-----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, H5BN5zrAUCk8Scr+g89nVuGnfKEeYfrQWbfiyYZFRSk23G4uwhkbib0l8DRd5v3Q ls9GWTAOpBXcPIbo/rNrlw== 0001035704-00-000034.txt : 20000203 0001035704-00-000034.hdr.sgml : 20000203 ACCESSION NUMBER: 0001035704-00-000034 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991119 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000202 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: 520521 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 AMENDMENT NO. 1 TO FORM 8-K 1 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) November 19, 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, Denver, Colorado 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) 2 ITEM 5. OTHER EVENTS. On December 6, 1999, the Registrant filed a Current Report on Form 8-K (the "Networld Initial Report") describing the acquisition of assets related to the Internet access business of Networld.com, Inc., a subsidiary of FutureOne, Inc. This Current Report on Form 8-K/A amends the Networld 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) Networld.com, Inc. - Financial Statements: Report of Independent Auditors - Ernst & Young LLP Balance Sheet as of September 30, 1999 Statement of Operations for the Year ended September 30, 1999 Statement of Changes in Business Net Assets for the Year ended September 30, 1999 Statement of Cash Flows for the Year ended September 30, 1999 Notes to Financial Statements (b) Pro Forma Financial Information: Pro Forma Condensed Combined Balance Sheet as of September 30, 1999 Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1998 Pro Forma Condensed Combined Statement of Operations for the Nine Months Ended September 30, 1999 (c) Exhibits:
Exhibit Number Description -------------- ----------- 10.1 Asset Purchase Agreement by and among RMI.NET, Inc., and Networld.com, Inc. and FutureOne, Inc. * 20.1 News Release dated November 23, 1999 announcing the Networld.com, Inc. asset acquisition. *
- ------------- * Previously filed. 3 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. RMI.NET, Inc. --------------------------------------- (Registrant) Date: February 2, 2000 By: /s/ CHRISTOPHER J. MELCHER ----------------------------------- Christopher J. Melcher Vice President, General Counsel and Corporate Secretary 4 Report of Independent Auditors The Board of Directors and Stockholders FutureOne, Inc. We have audited the accompanying balance sheet of the Internet Access Business of Networld.com, Inc., a subsidiary of FutureOne, Inc., (the Business) as of September 30, 1999, and the related statements of operations, changes in business net assets, and cash flows for the year then ended. These financial statements are the responsibility of the Business's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides 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 the Internet Access Business of Networld.com, Inc. at September 30, 1999, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Internet Access Business of Networld.com, Inc. will continue as a going concern. As more fully described in Note 1, the Business has recurring losses, and negative working capital. These conditions raise substantial doubt about the Business's ability to continue as a going concern (management's plans in regard to those matters are also described in Note 1). The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty. /s/ ERNST & YOUNG LLP Phoenix, Arizona December 29, 1999 F-1 5 Internet Access Business of Networld.com, Inc. Balance Sheet September 30, 1999 ASSETS Current assets: Trade accounts receivable, net of allowance for doubtful accounts of approximately $35,490 $ 59,005 Prepaid expenses 83,669 -------- Total current assets 142,674 Property and equipment, net 492,950 Intangible assets, net 357,425 ======== $993,049 ======== LIABILITIES AND BUSINESS NET ASSETS Current liabilities: Trade accounts payable $481,924 Accrued expenses 21,697 Deferred revenue 50,954 Current portion of capital leases 124,837 -------- Total current liabilities 679,412 Notes payable 29,752 Capital lease payable, less current portion 172,116 BUSINESS NET ASSETS 111,769 -------- $993,049 ========
See accompanying notes. F-2 6 Internet Access Business of Networld.com, Inc. Statement of Operations Year ended September 30, 1999 Service revenues $ 1,554,818 Costs of service revenues (1,532,740) ----------- Gross profit 22,078 Operating expenses: General and administrative 972,235 Depreciation and amortization 276,363 Unusual Items 120,175 ----------- Loss from operations (1,346,695) Interest expense (net) 21,198 ----------- Net loss $(1,367,893) ===========
See accompanying notes. F-3 7 Internet Access Business of Networld.com, Inc. Statement of Changes in Business Net Assets Year ended September 30, 1999 Balance at October 1, 1998 $ 722,640 Net loss (1,367,893) Contributed assets of GlobalKey, Inc. 146,500 Advances from FutureOne, Inc. 610,522 =========== Balance at September 30, 1999 $ 111,769 ===========
