-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L2If2qPUvSGk1w/bO5xxpdmEXm+XRRDEx3dVUQ44BKcP9het6o5sFFEj2oB4P0uT RawEAFTpKJok4w3e6Q6grw== 0000912057-99-006047.txt : 19991117 0000912057-99-006047.hdr.sgml : 19991117 ACCESSION NUMBER: 0000912057-99-006047 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990830 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RMI NET INC CENTRAL INDEX KEY: 0001003282 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 841322326 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-28738 FILM NUMBER: 99754790 BUSINESS ADDRESS: STREET 1: 999 18TH STREET STREET 2: STE 2201 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3036720700 MAIL ADDRESS: STREET 1: 999 18TH STREET STREET 2: STE 2201 CITY: DENVER STATE: CO ZIP: 80202 FORMER COMPANY: FORMER CONFORMED NAME: ROCKY MOUNTAIN INTERNET INC DATE OF NAME CHANGE: 19960508 8-K/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) August 30, 1999 ------------------------- RMI.NET, Inc. -------------------------------------------------------------------------- (Exact name of Registrant as specified in charter) Delaware -------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 001-12063 84-1322326 ------------------------ --------------------------------- (Commission File Number) (IRS Employee Identification No.) 999 Eighteenth Street, Suite 2201 80202 -------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (303) 672-0700 ----------------------- -------------------------------------------------------------------------- (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS. On September 15, 1999, the Registrant filed a Current Report on Form 8-K (the "WolfeNet Initial Report") describing the merger of Wolfe Internet Access, L.L.C. ("WolfeNet") with and into the Company. This Current Report on Form 8-K/A amends the WolfeNet Initial Report by including with this Form 8-K/A the financial statements and pro forma financial information prescribed by Item 7 of Form 8-K. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Wolfe Internet Access, L.L.C. - Audited Financial Statements: Independent Auditors' Report - Moss & Adams LLC Balance Sheets as of December 31, 1998 and 1997 Statements of Operations for the Years Ended December 31, 1998 and 1997 Statements of Stockholders' Equity (Deficiency) for the Years Ended December 31, 1998 and 1997 Statements of Cash Flows for the Years Ended December 31, 1998 and 1997 Notes to Financial Statements (b) Pro Forma Financial Information: Pro Forma Condensed Combined Balance Sheet as of December 31, 1998 Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1998 (c) Exhibits:
Exhibit Number Description -------------- ----------- 10.1 Asset Purchase Agreement by and among RMI.NET, Inc., Wolfe Internet Access, L.L.C., Happy Man Corporation, Irving S. Wolfe, M. Mercedes Shereda, and Daniel M. Raybin dated as of August 31, 1999 * 20.1 News Release dated August 8, 1999 announcing the WolfeNet acquisition. *
* Previously filed. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Rocky Mountain Internet, Inc. ------------------------------ (Registrant) Date: November 15, 1999 By: /s/ Christopher J. Melcher ---------------------------- Christopher J. Melcher Vice President, General Counsel and Corporate Secretary WOLFE INTERNET ACCESS LLC INDEPENDENT AUDITOR'S REPORT AND FINANCIAL STATEMENTS JANUARY 31, 1999 AND 1998 INDEPENDENT AUDITOR'S REPORT Board of Directors Wolfe Internet Access LLC Seattle, Washington We have audited the accompanying balance sheet of Wolfe Internet Access LLC as of January 31, 1999 and 1998 and the related statements of operations, members' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wolfe Internet Access as of January 31, 1999 and 1998, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Moss & Adams LLC Seattle, Washington October 22, 1999 WOLFE INTERNET ACCESS LLC BALANCE SHEET JANUARY 31, 1999 AND 1998 ASSETS
1999 1998 -------- -------- CURRENT ASSETS Cash and cash equivalents $ 50,097 $ 51,710 Trade receivables, net of allowance for doubtful accounts of $32,174 and $14,914 for 1999 and 1998 50,200 104,885 Inventories 1,056 20,315 Other current assets 32,289 28,258 -------- --------- Total current assets 133,642 205,168 PROPERTY AND EQUIPMENT, net 326,975 422,369 OTHER ASSETS 3,372 6,716 -------- --------- $463,989 $ 634,253 ======== ========= LIABILITIES AND MEMBERS' DEFICIT CURRENT LIABILITIES Accounts payable $ 53,300 $132,357 Accrued payroll and related taxes 124,752 111,942 Accrued expenses 8,748 38,270 Deferred revenue 339,479 153,339 Advance from member 18,903 331,809 Current portion of capital lease obligations with affiliate 10,859 152,000 -------- --------- Total current liabilities 556,041 919,717 CAPITAL LEASE OBLIGATIONS WITH AFFILIATE, net of current portion - 204,511 COMMITMENTS (Note 5) MEMBERS' DEFICIT (92,052) (489,975) -------- --------- $463,989 $ 634,253 ======== =========
