accounts receivable are allocated
to the specific invoices identified on the customers remittance
advice or, if unspecified, are applied to the oldest unpaid invoices.
The
carrying amount of accounts receivable is reduced by a valuation allowance
that reflects the Companys best estimate of the amounts
that may not be collected. This estimate is based on reviews of all
balances in excess of 90 days from the invoice date and an assessment
of current creditworthiness, estimating the portion, if any, of the balance
that will not be collected. The Company reviews its valuation allowance
on a quarterly basis.
Merchandise
Inventories
Merchandise
inventories, principally wireless devices, are stated at the lower of cost (first-in,
first-out) basis or market. Inventories are recorded net of a reserve for
excess and obsolete merchandise.
F-8
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Property,
Equipment and Leasehold Improvements
Property,
equipment and leasehold improvements are stated at cost. Depreciation
is provided on the straight-line method over the estimated useful
lives of the related assets ranging from two to seven years. Leasehold
improvements are depreciated over the lesser of their useful lives
or term of the lease. Expenditures for maintenance and repairs are
charged to expense as incurred.
Computer
Software Developed or Obtained For Internal Use
All
direct internal and external costs incurred in connection with the development
stage of software for internal use are capitalized. Amounts capitalized
are included in property, equipment and leasehold improvements
and are amortized on a straight-line basis over three years beginning when
such assets are placed in service. All other costs associated with internal
use software are expensed when incurred.
Deferred
Acquisition and Financing Costs
The
Company has capitalized allowable amounts in accordance with FAS 141
Business Combinations (as amended) associated with the acquisitions
discussed in note 14. As of December 31, 2007, approximately $5
million has been capitalized as deferred acquisition costs. These amounts
will be considered in conjunction with the purchase price allocation to be completed
by the Company.
The
Company has capitalized allowable amounts in accordance with EITF
95-13 Classifications of Debt Issue Costs in a Statement of Cash
Flows and APB Opinion No. 21 Interest on Receivables and Payables (as
amended). As of December 31, 2007, approximately $1 million
has been capitalized as deferred financing costs. These costs shall be amortized
over the term of the debt.
Goodwill
and Intangible Assets
Goodwill
and intangible assets result primarily from acquisitions accounted
for under the purchase method. In accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets (SFAS No. 142), goodwill and intangible assets with
indefinite lives are not amortized but are subject to impairment
by applying a fair value based test. Intangible assets with finite useful lives
related to developed technology, customer lists, trade names and other
intangibles are being amortized on a straight-line basis over the estimated
useful life of the related asset, generally one to five years.
Recoverability
of Intangible and Other Long Lived Assets
In
accordance with SFAS No.142, the Company reviews the carrying value of
goodwill and intangible assets with indefinite lives annually or in certain
circumstances as required. The Company measures impairment
losses by comparing carrying value to fair value. Fair value is determined
using discounted cash flow methodology.
F-9
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
In
accordance with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, long-lived assets used in operations
are reviewed for impairment whenever events or changes in circumstances
indicate that carrying amounts may not be recoverable. For long-lived
assets to be held and used, the Company recognizes an impairment
loss only if its carrying amount is not recoverable through its undiscounted
cash flows and measures the impairment loss based on the difference
between the carrying amount and fair value.
For
the three year period ended December 31, 2007, there were no SFAS No. 142
or 144 impairment charges.
Revenue
Recognition
The
Company derives revenue from relay services which is recognized as
revenue when services are provided or earned.
In
June 2006, the Federal Communications Commission certified
the Company as an Internet Protocol Relay and Video Relay Service Provider.
As a result, the Company became eligible to be compensated directly
from the Interstate Telecommunications Relay Services Fund for
reimbursement of its i711.com minutes and began recognizing
the full revenue from these minutes along with a related cost of revenue
for the costs associated with these minutes, which is provided by Nordia,
Inc. Previously, the Company relied on Nordia to obtain the reimbursement
amounts on the Companys behalf. This previous practice resulted
in the Company recording only a portion of the total revenue from
the service provided as the Company was not the primary obligor.
The
Company derives subscriber revenue from the provision of wireless
communication services. Subscriber revenue consists of monthly
charges for access and usage and is recognized as the service is provided. Equipment
revenue is recognized upon shipment and transfer of title to the end user.
Revenue from commissions is recognized upon activation of subscribers
on behalf of third party wireless network providers.
The
Company collects sales taxes from its customers when required
and maintains a policy to classify these tax collections as a current liability
until remitted to the appropriate state agency and a corresponding reduction
of revenue.
Revenue
Recognition-Discontinued Operation
Revenue
from the sale of prepaid calling cards was deferred upon sale of the cards.
These deferred revenues were earned when usage of the cards occurred and/or
administrative fees were imposed (see Note 4).
Cost
of Revenues
Cost
of relay revenue consists principally of charges related to outsourced relay
operators utilized to facilitate calls. Cost of subscriber revenue consists
principally of airtime costs charged by carriers. Cost of equipment
revenue consists of the cost of equipment sold.
F-10
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Cost
of Revenues-Discontinued Operation
Cost
of prepaid services consisted principally of usage costs charged by carriers.
Income
Taxes
Deferred
income taxes are determined using the asset and liability method.
Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. A valuation
allowance is recorded when the expected recognition of a deferred tax asset
is considered to be unlikely.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48 (FIN
48), Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, which clarifies
the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity
in practice associated with certain aspects of the recognition and measurement related to accounting for income
taxes. This interpretation is effective for fiscal years beginning after December 15, 2006. The adoption of FIN
48 did not have a material effect on the Companys financial condition or results of operations.
Advertising
Costs
Advertising
costs are expensed as incurred. During 2007, 2006 and 2005, advertising expense
was approximately $105, $97 and $110, respectively.
Research
and Development Costs
Research
and development costs are expensed as incurred.
Stock-Based
Employee Compensation
At
December 31, 2007, the Company had three stock-based compensation
plans, which are more fully described in Note 11 of these Notes to Consolidated
Financial Statements below.
Prior
to January 1, 2006, the Company accounted for awards granted under those
plans using an intrinsic value approach to measure compensation expense
in accordance with Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees and related interpretations.
Under this method, compensation expense, if any, was recorded on the
date of the grant only if the current market price of the underlying stock
exceeded the exercise price. Under the provisions of APB 25, there was no compensation
expense resulting from the issuance of stock options by the Company
where the exercise price was equivalent to the fair market value at the
date of grant.
F-11
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Effective
January 1, 2006, the Company adopted SFAS No. 123R, Share-Based Payments
(SFAS 123R) and considered the related guidance of the Securities
and Exchange Commission (SEC) included in Staff Accounting
Bulletin (SAB) No. 107. The Company elected to use the modified
prospective transition method as permitted by SFAS 123R and, accordingly,
did not restate their financial results for prior periods. Under this transition
method, stock-based compensation expense for the year ended December
31, 2006 includes compensation expense for all stock-based compensation
awards granted prior to, but not yet vested as of January 1, 2006 (based on
the grant date fair value estimated in accordance with the original provisions
of SFAS 123 and previously presented in the pro forma footnote disclosures),
and compensation cost for all stock-based payments granted subsequent
to January 1, 2006 (based on the grant-date fair value estimated in accordance
with the new provisions of SFAS 123(R)), which vested during 2006. The Company
did not issue any new stock options during the years ended December 31,
2007 and 2006. The Companys adoption of SFAS 123R had no effect on
the Companys basic and diluted net loss per share for the years ended
December 31, 2007 and 2006. As part of the adoption of SFAS 123(R), effective January
1, 2006, the Company eliminated $1,230 of deferred employee
compensation against paid in capital.
