Exhibit 99.1
Risk Factors
Risks Particular To GoAmerica
We have historically incurred losses and these losses will continue in the
foreseeable future.
We have never earned a profit. We had net losses of $8.2 million, $55.9
million, and $120.3 million for the years ended December 31, 2003, 2002 and
2001, respectively. Since our inception, we have invested significant capital to
build our wireless network operations and e-commerce systems as well as our
billing system. We also have provided mobile devices made by third parties to
our customers at prices below our costs for such devices. In addition, although
we have reduced our exposure to subscriber-related costs through our strategic
alliance with EarthLink in September 2002, our costs of subscriber revenue,
consisting principally of our purchase of wireless airtime from network
carriers, have historically exceeded our subscriber revenue. Further, we have
experienced negative overall gross margins, which consist of margins on our
subscriber revenues, equipment sales and other revenue, and may experience
negative overall gross margins again in the future. We have incurred operating
losses since our inception and expect to continue to incur operating losses for
at least the next year. We will need to generate significant revenue to become
profitable and sustain profitability on a quarterly and annual basis.
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:
o our competitors announce and develop, or lower the prices of,
competing services;
o 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
o prices for our services decrease as a result of reduced demand or
competitive pressures.
As a result, we may not be able to increase revenue or achieve
profitability on a quarterly or annual basis.
We may be unable to execute our new business strategy announced in December
2003.
Our new business strategy is centered on the pursuit of three priorities,
centered on the offering of services to deaf or hard of hearing customers by our
Wynd Communications subsidiary. These priorities and the principal risks
associated with each priority are:
o Growth of Wynd Communications' core wireless services business. We
cannot assure you that we will be able to grow our core business
profitability. Crucial to any growth will be our ability to increase
sales to existing, past and potential customers while controlling
our marketing expenses. Growth by means of product or service
acquisitions may require additional capital to fund acquisitions and
we will confront the risks, described below, inherent in an
acquisition strategy.
o 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 obsolete
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. We expect that capital constraints will continue to limit
our marketing efforts in the future.
o Streamlining of operations to enable superior customer support. Our
business model will be materially adversely affected if we are
unable to offer superior customer support to deaf and hard of
hearing customers. In the past, capital constraints have limited our
customer support functions. We rely upon EarthLink to provide
customer support in other aspects of our business, but will need to
provide customer support on our own or through outsourcing in our
Wynd Communications business. In order to provide such support, we
have contracted with an experienced third party organization to
provide primary and secondary customer and technical support while
leveraging internal resources to provide supplemental support. We
cannot assure you that our efforts in this area will be successful
in improving the quality of the interaction our customers have with
us.
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.
On March 10, 2004, we consummated the second stage of a private placement
announced in December 2003. Through our initial closing in December 2003 and our
second closing on March 10, 2004, we raised net proceeds of approximately $13
million through the issuance of this common stock and warrants. We expect that
we will require substantially all of the net proceeds from the private placement
in order to implement our new business strategy that we announced in December
2003. Our strategy is centered on the pursuit of three priorities, centered on
our Wynd Communications subsidiary: (a) growth of Wynd Communications' core
wireless services business; (b) development and marketing of new communications
services, including branded Internet protocol and video relay services; and (c)
streamlined operations to enable superior customer support. 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. At
this time, we do not have any bank credit facility or other working capital
credit line under which we may borrow funds for working capital or other general
corporate purposes. 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.
If funds are raised through the issuance of equity securities, the
percentage ownership of our then-current stockholders will be reduced 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.
Our limited cash resources will likely restrict our flexibility and overall
operations.
In order for us to execute our new business plan, it will be necessary for
us to continue to operate under significant budgetary constraints. These
constraints limit our ability to respond to business opportunities or issues as
they arise. Since the wireless communications industry remains in an early stage
and its needs are dynamic, our budgetary constraints may adversely affect our
ability to respond to market demands and our ability to compete.
