8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): January 10, 2008

GOAMERICA, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	0-29359	22-3693371
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

433 HACKENSACK AVENUE, HACKENSACK, NJ 07601
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (201) 996-1717

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 2.01 Completion of Acquisition or Disposition of Assets

        As previously reported by GoAmerica, Inc. (the “Company” or “GoAmerica”) in its Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2008 (the “Initial Form 8-K”), on January 10, 2008, the Company closed its transactions with Clearlake Capital Group (“Clearlake”), MCI Communications Services, Inc. (“Verizon”), and Hands On Video Relay Services, Inc. (“Hands On”). In sum:

• The Company raised $125 million of equity and debt financing; $15 million of which is in the form of an unfunded credit facility.

• The Company closed an asset purchase of the Verizon Telecommunications Relay Services (“TRS”) division, a leading provider of relay services.

• The Company completed a merger with Hands On, a California-based provider of video relay and interpreting services.

        The foregoing summary description is not intended to be complete and is qualified in its entirety by the complete text of all of the Items contained in the Initial Form 8-K and the documents filed as exhibits to the Initial Form 8-K, which are incorporated herein by reference.

        This Current Report on Form 8-K/A is being filed as an amendment to the Initial Form 8-K to provide the financial statements and pro forma financial information that were excluded from the Initial Form 8-K as permitted by Item 9.01 of Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

(1)  The following year-end financial statements are incorporated herein by reference from the Company’s definitive proxy materials filed with the SEC on November 9, 2007:

Mass Markets — TeleRelay Services (Verizon’s TRS Division) Year-End Carve-Out Financial Statements:

Report of Independent Auditors

Independent Auditors’ Report

Carve-Out Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004

Carve-Out Statements of Selected Assets, Selected Liabilities and Parent Funding for the Years Ended December 31, 2006 and 2005

Carve-Out Statements of Parent Funding as of December 31, 2006, 2005 and 2004

Carve-Out Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004

Notes to the Year-End Carve-Out Financial Statements

 

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Hands On Video Relay Services, Inc. Year-End Financial Statements:

Report of Certified Public Accountants

Balance Sheets as of December 31, 2006, 2005 and 2004

Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004

Statements of Changes in Stockholders Deficit for the Years Ended December 31, 2006, 2005 and 2004

Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004

Notes to the Year-End Financial Statements

Report of Certified Public Accountants with respect to a supplementary schedule

Statements of General and Administrative Expenses for the Years Ended December 31, 2006, 2005 and 2004

 

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Hands On Sign Language Services, Inc. Year-End Financial Statements:

Report of Certified Public Accountants

Balance Sheets as of December 31, 2006, 2005 and 2004

Statements of Operations and Retained Earnings for the Years Ended December 31, 2006, 2005 and 2004

Statements of Stockholders Equity for the Years Ended December 31, 2006, 2005 and 2004

Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004

Notes to the Year-End Financial Statements

Report of Certified Public Accountants with respect to a supplementary schedule

Statements of General and Administrative Expenses for the Years Ended December 31, 2006, 2005 and 2004

               (2) The following interim financial statements are filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference:

Mass Markets — TeleRelay Services (Verizon’s TRS Division) Interim Carve-Out Financial Statements:

Condensed Carve-Out Statements of Selected Assets, Selected Liabilities and Parent Funding as of September 30, 2007 (unaudited) and December 31, 2006

Condensed Carve-Out Statements of Operations for the Nine Months Ended September 30, 2007 and September 30, 2006 (unaudited)

Condensed Carve-Out Statements of Cash Flows for the Nine Months Ended September 30, 2007 and September 30, 2006 (unaudited)

Notes to the Interim Carve-Out Financial Statements

Hands On Video Relay Services, Inc. and Hands on Sign Language Services, Inc. Combined Condensed Interim Financial Statements:

Combined Condensed Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006

Combined Condensed Statements of Operations for the Nine Months Ended September 30, 2007 and 2006 (unaudited)

Combined Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (unaudited)

Notes to the Combined Condensed Interim Financial Statements

 

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(b) Pro Forma Financial Information.

        (1) The following pro forma financial information is filed as Exhibit 99.2 to this Current Report on Form 8-K/A and incorporated herein by reference:

GoAmerica, Inc. and Verizon’s TRS Division and Hands On Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet as of September 30, 2007

GoAmerica, Inc. and Verizon’s TRS Division and Hands On Unaudited Pro Forma Condensed Combined Consolidated Statements of Operations for the nine months ended September 30, 2007

GoAmerica, Inc. and Verizon’s TRS Division and Hands On Unaudited Pro Forma Condensed Combined Consolidated Statements of Operations for the year ended December 31, 2006

GoAmerica, Inc. and Verizon’s TRS Division and Hands On Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

(d) Exhibits

The following exhibits are filed with this Current Report on Form 8-K:

Exhibit No.	Description
Exhibit 23.1	Consent of Ernst & Young LLP
Exhibit 23.2	Consent of KPMG LLP
Exhibit 23.3	Consent of Gallina LLP
Exhibit 99.1	Financial Statements of Business Acquired
Exhibit 99.2	Summary Pro Forma Financial Information

 

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GOAMERICA, INC.