The
Company has granted restricted stock awards, restricted by a service condition,
with vesting periods of up to 3 years. Restricted stock awards are valued using
the fair market value of the Companys common stock
as of the date of grant. The Company recognizes compensation expense
on a straight line basis over the requisite service period of the award. The
remaining unvested shares are subject to forfeitures and restrictions on
sale, or transfer, up until the vesting date.
Earnings
(Loss) Per Share
The
Company computes net loss per share under the provisions of SFAS No.
128, Earnings per Share (SFAS 128), and SEC Staff Accounting Bulletin
No. 98 (SAB 98).
F-12
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Under
the provisions of SFAS 128 and SAB 98, basic loss per share is computed
by dividing the Companys net loss for the period by the weighted-average
number of shares of common stock outstanding during the period.
Diluted net loss per share excludes potential common shares if the
effect is antidilutive. Diluted loss per share is determined in the same
manner as basic loss per share except that the number of shares 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 and warrants as well as preferred
stock and unvested restricted stock is anti-dilutive and as such, these amounts
have been excluded from the calculation of diluted loss per share. For
the years ended December 31, 2007, 2006 and 2005, a total of 576,950, 453,344
and 426,428 of common stock equivalent shares were excluded from
the computation of diluted net loss per share and consisted of the following:
|
|
Years
Ended December 31,
|
|
|
2007
|
2006
|
2005
|
|
Options
|
|
80,829
|
|
83,191
|
|
97,108
|
|
Warrants
|
|
84,320
|
|
84,320
|
|
84,320
|
|
Preferred
stock
|
|
290,135
|
|
|
|
|
|
Non-vested
restricted stock
|
|
121,666
|
|
285,833
|
|
245,000
|
|
|
|
|
Total
|
|
576,950
|
|
453,344
|
|
426,428
|
|
|
|
|
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to a concentration
of credit risk consist of cash and cash equivalents and accounts receivable.
The Company maintains a significant portion of its cash and cash equivalents
with two financial institutions. At times these balances exceed the FDIC
insured limit.
As
of December 31, 2007 and 2006, the Company had 83% and 61%, respectively,
of its accounts receivable with the National Exchange Carriers Association (NECA).
For the years ended December 31, 2007 and 2006, the Company generated
88% and 68%, respectively, of its total revenue with NECA. As of December
31, 2007 and 2006, the Company had 7% and 11%, respectively, of its accounts
receivable with T-Mobile. For the years ended December 31, 2007 and 2006,
the Company generated 4% and 19%, respectively, of its total revenue with
T-Mobile. The Company performs periodic credit evaluations of its
customers but generally does not require collateral.
Other
Concentration of Risk
The
Company is heavily reliant upon Nordia, Inc. for technology and labor supporting
our IP text relay services. The Company is heavily reliant upon Visual
Language Interpreting, Inc. for specialized labor supporting its Video Relay
Service, launched in December 2006.
F-13
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Fair
Value of Financial Instruments
The
carrying amounts of the Companys financial instruments, which
include cash and cash equivalents, accounts and notes receivable, accounts payable
and other debt obligations approximate their fair values due to the short
maturity of these items.
Reclassifications
The
Company has reclassified certain prior year information to conform
with current year presentation. Such reclassifications had no effect on the
prior years net loss.
Recent
Accounting Pronouncements
In
July 2006, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty
in Income Taxes an interpretation of FASB Statement No. 109,
which clarifies the accounting and disclosure for uncertainty in tax positions,
as defined. FIN 48 seeks to reduce the diversity in practice associated with
certain aspects of the recognition and measurement related to accounting
for income taxes. This interpretation is effective for fiscal years beginning
after December 15, 2006. The adoption of FIN 48 did not have a material
effect on the Companys financial condition or results of operations.
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a framework
for measuring fair value in accordance with accounting principles generally
accepted in the United States, and expands disclosures about fair value measurements.
SFAS No. 157 was effective for financial statements issued for fiscal years
beginning after November 15, 2007, with earlier application encouraged,
but the issuance of FASB Staff Position SFAS No. 157-2 has delayed the effective
date to fiscal years beginning after November 15, 2008 as it relates to
non-financial assets and non-financial liabilities. Any amounts recognized
upon adoption as a cumulative effect adjustment will be recorded to
the opening balance of retained earnings in the year of adoption. The adoption
of SFAS No. 157 is not expected to have a material effect on the Companys
financial condition or results of operations.
F-14
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
In
February 2007, the FASB issued SFAS No. 159, Establishing the Fair Value
Option for Financial Assets and Liabilities to permit all entities
to choose to elect to measure eligible financial instruments and certain
other items at fair value. The decision whether to elect the fair value
option may occur for each eligible item either on a specified election
date or according to a preexisting policy for specified types of eligible items.
However, that decision must also take place on a date on which criteria
under SFAS 159 occurs. Finally, the decision to elect the fair value option
shall be made on an instrument-by-instrument basis, except in
certain circumstances. An entity shall report unrealized gains and losses
on items for which the fair value option has been elected in earnings at
each subsequent reporting date. SFAS No. 159 applies to fiscal years beginning
after November 15, 2007, with early adoption permitted for an entity
that has also elected to apply the provisions of SFAS No. 157,
Fair
Value Measurements.
The
adoption of SFAS No. 159 is not expected to have a material effect on the
Companys financial condition or results of operations.
In
December 2007, the FASB issued SFAS 141 (revised 2007),
Business
Combinations
(SFAS
141(R)), which establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest
in an acquiree, including the recognition and measurement of goodwill
acquired in a business combination. SFAS 141(R ) applies to fiscal years
beginning on or after December 18, 2008. Earlier adoption is prohibited.
The Company is currently evaluating the impact of adopting SFAS 141(R)
on its results of operations and financial condition.
In
December 2007, the FASB issued SFAS No. 160,
Noncontrolling
Interests in Consolidated Financial Statements an amendment
of ARB No. 51
.
SFAS 160 amends ARB 51 to establish accounting and reporting standards
for the noncontrolling interest in a subsidiary and for the deconsolidation
of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary,
which is sometimes referred to as minority interest, is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. Among other requirements,
this statement requires consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and
the noncontrolling interest. It also requires disclosure, on the face of the
consolidated income statement, of the amounts of consolidated
net income attributable to the parent and to the noncontrolling interest.
SFAS 160 applies to fiscal years beginning on or after December 18, 2008.
Earlier adoption is prohibited. The Company is currently evaluating the
impact of adopting SFAS 160 on its results of operations and financial
condition.
F-15
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
3.
Settlement of Hands On Litigation
On
May 2, 2005, the Company entered into a loan agreement with Hands
On Video Relay Services, Inc., a Delaware corporation, and Hands On Sign Language
Services, Inc., a California corporation (collectively, the Hands On Entities).
Pursuant to that agreement, all amounts that the Company advanced
to Hands On were secured, initially, by the assets acquired with such funds
with interest at a defined prime rate. On July 6, 2005, the Company
entered into a merger agreement with the Hands On Entities and their
principal shareholders (collectively, Hands On).
On
March 1, 2006, the Company announced its receipt of a letter from
Hands On in which Hands On purportedly terminated the merger agreement
among the parties. Subsequent discussions between the parties did not provide
a basis to pursue the merger. Hands On stockholders had approved the proposed
merger with GoAmerica at special Hands On stockholder meetings
held on February 22, 2006. A Special Meeting of GoAmerica Stockholders
relating to the Companys proposed merger with Hands On was scheduled
for March 13, 2006, adjourned from February 27, 2006 in order to allow
GoAmerica to achieve a quorum with respect to the Special Meeting.
As of March 6, 2006, the Company had achieved a quorum and received
votes overwhelmingly in favor of the Hands On merger. On March 7,
2006, the Company announced its cancellation of its Special Meeting of
Stockholders and its determination not to pursue its proposed merger
with Hands On. As a result of the merger agreement termination,
Hands Ons repayment obligations under the loan agreement began
July 1, 2006. After the Company received all such payments due through
September 30, 2006, Hands On ceased making payments due leaving
an outstanding receivable of $562 at December 31, 2006.