Our independent auditors expressed a "going concern" opinion with respect to our
2002 consolidated financial statements.
Although our independent auditors have not expressed a going concern
opinion with respect to our 2003 consolidated financial statements as a result
of our recently completed private placement, our
independent auditors did express such a qualification with respect to our 2002
consolidated financial statements. We believe that this qualification materially
adversely affected the manner in which third parties did business with us, most
notably in connection with the extension of credit and their degree of
commitment to any long term agreements. That qualification also made it more
difficult for us to obtain capital. We cannot assure you that we will be able to
convince third parties to reconsider or relax the measures or restrictions that
they have taken or placed on us in the past to protect their credit position or
enter into a business relationship with us at all as a result of our recently
completed private placement.
It remains difficult to predict the outcome of our strategic alliance with
EarthLink.
We substantially revised our business model when we entered into our
strategic alliance with EarthLink in September 2002. While we succeeded in
reducing our operating expenses, we cannot yet determine whether:
o the businesses that we have retained, primarily Wynd Communications,
will be viable enough to support our entire infrastructure;
o the operations that we have turned over to EarthLink will be
performed in a manner consistent with our expectations;
o we will have a continuing relationship with EarthLink beyond the
initial term of our strategic alliance, which is scheduled to expire
in September 2004; and if so, whether we will derive significant
on-going revenues with our continuing relationships with EarthLink,
and if not, whether we will be able to profitably maintain those
subscribers that we would then service directly again; or
o our relationship with EarthLink will cause other potential business
partners to refrain from doing business with us or entering into
material transactions.
We have only a limited operating history, which makes it difficult to evaluate
an investment in our common stock.
We have only a limited operating history on which you can evaluate our
business, financial condition and operating results. We face a number of risks
encountered by early stage technology companies that participate in new
technology markets, including our ability to:
o manage our dependence on wireless data services which have only
limited market acceptance to date;
o maintain our engineering and support organizations, as well as our
distribution channels;
o negotiate and maintain favorable usage rates with telecommunications
carriers;
o retain and expand our subscriber base at profitable rates;
o recoup our expenses associated with the wireless devices we resell
to subscribers;
o manage expanding operations, including our ability to expand our
systems if our subscriber base grows substantially;
o attract and retain management and technical personnel; and
o anticipate and respond to market competition and changes in
technologies such as wireless data protocols and wireless devices.
We may not be successful in addressing or mitigating these risks and
uncertainties, and if we are not successful our business could be significantly
and adversely affected.
To generate increased revenue we will have to increase substantially the number
of our subscribers, which may be difficult to accomplish.
In addition to increasing our subscriber base, we will have to limit our
churn, or the number of subscribers who deactivate our service. Adding new
subscribers will depend to a large extent on the success of our direct and
indirect distribution channels and acquisition strategy, and there can be no
assurance that they will be successful. Limiting our churn rate will require
that we provide our subscribers with a favorable experience in using our
wireless service. Our subscribers' experience may be unsatisfactory to the
extent that our service malfunctions or our customer care efforts, including our
Web site and 800 number customer service efforts, do not meet or exceed
subscriber expectations. In addition, factors beyond our control, such as
technological limitations of the current generation of wireless devices, which
may cause our subscribers' experience with our service to not meet their
expectations, could increase our churn rate and adversely affect our revenues.
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:
o failure to integrate the acquired assets and/or companies with our
current business;
o the price we pay may exceed the value we eventually realize;
o loss of share value to our existing stockholders as a result of
issuing equity securities as part or all of the purchase price;
o potential loss of key employees from either our current business or
the acquired business;
o entering into markets in which we have little or no prior
experience;
o diversion of management's attention from other business concerns;
o assumption of unanticipated liabilities related to the acquired
assets; and
o 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.