By: /s/ Donald G. Barnhart

       Donald G. Barnhart, Senior Vice President

Dated: March 7, 2008

 

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EXHIBIT INDEX

The following exhibits are filed with this Current Report on Form 8-K:

Exhibit No.	Description
Exhibit 23.1	Consent of Ernst & Young LLP
Exhibit 23.2	Consent of KPMG LLP
Exhibit 23.3	Consent of Gallina LLP
Exhibit 99.1	Financial Statements of Business Acquired
Exhibit 99.2	Summary Pro Forma Financial Information

 

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EX-23.1

Exhibit 23.1

Consent of Independent Auditors

        We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-148781) pertaining to the stock options assumed upon consummation of GoAmerica Inc.’s acquisition of Hands On Video Relay Services, Inc. and pertaining to the GoAmerica, Inc. 2005 Equity Compensation Plan,

(2) Registration Statement (Form S-8 No. 333-134195) pertaining to the GoAmerica, Inc. 2005 Equity Compensation Plan,

(3) Registration Statement (Form S-8 No. 333-90088) and related Prospectus pertaining to the GoAmerica, Inc. 1999 Stock Plan, and

(4) Registration Statement (Form S-8 No. 333-47736) and related Prospectus pertaining to the GoAmerica Communications Corp. 1999 Stock Option Plan, GoAmerica Inc. 1999 Stock Plan and GoAmerica, Inc. Employee Stock Purchase Plan;

of our report dated June 11, 2007, with respect to the 2006 special-purpose carve-out financial statements of Verizon Business Global LLC’s Mass Markets — TeleRelay Service, included in GoAmerica, Inc.’s Schedule 14A Definitive Proxy Statement filed with the Securities and Exchange Commission on November 9, 2007.

/s/ Ernst & Young LLP
New York, NY
March 7, 2008

 

EX-23.2

Exhibit 23.2

Independent Auditors’ Consent

We consent to the incorporation by reference in the registration statements No. 333-148781, 333-134195, 333-90088 and 333-47736 on Form S-8 of GoAmerica, Inc. of our report dated June 11, 2007, with respect to the special-purpose carve-out statements of selected assets, selected liabilities and parent funding of Verizon Business Global LLC’s (Verizon Business) Mass Markets — TeleRelay Service (Mass Markets — TRS) business as of December 31, 2005, and the related carve-out statements of operations, parent funding, and cash flows for each of the years in the two-year period ended December 31, 2005, which report is included in GoAmerica, Inc.’s Schedule 14A Definitive Proxy Statement filed on November 9, 2007.

/s/ KPMG LLP

Atlanta, Georgia
March 7, 2008

 

EX-23.3

Exhibit 23.3

CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS

        We consent to the incorporation by reference in registration statements No. 333-148781, 333-134195, 333-47736 on Form S-8 of GoAmerica, Inc. of our report dated August 30, 2007, with respect to the audited financial statements of Hands On Video Relay Services, Inc. as of December 31, 2006, 2005, and 2004, and our report dated August 30, 2007, with respect to the audited financial statements of Hands On Sign Language Services, Inc. as of December 31, 2006, 2005, and 2004, which reports are incorporated by reference on Form 8-K of GoAmerica, Inc., dated March 7, 2008.

/s/ Gallina LLP
Roseville, California
March 7, 2008

 

EX-99.1

Exhibit 99.1

VERIZON BUSINESS GLOBAL LLC
MASS MARKETS-TRS
CARVE-OUT STATEMENTS OF SELECTED ASSETS,
SELECTED LIABILITIES AND PARENT FUNDING
(In thousands)

	September 30, 2007	December 31, 2006
	(Unaudited)
Selected Assets
Current assets:
Accounts receivable, net	$    6,143	$    6,075
Prepaid expenses	2,109	2,110
Deferred taxes	5,840	7,154
Other current assets	1,020	509
Total current assets	15,112	15,848
Intangible assets, net	2,090	3,415
Deferred Income taxes	202	85
Other assets	356	1,228
Total Selected Assets	$ 17,760	$ 20,576
Selected Liabilities and Parent Funding
Current liabilities:
Accounts payable	$   4,545	$   6,215
Accrued access costs	35	42
Accrued service penalty	12,783	12,783
Other current liabilities	8,521	16,685
Total current liabilities	25,884	35,725
Other liabilities	8,632	6,217
Total Selected Liabilities	34,516	41,942
Total parent funding	(16,756)	(21,366)
Total Selected Liabilities and Parent Funding	$  17,760	$  20,576

 

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VERIZON BUSINESS GLOBAL LLC
MASS MARKETS-TRS
CARVE-OUT STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)

	Nine Months Ended September 30,
	2007		2006
Revenues:
Operating Revenues, net	$ 47,589		$ 50,633
Direct Expenses:
Access costs	169		248
Cost of services and products	35,247		38,855
Selling, general and administrative	499		442
Amortization	1,325		1,325
Total Direct Expenses	37,240		40,870
Allocated Expenses:
Cost of services and products	1,451		2,829
Selling, general and administrative	10,471		5,345
Depreciation and amortization	2,492		1,417
Total Allocated Expenses	14,414		9,591
Total Operating Expenses	51,654		50,461
Income (loss) before income taxes	(4,065	)	172
Income tax provision (benefit)	(1,585	)	67
Net income (loss)	$ (2,480	)	$ 105

 

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VERIZON BUSINESS GLOBAL LLC
MASS MARKETS-TRS
CARVE-OUT STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Nine Months Ended September 30,
	2007
Cash Flows from Operating activities
Net loss	$ (2,480	)
Adjustments to reconcile net loss to net cash used in operating activities:
Direct amortization	1,325
Deferred income tax expense	1,197
Changes in operating assets and liabilities:
Increase in accounts receivable	(68	)
Decrease in other current assets and non current assets	362
Decrease in accounts payable and accrued access costs	(1,677	)
Decrease in other current liabilities and non current liabilities	(5,749	)
Net cash used in operating activities	(7,090	)
Cash Flows from Investing activities
	—
Net cash used in investing activities	—
Cash Flows from Financing activities
Change in parent funding	7,090
Net cash provided by financing activities	7,090
Net increase (decrease) in cash and cash equivalents	—
Cash and cash equivalents at beginning of period	—
Cash and cash equivalents at end of period	$      —
Note: Data for 2006 not available