Hands
On had indicated that it did not intend to make any more payments
to the Company under the existing terms of the loan agreement
and that Hands On was attempting to restructure its debts and raise new
capital. In December 2006, the Company commenced litigation
against Hands On, seeking recovery of its loan receivable.
In
April 2007, the Company executed a settlement agreement and mutual
release related to its litigation with Hands On in exchange for an immediate
$400 cash payment, termination of litigation, mutual release
of all loan- and merger-related claims (asserted and otherwise), and
other consideration and recorded a settlement loss of $162.
As
a result of the terminated merger, the Company wrote off a total
of $490 of merger related expenses during the year ended December
31, 2006 and such write off is included in other income (expense), net.
On
September 12, 2007, the Company entered into a definitive merger
agreement with Hands On Video Relay Services, Inc. (Hands On). (see note
14)
F-16
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
4.
Discontinued Operation.
On
September 1, 2006, the Company entered into an agreement to sell
GoAmerica Marketing, Inc., dba GA Prepaid (GA Prepaid), its
prepaid calling card division, effective August 31, 2006. The sale closed on
October 2, 2006 and the Company recognized a gain on sale of $38, representing
the excess of purchase consideration received at closing over the book value
of assets sold. The gain is reflected in the 2006 results for the discontinued
segment. The Company received total consideration of $131, which
consisted of the purchase price of $75 and working capital reimbursements
totaling $56. The Company was paid $20 at closing and $111
was payable under a guaranteed promissory note to be received in five monthly
installments beginning on October 31, 2006.
Total
revenues related to the discontinued operations were $3,582 and $3,147
for the years ended December 31, 2006 and 2005, respectively. There were
no assets or liabilities of GA Prepaid in the Consolidated Balance Sheet as
of December 31, 2007 and 2006 and the results of operations have been reclassified
as loss from discontinued operations in the Consolidated Statements
of Operations for all dates and periods presented.
5.
Credit Agreement
On
August 1, 2007, the Company entered into a Credit Agreement, (the
Credit Agreement), with to Clearlake Capital Group (Clearlake)
as administrative agent and collateral agent, pursuant to which the Company
received a $1,000 bridge loan, which was increased by $1,750 on September
14, 2007 and an additional increase of $750 on October 29, 2007. Interest
on the loan is payable on the first business day following the end of each month,
at the LIBOR rate, plus 8%. LIBOR rate utilized for interest calculations at
December 31, 2007 was 5.125%. Interest is payable in cash, except that
a portion of the interest equal to 4% is payable in kind in the form of
additional loans. The loan is secured by substantially all of the assets of
GoAmerica and its principal subsidiaries and the stock of such principal
subsidiaries. The credit agreements contain customary operating and
financial covenants, including restrictions on the Companys ability
to pay dividends to its common stockholders, make investments,
undertake affiliate transactions, and incur additional indebtedness, in addition
to financial compliance requirements. Subsequent to December
31, 2007, the loan was repaid upon the closing of the Verizon transaction described
in note 14.
At
December 31, 2007, the Company had $3,532 outstanding under the
agreement.
6.
Goodwill
The
Companys annual impairment test under SFAS No. 142 indicated
that no impairment had occurred during 2007, 2006 and 2005 relative
to the Companys Wynd reporting unit. Furthermore, there was
no change in the Companys goodwill balance during the three year
period ended December 31, 2007.
F-17
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
7.
Supplemental Balance Sheet Information
Merchandise
inventories:
During
2007, the Company recorded write-downs of approximately $18 in
order to reflect inventory at the lower of cost or market. The write-down
primarily relates to a lower of cost to market adjustment for
wireless phones which remained unsold. There were no write-downs recorded
during 2006.
Property,
equipment and leasehold improvements:
Property,
equipment and leasehold improvements consisted of the following:
|
December
31,
|
|
2007
|
|
2006
|
Furniture,
fixtures and equipment
|
$ 211
|
|
|
$ 333
|
|
Computer
equipment and software
|
2,996
|
|
|
6,159
|
|
Leasehold
improvements
|
11
|
|
|
162
|
|
|
|
|
|
|
|
|
3,218
|
|
|
6,654
|
|
Accumulated
depreciation and amortization
|
(2,301
|
)
|
|
(5,899
|
)
|
|
|
|
|
|
|
|
$ 917
|
|
|
$ 755
|
|
|
|
|
|
|
|
The
Company recorded depreciation expense of $356, $362 and $485
for the years ended December 31, 2007, 2006 and 2005, respectively. In
addition, during 2007, the Company wrote off retired assets that were fully
depreciated in the amount of $3,960.
Included
in the above table are the following assets recorded under capital leases:
|
December
31,
|
|
2007
|
|
2006
|
Cost
|
$340
|
|
|
$278
|
|
Accumulated
amortization
|
(97
|
)
|
|
(37
|
)
|
|
|
|
|
|
|
Net
assets
|
$243
|
|
|
$241
|
|
|
|
|
|
|
|
The
Company includes the amortization of leased assets in their reported
totals for depreciation and amortization of fixed assets. For the years
ended December 31, 2007 and 2006, such amortization amounted
to $55 and $37, respectively.
F-18
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Accounts
Payable and Accrued expenses:
Accounts
Payable and Accrued expenses consisted of the following:
|
December
31,
|
|
2007
|
|
2006
|
Relay
services
|
$1,422
|
|
|
$1,478
|
|
Dealer
commissions
|
20
|
|
|
176
|
|
Professional
fees
|
2,426
|
|
|
206
|
|
Employee
compensation
|
746
|
|
|
113
|
|
Franchise
taxes
|
|
|
|
90
|
|
Interest
|
36
|
|
|
|
|
Carrier
services
|
177
|
|
|
349
|
|
Insurance
|
9
|
|
|
12
|
|
Equipment
purchases
|
3
|
|
|
38
|
|
Other
|
69
|
|
|
79
|
|
|
|
|
|
|
|
|
$4,908
|
|
|
$2,541
|
|
|
|
|
|
|
|
8.
Commitments and Contingencies
Boundless
Matter
On
September 22, 2004, Boundless Depot, LLC (Boundless Depot) and Scott
Johnson, one of two Boundless Depot shareholders, sued GoAmerica and Wynd
Communications in the Superior Court of the State of California for
the County of Los Angeles, claiming damages of one million dollars
for GoAmericas refusal to pay Boundless Depot unattained contingent consideration,
comprised of cash and/or GoAmerica Common Stock, with respect
to the Asset Purchase Agreement dated as of February 8, 2003 (the Deafwireless
Agreement), pursuant to which GoAmerica and Wynd Communications
acquired certain Deafwireless assets. The total value of such contingent consideration,
if all contingencies had been fully met and amounts paid immediately
thereupon, would not have exceeded $211; however, the Company does
not believe any of the contingent consideration is owed to Boundless Depot or
either of its shareholders since conditions of the Deafwireless Agreement
were not met and the Company incurred costs for which it is entitled
to receive reimbursement from Boundless Depot or offset against
any amounts that may become payable to Boundless Depot. Upon
petition by GoAmerica and Wynd Communications, the Court has
ordered this matter into arbitration, which was scheduled for February
2006 and later deferred due to settlement discussions. The plaintiffs have
not moved to reschedule the arbitration proceeding. We intend to defend
this action vigorously and may elect to pursue counterclaims.