See accompanying notes. F-4 8 Internet Access Business of Networld.com, Inc. Statement of Cash Flows Year ended September 30, 1999 OPERATING ACTIVITIES Net loss $(1,367,893) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 276,363 Provision for doubtful accounts (benefit) (7,510) Deferred revenue 50,954 Provision for unusual item 120,175 Changes in operating assets and liabilities: Trade accounts receivable 9,236 Prepaid expenses (56,777) Trade accounts payable 412,045 Accrued expenses (12,702) ----------- Net cash used in operating activities (576,109) INVESTING ACTIVITIES -- ----------- Net cash used in investing activities -- FINANCING ACTIVITIES Net advances from FutureOne, Inc. 610,522 Principal payments under capital lease obligations (34,413) ----------- Net cash provided by financing activities 576,109 Increase (decrease) in cash and cash equivalents -- Cash and cash equivalents at beginning of period -- ----------- Cash and cash equivalents at end of period $ -- =========== SUPPLEMENTAL CASH FLOW INFORMATION Assets acquired under capital lease obligation $ 282,247 =========== GlobalKey, Inc. assets contributed by Future One, Inc. $ 146,500 ===========
See accompanying notes. F-5 9 Internet Access Business of Networld.com, Inc. Notes to Financial Statements September 30, 1999 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Description of Business The Internet Access Business of Networld.com, Inc., a subsidiary of FutureOne, Inc., ("the Business") provides Internet access services as an Internet Service Provider (ISP). These services are provided to both individuals and companies. The business is comprised of those ISP operations of Networld.com, Inc. Basis of Presentation The accompanying financial statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business. As shown in the accompanying statement of operations, the Business incurred a net loss of $1.4 million over the past year and has negative working capital of $537,000 at September 30, 1999. To meet its immediate cash needs, the Business requires continued funding from FutureOne, Inc., its parent company, and to increase its revenue levels through additional customers to cover operating costs. If the Business is not successful in increasing revenues to attain profitability and/or to continue to receive the financial support of its parent company, the Business may not be able to continue in operation. Revenue and Cost Recognition The Business charges customers (subscribers) monthly access fees to the Internet and recognizes the revenue in the month the access is provided. For certain subscribers billed in advance, the Business recognizes the revenue over the period the billing covers. Cash and Cash Equivalents The Business considers all money market funds with a maturity of three months or less at the date acquired to be cash equivalents. Accounts Receivable Accounts receivable are typically unsecured. The Business performs on going credit evaluations of its retail customers and maintains reserves for potential credit losses. F-6 10 Internet Access Business of Networld.com, Inc. Notes to Financial Statements (continued) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Property and equipment is stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, generally three years for software and web site costs and five to seven years for computer related equipment, construction equipment and vehicles. Intangible Assets Intangible assets consist of trademarks, goodwill, debt issue costs and licenses and are capitalized and amortized on a straight-line basis over their expected useful lives, which range from three to ten years. Income Taxes The Business is included in the tax return of FutureOne, Inc. Under the tax sharing arrangement, the Business is to pay FutureOne, Inc. its taxes due on a standalone basis. At September 30, 1999, the Business had cumulative losses. Therefore, there is no income tax expense or benefit. Advertising Costs Advertising costs are expensed as incurred. Advertising expense was approximately $35,000 for the year ended September 30, 1999. 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Comprehensive Loss As of October 1, 1997, the Business adopted the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130). Statement 130 establishes new rules for reporting and display of comprehensive income and its components. Comprehensive loss is the same as net loss for all periods presented. F-7 11 Internet Access Business of Networld.com, Inc. Notes to Financial Statements (continued) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value of Financial Instruments The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of capital leases is determined using current applicable interest rates as of the balance sheet date and approximates the carrying value of such capital leases. 