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VERIZON BUSINESS GLOBAL LLC
MASS MARKETS-TRS
NOTES TO CARVE-OUT FINANCIAL STATEMENTS

(Unaudited)
(In thousands)

Note 1 - Basis of Presentation:

        Historically, financial statements have not been prepared for Mass Markets or Mass Markets - TRS, as neither have any separate legal status or existence. The accompanying special-purpose carve-out financial statements have been prepared to present the statements of selected assets, selected liabilities and parent funding, and statements of operations and cash flows of the Mass Markets - TRS business. The accompanying special-purpose carve-out financial statements have been prepared in accordance with U.S. generally accepted accounting principles using specific information where available and allocations where data is not maintained on a business-specific basis within Verizon’s books and records. Because of the allocations and estimates used to prepare these financial statements, they may not reflect the financial position or results of operations of Mass Markets - TRS after its acquisition by another entity.

        The carve-out financial statements include only those selected assets, liabilities and related operations of Mass Markets - TRS specifically identified by Verizon and certain allocations of other assets, liabilities and operations of Verizon. These special-purpose carve-out financial statements also include the selected assets, liabilities and expenses related to employees who support the Mass Markets - TRS business, some or all of which are expected to transfer to a buyer after the sale of Mass Markets - TRS. The expenses of Mass Markets - TRS include the cost of provisioning services related to providing communication services.

Note 2 - Summary of Significant Accounting Pronouncements:

        In July 2006, the FASB issued Interpretation No, 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Verizon was required to adopt FIN 48 effective January 1, 2007. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized upon adoption of FIN 48. FIN 48 did not have a material impact on the financial condition, results of operations, or cash flow of Mass Markets — TRS.

Note 3 - Income Taxes:

        For the periods presented, Verizon and its domestic subsidiaries, including Mass Markets - TRS, file a consolidated federal income tax return. Mass Markets - TRS participates in a tax sharing agreement with Verizon and remits tax payments to Verizon based on the respective tax liability on a separate company basis. Current and deferred tax expense is determined by applying the provisions of SFAS No. 109, “Accounting for Income Taxes”, to each subsidiary as if it were a separate taxpayer. As a result, Verizon recognizes deferred income tax assets and liabilities for the expected future tax consequences of transactions and events. Under this method, deferred

 

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income tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Net deferred tax assets will be utilized through inclusion in Verizon’s consolidated federal and state income tax returns. As such, a valuation allowance has not been recorded against the net deferred tax asset balance.

Note 4 - Subsequent Events:

        During December 2007, Verizon, based on recent discussions with the FCC, reassessed its potential liability for having missed the speed of answer requirement during May 2005 through August 2006 and concluded that the reserve could be reduced. As a result, Verizon reduced its reserve by $10.6 million, which was reflected as an increase in revenue.

        On January 10, 2008, the acquisition of Verizon’s Mass Markets - TRS business by a subsidiary of GoAmerica, Inc. was consummated.

 

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HANDS ON VIDEO RELAY SERVICES, INC. AND AFFILIATE

COMBINED BALANCE SHEETS

(In thousands, except share and per share data)
(Unaudited)

	September 30, 2007		December 31, 2006
			(A)
Assets
Current assets:
Cash and cash equivalents		$1,943		$   251
Accounts receivable, net		3,744		1,936
Other receivables		439		189
Deferred taxes		94		—
Prepaid expenses and other current assets		1,483		135
Total current assets		7,703		2,511
Property, equipment and leasehold improvements, net		1,437		723
Other assets		72		57
		$9,212		$3,291
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$2,159		$1,971
Accrued expenses		1,028		556
Line of credit		1,914		—
Income taxes payable		843		5
Other current liabilities		243		1,614
Total current liabilities		6,187		4,146
Long term debt		950		—
Other liabilities		5		5
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.001 par value, issued: 1,724,138 in 2007 and none in 2006		2		—
Common stock, $.001 par value, issued: 8,087,670 in 2007 and 4,320,269 in 2006		6		4
Additional paid-in capital		2,026		34
Retained earnings (accumulated deficit)		36		(898	)
Total stockholders’ equity (deficit)		2,070		(860	)
		$9,212		$3,291

(A) The December 31, 2006 balance sheet was derived by combining the audited balance sheets of Hands On Video Relay Services, Inc. and Hands On Sign Language Services, Inc.

The accompanying notes are an integral part of these financial statements.

 

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HANDS ON VIDEO RELAY SERVICES, INC. and AFFILIATE

STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)

(Unaudited)

	Nine Months Ended September 30,
	2007			2006
Revenues:
Video Relay Service		$20,623			$11,552
		20,623			11,552
Costs and expenses:
Cost of video relay service		8,708			5,383
General and administrative		10,508			5,180
		19,216			10,563
Profit from operations		1,407			988
Other income (expense):
Other income		544			4
Interest income (expense), net		(275	)		(248	)
Total other income (expense), net		269			(244	)
Income before taxes		1,676			744
Income taxes		742			—
Net income		$     934			$     744
Basic net income per share		$    0.18			$    0.10
Diluted net income per share		$    0.15			$    0.09
Weighted average shares used in computation of
basic net income per share		4,880,300			4,206,049
Weighted average shares used in computation of
diluted net income per share		5,823,364			4,792,757

The accompanying notes are an integral part of these financial statements.