F-19
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Leases
and Other
Future
minimum capital lease payments and future minimum
lease payments relating to office space under noncancelable operating leases
as of December 31, 2007 are as follows:
Year ending December
31,
|
Capital
Leases
|
Operating
Leases
|
2008
|
|
$108
|
|
$ 420
|
|
2009
|
|
76
|
|
428
|
|
2010
|
|
11
|
|
104
|
|
2011
|
|
|
|
103
|
|
2012
|
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
195
|
|
$1,055
|
|
Less amount representing
interest
|
|
(33
|
)
|
|
|
|
|
|
|
|
Present value of net minimum
capital lease payments
|
|
162
|
|
|
|
Less current portion of
capital lease obligations
|
|
(88
|
)
|
|
|
|
|
|
|
|
Obligations under capital
lease, net of current portion
|
|
$ 74
|
|
|
|
|
|
|
|
|
During
2007, 2006 and 2005, total rent expense was approximately $441, $306
and $301, respectively.
Effective
November 1, 2007, Wayne D. Smith resigned from all of his positions
with the Company. Mr. Smith will receive one years severance,
continuing medical benefits, and all restrictions remaining on restricted
stock grants of the Companys Common Stock previously made
to him have lapsed resulting in a charge of $84 to the statement
of operations. Mr. Smith will be entitled to receive a bonus, relating
to 2007, in an amount equal to any bonus that may be paid to any other
executive officer of the Company. The Company has accrued $193
as of December 31, 2007 for such obligations.
At
December 31, 2007, $200 of the Companys cash was held in
escrow in support of a performance bond issued in favor of the State of
Tennessee in order to secure transfer approval of the state TRS contract that
is pending final approval. (see note 14)
During
2005, the Company entered into employment agreements with
certain of its key executives which provide for fixed compensation. These
agreements generally continue until terminated by the employee
or the Company and, under certain circumstances, provide for salary
continuance for a specified period of no more than 1 year. In December
2007, certain agreements were amended in anticipation of the pending
transactions. (see note 14)
Subsequent
to December 31, 2007, the Company entered into and assumed additional
agreements in conjunction with the transactions further discussed in note
14.
F-20
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
9.
Benefit Plan
The
Company has established a defined contribution plan under Section 401(k)
of the Internal Revenue Code, which provides for voluntary employee contributions
of up to 15 percent of compensation for employees meeting certain
eligibility requirements. The Company contributes to the plan up to
a maximum of 3 percent of eligible employee compensation.
The Companys contribution during 2007, 2006 and 2005 was $53,
$39 and $42, respectively.
10.
Stockholders Equity
On
August 1, 2007, the Company filed a Certificate of Designations,
Powers,
Preferences and Rights of the Series A Preferred Stock (
Series A Preferred Stock
) with the Secretary of State of the State of Delaware.
Such certificate authorized and designated 290,135 shares of Series A Preferred
Stock with a par value of $0.01 per share. The Series A Preferred Stock,
plus all accrued and unpaid dividends, has a liquidation value of $5.17
per share and is convertible into shares of Common Stock, at any time
after the date of issue, at a conversion price of $5.17, subject to adjustment
for stock splits, stock dividends and issuances of additional shares of common
stock for no consideration or for consideration that is less than the conversion
price that is then in effect. The Series A Preferred Stock may be redeemed at the option of the holder or by the Company under certain circumstances.
Each holder shall be entitled to the number of votes equal
to the number of shares of Common Stock the Series A Preferred Stock could be
converted into. The shares of Series A Preferred Stock will accrue cumulative
cash dividends at a rate of 8% per annum, compounded quarterly from
the date of issuance. Payment of dividends on the Series A Preferred Stock
will be paid in preference to any dividend on Common Stock.
On
August 1, 2007, the Company sold 290,135 shares of Series A Preferred Stock to Clearlake Capital Group (Clearlake) at
a purchase price of $5.17 per share resulting in net proceeds of approximately
$1,460,000. On August 1, 2007, the Company also entered into an agreement with Clearlake, which was later amended on September 12, 2007,
allowing for the purchase of 7,446,809 additional shares of preferred stock, subject to the Company filing, an amended and restated certificate of incorporation increasing the authorized number of shares of Series A Preferred Stock,
in connection with the acquisitions more fully described in note 14. As
of December 31, 2007, the Company had accrued approximately $50
of preferred dividends.
F-21
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
As
of December 31, 2007, the Company had the following warrants outstanding
and exercisable:
|
Amount
|
Exercise
price
|
Expiration
date
|
Private placement
agent-2004 financing
|
|
14,101
|
|
$12.00
|
|
March 10, 2009
|
|
2004 investors
|
|
57,719
|
|
$12.00
|
|
December 19, 2008
|
|
Landlord
|
|
12,500
|
|
$36.80
|
|
November 14, 2013
|
|
|
|
|
|
|
|
|
Total
|
|
84,320
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2007, the Company had reserved shares of common
stock for issuance as follows:
Exercise of common
stock options or additional common stock awards
|
|
1,713,329
|
|
Exercise of common stock
purchase warrants
|
|
84,320
|
|
Employee Stock Purchase
Plan
|
|
48,335
|
|
Exercise of right to convert
of preferred shares
|
|
290,135
|
|
11.
Stock Option Plans and Other Stock-Based Compensation
On
August 3, 1999, the Company adopted the GoAmerica Communications
Corp. 1999 Stock Option Plan. This plan provided for the granting of awards
to purchase shares of common stock. No further option grants will
be made under the GoAmerica Communications Corp. 1999 Stock
Option Plan.
In
December 1999, the Companys Board of Directors adopted the GoAmerica,
Inc. 1999 Stock Plan (the 1999 Plan) as a successor plan to the GoAmerica
Communications Corp. 1999 Stock Option Plan, pursuant to which 60,000
additional shares of the Companys common stock have been reserved
for issuance to selected employees, non-employee directors and consultants.
In May 2001, the Companys shareholders approved an increase in the
maximum number of shares issuable under the 1999 Plan from
60,000 to 132,809 shares.
In
November 2005, the Companys Board of Directors adopted the 2005 Equity
Compensation Plan (the 2005 Plan) as a successor plan to the 1999 Plan,
pursuant to which 400,000 additional shares of the Companys common
stock have been reserved for issuance to selected employees, non-employee
directors and consultants. In December 2005, the Companys shareholders
approved the 2005 Plan. In December of 2007, the Companys shareholders
amended the plan, pursuant to which 1,600,000 additional shares of the
Companys common stock have been reserved for issuance to selected
employees, non-employee directors and consultants bringing the total
available under the plan to 2,000,000.
Under
the terms of the 2005 Plan, a committee of the Companys
Board of Directors may grant options to purchase shares of the Companys
common stock to employees and consultants of the Company
at such prices that may be determined by the committee.
The 2005 Plan provides for award grants in the form of incentive stock
options, non-qualified stock options and restricted stock awards. Options granted
under the 2005 Plan generally vest annually over 4 years and expire after 10
years.
F-22
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
On
December 29, 2005 the Companys Board of Directors approved the acceleration
of vesting of certain unvested and out of the money stock options
with exercise prices equal to or greater than $4.19 per share previously awarded
to our employees, including our executive officers and directors, under the
1999 plans. The acceleration of vesting was effective for stock options outstanding
as of December 29, 2005. Options to purchase approximately 31,518 shares of
common stock or 86% of our outstanding unvested options were subject to the
acceleration. The weighted average exercise price of the options that were accelerated
was $19.93. As a result of this acceleration, the Company was required to perform
a calculation under FASB Financial Interpretation FIN 44 to determine if a charge
resulted from the acceleration. Such computation did not require the recording
of any additional expense. The purpose of the acceleration was to enable the
Company to avoid recognizing compensation expense associated with these options
in future periods in our Consolidated Statements of Operations upon the adoption
of SFAS 123R in January 2006. The Company also believes that because the options
that were accelerated had exercise prices in excess of the current market value
of the Companys common stock, the options had limited economic value and
were not fully achieving their original objective of incentive compensation
and employee retention.