SEE ACCOMPANYING NOTES. 2 WOLFE INTERNET ACCESS LLC STATEMENT OF OPERATIONS YEARS ENDED JANUARY 31, 1999 AND 1998
1999 1998 ---------- ---------- REVENUE Gross revenue earned $3,541,788 $3,288,205 Less: adjustments (199,141) (168,684) ---------- ---------- 3,342,647 3,118,521 COST OF REVENUE EARNED 1,019,223 771,669 ---------- ---------- GROSS PROFIT 2,323,424 2,346,852 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,509,049 2,119,597 DEPRECIATION AND AMORTIZATION 306,991 382,884 ---------- ---------- OPERATING LOSS (492,616) (155,629) ---------- ---------- OTHER INCOME (EXPENSE) Finance charges 67,445 31,239 Interest expense (13,057) (37,305) Interest income 110 1,638 Other income (expense), net 38,408 41,592 -------- --------- 92,906 37,164 ---------- ---------- NET LOSS $ (399,710) $ (118,465) ========== ==========
SEE ACCOMPANYING NOTES. 3 WOLFE INTERNET ACCESS LLC STATEMENT OF MEMBERS' DEFICIT YEARS ENDED JANUARY 31, 1999 AND 1998
Members' Accumulated Contributions Deficit Total ------------- ----------- ---------- BALANCE, JANUARY 31, 1997 $ 856,100 $(1,227,610) $(371,510) Net loss - (118,465) (118,465) ---------- ----------- --------- BALANCE, JANUARY 31, 1998 856,100 (1,346,075) (489,975) Membership contributions 500,000 - 500,000 Conversion of advance from member to members' contributions 297,633 - 297,633 Net loss - (399,710) (399,710) ---------- ----------- --------- BALANCE, JANUARY 31, 1999 $1,653,733 $(1,745,785) $ (92,052) ========== =========== =========
SEE ACCOMPANYING NOTES. 4 WOLFE INTERNET ACCESS LLC STATEMENT OF CASH FLOWS YEARS ENDED JANUARY 31, 1999 AND 1998
1999 1998 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (399,710) $(118,465) Items not requiring cash Depreciation 306,991 382,884 Loss on disposal of fixed assets 6,224 - Changes in operating assets and liabilities Trade receivables 54,685 (22,605) Inventories 19,259 (13,000) Other assets (687) (15,815) Accounts Payable (79,057) 86,611 Deferred revenue 186,140 83,711 Accrued payroll and related taxes 12,810 40,028 Accrued expenses (29,522) 25,968 ---------- --------- Net cash used in operating activities 77,133 449,317 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (12,364) (48,770) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from shareholder contributions 500,000 - Repayment of advance from member (15,273) (53,237) Payments on capital lease obligations with affiliate (551,109) (417,041) ---------- --------- Net cash used in financing activities (66,382) (470,278) ---------- --------- CHANGE IN CASH AND CASH EQUIVALENTS (1,613) (69,731) CASH AND CASH EQUIVALENTS Beginning of year 51,710 121,441 ---------- --------- End of year $ 50,097 $ 51,710 ========== ========= NON-CASH TRANSACTIONS Equipment acquired through capital lease with affiliate $ 205,457 $ 201,345 ========== ========= Conversion of shareholder loan to equity $ 297,633 $ - ========== =========
SEE ACCOMPANYING NOTES. 5 WOLFE INTERNET ACCESS LLC NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999 AND 1998 NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS - Wolfe Internet Access LLC ("the Company") is an E-Business and communications services provider for small- and medium-sized business enterprises, as well as dial-up residential customers in Washington and Oregon. The Company also offers its customers a full range of value-added web site services, including web site hosting, web site production and marketing, e-commerce, and web training. The Company was formed on October 25, 1994. The LLC agreement provides for the dissolution of the Company on or before September 30, 2014. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH EQUIVALENTS - The Company considers all highly-liquid investments with original maturities of three months or less to be cash equivalents. FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK - Financial instruments, which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Company places its cash and temporary cash investments with quality financial institutions. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and markets which comprise the Company's customer base. The Company generally does not require collateral and receivables are generally due within 30 days. REVENUE RECOGNITION - The Company charges customers (subscribers) access fees to the Internet either monthly or on a multi-month basis. Revenue is recognized in the month the access is provided. For multi-month subscribers billed in advance, the Company defers and recognizes the revenue ratably over the period the service is provided. Revenue for other services provided, including set-up fees charged to customers when their accounts are activated, or equipment sales, are recognized as the service is performed or the equipment is delivered to the customer. COST OF REVENUE EARNED - Cost of revenue earned consists of the cost of high speed data circuits and telephone lines that allow customers access to the Company's service plus Internet access fees paid by the Company to Internet backbone carriers. 