 

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HANDS ON VIDEO RELAY SERVICES, INC. and AFFILIATE

STATEMENTS OF CASH FLOWS

(In thousands)
(Unaudited)

	Nine Months Ended September 30,
	2007		2006
Operating activities
Net income	$    934		$    744
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of fixed assets	228		239
Change in deferred income taxes	(179	)	—
Forgiveness of stockholder receivable	100		—
Stock option expense	67		—
Settlement gains, net	(509	)	—
Changes in operating assets and liabilities:
Increase in accounts receivable	(1,707	)	(1,132	)
(Increase) decrease in other receivables	(365	)	(3	)
Increase in prepaid expenses and other current assets	(1,347	)	14
(Decrease) increase in accounts payable	179		197
Increase (decrease) in accrued expenses	307		(147	)
Increase in income taxes payable	848		—
Net cash used in operating activities	(1,444	)	(87	)
Investing activities
Change in other assets and restricted cash	(46	)	1
Purchase of property, equipment and leasehold improvements	(942	)	(223	)
Net cash used in investing activities	(989	)	(222	)
Financing activities
Proceeds from issuance of note payable	3,046		—
Proceeds from the issuance of common stock	1,995		17
Payments made on debt obligations	(776	)	(53	)
Payments made on capital lease obligations	(61	)	(28	)
Net cash (used in) provided by financing activities	4,455		(64	)
Net increase (decrease) in cash and cash equivalents	2,021		(374	)
Cash and cash equivalents at beginning of period	(78	)	63
Cash and cash equivalents at end of period	$1,943		$   (311	)
Supplemental Disclosure of Non-Cash Investing Activities:
Cash paid for interest	$   128		$      57
Cash paid for income taxes	$       7		$        2
Supplemental Disclosure of Non-Cash Financing Activities:
Issuance of common stock	$   421		$     —
Issuance of stockholder receivable	$  (418	)	$     —

The accompanying notes are an integral part of these financial statements

 

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Hands On Video Relay Services, Inc. and Affiliate
Notes to the Combined Financial Statements
for the nine months ended September 30, 2007
(Unaudited)

Note 1: Basis of Presentation:

        The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States requiring management of Hands On Video Relay Services, Inc. and Affiliate (the “Company”) to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period presented. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed herein) which the Company considers necessary for the fair presentation of its financial position as of September 30, 2007, the results of its operations for the nine month periods ended September 30, 2007 and 2006 and its cash flows for the nine month periods ended September 30, 2007 and 2006.

        The Company provides a service that allows the deaf and hard-of-hearing to communicate effectively through American Sign Language (ASL). The Company uses the Internet to provide an audio/video link to a qualified Video Interpreter who acts as a translator between the visual language of ASL and the audio language of a hearing person.

        The Company prepares its financial statements on the accrual basis of accounting. Accordingly, revenue is recognized as the service is provided and expenses are recognized as incurred.

        Results for the interim period are not necessarily indicative of results that may be expected for the entire year or for any other interim period. The results of operations for the nine month periods ended September 30, 2006 and cash flows for the nine month periods ended September 30, 2006 are presented herein giving the effect to Hands On Video Relay Services, Inc.’s merger with Hands On Sign Language Services, Inc. (“SLS”).

Note 2: Summary of Significant Accounting Policies:

        The following items comprise the significant accounting policies of the Company. These policies reflect industry practices and conform to generally accepted accounting principles.

Company Activities:

        The Company provides a service that allows the deaf and hard-of-hearing to communicate effectively and naturally with the hearing world through American Sign Language. It provides an audio/video link to qualified video interpreters who are intermediaries for the hearing impaired community.

 

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        The Company also provides sign language interpreter services to companies and organizations throughout Northern California.

Principles of Combination:

        The accompanying financial statements include accounts of the Company ($.001 par value, 10,000,000 common shares authorized, 8,087,670 shares issued and outstanding at September 30, 2007, and $.001 par value, 1,724,138 preferred shares authorized and outstanding at September 30, 2007.)

Business combination:

        On June 19, 2007 Hands On Sign Language Services, Inc. was acquired by Hands On Video Relay Services, Inc. through the issuance of 2,270,000 shares of Hands On Video Relay Services, Inc. common stock to the stockholders of Hands On Sign Language Services, Inc. The Company increased the number of authorized shares of the company to 10,000,000. As of September 30, 2007, the Company had 8,087,670 shares issued and outstanding with a par value of $.001.

        The financial statements have been presented as if Hands On Video Relay Services, Inc. and Hands On Sign Language Services, Inc. were combined as of January 1, 2007 as there was no effect to operations subsequent to the combination.

Stock-Based Compensation:

        The Company accounts for its stock-based awards to employees using the intrinsic value method under Accounting Principles Board Opinion (APB) No. 123(R), Accounting for Stock-Based Compensation.

Recent Accounting Pronouncements:

        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 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged. 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 Company has not yet determined the impact of this statement on its results of operations or financial condition.

        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 Company has not yet determined the impact of this statement on its results of operations or financial condition.

Note 3: Stockholder Receivable:

        Stockholder receivable at September 30, 2007 consists of two notes totaling $418,337 due from stockholders. The notes bear interest at 4.81% per annum, with no minimum scheduled payments. The principal and accrued interest on the notes is due 10 years from the original date of the note.