The
following table summarizes the stock option activity on a combined basis for
the Companys stock based compensation plans during 2007, 2006 and 2005:
|
Number of
Options
|
Weighted-Average
Exercise Price
|
Outstanding at
January 1, 2005
|
|
89,387
|
|
$ 90.61
|
|
Granted
|
|
10,242
|
|
$ 4.19
|
|
Exercised
|
|
|
|
|
|
Cancelled
|
|
(2,521
|
)
|
$ 65.30
|
|
|
|
|
|
|
Outstanding at December
31, 2005
|
|
97,108
|
|
$ 72.59
|
|
Granted
|
|
|
|
|
|
Exercised
|
|
(1,654
|
)
|
$ 4.19
|
|
Cancelled
|
|
(12,263
|
)
|
$ 43.82
|
|
|
|
|
|
|
Outstanding at December
31, 2006
|
|
83,191
|
|
$ 75.90
|
|
Granted
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
Cancelled
|
|
(2,362
|
)
|
$155.63
|
|
|
|
|
|
|
Outstanding at December
31, 2007
|
|
80,829
|
|
$ 73.57
|
|
|
|
|
|
|
Exercisable at December
31, 2007
|
|
79,162
|
|
$ 75.07
|
|
|
|
|
|
|
Exercisable at December
31, 2006
|
|
79,858
|
|
$ 78.97
|
|
|
|
|
|
|
Exercisable at December
31, 2005
|
|
92,108
|
|
$ 76.41
|
|
|
|
|
|
|
Available for grant at
December 31, 2007
|
|
1,632,500
|
|
|
|
|
|
|
|
|
The
total intrinsic value, which is the amount by which the stock price exceeds
the exercise price of the options on the date of exercise, of options exercised
during the years ended December 31, 2007, 2006 and 2005 was none, $9 and none,
respectively.
F-23
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
The
following table summarizes information about fixed price stock options outstanding
at December 31, 2007:
|
Outstanding
|
Range of
Exercise Prices
|
|
Number
Outstanding
|
Weighted-
Average
Exercise
Price
|
Weighted-
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
|
$2.35-$4.19
|
|
17,191
|
|
$3.12
|
|
6.8 years
|
|
|
|
$16.00-$26.40
|
|
38,139
|
|
$19.93
|
|
6.0 years
|
|
|
|
$43.20-$44.80
|
|
5,875
|
|
$44.02
|
|
3.5 years
|
|
|
|
$84.00-$84.80
|
|
4,271
|
|
$84.50
|
|
3.0 years
|
|
|
|
$104.80-$151.20
|
|
6,222
|
|
$149.55
|
|
5.0 years
|
|
|
|
$162.48-$167.20
|
|
2,881
|
|
$166.70
|
|
2.8 years
|
|
|
|
$401.60-$600.00
|
|
5,750
|
|
$428.29
|
|
3.4 years
|
|
|
|
$1200.00-$1280.00
|
|
500
|
|
$1280.00
|
|
3.6 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending exercisable
|
|
79,162
|
|
$75.07
|
|
4.2 years
|
|
$37
|
|
|
Exercisable
|
Range of
Exercise Prices
|
Number
Exercisable
|
Weighted-
Average
Exercise
Price
|
$2.35-$4.19
|
15,524
|
|
$3.20
|
|
$16.00-$26.40
|
38,139
|
|
$19.93
|
|
$43.20-$44.80
|
5,875
|
|
$44.02
|
|
$84.00-$84.80
|
4,271
|
|
$84.50
|
|
$104.80-$151.20
|
6,222
|
|
$149.55
|
|
$162.48-$167.20
|
2,881
|
|
$166.70
|
|
$401.60-$600.00
|
5,750
|
|
$428.29
|
|
$1200.00-$1280.00
|
500
|
|
$1280.00
|
|
|
|
|
|
|
|
79,162
|
|
|
|
|
|
|
|
|
The
aggregate intrinsic value in the table above represents the total pretax intrinsic
value (i.e., the difference between the Companys closing stock price on
the last trading day, December 31, 2007 and the exercise price, times the number
of shares) that would have been received by the option holders had all option
holders exercised their in the money options on December 31, 2007. This amount
changes based on the fair market value of the Companys stock.
F-24
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
The
weighted average grant date fair value of options granted during 2005 was $2.79.
There were no options granted during 2007 and 2006.
The
following table sets forth the total stock-based compensation expense resulting
from stock options and nonvested restricted stock awards included in the Companys
consolidated statements of operations for the year ended December 31, 2007:
|
Year
Ended
December
31, 2007
|
|
|
|
Selling,
general and administrative
|
$
781
|
|
|
|
|
Stock-based
compensation expense before income taxes
|
781
|
|
Income
tax benefit
|
|
|
|
|
|
Total
stock-based compensation expense after income taxes
|
$
781
|
|
|
|
|
As
of December 31, 2007, approximately $2 of total unrecognized compensation cost
related to stock options issued prior to 2006 is expected to be recognized over
a weighted-average period of 1 year.
Prior
to the adoption of SFAS 123R, the Company applied SFAS No. 123, as amended by
SFAS No. 148, Accounting for Stock-Based Compensation Transition
and Disclosure (SFAS 148), which allowed companies to apply
the existing accounting rules under APB 25 and related Interpretations. In general,
as the exercise price of options granted under these plans was equal to the
market price of the underlying common stock on the grant date, no stock-based
employee compensation cost was recognized in our net income (loss). As required
by SFAS 148 prior to the adoption of SFAS 123R, the Company provided pro forma
net income (loss) and pro forma net income (loss) per common share disclosures
for stock-based awards, as if the fair-value-based method defined in SFAS 123
had been applied.
The
following table illustrates the effect on net loss after tax and net loss per
common share as if the Company had applied the fair value recognition provisions
of SFAS 123 to stock-based compensation during the year ended December 31, 2005:
|
December
31,
2005
|
|
|
|
Net
loss, as reported
|
$
(4,372
|
)
|
Deduct:
Stock-based employee compensation expense included in reported net
|
|
|
loss
|
54
|
|
Add:
Total stock-based employee compensation expense determined under fair
|
|
|
value
based method for all awards
|
(569
|
)
|
|
|
|
Pro
forma net loss
|
$
(4,887
|
)
|
Loss
per share basic, as reported
|
$
(2.09
|
)
|
|
|
|
Loss
per share diluted, as reported
|
$
(2.09
|
)
|
|
|
|
Pro
forma loss per share - basic
|
$
(2.33
|
)
|
|
|
|
Pro
forma loss per share - diluted
|
$
(2.33
|
)
|
|
|
|
F-25
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
For
purposes of the above pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. The fair value
for these options was estimated at the date of grant using the Black-Scholes
option pricing model with the following assumptions for 2005: weighted-average
risk-free interest rate of 4.20%; expected volatility of 80%; no dividends;
and a weighted-average expected life of the options of 2.0 years.
Restricted
Stock
In
November 2005, the Company issued 245,000 shares of common stock under the 2005
Plan in the form of restricted stock awards in connection with employment agreements.
These shares were issued as an incentive to retain key employees and officers
and will vest over 3 years.
In
November 2006, the Company issued 122,500 shares of common stock under the 2005
Plan in the form of restricted stock awards of which 92,500 were issued to directors
of the Company and 30,000 to consultants. These shares will vest over 3 years,
with the exception of certain shares which vesting was accelerated (see note
8).
