-----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, H4z5IqQBoGFeeVKeQwVEy+wKJghkyh9uZl1PvzGpR2QzuugwghwobXKY4i1nrcgQ nudCjBpakjDnE2CHe08vOQ== 0001047469-99-029749.txt : 19990805 0001047469-99-029749.hdr.sgml : 19990805 ACCESSION NUMBER: 0001047469-99-029749 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990611 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990804 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: 99677848 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 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO.2 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) June 11, 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 ----------------------- Rocky Mountain Internet, Inc. - ------------------------------------------------------------------------------ (Former name or former address, if changed since last report) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On June 28, 1999, the Registrant filed a Current Report on Form 8-K (the "IdealDial Initial Report") describing the merger of IdealDial Corporation with and into the Company. This Current Report on Form 8-K/A (the "Form 8-K/A") amends the IdealDial Initial Report by including with this Form 8-K/A the financial statements and pro forma financial information required pursuant to Item 7. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) IdealDial Corporation - Audited Financial Statements: Independent Auditors' Report - Hein & Associates LLP 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 Agreement and Plan of Merger by and among Rocky Mountain Internet, Inc. d/b/a RMI.NET, Inc. and IdealDial Corporation and Michael Payne dated as of June 11, 1999 * 10.2 Rocky Mountain Internet, Inc. d/b/a RMI.NET, Inc. and Internet Connect Internet Connect, Inc., Interweb Design and Hosting, Inc., Jay W. Mason, M.D., Dax J.C. Kelson, David S. Jennings, David L. Alderson, Jr., and Timothy H. Crawford, M..D. dated as of June 10, 1999 * 20.1 News Release dated June 14, 1999 announcing the IdealDial Merger. * 20.2 News Release dated June 15, 1999 announcing the Internet Connect Merger. * * 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: July 30, 1999 By: /s/ CHRISTOPHER J. MELCHER ------------------------------------- Christopher J. Melcher Vice President, General Counsel and Corporate Secretary INDEX TO FINANCIAL STATEMENTS INDEPENDENT AUDITOR'S REPORT..................................................2 BALANCE SHEET - December 31, 1997 and 1998....................................3 STATEMENTS OF OPERATIONS - For the Years Ended December 31, 1997 and 1998..........................................4 STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIENCY) For the Years Ended December 31, 1997 and 1998......................5 STATEMENTS OF CASH FLOWS - For the Years Ended December 31, 1997 and 1998..........................................6 NOTES TO FINANCIAL STATEMENTS.................................................7 SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA.........................11 PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1999..............12 PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the Year Ended December 31, 1998...............................13 PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the Three Months Ended March 31, 1999..........................14 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL DATA.....................15
1 INDEPENDENT AUDITOR'S REPORT Board of Directors IdealDial Corporation Denver, Colorado We have audited the accompanying balance sheets of IdealDial Corporation as of December 31, 1998 and 1997, and the related statements of operations, stockholder's equity (deficiency), 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 IdealDial Corporation as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. HEIN + ASSOCIATES LLP Denver, Colorado June 3, 1999 IDEALDIAL CORPORATION BALANCE SHEET ASSETS
December 31, ------------------------------------ 1997 1998 ------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 624,000 $ 48,000 Marketable securities 158,000 4,000 Trade receivables, net allowance for doubtful accounts of $38,000 and $65,000, respectively 1,020,000 1,037,000 Accounts receivable, Stockholder 150,000 - Investment - affiliated company 150,000 150,000 Prepaid expenses and other 104,000 59,000 ------------- ------------- Total current assets 2,206,000 1,298,000 EQUIPMENT, net 507,000 969,000 OTHER- Refundable deposits 19,000 19,000 ------------- ------------- TOTAL ASSETS $ 2,732,000 $ 2,286,000 ============= ============= LIABILITIES AND STOCKHOLDER'S DEFICIENCY CURRENT LIABILITIES Note payable $ - $ 450,000 Accounts payable 2,110,000 836,000 Accrued liabilities 314,000 312,000 Deferred revenues 44,000 27,000 Current portion of capital lease obligations - 145,000 ------------- ------------- Total current liabilities 2,468,000 1,770,000 CAPITAL LEASE OBLIGATIONS, net of current portion - 264,000 CUSTOMER DEPOSITS AND HOLDBACKS 353,000 274,000 COMMITMENTS AND CONTINGENCIES (Notes 2 and 3) - - STOCKHOLDER'S DEFICIENCY: Common stock, $.01 par value, 14,000,000 shares authorized, 12,467,000 shares issued and outstanding 125,000 125,000 Additional paid-in capital 140,000 903,000 Accumulated deficit (354,000) (1,050,000) ------------- ------------- Total stockholder's equity (deficiency) (89,000) (22,000) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 2,732,000 $ 2,286,000 ============= =============