Note 4: Short Term Loan Agreement:

        On May 2, 2005, the Company entered into a loan agreement with GoAmerica, Inc. Interest accrued monthly at variable rates ranging from 6.0% to 7.5% for the first twelve months following each advance. Principal and accrued interest were due in equal installments over the second twelve months following each advance. The loan was collateralized primarily by equipment and other assets and rights acquired by the Company with any advance. At March 31, 2007, the balance on the loan payable was $561,283. In April of 2007, the Company entered into an agreement with GoAmerica, Inc. to settle this debt for $400,000, resulting in a gain to the Company of $161,283.

Note 5: Income Taxes:

        The net deferred tax asset in the accompanying balance sheet includes the following components:

Deferred tax assets:
Federal	$152,000
State	26,100
Total deferred tax assets	$178,700

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        These amounts have been presented in the Company’s financial statements as follows:

Current deferred tax assets	$177,800
Non-current deferred tax assets	900
Net deferred tax assets	$178,700

        The components of income tax benefit (expense) for the nine months ended September 30, 2007 are as follows:

	Current		Deferred	Total
State tax	$(157,076	)	$  26,100	$   (183,176	)
Federal tax	(686,321	)	152,600	(838,921	)
	$(843,397	)	$178,700	$(1,022,097	)

Note 6: Stock Options:

        The Company accounts for its stock-based awards to employees using the intrinsic value method under Financial Accounting Standards Board (FASB) No. 123(R), Accounting for Stock-Based Compensation. The Company’s 2004 Stock Plan (the Plan), which is stockholder approved, permits the grant of share options and shares to its employees for up to 3,085,127 shares of common stock. The Company believes that such awards better align the interest of their employees with those of their stockholders. Option awards are generally granted with an exercise price equal to the market price of the stock at the date of grant; those option awards generally vest based on years of continuous service and have a 10 year contractual term. Share awards generally vest over 4 years. The option and share awards provide for accelerated vesting under certain circumstances approved by the board of directors.

        The fair value of each option award is estimated on the date of grant using a Black-Scholes valuation model that used the assumptions noted in the following table. Because the Black-Scholes option valuation models incorporate ranges of assumptions for inputs, those rages are disclosed. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Annualized volatility	63.00%
Annual rate of quarterly dividends	0.00%
Discount rate	4.680% - 7.50%
Expected term (in years)	6.00 - 6.25

 

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        A summary of option activity under the plan as of September 30, 2007, and changes during the six months then ended are presented below:

Options	Shares (000)		Exercise Price	Weighted Average Remaining Contactual Term	Aggregate Intrinsic Value ($000)
Outstanding options at January 1, 2007	486		$0.06
Granted	2,090		0.30
Exercised	(1,488	)	0.30
Forfeited or expired	(148	)	0.06
Outstanding at September 30, 2007	940		0.21	8.9	$  0.10
Exercisable at September 30, 2007	450		$0.16	8.1	$  0.03

        The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2007 was $0.30. The total intrinsic value of options exercised during the nine months ended September 30, 2007 was $222,944.

        A summary of the status of the Company’s nonvested shares as of September 30, 2007, and changes during the nine months ended September 30, 2007 is presented below:

Nonvested shares	Shares (000)		Weighted - average grant date fair value
Nonvested January 1, 2007	—		$  —
Granted	2,090		0.30
Vested	(450	)	0.30
Forfeited			—
Nonvested September 30, 2007	542		$0.30

        As of September 30, 2007, there was $249,252 of total unrecognized compensation cost related to nonvested stock option arrangements granted under the plan. The cost is expected to be recognized over a weighted-average period of 4.3 years. The total fair value of shares vested during the nine months ended September 30, 2007 was $101,453.

Note 7: Stockholders Equity:

        On June 19, 2007, Hands On Sign Language Services, Inc. was acquired by Hands On Video Relay Services, Inc. through the issuance of 2,270,000 shares of Hands On Video Relay Services, Inc. common stock to the stockholders of Hands On Sign Language Services, Inc. and the retirement of 200 shares previously issued to Hands On Sign Language Services, Inc.

        During the nine months ended September 30, 2007, the Company issued 1,487,601 shares of its common stock in connection with the exercise of stock options at an average exercise price of $0.30 per share.

        During the quarter ended September 30, 2007, the Company converted its note payable for $1,500,000 to 1,724,138 shares of its preferred stock at the option of the note holders. In addition, the Company sold 10,000 shares of its common stock at $0.50 per share.

Note 8: Subsequent Events:

        On January 10, 2008, the Company consummated the agreement to be acquired by GoAmerica, Inc. and, as a result, received $35 million in cash and common stock valued at approximately $35 million.

 

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EX-99.2

Exhibit 99.2

Summary Pro Forma Financial Information

        We have presented below pro forma condensed consolidated financial information which gives effect to the acquisition of Verizon’s TRS division and the Hands On merger. The pro forma information is presented under the purchase method of accounting. The pro forma information is presented for illustrative purposes only. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The pro forma condensed consolidated financial statements do not purport to represent what the consolidated results of operations or financial position of GoAmerica would actually have been if the TRS acquisition and the Hands On merger had in fact occurred on the dates that we refer to below, nor do they purport to project the results of operations or financial position of GoAmerica for any future period or as of any date, respectively. The pro forma condensed consolidated financial statements do not give effect to any restructuring costs or to any potential cost savings or other operating efficiencies that could result from the acquisition of Verizon’s TRS division or the Hands On merger.

        Under the purchase method of accounting, tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their estimated fair market values. The excess of the purchase price, including estimated fees and expenses related to the TRS acquisition and the Hands On merger, over the net assets acquired is classified as goodwill on the accompanying unaudited pro forma condensed consolidated balance sheet. The estimated fair values and useful lives of assets acquired and liabilities assumed are based on a preliminary valuation and are subject to final valuation adjustments which may cause some of the intangibles to be amortized over a shorter life than presently anticipated.