The
following table summarizes the Companys nonvested restricted stock activity
for the year ended December 31, 2007:
|
Number of
Shares
|
Weighted
Average
Grant
Date Fair
Value
|
Non vested stock
at January 1, 2005
|
|
|
|
$
|
|
Granted
|
|
245,000
|
|
5.24
|
|
Vested
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
Non vested stock at December
31, 2005
|
|
245,000
|
|
$5.24
|
|
Granted
|
|
122,500
|
|
4.02
|
|
Vested
|
|
(81,667
|
)
|
5.24
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
Non vested stock at December
31, 2006
|
|
285,833
|
|
$4.72
|
|
Granted
|
|
|
|
|
|
Vested
|
|
(160,835
|
)
|
4.78
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
Non vested stock at December
31, 2007
|
|
124,998
|
|
$4.64
|
|
|
|
|
|
|
F-26
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
As
of December 31, 2007, $290 of total unrecognized compensation costs which will
be recognized in January 2008. (see note 14)
12.
Income Taxes
Significant
components of the Companys deferred tax assets and liabilities are as follows:
|
December
31,
|
|
2007
|
2006
|
Deferred tax
assets:
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$ 69,889
|
|
$ 69,466
|
|
Deferred
compensation
|
|
9,614
|
|
9,318
|
|
Reserves
and accruals
|
|
111
|
|
60
|
|
Amortization
of goodwill
|
|
3,272
|
|
3,398
|
|
Other
|
|
2,539
|
|
2,444
|
|
Less valuation allowance
|
|
(85,424
|
)
|
(84,685
|
)
|
|
|
|
|
|
Deferred tax assets
|
|
1
|
|
1
|
|
Deferred tax liabilities:
|
|
Intangible
assets
|
|
(1
|
)
|
(1
|
)
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
|
$
|
|
|
|
|
|
|
A
reconciliation setting forth the differences between the effective tax rate
of the Company and the U.S. statutory rate is as follows:
|
Year ended
December 31,
|
|
2007
|
2006
|
2005
|
Statutory federal
income tax benefit at 34%
|
|
$(1,275
|
)
|
$(667
|
)
|
$(1,487
|
)
|
State income tax benefit,
net of federal benefit
|
|
(1,395
|
)
|
(890
|
)
|
(1,002
|
)
|
Non-deductible expenses
|
|
4
|
|
4
|
|
168
|
|
Other, primarily changes
in net operating loss carryforwards available
|
|
705
|
|
715
|
|
3,178
|
|
Change in valuation allowance
|
|
739
|
|
49
|
|
(1,621
|
)
|
|
|
|
|
|
|
|
Total
|
|
$(1,222
|
)
|
$(789
|
)
|
$ (764
|
)
|
|
|
|
|
|
|
|
The
state tax benefits recorded in 2007, 2006 and 2005 of $1,222, $789 and $764,
respectively, are attributable to the Companys sale of certain state net
operating loss carryforwards.
F-27
GOAMERICA,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands,
except share and per share data)
At
December 31, 2007, the Company had federal and state net operating
loss (NOL) carryforwards of approximately $185,200 and $116,900,
respectively. The federal NOL carryforwards expire beginning in 2011 and state
NOLs beginning in 2007. The Tax Reform Act of 1986 enacted a complex
set of rules limiting the potential utilization of net operating loss and
tax credit carryforwards in periods following a corporate ownership change.
In general, for federal income tax purposes, an ownership change is deemed
to occur if the percentage of stock of a loss corporation owned (actually, constructively
and, in some cases, deemed) by one or more 5% shareholders
has increased by more than 50 percentage points over the lowest percentage
of such stock owned during a three-year testing period. During 1999, 2004 and
again in 2008, such a change in ownership occurred. As a result of the change,
the Companys ability to utilize certain of its net operating loss carryforwards
will be limited. In addition, the Company acquired additional net
operating losses through its acquisitions of Wynd and Hotpaper. The Company
believes that an ownership change has occurred with respect to these entities.
The effect of an ownership change would be the imposition of an annual
limitation on the use of net operating loss carryforwards attributable
to periods before the change. The Company has not performed a detailed
analysis to determine the amount of the potential limitations
including those that may result from the Companys January
2008 acquisitions.
13.
Related party transactions
The
Company entered into certain financing and equity agreements with
Clearlake as a result of the transactions described in note 14. As a result,
the Company paid Clearlake approximately $1,200 of capitalized
deferred financing fees and $200 of expense reimbursements which
have been charged to the statement of operations. Such amounts are
also included as borrowings under the credit agreement described in note
5. In addition, during 2007 the Company paid Clearlake approximately
$106 of interest of which $32 was paid in cash and the balance has been
added to the outstanding balance. The Company also accrued $36 of interest
as of December 31, 2007.
14.
Subsequent events
Acquisitions
Verizon
TRS division acquisition
On
January 10, 2008, the Company acquired the assets of Verizons TRS
division for $46 million in cash and up to an additional $8 million
in contingent cash consideration.
The
Verizon acquisition was financed through $35 million of
equity financing and $30 million of senior debt
financing, funded in each case by funds managed by Clearlake. Concurrently
with the execution of the Verizon
acquisition
, Clearlake
purchased an additional 6,479,691 shares of Series A Preferred Stock
at a price of $5.17 per share. The Company consummated the acquisition in an effort to increase its volume and improve its results of operations.
F-28
GOAMERICA,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands,
except share and per share data)
The
funding of the estimated purchase price of the acquisition is as follows:
Value of preferred
stock issued
|
|
$ 35,000
|
|
Senior debt issuance
|
|
30,000
|
|
Acquired working capital
|
|
(6,000
|
)
|
Additional working capital
raised
|
|
(11,000
|
)
|
Estimated direct transaction
costs
|
|
4,000
|
|
|
|
|
Total estimated purchase
price
|
|
$ 52,000
|
|
|
|
|
The
components of the purchase price are as follows:
Cash consideration
|
|
$ 46,000
|
|
Contingent consideration
|
|
8,000
|
|
Transaction costs
|
|
4,000
|
|
|
|
|
Total purchase consideration
and transaction costs
|
|
58,000
|
|
Acquired working capital
|
|
(6,000
|
)
|
|
|
|
Total estimated purchase
price
|
|
$ 52,000
|
|
|
|
|
Under
the purchase method of accounting, the total estimated purchase price,
as shown in the table above, is allocated to net tangible assets acquired based
on their estimated fair values as of the date of the completion of
the acquisition. The fair value of these assets is subject to change based on
additional information that may come to managements
attention, restructuring decisions made upon completion of the acquisition
or results of the fund-raising effort referenced above. Amounts represented
in this table assume the payment of the contingent consideration and
do not reflect the acquired working capital. The preliminary estimated
purchase price is allocated as follows:
Identifiable
intangible assets
|
|
$ 5,200
|
|
Goodwill
|
|
46,800
|
|
|
|
|
Total estimated purchase
price
|
|
$52,000
|
|
|
|
|
F-29
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
The
Company is currently in the process of determining identifiable intangible
assets and their associated useful lives. In addition, the Company is
also evaluating what, if any, amount of goodwill is expected to be tax
deductible. The Company is currently evaluating future organizational structure
and therefore has not identified amounts by reportable segment.
In
connection with the Verizon acquisition, the Company entered into a Managed
Services Agreement, dated August 1, 2007, with Stellar Nordia Services
LLC (Stellar Nordia). Under that agreement, Stellar Nordia
will assume facilities, employee and operational responsibilities
for the two primary call centers associated with Verizons TRS division
business.
Stellar
Nordia will provide inbound call relay services to the Company, utilizing
Stellar Nordias proprietary platform and software for the newly acquired
traffic from Verizon and for the Companys existing text traffic.
In addition, pursuant to a related agreement, Stellar Nordia will, as subcontractor
to the Comapny, assume and operate under the Companys supervision,
the call centers being acquired under the asset purchase agreement for
Verizons TRS division as well as the current, pre-acquisition traffic
of the Company. The Company expects to realize material cost
savings as compared to Verizon from utilizing the Stellar Nordia arrangement
described in this paragraph.