2. ACQUISITIONS On November 12, 1998, FutureOne, Inc. acquired the ISP of GlobalKey, Inc., then contributed the assets of GlobalKey to operations of the Business, in a purchase business combination for consideration of 50,000 shares of the FutureOne, Inc.'s common stock with a fair value at date of issuance of $2.93 per share for a total consideration of $146,500. In January 1999, the Internet access supplier terminated service to the Business because of prior payment disputes with GlobalKey. The small number of customers acquired from GlobalKey have been lost and the value of the customers and associated goodwill have been written off as an unusual item. A summary of the purchase price allocations for this acquisition is as follows:
LESS: GOODWILL FUTUREONE, TANGIBLE AND LESS: INC. NET CASH ASSETS CUSTOMER LIABILITIES COMMON PAID ACQUIRED LIST ASSUMED STOCK ISSUED (RECEIVED) -------------- -------------- --------------- --------------- ------------- GlobalKey, Inc. 20,000 126,500 - (146,500) -
The following table sets forth the unaudited pro forma results of operations as if the acquisition was consummated at the beginning of the immediately preceding year for the year ended September 30, 1999 (unaudited): Revenues $ 1,556,000 Net loss (1,371,000) F-8 12 Internet Access Business of Networld.com, Inc. Notes to Financial Statements (continued) 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following at September 30, 1999: Furniture and fixtures $ 17,399 Computers and other equipment 659,815 Software 92,086 --------- 769,300 Less accumulated depreciation and amortization (276,350) ========= $ 492,950 =========
4. INTANGIBLE ASSETS Intangible assets consists of the following at September 30, 1999: Organization costs $ 353 Customer lists 150,458 Goodwill 279,478 Trademarks 645 Debt issuance costs, capital leases 165,000 --------- 595,934 Less amortization (238,509) --------- $ 357,425 =========
5. LEASES The Business has equipment under capital leases. The Business also leases office facilities under noncancelable operating leases that expire in various years through December 2001. F-9 13 Internet Access Business of Networld.com, Inc. Notes to Financial Statements (continued) 5. LEASES (CONTINUED) Future minimum payments under capital leases and noncancelable operating leases with initial terms of one year or more consisted of the following at September 30, 1999:
CAPITAL LEASES OPERATING LEASES -------------- ---------------- 2000 $ 140,724 $233,902 2001 140,093 85,158 2002 41,003 -- 2003 -- -- 2004 -- -- Thereafter -- -- --------- -------- Total minimum lease payments 321,820 $319,060 ======== Less amounts representing interest (24,867) --------- Present value of net minimum lease payments 296,953 Less current portion (124,837) --------- $ 172,116 =========
In June 1997, the Business entered into the first of three leasing arrangements with El Camino Resources, Ltd. Under the terms of the first lease, El Camino provided $150,000 of available credit. This lease for the equipment requires payments of $5,690 per month, for a term of 30 months, and includes a buyout provision equal to the fair market value of the leased equipment at the end of the lease, but not to exceed 20 percent of original cost. In conjunction with the lease arrangement, FutureOne, Inc. issued 250,000 shares of its common stock to El Camino. During the year ended September 30, 1999, the Business has entered into a second lease with El Camino for $150,000. The lease requires payments of $5,406 per month for a term of 30 months, and includes a buyout provision equal to the fair market value of the leased equipment at the end of the lease, but not to exceed 20 percent of the original cost. During the year ended September 30, 1999, the Business has entered into a third lease with El Camino for $250,000 of which $163,000 was funded at September 30, 1999. The lease will require payments of $9,483 per month once the lease is fully funded, for a term of 30 months, and includes a buyout provision equal to the fair market value of the leased equipment at the end of the lease, but not to exceed 20 percent of original cost. F-10 14 Internet Access Business of Networld.com, Inc. Notes to Financial Statements (continued) 5. LEASES (CONTINUED) Property and equipment includes the following amounts for leases that have been capitalized as of September 30, 1999: Equipment $ 437,599 Less accumulated amortization (84,133) --------- $ 353,466 =========