Pro Forma Information — Combination of GoAmerica with Verizon’s TRS Division and Hands On

The following unaudited pro forma condensed combined consolidated balance sheet and unaudited pro forma condensed combined consolidated statements of operations give effect to the acquisition of Verizon’s TRS division by GoAmerica and the Hands On merger. Such pro forma financial statements were derived from, are qualified in their entirety by reference to and should be read in conjunction with:

• the audited consolidated financial statements of GoAmerica for the year ended December 31, 2006, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC;

• the unaudited consolidated financial statements of GoAmerica as of and for the nine month period ended September 30, 2007, contained in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007;

• the audited carve-out financial statements of Verizon’s TRS division for the year ended December 31, 2006, contained in the Company’s definitive proxy materials filed with the SEC on November 9, 2007 and incorporated by reference herein;

• the unaudited carve-out financial statements of Verizon’s TRS division for the nine month period ended September 30, 2007 contained herein;

 

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• the audited consolidated financial statements of Hands On for the year ended December 31, 2006 (after giving pro forma effect to Hands On’s merger with SLS) contained in the Company’s definitive proxy materials filed with the SEC on November 9, 2007 and incorporated by reference herein; and

• the unaudited consolidated financial statements of Hands On for the nine month period ended September 30, 2007 (after giving pro forma effect to Hands On’s merger with SLS) contained herein.

        The unaudited pro forma condensed combined consolidated balance sheet gives effect to the acquisition of Verizon’s TRS division and merger with Hands On as though it occurred on September 30, 2007. The unaudited pro forma condensed combined consolidated statements of operations give effect to the acquisition as though it occurred at the beginning of the respective periods presented.

        The pro forma adjustments presented below are based upon a valuation of Verizon’s TRS division’s working capital as defined in the TRS asset purchase agreement. The final calculation of the purchase price will be based upon a determination of the fair value of Verizon’s TRS division’s tangible and identifiable intangible assets acquired and liabilities assumed. The actual results of operations will differ, perhaps significantly, from the unaudited pro forma amounts reflected below because of a variety of factors, including access to additional information and changes in value not currently identified.

 

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GoAmerica, Inc. and Verizon’s TRS division and Hands On
Unaudited Pro forma Condensed Combined Consolidated Balance Sheet
As of September 30, 2007

		Historical			Pro Forma
		GoAmerica	Verizon's TRS Division (i)	Hands On	Adjustments		Company
		(In thousands)
Assets
Current assets:
	Cash and cash equivalents	$  3,082	$—	$1,943	$  20,186	(E)	$  25,211
	Accounts receivable, net	1,865	—	3,744	6,000	(E)	11,609
	Other receivables	20	—	439	—		459
	Merchandise inventories	284	—	—	—		284
	Deferred taxes	—	—	94	—		94
	Prepaid expenses and other	162	—	1,483	—		1,645
Total current assets		5,413	—	7,703	26,186		39,302
Property, equipment and leasehold improvements, net		863	—	1,437	—		2,300
Goodwill		6,000	—	—	46,800	(E)
					44,019	(I)	96,819
Trade names and other intangible assets		—	—	—	5,200	(E)
					29,346	(I)	34,546
Deferred acquisition costs		3,571	—	—	(3,571	)(E,I)	—
Deferred financing costs		1,162	—	—	(1,162	)(E,I)	—
Other assets		239	—	72	—		311
		$17,248	$—	$9,212	$146,819		$173,279
Liabilities and stockholders' equity
Current liabilities:
	Accounts payable	$     967	$—	$2,159	$        —		$    3,126
	Accrued expenses and other payables	2,651	—	1,028	8,000	(E)	11,679
	Deferred revenue	98	—	—	—		98
	Loans payable, net of discount	2,719	—	1,914	(4,633	)(E,I)	—-
	Income taxes payable	-	—	843	—		843
	Other current liabilities	87	—	243	—		330
Total current liabilities		6,522	—	6,187	3,367		16,076
Long term debt		—	—	950	30,000	(E)
					39,050	(I)	70,000
Other long term liabilities		68	—	5	—		73
Commitments and contingencies
Stockholders' equity:
	Preferred stock	3	—	2	68	(E)
					8	(I)	80

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	Common stock	25	—	6	61	(I)	92
	Additional paid-in capital	288,455	—	2,026	34,932	(E)
					39,333	(I)	364,746
	Accumulated deficit	(277,639)	—	36	—		(277,603)
	Treasury Stock, at cost, 24,063 shares in 2005	(186)	—	—	—		(186)
Total stockholders' equity		10,658	—	2,070	74,402		87,130
		$17,248	$—	$9,212	$107,769		$173,279

(i) In accordance with the TRS asset purchase agreement, certain assets will be transitioned directly to Stellar Nordia Services LLC (“Stellar Nordia”) as Stellar Nordia will provide services to the Company under a managed services agreement. The working capital that will be acquired as of closing has been accounted for in the pro forma adjustments. As such, balance sheet data has not been presented

See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements, which are an integral part of these statements.