6 WOLFE INTERNET ACCESS LLC NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999 AND 1998 NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) PROPERTY AND EQUIPMENT - Depreciation and amortization of property and equipment are computed using the straight-line method over the estimated useful lives of the assets, generally three years. Equipment accounted for as capital leases is amortized over the life of the lease. Improvements to leased property are amortized over the lesser of the life of the lease or the estimated useful life of the improvements. ADVERTISING - The Company expenses advertising costs as incurred. During the years ended January 31, 1999 and 1998, the Company incurred approximately $218,000 and $87,000, respectively, in advertising costs. INVENTORIES - Inventories consist of Internet access equipment and are valued at the lower of cost of market. Cost is determined using the first-in, first-out (FIFO) method. INCOME TAXES - The Company has elected to be taxed as a Limited Liability Corporation with the result that earnings and losses are taxed at the shareholder level. Accordingly, no provision for income tax is included in these financial statements. RECENT ACCOUNTING PRONOUNCEMENTS - In March 1998, the Accounting Standards Executive Committee issued Statement of Position 98-1 ("SOP 98-1"), Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires all costs related to the development of internal use software other than those incurred during the application development stage to be expensed as incurred. Costs incurred during the application development stage are required to be capitalized and amortized over the estimated useful life of the software. SOP 98-1 is effective for the Company's fiscal year ending January 31, 2000. Adoption is not expected to have a material effect on the Company's financial statements as the Company's policies are substantially in compliance with SOP 98-1. In April 1998, the American Institute of Certified Public Accountants issued SOP 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 is effective for the Company's fiscal year ending January 31, 2000. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. Adoption is not expected to have a material effect on the Company's financial statements. 7 WOLFE INTERNET ACCESS LLC NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999 AND 1998 NOTE 2 - PROPERTY AND EQUIPMENT
1999 1998 ------------- ------------ Computer and office equipment $ 1,381,883 $ 1,179,938 Computer software 27,050 27,050 Leasehold improvements 38,862 35,298 ------------- ------------ 1,447,795 1,242,286 Less accumulated depreciation (1,120,820) (819,917) ------------- ------------ $ 326,975 $ 422,369 ============= ============
Equipment accounted for as capital leases (Note 3) had a cost of $1,358,150 and $1,152,693 and accumulated depreciation of $1,056,225 and $772,934 at January 31, 1999 and 1998, respectively. NOTE 3 - CAPITAL LEASE OBLIGATIONS WITH AN AFFILIATE The Company leases a significant portion of its computer and office equipment from Happy Man Corporation, a company related through common ownership. The lease terms provide for payments over 42 months for furniture, 30 months for non-dial-up equipment and 18 months for dial-up equipment. Effective interest rates on the leases is generally 8% per annum. The Company is obligated to purchase the equipment at the end of the lease term based on a percentage of the original cost ranging from 5% to 20%. Lease payment terms between the Company and the affiliate have not been strictly followed. Payments, at times, have been made on a periodic basis other than monthly. Interest has been accrued on the outstanding balance of the capital lease obligations throughout the lease periods. At January 31, 1999, lease payments exceeded the amounts required under the lease terms, and the excess payments have been applied to reduce the outstanding lease obligation. NOTE 4 - ADVANCES FROM MEMBER At January 31, 1999 and 1998 the Company had outstanding advances from the majority member/owner in the amounts of $18,903 and $331,809, respectively. The advances are non-interest bearing, unsecured and due on demand. The advances have been used, as needed, to help fund operations. During 1999, $297,633 of advances were converted to membership contributions. 8 WOLFE INTERNET ACCESS LLC NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999 AND 1998 NOTE 5 - COMMITMENTS The Company leases operating facilities and equipment under operating lease agreements expiring through 2002. Certain of these lease agreements require the Company to pay operating expenses and provide for escalation of annual rentals if the lessor's operating costs increase. At January 31, 1999, the future minimum payments under these leases are as follows:
Years ending January 31 ----------------------- 2000 $ 155,000 2001 148,000 2002 79,000 ----------- $ 382,000 ===========
Rent expense approximated $157,307 and $112,322 for the years ended January 31, 1999 and 1998, respectively. NOTE 6 - SUBSEQUENT EVENT Effective September 1, 1999, the Company entered into an agreement to sell significantly all of the assets of the Company, including assets leased from its affiliate (Note 3). The purchaser is RMI.NET, Inc., a publicly traded company, which provides E-Business and communication services in certain parts of the United States. The purchase price is $6,560,000, payable in the form of 811,687 shares of RMI.NET, Inc. common stock. 9 SELECTIVE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA The following selected unaudited pro forma combined financial information presented below has been derived from the unaudited or audited historical financial statements of the Company, Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a Dave's World) and reflects management's present estimate of pro forma adjustments, including a preliminary estimate of the purchase price allocations, which ultimately may be different. The acquisition is being accounted for using the purchase method of accounting. Accordingly, assets acquired and liabilities assumed are recorded at their estimated fair values, which are subject to further adjustment based upon appraisals and other analysis, with appropriate recognition given to the effect of the Company's borrowing rates and income tax rates. The unaudited pro forma combined statements of operations for the six months ended June 30, 1999 and the year ended December 31, 1998 give effect to the acquisitions as if they had been consummated at the beginning of such period. These pro forma statements of operations combines the historical consolidated statements of operations for the periods reported for the Company, Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a Dave's World). The unaudited pro forma condensed combined balance sheet as of June 30, 1999 gives effect to the acquisitions as if they had been consummated on that date. This pro forma balance sheet combines the historical consolidated balance sheet at that date for the Company, Wolfe Internet Access L.L.C., ACES Research, Inc., and for Triad Resources L.L.C. (d/b/a WebZone). The unaudited pro forma condensed combined financial statements may not be indicative of the results that actually would have occurred if the transaction described above had been completed and in effect for the periods indicated or the results that may be obtained in the future. The unaudited pro forma condensed combined financial data presented below should be read in conjunction with the audited and unaudited historical financial statements and related notes thereto of the Company. 10 Pro Forma Condensed Combined Balance Sheet As of June 30, 1999 (Unaudited)
--------------------------------------------------------------------------------------- Previously Reported Wolfe Internet Pro Forma Pro Forma Pro Forma RMI.NET, Inc. Acquisitions(A) Access L.L.C. (B) Subtotal Adjustments (C) Combined --------------------------------------------------------------------------------------- (Dollars in Thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 4,423 $ 11 $ 116 $ 4,550 $ 0 $ 4,550 Trade receivables less allowance for doubtful accounts 4,687 162 319 5,168 - 5,168 Inventories 237 - 3 240 - 240 Other 840 18 10 868 - 868 ------------------------------------------------------------------------------------ Total Current Assets 10,187 191 448 10,826 - 10,826 ------------------------------------------------------------------------------------ PROPERTY AND EQUIPMENT, net 8,270 845 192 9,307 - 9,307 Goodwill, net 21,637 6,773 - 28,410 7,053 (1) 35,463 Other 117 61 - 178 - 178 ------------------------------------------------------------------------------------ Total Assets $ 40,211 $ 7,870 $ 640 $ 48,721 $ 7,053 $ 55,774 ==================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,361 $ 157 $ 145 $ 4,663 $ 0 $ 4,663 Current maturities of long term debt and capital lease obligations 1,919 140 9 2,068 - 2,068 Deferred revenue 1,076 - 532 1,608 - 1,608 Accrued payroll & related taxes 408 - 98 506 - 506 Accrued expenses & other 2,070 142 96 2,308 - 2,308 ------------------------------------------------------------------------------------ Total Current Liabilites 9,834 439 880 11,153 - 11,153 ------------------------------------------------------------------------------------ LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 3,227 238 - 3,465 - 3,465 ------------------------------------------------------------------------------------ Total liabilites 13,061 677 880 14,618 - 14,618 REDEEMABLE CONVERTIBLE PREFERRED STOCK 4,594 - - 4,594 - 4,594 Stockholders' Equity Common Stock 12 12 1 (1) 13 Additional paid in capital 47,422 7,193 1,849 56,464 (1,849) 54,615 6,563 (1) 6,563 Accumulated deficit (24,878) - (2,089) (26,967) 2,338 (2) (24,629) Unearned compesation - - - - - - ------------------------------------------------------------------------------------ 22,556 7,193 (240) 29,509 7,053 36,562 ------------------------------------------------------------------------------------ $40,211 $ 7,870 $ 640 $ 48,721 $ 7,053 $ 55,774 ====================================================================================
11 Pro Forma Condensed Combined Statement of Operations For the Year Ended December 31, 1998 (Unaudited)
Historical --------------------------------------------------------------------------------------------- Previously Reported Wolfe Internet Pro Forma Pro Forma Pro Forma RMI.NET, Inc. Acquisitions (A) Access L.L.C. (B) Subtotal Adjustments (C) Combined --------------------------------------------------------------------------------------------- (Amount in Thousands, Except Per Share Data) Revenue Communication Services $7,974 $14,302 $3,343 $25,619 $0 $25,619 Web Solutions 2,113 0 0 2,113 0 2,113 --------------------------------------------------------------------------------------------- 10,087 14,302 3,343 27,732 0 27,732 --------------------------------------------------------------------------------------------- Cost of revenue earned Communication Services 3,471 10,295 1,019 14,785 0 14,785 Web Solutions 50 0 0 50 0 50 --------------------------------------------------------------------------------------------- 3,521 10,295 1,019 14,835 0 14,835 --------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------- Gross profit 6,566 4,007 2,324 12,897 0 12,897 --------------------------------------------------------------------------------------------- General, selling and administrative expenses 9,184 4,085 2,509 15,778 0 15,778 Cost related to unsuccessful merger attempt 6,071 0 0 6,071 0 6,071 Depreciation and amortization 1,789 2,730 307 4,826 1,411 (3) 6,237 --------------------------------------------------------------------------------------------- Operating income (loss) (10,478) (2,808) (492) (13,778) (1,411) (15,189) --------------------------------------------------------------------------------------------- Other income (expense) Interest expense (320) (144) (13) (477) 0 (477) Interest Income 51 0 0 51 0 51 Other income (expense), net 78 106 106 290 0 290 --------------------------------------------------------------------------------------------- (191) (38) 93 (136) 0 (136) --------------------------------------------------------------------------------------------- Net loss ($10,669) ($2,846) ($399) ($13,914) ($1,411) ($15,325) ============================================================================================= Preferred stock dividends $33 $33 Net loss applicable to common Stockholders ($10,702) ($15,358) ============== =========== Basic and Diluted loss per share from ($1.39) ($1.62) continuing operations (4) ============== =========== Average number of common shares 7,690 985 812 9,487 outstanding (4) =============================================== ===========
12 Pro Forma Condensed Combined Statement of Operations For the Six Months Ended June 30, 1999 (Unaudited)
Historical --------------------------------------------------------------------------------------------- Previously Reported Wolfe Internet Pro Forma Pro Forma Pro Forma RMI.NET, Inc. Acquisitions (A) Access L.L.C. (B) Subtotal Adjustments (C) Combined --------------------------------------------------------------------------------------------- (Amount in Thousands, Except Per Share Data) Revenue Communication Services $9,801 $5,122 $1,790 $16,713 $0 $16,713 Web Solutions 1,851 0 0 1,851 0 1,851 -------------------------------------------------------------------------------------------- 11,652 5,122 1,790 18,564 0 18,564 -------------------------------------------------------------------------------------------- Cost of revenue earned Communication Services 5,406 3,452 598 9,456 0 9,456 Web Solutions 511 0 0 511 0 511 -------------------------------------------------------------------------------------------- 5,917 3,452 598 9,967 0 9,967 -------------------------------------------------------------------------------------------- Gross profit 5,735 1,670 1,192 8,597 0 8,597 -------------------------------------------------------------------------------------------- General, selling and