The
managed services agreement also provides that Stellar Nordia will
undertake capital expenditures and hiring in preparation for the TRS acquisition,
such that Stellar Nordia will be in a position to service existing TRS division
traffic upon consummation of the closing. The managed services
agreement obligates the Company to pay certain fees to Stellar Nordia
if the Company elects to terminate the managed services agreement
early.
The
managed services agreement replaced the Companys existing
agreement with Stellar Nordia upon the closing of the acquisition of Verizons
TRS division. Under the new agreement, provided that one or more of
the state contracts are in effect, the Company has agreed to provide Stellar
Nordia with rolling forecasts of its IP relay traffic demand forecasts,
and has agreed to certain minimum call traffic commitments
with financial penalties for failure to achieve either the traffic forecasts
or the call traffic commitments as to such state contracts. The
Company has agreed to pay Stellar Nordia monthly and Stellar Nordia
has agreed to bill the Company in U.S. dollars, except that IP relay traffic
handled by Stellar Nordia in Canada will be billed in Canadian dollars, the
exchange rate for which has been fixed within an exchange rate band. In addition,
provided that one or more of the state contracts are in effect at the time
of closing of the acquisition, the Company has agreed to pay Stellar Nordia,
over sixteen quarters, a transition fee equal to the lesser of an established
fee or, in the event of loss of the state TRS service, 50% of any actual, direct
and documented loss by Stellar Nordia. The maximum amount
the Company may be liable for under such agreement will not exceed
$5.5 million.
Hands
On acquisition
On
January 10, 2008, the Company acquired Hands On for $35 million
in cash and approximately 6,700,000 shares of it
s
common stock. The cash portion of the consideration was funded by the sale of 967,118
shares of Series A Preferred Stock to a fund managed
by Clearlake and
the issuance of new debt. The Company consummated the merger in an effort to increase its volume and improve its results of operations.
F-30
GOAMERICA,
INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(In thousands,
except share and per share data)
The
total purchase price of the merger based on an average market
price per share of the Companys common stock of $5.17
is as follows:
Value of common
stock issued
|
|
$ 34,630
|
|
Senior debt issuance
|
|
40,000
|
|
Assumption of Hands On
options
|
|
1,805
|
|
Acquired net assets
|
|
(2,070
|
)
|
Additional working capital
raised
|
|
(5,000
|
)
|
Estimated direct transaction
costs
|
|
4,000
|
|
|
|
|
Total estimated purchase
price
|
|
$ 73,365
|
|
|
|
|
In
accordance with the merger agreement 220,498 Hands On stock options
were exchanged for 276,238 stock options of the Company. The fair market
value of the Company options exceeded the fair market value of the
Hands On options by $1,805.
Under
the purchase method of accounting, the total estimated purchase price,
as shown in the table above, is allocated to Hands On net tangible assets based
on their estimated fair values as of the date of the completion of
the merger. The fair value of these assets is subject to change based on
additional information that may come to managements
attention, restructuring decisions made upon completion of the merger
or results of the fund raising effort referenced above. The preliminary
estimated purchase price is allocated as follows:
Identifiable
intangible assets
|
|
$29,346
|
|
Goodwill
|
|
44,019
|
|
|
|
|
Total estimated purchase
price
|
|
$73,365
|
|
|
|
|
F-31
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
The
Company is currently in the process of determining identifiable intangible
assets and their associated useful lives. In addition, the Company is also
evaluating what, if any, amount of goodwill is expected to be tax deductible.
The Company is currently evaluating future organizational structure and
therefore has not identified amounts by reportable segment.
In
conjunction with the closing of the Hands On acquisition, the Company assumed
certain outstanding operating and capital leases agreements in force on
the date of closing.
To
create additional flexibility to pursue strategic opportunities, the Company
has also secured a $15 million unfunded credit revolver, with a term of five years and interest rates to be determined at time of utilization which creates
additional liquidity for the Company as needed.
Restricted
Stock
During
January 2008, the Company vested 121,666 shares of restricted stock which
represented all remaining restricted shares held by executive management
and directors that were unvested at December 31, 2007. As a result, the
Company will recognize $290 of non cash compensation expense during
the quarter ending March 31, 2008.
Employment
Agreements
Effective
with the closing of the transactions referred to above there were changes to
the following employment arrangements:
-
Donald
G. Barnharts prior employment agreement was superseded by
an Agreement
Regarding
Basic Terms of Employment (the Superseding Employment
Agreement),
pursuant
to which Mr. Barnhart will serve the Company as Senior Vice President,
Accounting,
at a base annual salary of $185. The Superseding Employment
Agreement
provides
that Mr. Barnhart will serve on an at will basis, without a specific term
of
employment.
He will be eligible to receive a bonus, and will receive an option grant of
70,000
shares. The options will vest at the rate of one-forty-eighth of such shares
per
month,
provided Mr. Barnhart remains employed with the Company on
each vesting date.
If
Mr. Barnharts employment is terminated without Cause or for
Good Reason (in each
case
as defined in the Superseding Employment Agreement), Mr. Barnhart
will be entitled to receive 12 months severance.
-
Jesse
Odoms prior employment agreement was superseded by an
Agreement Regarding
Basic
Terms of Employment (the Second Superseding Employment
Agreement),
pursuant
to which Mr. Odom will serve the Company as Senior Vice President,
Technology,
at a base annual salary of $200. The Second Superseding Employment
Agreement
provides that Mr. Odom will serve on an at will basis, without a specific
term
of
employment. He will be eligible to receive a bonus, and will receive
an option grant of
100,000
shares. The options will vest at the rate of one-forty-eighth of such shares
per
month,
provided Mr. Odom remains employed with the Company on
each vesting date. If
Mr.
Odoms employment is terminated without Cause or for Good
Reason (in each case as defined
in the Superseding Employment Agreement), Mr. Odom will
be entitled to receive 12 months severance.
F-32
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
On
March 20, 2008, the Company entered into new employment agreements
with Daniel R. Luis, its Chief Executive Officer, and with Edmond Routhier,
its President and Vice Chairman of the Board (collectively, the Executives).
In addition, each will receive an option grant of 400,000 shares. Each employment agreement is substantially the same.
The
employment agreements provide that both Executives are to receive
an initial base salary of $275,000. The Compensation Committee
may award one or both Executives additional bonus payments, option
grants or restricted stock awards in its discretion.
The
agreements are each of indefinite term; each such agreement provides
for an annual salary review, at which time the salaries paid under such
agreements may be increased (but not decreased) in the discretion
of the Compensation Committee.
In
the event that either Executive is terminated without cause or resigns
for good reason (as each such term is defined in the agreements),
he shall be entitled to receive enhanced severance, in an amount equal
to one years base salary, as well as the right to continue in Company
health and welfare benefit plans for one year after termination and 90
days outplacement services at a level commensurate with
his position.
In
the event of a change of control of the Company, as defined in the employment
agreements, 25% of the Executives then-unvested stock options shall
immediately vest. In addition, after a change of control of the Company,
all remaining unvested stock of either Executive shall immediately
vest if (a) such Executives aggregate compensation is substantially
diminished, or (b) such Executive is required to relocate more than
100 miles from his then-current residence in order to continue to
perform his duties.
Each
Executive also receives a $1,000 per month expense allowances and is
reimbursed for additional business travel and entertainment expenses
incurred in connection with their duties. Each employment agreement
also contains certain confidentiality provisions and requires that the Company
maintain standard directors and officers insurance in the same amount
as the Company maintains for other directors and officers.
Amendment
of 2005 Equity Compensation Plan
On
March 20, 2008 the Board of Directors of the Company amended its
2005 Equity Compensation Plan to increase the total number of shares
available for award thereunder from 2,000,000 shares to 2,600,000 shares.
The Company intends to seek stockholder approval of such amendment
as soon as practicable.