 

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GoAmerica, Inc. and Verizon’s TRS division and Hands On
Unaudited Pro Forma Condensed Combined Consolidated Statements of Operations
For the nine months ended September 30, 2007

			Historical								Pro forma
			GoAmerica			TRS		Hands On			Adjustments			Company
		(In thousands, except for share and per share data)
Revenues:
	Subscriber			$     867		$       —			$      —			$    —			$     867
	Relay services			11,787		47,589			20,623			—			79,999
	Commissions			451		—			—			—			451
	Equipment			300		—			—			—			300
	Other			43		—			—			—			43
				13,448		47,589			20,623			—			81,660
Costs and expenses:															—
	Cost of subscriber revenue			811		—			—			—			811
	Cost of relay services			8,074		37,197			8,708			(4,834	)(D)		49,145
	Cost of equipment sales			495		—			—			—			495
	Cost of network operations			87		169			—			—			256
	Sales and marketing			1,615		—			—			—			1,615
	General and administrative			4,092		10,471			10,508			—			25,071
	Research and development			316		—			—			—			316
	Depreciation and amortization			257		2,492			—			—			2,749
	Amortization of intangibles			—		1,325			—			1,300	(A)
												4,891	(F)		7,516
				15,747		51,654			19,216			1,357			87,974
Loss from operations				(2,299	)	(4,065	)		1,407			(1,357	)		(6,314	)
Other income (expense):
	Settlement gains, net			(162	)	—			544			—			382
	Interest (expense) income, net			49		—			(275	)		1,840	(B)
												4,307	(G)		5,921
	Total other income (expense)			(113	)	—			269			6,147			6,303
Loss before income taxes and extraordinary items				(2,412	)	(4,065	)		1,676			4,789			(12	)
	Income tax (expense) benefit			—		1,585			(742	)		—			843
Net income (loss)				(2,412	)	(2,480	)		934			4,789			831
	Preferred dividends			20		—			—			2,094	(C)
												299	(H)		2,413
Net income (loss) applicable to common shares				$ (2,432	)	$ (2,480	)		$934			$ 2,396			$ (1,582	)

 

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Pro Forma Data
Pro forma (loss) earnings per common share
	Basic and Diluted:
	Pro forma basic and diluted loss per share
	(before preferred dividends)	$(1.09)			$  0.09
	Effect of preferred dividend	$(0.01)			$(0.27)
	Pro forma basic and diluted loss per share	$(1.10)			$(0.17)
Pro forma weighted average number of common shares
	Basic	2,216,349	—	6,700,000	8,916,349
	Diluted	2,216,349	—	6,700,000	8,916,349

See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements, which are an integral part of these statements.

 

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GoAmerica, Inc. and Verizon’s TRS Division and Hands On
Unaudited Pro forma Condensed Combined Consolidated Statements of Operations
For the year ended December 31, 2006

		Historical						Pro forma
		GoAmerica		TRS		Hands On		Adjustments		Company
		(In thousands, except for share and per share data)
Revenues:
	Subscriber	$   1,190		$       —		$      —		$       —		$    1,190
	Relay services	8,695		67,083		14,616		—		90,394
	Interpreting services	—		—		1,792		—		1,792
	Commissions	2,454		—		—		—		2,454
	Equipment	429		—		—		—		429
	Other	8		—		—		—		8
		12,776		67,083		16,408		—		96,267
Costs and expenses:
	Cost of subscriber revenue	845		—		—		—		845
	Cost of relay services	5,320		55,078		6,865		(6,445	)(D)	60,818
	Cost of interpreting services	—		—		833		—		833
	Cost of equipment sales	536		—		—		—		536
	Cost of network operations	110		331		—		—		441
	Sales and marketing	2,494		—		—		—		2,494
	General and administrative	4,589		7,828		7,267		—		19,684
	Research and development	359		—		—		—		359
	Depreciation and amortization	362		1,889		267		—		2,518
	Amortization of intangibles	—		1,767		—		1,733	(A)
								9,782	(F)	13,282
		14,615		66,893		15,232		5,070		101,810
Loss from operations		(1,839	)	190		1,176		(5,070	)	(5,543	)
Other income (expense):
	Settlement gains, net	(490	)	—		—		—		(490	)
	Interest (expense) income, net	169		—		(175	)	(3,700	)(B)	(3,706	)
								(5,742	)(G)	(5,742	)
	Total other income (expense)	(321	)	—		(175	)	(9,442	)	(9,938	)
Loss before income taxes and extraordinary items		(2,160	)	190		1,001		(14,512	)	(15,481	)
	Income tax (expense) benefit	789		(74	)	(7	)	—		708
Loss from continuing operations		(1,371	)	116		994		(14,512	)	(14,773	)
	Loss from discontinued operations	(589	)	—		—		—		(589	)

 

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Net loss		(1,960	)		116	994		(14,512	)	(15,362	)
	Preferred dividends	—			—	—		2,792	(C)
								399	(H)	3,191
Net income (loss) applicable to common shares		$(1,960	)		$116	$994		$(17,703	)	$(18,553	)
Pro Forma Data
Pro forma (loss) earnings per common share
	Basic and Diluted:
	Pro form loss from continuing operations	$  (0.65	)							$   (1.68	)
	Pro forma basic and diluted loss per share	$  (0.28	)							$   (0.07	)
	Pro forma basic and diluted loss per share
	(before preferred dividends)	$  (0.93	)							$   (1.75	)
	Effect of preferred dividend	$       —								$   (0.36	)
	Pro forma basic and diluted loss per share	$  (0.93	)							$(2.11	)
Pro forma weighted average number of common shares
	Basic	2,105,184		—			6,700,000			8,805,184
	Diluted	2,105,184		—			6,700,000			8,805,184

See accompanying notes to unaudited pro forma condensed combined consolidated
financial statements, which are an integral part of these statements.