Amortization of leased assets is included in depreciation and amortization expense. Rental expense for the year ended September 30, 1999 was approximately $240,000. 6. UNUSUAL ITEMS In January 1999, the Internet access supplier terminated service to the Business because of prior payment disputes with GlobalKey, Inc. The customers acquired from GlobalKey, Inc. have been lost and the unamortized value of the customer list and goodwill acquired from GlobalKey, Inc. has been charged as an expense totaling $120,175, which is included in operations as an unusual item. 7. YEAR 2000 ISSUE (UNAUDITED) The Business experienced no significant problems in the transition to the Year 2000. The Business does not feel it has any continued exposure to the Year 2000 problem. 8. SUBSEQUENT EVENTS Subsequent to September 30, 1999, the Business' sole stockholder entered into an agreement to sell the assets of the Company. F-11 15 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, Networld.com, Inc., AIS Network Corporation, 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 or other analyses, 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 nine months ended September 30, 1999 and the year ended December 31, 1998 give effect to the acquisitions as if they had been consummated at the beginning of each period. These pro forma statements of operations combine the historical consolidated statements of operations for the periods reported for the Company, Networld.com, Inc., AIS Network Corporation, 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 September 30, 1999 gives effect to the acquisitions as if they had been consummated on that date. The pro forma balance sheet combines the historical consolidated balance sheet at that date for the Company, Networld.com, Inc., and AIS Network Corporation. 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 and the financial statements and notes of the acquired companies. 16 PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1999 (UNAUDITED)
Previously Reported Networld.com Pro Forma Pro Forma Pro Forma RMI.NET, Inc. Acquisitions(A) Inc. Subtotal Adjustments(B) Combined ------------- --------------- ----------- --------- -------------- --------- (Dollars in Thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,213 $ 285 $ -- $ 6,498 $ -- $ 6,498 Trade receivables less allowance for doubtful accounts 4,681 75 59 4,815 -- 4,815 Inventories 223 -- -- 223 -- 223 Other 1,123 1 84 1,208 -- 1,208 -------- -------- -------- -------- -------- -------- Total Current Assets 12,240 361 143 12,744 -- 12,744 -------- -------- -------- -------- -------- -------- PROPERTY AND EQUIPMENT, net 9,881 275 493 10,649 -- 10,649 Goodwill, net 35,451 -- 357 35,808 5,732 41,540 Other 548 -- -- 548 -- 548 -------- -------- -------- -------- -------- -------- Total Assets $ 58,120 $ 636 $ 993 $ 59,749 $ 5,732 $ 65,481 ======== ======== ======== ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 3,480 $ 57 $ 482 $ 4,019 $ 0 $ 4,019 Current maturities of long term debt and capital lease obligations 2,465 -- 124 2,589 -- 2,589 Deferred revenue 2,184 -- 51 2,235 -- 2,235 Accrued payroll & related taxes 657 20 -- 677 -- 677 Accrued expenses & other 1,931 -- 22 1,953 -- 1,953 -------- -------- -------- -------- -------- -------- Total Current Liabilities 10,717 77 679 11,473 -- 11,473 -------- -------- -------- -------- -------- -------- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 2,742 -- 202 2,944 -- 2,944 -------- -------- -------- -------- -------- -------- Total liabilities 13,459 77 881 14,417 -- 14,417 REDEEMABLE CONVERTIBLE PREFERRED STOCK 1,928 -- -- 1,928 -- 1,928 Stockholders' Equity Common Stock 18 1 -- 19 (1)(2) 18 Additional paid in capital 73,048 36 -- 73,084 (36)(2) 79,451 6,403 (1) Accumulated deficit (30,333) 522 112 (29,699) (634)(2) (30,333) -------- -------- -------- -------- -------- -------- 42,733 559 112 43,404 5,732 49,136 -------- -------- -------- -------- -------- -------- $ 58,120 $ 636 $ 993 $ 59,749 $ 5,732 $ 65,481 ======== ======== ======== ======== ======== ========
17 PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
Historical -------------------------------------------------------------------------------------- Previously Reported Networld.com Pro Forma Pro Forma Pro Forma RMI.NET, Inc. Acquisitions(A) Inc. Subtotal Adjustments(B) Combined ------------- --------------- ------------ --------- -------------- --------- (Amount in Thousands, Except Per Share Data) Revenue Communication Services $ 7,974 $ 18,770 $ 1,143 $ 27,887 $ -- $ 27,887 Web Solutions 2,113 -- -- 2,113 -- 2,113 10,087 18,770 1,143 30,000 -- 30,000 -------- -------- -------- -------- -------- -------- Cost of revenue earned Communication Services 3,471 11,546 938 15,955 -- 15,955 Web Solutions 50 -- -- 50 -- 50 -------- -------- -------- -------- -------- -------- 3,521 11,546 938 16,005 -- 16,005 -------- -------- -------- -------- -------- -------- Gross profit 6,566 7,224 205 13,995 -- 13,995 -------- -------- -------- -------- -------- -------- General, selling and administrative expenses 9,184 7,168 984 17,336 -- 17,336 Cost related to unsuccessful merger attempt 6,071 -- -- 6,071 -- 6,071 Depreciation and amortization 1,789 3,081 161 5,031 4,849 (3) 9,880 -------- -------- -------- -------- -------- -------- Operating income (loss) (10,478) (3,025) (940) (14,443) (4,849) (19,292) -------- -------- -------- -------- -------- -------- Other income (expense) Interest expense (320) (157) (10) (487) -- (487) Interest Income 51 7 -- 58 -- 58 Other income (expense), net 78 212 -- 290 -- 290 -------- -------- -------- -------- -------- -------- (191) 62 (10) (139) -- (139) -------- -------- -------- -------- -------- -------- Net loss $(10,669) $ (2,963) $ (950) $(14,582) $ (4,849) $(19,431) ======== ======== ======== ======== ======== ======== Preferred stock dividends $ 33 $ 33 Net loss applicable to common Stockholders $(10,702) $(19,464) ======== ======== Basic and Diluted loss per share from continuing operations(4) $ (1.39) $ (1.89) ======== ======== Average number of common shares outstanding(4) 7,690 2,223 354 10,267 ======== ======== ======== ========
18 PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
Historical -------------------------------------------------------------------------------------- Previously Reported Networld.com Pro Forma Pro Forma Pro Forma RMI.NET, Inc. Acquisitions(A) Inc. Subtotal Adjustments(B) Combined ------------- --------------- ------------ --------- -------------- --------- (Amount in Thousands, Except Per Share Data) Revenue Communication Services $ 17,859 $ 8,084 $ 1,180 $ 27,123 $ -- $ 27,123 Web Solutions 2,924 -- -- 2,924 -- 2,924 -------- -------- -------- -------- -------- -------- 20,783 8,084 1,180 30,047 -- 30,047 -------- -------- -------- -------- -------- -------- Cost of revenue earned Communication Services 9,969 4,336 1,154 15,459 -- 15,459 Web Solutions 873 -- -- 873 -- 873 -------- -------- -------- -------- -------- -------- 10,842 4,336 1,154 16,332 -- 16,332 -------- -------- -------- -------- -------- -------- Gross profit 9,941 3,748 26 13,715 -- 13,715 -------- -------- -------- -------- -------- -------- General, selling and administrative expenses 17,497 3,360 1,044 21,901 -- 21,901 Depreciation and amortization 4,880 1,187 248 6,315 2,324(3) 8,639 -------- -------- -------- -------- -------- -------- Operating income (loss) (12,436) (799) (1,266) (14,501) (2,324) (16,825) -------- -------- -------- -------- -------- -------- Other income (expense) Interest expense (369) (46) (19) (434) -- (434) Interest Income 121 13 -- 134 -- 134 Other income (expense), net -- 58 -- 58 -- 58 -------- -------- -------- -------- -------- -------- (248) 25 (19) (242) -- (242) -------- -------- -------- -------- -------- -------- Net loss $(12,684) $ (774) $ (1,285) $(14,743) $ (2,324) $(17,067) ======== ======== ======== ======== ======== ======== Preferred stock dividends $ 199 $ 199 Net loss applicable to common Stockholders $(12,883) $(17,266) ======== ======== Basic and Diluted loss per share from continuing operations(4) $ (1.09) $ (1.20) ======== ======== Average number of common shares outstanding(4) 11,806 2,223 354 14,383 ======== ======== ======== ========
19 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 September 30, 1999. The accompanying unaudited pro forma condensed combined statements of operations are presented for the nine months ended September 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 September 30, 1999 includes the balance sheet as of September 30, 1999 of AIS Network Corporation. The accompanying unaudited pro forma condensed combined statements of operations presented for the nine months ended September 30, 1999 and the year ended December 31, 1998 include the condensed statements of operations for the respective periods ended for AIS Network Corporation, 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). (B) PRO FORMA ADJUSTMENTS: The following pro forma adjustments have been made to the unaudited condensed combined balance sheet as of September 30, 1999 and the unaudited condensed combined statements of operations for the nine months ended September 30, 1999 and the year ended December 31, 1998. (1) To reflect the issuance of 353,519 shares of RMI stock valued at $2.8 million, in connection with the acquisition of Networld.com, Inc., and the issuance of 425,967 shares of RMI stock valued at $3.7 million, in connection with the acquisition of AIS Network Corporation. The $5.7 million excess of the purchase price over the fair value of the assets acquired has been allocated to goodwill. Shares of Common Stock issued in the acquisitions 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 other analyses are performed. Upon completion of the appraisals or other analyses and in accordance with the terms thereof, the excess purchase price currently allocated to goodwill may be reallocated 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 acquired companies. (3) To adjust amortization expense for the increase in 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 Networld.com, Inc., AIS Network Corporation, 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. -----END PRIVACY-ENHANCED MESSAGE-----