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. Even with the net proceeds from our
recently completed private placement, we may be unable to develop and expand our
systems and operations or implement our new business plan for one or more of the
following reasons:
o 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;
o we may not be able to dedicate the capital necessary to effectively
develop and expand our systems and operations; and
o 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 wireless data 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.
Steps we have taken during 2002 and 2003 to respond to our diminished liquidity
may negatively impact our ability to do business in the future.
We took many steps during 2002 and 2003 that we may not have taken had we had
substantial additional liquidity. In addition to our strategic alliance with
EarthLink, we implemented substantial cost-cutting measures in recent periods in
order to survive. Among other things, we:
o reduced our headcount from 225 employees at December 31, 2001 to 40
employees at December 31, 2003;
o reduced our expenditures on development from approximately
$4,174,000 in 2001 to approximately $1,209,000 in 2003;
o reduced our expenditures on advertising from approximately
$4,900,000 in 2001 to approximately $23,000 in 2003; and
o reduced our office space under lease from approximately 66,000 total
square feet at December 31, 2001 to approximately 12,000 total
square feet at December 31, 2003.
We understand that our business reputation and capacity to do business may have
been damaged by the cutbacks which we were forced to implement. If we are unable
to restore our reputation and our capacity, our business could be significantly
and adversely affected.
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 wireless
data 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.
If we do not respond effectively and on a timely basis to rapid technological
change, our business could suffer.
The wireless and data communications industries are characterized by
rapidly changing technologies, industry standards, customer needs and
competition, as well as by frequent new product and service introductions. Our
services are integrated with wireless handheld devices and must also be
compatible with the data networks of wireless carriers. In certain aspects of
our business, our services must be integrated with the computer systems of
corporate customers. 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:
o effectively use and integrate new technologies;
o continue to develop our technical expertise;
o enhance our wireless data, engineering and system design services;
o develop applications for new wireless networks and services;
o develop services that meet changing customer needs;
o influence and respond to emerging industry standards and other
changes; and
o advertise and market our services.
We depend upon wireless 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 wireless carriers such as Cingular
Interactive, Motient, T-Mobile, and WebLink Wireless 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 recent years, certain
wireless carriers experienced financial difficulties and sought protection under
the bankruptcy laws. We cannot assure you that these companies will emerge from
bankruptcy or that others will not seek similar protection. Such bankruptcies
may result in discontinued or interrupted service and fewer network
alternatives. In addition, although we have some forward price protection in our
existing agreements with certain carriers, we could be adversely affected if
wireless carriers were to increase the prices of their services. Our existing
agreements with the wireless carriers generally have one-to-three year terms.
Some of these wireless carriers are, or could become, our competitors.
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
wireless data communications services. We are highly dependent on our EarthLink
and other indirect distribution alliance partners for implementation of our
sales and marketing initiatives. Should our relationships with our distribution
alliance partners cease or be less successful than anticipated, our business,
results of operations, and financial conditions 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. A major part of our compensation to our key employees is in the form of
stock option grants. The prolonged depression in our stock price has made it
difficult for us to retain our employees and recruit additional qualified
personnel.
Wireless data systems failures could harm our business by injuring our
reputation or lead to claims of liability for delayed, improper or unsecured
transmission of data.
A significant barrier to the growth of electronic commerce and wireless
data services has been the need for secure and reliable transmission of
confidential information. Our existing wireless data 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 wireless 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. 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.
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 wireless data services, we
rely on wireless 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. As our liquidity deteriorated during 2003, our vendors tightened our
credit or refused to extend credit to us, making it more difficult for us to
obtain suppliers on terms satisfactory to us. 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 in the wireless data communications
market 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 wireless
carriers, wireless handheld 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 expect
that we will compete primarily on the basis of the functionality, breadth,
quality and price of our services. Our current and potential competitors
include:
o wireless device manufacturers, such as Palm, Handspring, Motorola,
RIM and Danger;
o wireless network carriers, such as AT&T Wireless, Verizon Wireless,
Cingular Interactive, Sprint PCS, T-Mobile and Nextel
Communications, Inc.;
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.