 

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GoAmerica, Inc. and Verizon’s TRS Division and Hands On
Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

Note 1. Basis of Pro Forma Presentation

Verizon TRS division

        On January 10, 2008, GoAmerica acquired the assets of Verizon’s TRS division for $46 million in cash and up to an additional $8 million in contingent cash consideration. This acquisition was financed by the issuances of new GoAmerica preferred stock and debt totaling $65 million to Clearlake, pursuant to agreements and a commitment letter executed concurrently with the Verizon agreement. Completion of the acquisition was subject to stockholder approval by the stockholders of GoAmerica and to receipt of required regulatory approvals.

        The Verizon transaction was financed through $35 million of committed equity financing and $30 million of committed senior debt financing, funded in each case by funds managed by Clearlake. Concurrently with the execution of the Verizon definitive agreement, Clearlake:

• Purchased 290,135 shares of a newly created GoAmerica Series A Preferred Stock at a price of $5.17 per share;

• Provided GoAmerica with $1.0 million pursuant to a bridge loan commitment, which was increased by another $1.75 million on September 14, 2007, and which may be increased to up to a maximum of $3.5 million;

• Agreed to purchase an additional 6,479,691 shares of Series A Preferred Stock at a price of $5.17 per share, subject to certain conditions, upon consummation of the Verizon transaction; and

• Provided GoAmerica with a commitment letter for $30 million of senior debt financing to be raised for the closing of the Verizon transaction.

        The funding of the estimated purchase price of the acquisition is as follows (in thousands):

Value of GoAmerica preferred stock issued	$   35,000
Senior debt issuance	30,000
Acquired working capital	(6,000	)
Additional working capital raised	(11,000	)
Estimated GoAmerica direct transaction costs	4,000
Total estimated purchase price	$   52,000

 

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        The components of the purchase price are as follows (in thousands):

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 merger. The fair value of these assets is subject to change based on additional information that may come to our 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 (in thousands):

Identifiable intangible assets	$  5,200
Goodwill	46,800
Total estimated purchase price	$52,000

Hands On

        On September 12, 2007, GoAmerica announced the execution of a definitive merger agreement with Hands On for $35 million in cash and 6,700,000 shares of GoAmerica common stock. The cash portion of the consideration was funded by the issuances of new debt and shares of Series A Preferred Stock to a fund managed by Clearlake, pursuant to agreements and a commitment letter executed concurrently with the Hands On merger agreement. Completion of the Hands On merger was subject to approval by the stockholders of GoAmerica and Hands On, consummation of the acquisition of Verizon’s TRS division, and other customary closing conditions.

        The Hands On transaction will be funded through $5 million of committed equity financing and $40 million of committed senior debt financing, funded in each case by Clearlake; this brings the total Clearlake financing commitment (including the commitment made by Clearlake with respect to the acquisition of Verizon’s TRS division) to GoAmerica to $110 million in equity and debt. Concurrently with the execution of the definitive Hands On merger agreement, but subject to certain closing conditions, Clearlake:

• Agreed to purchase an additional 967,118 shares of GoAmerica Series A Preferred Stock at a previously negotiated price of $5.17 per share; and

• Provided GoAmerica with a commitment letter for $40 million of senior debt financing to be raised for the closing of the Hands On transaction.

 

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        The estimated total purchase price of the merger based on an average market price per share of GoAmerica’s common stock of $5.17 is as follows (in thousands):

Value of GoAmerica 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 GoAmerica direct transaction costs	4,000
Total estimated purchase price	$73,365

        In accordance with the merger agreement 220,498 of Hands On stock options will be exchanged for 276,238 stock options of GoAmerica. The fair market value of the GoAmerica options exceeded the fair market value of the Hands On options by $1,805 at September 30, 2007.

        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 our 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 (in thousands):

Identifiable intangible assets	$29,346
Goodwill	44,019
Total estimated purchase price	$73,365

Note 2. Pro Forma Adjustments

        For purposes of determining the pro forma effect of the acquisition of Verizon’s TRS division on GoAmerica’s statements of operations for the year ended December 31, 2006 and the nine months ended September 30, 2007, the following adjustments have been made:

(A) Reflects the amortization of other intangible assets over a period of three years.

(B) Reflects interest on first lien term debt in connection with the acquisition of Verizon’s TRS division.

(C) Reflects preferred dividends for the 6,769,826 shares of Series A Preferred Stock issued or to be issued in connection with the acquisition of Verizon’s TRS division.

(D) Reflects pricing adjustments for a Master Service Agreement entered into as a result of the acquisition of Verizon’s TRS division.

        For purposes of determining the pro forma effect of the acquisition on the Company’s consolidated balance sheet as of September 30, 2007, the following adjustments have been made:

(E) Reflects the recording of the purchase price of Verizon’s TRS division.

 

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        For purposes of determining the pro forma effect of the Hands On merger on GoAmerica’s statements of operations for the year ended December 31, 2006 and the nine months ended September 30, 2007, the following adjustments have been made:

(F) Reflects the amortization of other intangible assets over a period of three years.

(G) Reflects interest on second lien term debt in connection with the Hands On merger.

(H) Reflects preferred dividends for the 967,118 of preferred shares to be issued in connection with the Hands On merger.

        For purposes of determining the pro forma effect of the Hands On merger on the Company’s consolidated balance sheet as of September 30, 2007, the following adjustments have been made:

(I) Reflects the recording of the purchase price of Hands On and the elimination of Hands On’s historical stockholders’ equity as of the date of the merger.

Note 3. Reclassifications

        Certain amounts related to Verizon’s TRS division’s results of operations have been reclassified to conform with the pro forma presentation.

        Certain amounts related to Hands On’s results of operations have been reclassified to conform with the pro forma presentation.

 

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