Amendments to Articles
of Incorporation or By-Laws
On
January 10, 2008, the Company filed an Amended and Restated Certificate of Incorporation
with the Secretary of State of Delaware (the
New Charter
). As described in the
Companys proxy materials for its 2007 annual meeting, the New Charter:
-
increases the number of authorized
shares of the Companys preferred stock and Series A Preferred Stock,
-
decreases the number of authorized
shares of the Companys common stock,
-
removes the provisions creating and
maintaining a classified board of directors,
-
results in Go Americas opting out
of Section 203 of the General Corporation Law of the State of Delaware
regarding restrictions on the Company engaging in business combinations with
interested stockholders,
-
authorizes the holders of the
Series A Preferred Stock to appoint two directors to the Companys board,
-
provides for automatic conversion
of the Series A Preferred Stock to common stock if the sale of Go America
common stock yields $50 million or more in gross proceeds in an underwritten public
offering and the average closing price of the common stock is $15.00 or more
per share over a 90-day period, and
-
provides for a reduction in the
rate of dividends payable on the Series A Preferred Stock from 8% per year to
3% per year if the average closing price of the common stock is $20.00 or more per
share over a 90-day period at any time one year or more after completion of the
Hands On merger.
The
Company also amended its By-laws by deleting the provisions concerning a staggered board of directors.
F-33
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
15.
Quarterly Financial Data (Unaudited)
The
table below summarizes the Companys unaudited quarterly operating results for
the years ended December 31, 2007 and 2006.
|
Quarter Ended
|
2007
|
March 31
|
June 30
|
September
30
|
December
31
|
Net revenue
|
|
$ 4,307
|
|
$ 4,305
|
|
$ 4,836
|
|
$ 5,177
|
|
Cost of revenue
|
|
(2,878
|
)
|
(3,146
|
)
|
(3,443
|
)
|
(3,199
|
)
|
Operating expenses
|
|
(1,994
|
)
|
(1,879
|
)
|
(2,150
|
)
|
(4,222
|
)
|
Depreciation and amortization
expenses
|
|
(73
|
)
|
(90
|
)
|
(94
|
)
|
(99
|
)
|
Other (expense) income,
net
|
|
(127
|
)
|
24
|
|
(10
|
)
|
(155
|
)
|
Loss before benefit from
income taxes
|
|
(765
|
)
|
(786
|
)
|
(861
|
)
|
(2,498
|
)
|
Benefit from income taxes
|
|
|
|
|
|
|
|
1,210
|
|
Net (loss) income
|
|
(765
|
)
|
(786
|
)
|
(861
|
)
|
(1,288
|
)
|
Preferred dividends
|
|
|
|
|
|
(20
|
)
|
(30
|
)
|
Net (loss) income applicable
to common stockholders
|
|
|
|
$ (765
|
)
|
$ (786
|
)
|
$ (881
|
)
|
$(1,318
|
)
|
Loss per share Basic
and diluted:
|
|
-
Loss from continuing operations
|
|
$ (0.35
|
)
|
$ (0.36
|
)
|
$ (0.41
|
)
|
$ (0.56
|
)
|
-
Loss from discontinued operations
|
|
$
|
|
$
|
|
$
|
|
$ (0.00
|
)
|
Basic and diluted net loss
per share
|
|
$ (0.35
|
)
|
$ (0.36
|
)
|
$ (0.41
|
)
|
$ (0.56
|
)
|
|
|
|
|
|
2006
|
March 31
|
June 30
|
September
30
|
December
31
|
Net revenue
|
|
$ 1,636
|
|
$ 2,388
|
|
$ 4,551
|
|
$ 4,201
|
|
Cost of revenue
|
|
(291
|
)
|
(954
|
)
|
(2,812
|
)
|
(2,754
|
)
|
Operating expenses
|
|
(1,786
|
)
|
(1,636
|
)
|
(1,832
|
)
|
(2,188
|
)
|
Depreciation and amortization
expenses
|
|
(144
|
)
|
(126
|
)
|
(104
|
)
|
12
|
|
Other (expense) income,
net
|
|
(374
|
)
|
43
|
|
46
|
|
(36
|
)
|
Loss before benefit from
income taxes
|
|
(959
|
)
|
(285
|
)
|
(151
|
)
|
(765
|
)
|
Benefit from income taxes
|
|
|
|
|
|
|
|
789
|
|
(Loss) income from continuing
operations
|
|
|
|
(959
|
)
|
(285
|
)
|
(151
|
)
|
24
|
|
Loss from discontinued
operations
|
|
(119
|
)
|
(81
|
)
|
(371
|
)
|
(18
|
)
|
Net (loss) income
|
|
$(1,078
|
)
|
$ (366
|
)
|
$ (522
|
)
|
$ 6
|
|
Loss per share Basic
and diluted:
|
|
-
Loss from continuing operations
|
|
$ (0.45
|
)
|
$ (0.13
|
)
|
$ (0.07
|
)
|
$ (0.00
|
)
|
-
Loss from discontinued operations
|
|
$ (0.06
|
)
|
$ (0.04
|
)
|
$ (0.18
|
)
|
$ (0.00
|
)
|
Basic and diluted net loss
per share
|
|
$ (0.51
|
)
|
$ (0.17
|
)
|
$ (0.25
|
)
|
$ (0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
F-34
GOAMERICA,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
16.
Supplemental Cash Flow Information
The
table below presents the Companys supplemental disclosure of cash flow information
for the years ended December 31, 2007, 2006 and 2005.
|
Years ended December 31,
|
|
2007
|
2006
|
2005
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ 26
|
|
$ 10
|
|
$ 28
|
|
|
|
|
|
|
|
|
Non-cash investing and
financing activities:
|
|
|
|
|
|
|
|
|
Deferred
financing costs withheld from proceeds from the sale of preferred stock
|
|
498
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
financing costs withheld from proceeds from the issuance of debt
|
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
acquisition costs withheld from proceeds from the sale of preferred stock
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
acquisition costs withheld from proceeds from the issuance of debt
|
|
2,273
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
associated with the sale of preferred stock
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of issuance of debt withheld from proceeds from the sale of preferred stock
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
preferred stock dividend
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid in kind
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of equipment through capital leases
|
|
203
|
|
203
|
|
108
|
|
|
|
|
|
|
|
|
Issuance
of shares pursuant to management contract
|
|
|
|
|
|
1,245
|
|
F-35
Schedule
II
GOAMERICA,
INC.
FINANCIAL STATEMENT SCHEDULE
Valuation
and Qualifying Accounts and Reserves
Years Ended December 31, 2007, 2006 and 2005
|
Balance at
Beginning of
Period
|
Additions:
Charged to Costs
and Expenses
|
Deductions
|
Balance at
End of
Period
|
Year Ended
December 31, 2007
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$157
|
|
$407
|
|
$272
|
(1)
|
$292
|
|
Inventory
Reserve
|
|
|
|
18
|
|
18
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December
31, 2006
|
|
Allowance
for doubtful accounts
|
|
$278
|
|
$156
|
|
$277
|
(1)
|
$157
|
|
|
|
|
|
|
|
|
|
|
Year Ended December
31, 2005
|
|
Allowance
for doubtful accounts
|
|
$603
|
|
$318
|
|
$643
|
(1)
|
$278
|
|
Inventory
Reserve
|
|
|
|
12
|
|
12
|
(2)
|
|
|
(1)
|
Uncollectible
accounts written-off, net of recoveries.
|
|
(2)
|
Inventory
discounts charged to reserve.
|
|
F-36
Goamerica (MM) (NASDAQ:GOAM)
Historical Stock Chart
From Sep 2024 to Oct 2024
Goamerica (MM) (NASDAQ:GOAM)
Historical Stock Chart
From Oct 2023 to Oct 2024