Our intellectual property rights may not be adequately protected under the
current state of the law.
Our success substantially depends on our ability to sell services which
are dependent on certain intellectual property rights. We currently do not have
patents on any of our intellectual property. Although we have applied for U.S.
federal trademark protection, we do not have any U.S. federal trademark
registrations for the marks "GoAmerica", "Go.Web", or certain of our other marks
and we may not be able to obtain such registrations. 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.
Research In Motion (RIM), the provider of the BlackBerry email service and
associated products, is currently engaged in litigation with NTP, Inc (NTP). NTP
is seeking a court injunction preventing RIM from providing BlackBerry email
service claiming that NTP is the rightful owner of certain patents supporting
this technology. On November 21, 2002 the United States District Court for the
Eastern District of Virginia ruled that RIM is infringing upon these patents
owned by NTP. This ruling and other rulings made by the Court during the course
of this case are currently under appeal by RIM and, in August 2003, the court
granted RIM's request to stay the injunction sought by NTP pending the
completion of another appeal by RIM's to the Court of Appeals for the Federal
Circuit. RIM is also pursuing reexamination of the disputed patents by the U.S.
Patent and Trademark Office. No court order has been issued preventing RIM from
providing the BlackBerry email service and it is impossible to ascertain how
long the reexamination and appeal processes may take.
We offer the BlackBerry service and associated products as a dealer for
EarthLink, which resells these offerings. If there is a court injunction
preventing RIM from providing BlackBerry, then we may not be able to generate
anticipated sales of BlackBerry related products. In addition, many of our
Go.Web customers who use our technology do so in conjunction with BlackBerry
email service. A prolonged court injunction against RIM could result in
increased churn amongst customers who pay a recurring fee for our services if
these customers are no longer able to use BlackBerry and therefore decide to
terminate their wireless data service plan altogether.
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.
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:
o the demand for and market acceptance of our services;
o downward price adjustments by our competitors on services they offer
that are similar to ours;
o changes in the mix of services sold by our competitors;
o technical difficulties or network downtime affecting wireless
communications generally;
o the ability to meet any increased technological demands of our
customers; and
o 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 new business plan, we may
experience growth in our business. In that event, it will be necessary for us to
expand our workforce and to train, motivate and manage additional employees 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:
o fire, flood, and other natural disasters;
o 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
o 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.
Risks Particular To Our Industry
The market for our services is new and highly uncertain.
The market for wireless data services is still emerging and continued
growth in demand for and acceptance of these services remains uncertain. Current
barriers to market acceptance of these services include cost, reliability,
functionality and ease of use. We cannot be certain that these barriers will be
overcome. 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.
We are not currently subject to direct regulation by the Federal
Communications Commission or any other governmental agency, other than
regulations applicable to businesses in general. However, in the future, we may
become subject to regulation by the FCC or another regulatory agency. In
addition, the wireless carriers who supply us airtime 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.
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:
o announcements of technological or competitive developments;
o acquisitions or strategic alliances by us or our competitors;
o the gain or loss of a significant customer or order;
o changes in estimates of our financial performance or changes in
recommendations by securities analysts regarding us or our industry;
or
o 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.
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
management's attention and resources.
We have issued a substantial number of warrants that enable their holders to
purchase our common stock at a price of $0.15 per share, which could depress the
price at which others will purchase our common stock.
As a result of our recently completed private placement, we issued warrants to
purchase 11,578,512 shares of our common stock at a price of $0.15 per share.
This compares with the following additional securities which were
outstanding upon consummation of our private placement:
o 161,137,648 shares of our common stock;
o options to purchase 10,657,939 share of our common stock; and
o warrants to purchase an additional 1,067,500 shares of our common
stock, exercisable at prices ranging from $0.46 to $3.00.