administrative expenses 10,222 1,251 1,388 12,861 0 12,861 Depreciation and amortization 2,605 978 161 3,744 705 (4) 4,449 -------------------------------------------------------------------------------------------- Operating income (loss) (7,092) (559) (357) (8,008) (705) (8,713) -------------------------------------------------------------------------------------------- Other income (expense) Interest expense (228) (41) (5) (274) 0 (274) Interest Income 68 2 0 70 0 70 Other income (expense), net 0 23 35 58 0 58 -------------------------------------------------------------------------------------------- (160) (16) 30 (146) 0 (146) -------------------------------------------------------------------------------------------- Net loss ($7,252) ($575) ($327) ($8,154) ($705) ($8,859) ============================================================================================ Preferred stock dividends $178 $178 Net loss applicable to common Stockholders ($7,430) ($9,037) ============ ============ Basic and Diluted loss per share from ($0.73) ($0.74) continuing operations (4) ============ ============ Average number of common shares 10,141 985 812 11,938 outstanding (4) =============================================== ============
13 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL DATA (UNAUDITED) BASIS OF PRESENTATION The accompanying unaudited pro forma condensed combined balance sheet is presented as of June 30, 1999. The accompanying unaudited pro forma condensed combined statements of operations are presented for the six months ended June 30, 1999 and the year ended December 31, 1998. (A) PREVIOUSLY REPORTED ACQUISITIONS: The accompanying unaudited pro forma condensed combined balance sheet presented as of June 30, 1999 includes the balance sheet as of June 30, 1999 of ACES Research, Inc. and Triad Resources L.L.C. (d/b/a WebZone). The accompanying unaudited pro forma condensed combined statements of operations presented for the six months ended June 30, 1999 and the year ended December 31, 1998 included the condensed statements of operations for the respective periods ended for ACES Research, Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a Dave's World). (B) The Wolfe Internet Access L.L.C. historical results presented for the year ended December 31, 1998 and six months ended June 30, 1999 actually represent the results for the year ended January 31, 1999 and the six months ended July 31, 1999, respectively. The Wolfe Internet Access L.L.C. balance sheet presented as of June 30, 1999 actually represents the balance sheet as of July 31, 1999. The Company believes that the results are not materially different than that which would have been presented for the year ended December 31, 1998 and as of and for the six months ended June 30, 1999. (C) PRO FORMA ADJUSTMENTS The following pro forma adjustments have been made to the unaudited condensed combined balance sheet as of June 30, 1999 and the unaudited condensed combined statements of operations for the six months ended June 30, 1999 and the year ended December 31, 1998 and includes only those proforma adjustments applicable to Wolfe Internet Access, LLC: (1) To reflect the 811,687 shares of RMI stock valued at $6.6 million which is the number of shares issued in connection with the acquisition of Wolfe Internet Access, LLC. The excess purchase price over the fair value of the assets acquired has been allocated to goodwill. The pro forma adjustment reflects the incremental goodwill in the amount of $7.0 million. Shares of Common Stock issued for the acquisition were recorded at fair market value as based on the current market price of RMI's publicly traded stock. The final allocation of the purchase price will be made after the appropriate appraisals or analyses are performed. Upon completion of the appraisals and in accordance with the terms thereof, the excess purchase price currently allocated to goodwill will be allocated to the appropriate asset classifications, including customer list and goodwill. While goodwill will be amortized over a period of five years, customer list or other identified intangibles may be amortized over shorter periods, which would therefore increase amortization expense. (2) To eliminate the equity accounts of the acquisition. (3) To adjust amortization expense due to increase in the carrying value of goodwill, using a life of five years, as if such acquisitions had been completed as of the beginning of such periods. (4) The Basic and Diluted loss per share from continuing operations and the average number of common shares outstanding for the pro forma combined amounts gives effect to the results as if Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a Dave's World) had been completed at the beginning of such periods. 14 -----END PRIVACY-ENHANCED MESSAGE-----