Of the warrants issued in connection with our private placement, warrants
covering 8,255,340 shares of our common stock are immediately exercisable and
the balance of the warrants (covering 3,323,172 shares) first become exercisable
in September 2005. The significant number of shares that may be issuable at a
price which could be less than the current market price of our common stock
could adversely affect the market price of our common stock.
Our common stock may be delisted from the Nasdaq SmallCap Market because of the
low bid price of our common stock. If such delisting occurs, the market price
and market liquidity of our common stock may be adversely affected.
Our common stock is currently not in compliance with Nasdaq Marketplace
Rule 4450(a)(5) which requires that a listed company maintain a minimum bid
price of $1.00 per share. Nasdaq has granted us a series of grace periods, the
most recent of which will expire on May 31, 2004, to regain compliance with this
requirement. In order to regain compliance with this Marketplace Rule and remain
listed on the Nasdaq SmallCap Market, GoAmerica's share price must close at a
minimum of $1.00 per share for 10 consecutive trading days prior to the end of
the grace period. If our common stock is delisted by Nasdaq, our common stock
would be eligible to trade on the OTC Bulletin Board maintained by Nasdaq,
another over-the-counter quotation system, or on the pink sheets, where an
investor may find it more difficult to dispose of our shares or obtain accurate
quotations as to the market value of our common stock. In addition, we would be
subject to a rule promulgated by the SEC that, if we fail to meet criteria set
forth in such rule, imposes various practice requirements on broker-dealers who
sell securities governed by the rule to persons other than established customers
and accredited investors. Consequently, such rule may deter broker-dealers from
recommending or selling our common stock, which may further affect the liquidity
of our common stock. Delisting from Nasdaq would make trading our common stock
more difficult for investors, potentially leading to further declines in our
share price. It would also make it more difficult for us to raise additional
capital. Further, if we are delisted we could also incur additional costs under
state blue sky laws in connection with any sales of our securities.
On March 10, 2004, our stockholders approved a resolution authorizing our
board to amend our certificate of incorporation to effect a reverse stock split
such that each outstanding 4, 6, 8, 10 or 12 shares of our common stock would be
combined, converted and changed into one share of our common stock, depending
upon which, if any, of these five ratios is selected by our board. One of the
purposes of this resolution is to increase the per share market price of our
common stock in order to maintain its listing on the Nasdaq SmallCap Market.
However, we cannot assure you that if our board implements any such reverse
stock split, it will have the intended effect of increasing the market price of
our common stock to the extent necessary to avoid delisting.
We cannot predict the outcome of the reverse stock splits that our stockholders
have authorized.
We cannot predict how investors will react to any reverse stock split that
we may implement as a result of the stockholder approval granted on March 10,
2004. Some investors may view the reverse stock split negatively. While the per
share price of our common stock may increase as of the effective date of any
reverse stock split that may be implemented, that per share price may decline
thereafter. Thus, the aggregate market price of a stockholder's common stock may
decline as a result of any reverse stock split that may be implemented.
If a reverse stock split is implemented, some stockholders may
consequently own less than 100 shares of our common stock. A purchase or sale of
less than 100 shares, known as an "odd lot" transaction,
may result in incrementally higher trading costs through certain brokers,
particularly "full service" brokers. Therefore, those stockholders who own less
than 100 shares following the effective date of such a reverse split may be
required to pay higher transaction costs if they sell their shares of our common
stock. While we believe that any such split may result in greater liquidity for
our stockholders, it is possible that such liquidity could be adversely affected
by the reduced number of shares outstanding after the effective date of the
split.
If we implement a reverse stock split, the number of shares of common stock that
our board may issue without further stockholder approval will increase
significantly.
If we implement a reverse stock split, the number of issued and
outstanding shares will decrease, but the number of authorized shares will not
change. Thus, the number of authorized but unissued shares will increase
significantly if we implement one of the reverse stock splits authorized by our
stockholders. The following table illustrates the effect of 1:4, 1:6, 1:8, 1:10
and 1:12 reverse stock splits, as well as effecting no reverse stock split, on
our (i) outstanding shares of common stock, assuming that we are obligated to
issue the maximum number of Additional Shares described below, (ii) authorized
shares of common stock which are reserved for issuance pursuant to options,
warrants, contractual commitments or other arrangements and (iii) shares of
common stock which are neither outstanding nor reserved for issuance and are
therefore available for issuance. The table does not take into account
fractional shares. If we effect a reverse stock split, we will pay cash in lieu
of issuing fractional shares.
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(iii)
(i) (ii) Authorized Shares
Shares of Shares of Common of Common
Common Stock Stock Reserved Stock Available
Reverse Split Ratio Outstanding for Issuance for Issuance
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No Reverse Split 168,953,530 27,670,637 153,375,832
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1:4 42,238,382 6,917,659 300,843,958
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1:6 28,158,921 4,611,772 317,229,305
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1:8 21,119,191 3,458,829 325,421,979
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1:10 16,895,353 2,767,063 330,337,583
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1:12 14,079,460 2,305,886 333,614,652
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The issuance in the future of additional authorized shares 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 effective increase in the number of authorized,
but unissued, shares of our common stock may be construed as having an
anti-takeover effect. We could, subject to the board's fiduciary duties and
applicable law, issue such additional authorized shares to purchasers who might
oppose a hostile takeover bid or any efforts to amend or repeal certain
provisions of our restated certificate of incorporation or bylaws. 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.
The number of shares of common stock which our board may issue without further
approval from our stockholders may also be increased as a result of another
amendment to our certificate of incorporation approved by our stockholders.
On March 10, 2004, our stockholders also approved an increase in the number of
shares of common stock which we may issue from 200,000,000 shares to
350,000,000. This action by our stockholders authorizes our board, in its
discretion, to either amend our certificate of incorporation to effect this
increase or to elect not to file such an amendment, in which case the
stockholder approval will have no effect. As noted above, an increase in our
authorized shares 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 and may be construed as having
an anti-takeover effect.
We will be required to issue additional shares of our common stock if the
registration statement for this offering is not declared effective by the SEC on
or before April 27, 2004.
In connection with our private placement, we executed a registration rights
agreement which obligates us to issue certain additional shares of our common
stock in the event that we are delayed in effecting the registration of the
shares issuable in the private placement. We refer to the shares that we may be
required to issue in such event as the "Additional Shares". Our registration
rights agreement provides that the maximum number of shares that we may be
required to issue as Additional Shares is 12% of the total shares of common
stock then owned by each investor in the private placement or which each
investor then has the right to acquire. By virtue of the fact that we were
unable to initially file this registration statement until the date set forth on
the first page of this prospectus, we have already become obligated to issue
2,945,224 Additional Shares. If, by April 27, 2004, the SEC does not declare
effective the registration statement of which this prospectus is a part, we will
be required to issue more Additional Shares, up to the limit mentioned above.
The issuance of Additional Shares will dilute the ownership interests of those
stockholders who did not invest in the private placement.
We have anti-takeover defenses that could delay or prevent an acquisition and
could adversely affect the price of our common stock.
Provisions of our certificate of incorporation and bylaws and provisions
of Delaware law could delay or prevent an acquisition or change of control of
GoAmerica or otherwise adversely affect the price of our common stock. For
example, our certificate of incorporation authorizes undesignated preferred
stock which our board of directors can designate and issue without further
action by our stockholders, establishes a classified board of directors,
eliminates the rights of stockholders to call a special meeting of stockholders,
eliminates the ability of stockholders to take action by written consent, and
requires stockholders to comply with advance notice requirements before raising
a matter at a stockholders' meeting. As a Delaware corporation, we are also
subject to the Delaware anti-takeover statute contained in Section 203 of the
Delaware General Corporation Law.
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.