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS. 3 IDEALDIAL CORPORATION STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED December 31, ------------------------------------ 1997 1998 ---------------- -------------- REVENUES $ 14,688,000 $ 9,499,000 COST OF SALES 12,810,000 7,811,000 ---------------- -------------- GROSS MARGIN 1,878,000 1,688,000 OPERATING EXPENSES: Selling 354,000 466,000 General and administrative 1,609,000 1,707,000 Depreciation 139,000 231,000 ---------------- -------------- 2,102,000 2,404,000 ---------------- -------------- LOSS FROM OPERATIONS (224,000) (716,000) OTHER INCOME (EXPENSE): Interest income (expense), net 28,000 (57,000) Other 28,000 77,000 ---------------- -------------- NET LOSS $ (168,000) $ (696,000) ================ ==============
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS. 4 IDEALDIAL CORPORATION STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIENCY) FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
COMMON STOCK --------------------------- NUMBER ADDITIONAL ACCUMULATED OF SHARES AMOUNT PAID-IN CAPITAL DEFICIT TOTAL ------------ ------------ --------------- ----------- ---------------- Balances, January 1, 1997 12,467,000 $ 125,000 $ 220,000 $ (186,000) $ 159,000 Net loss - - - (168,000) (168,000) Distribution to stockholder - - (80,000) - (80,000) ------------ ------------ --------------- ----------- ---------------- Balances, December 31, 1997 12,467,000 125,000 140,000 (354,000) (89,000) Stockholder contributions - - 763,000 - 763,000 Net loss - - - (696,000) (696,000) ------------ ------------ --------------- ------------ ---------------- Balances, December 31, 1998 12,467,000 $ 125,000 $ 903,000 $(1,050,000) $ (22,000)
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS 5 IDEALDIAL CORPORATION STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED December 31, ----------------------------------- 1997 1998 --------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (168,000) $ (696,000) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 139,000 231,000 Bad debt expense 54,000 295,000 Change in assets and liabilities: Decrease (increase) in: Marketable securities (308,000) 154,000 Trade receivables (47,000) (312,000) Other assets (137,000) 195,000 Increase (decrease) in: Accounts payable 1,008,000 (1,274,000) Accrued liabilities 266,000 (2,000) Deferred revenues (37,000) (17,000) Customer deposits and holdbacks (231,000) (79,000) --------------- ----------- Net cash provided by (used in) operating activities 539,000 (1,505,000) CASH FLOWS USED IN INVESTING ACTIVITIES - Purchase of equipment, net (233,000) (224,000) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of capital lease obligations - (60,000) Proceeds from notes payable - 450,000 Stockholder capital contribution - 763,000 Distribution to stockholder (80,000) - --------------- ----------- Net cash provided by (used in) financing activities (313,000) 929,000 --------------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 226,000 (576,000) CASH AND CASH EQUIVALENTS, beginning of period 398,000 624,000 --------------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 624,000 $ 48,000 =============== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Cash paid for interest $ 3,000 $ 55,000 =============== =========== Purchase of equipment with capital lease $ - $ 469,000 =============== ===========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS. 6 IDEALDIAL CORPORATION NOTES TO FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES: NATURE OF OPERATIONS - IdealDial Corporation (the Company), a Colorado corporation, is a full service telecommunications company, engaged in reselling telecommunications products and services. The Company offers its customers long distance services, prepaid phone cards, 800/900 Interactive Voice Response (IVR), service bureau applications, telephone solutions, and custom call processing. LIQUIDITY - During 1998 and 1997 the Company transformed from predominately an 800/900-service bureau to a full service telecommunications company that negatively impacted its operating results. The 900-industry market has decreased significantly due to the rapid growth of the information available through the Internet and the rapid increase in the number of customers utilizing the Internet. In February 1998, the Company also entered into a marketing agreement with a major publishing company in an effort to procure customers from its multi-million customer base. Significant program development cost of approximately $500,000 were incurred and expensed to cost of sales in 1998. The program failed to generate significant revenues and the program was terminated in November 1998. As a result, as of December 31, 1998, the Company had a working capital deficiency of approximately $472,000 and stockholder's deficiency of $22,000. In addition, the Company has a significant commitment with its long distance carrier, which if not met or renegotiated, would adversely affect the Company's financial condition. Management has implemented a plan to return the Company to profitability by focusing on additional long distance services, marketing highly profitable bundled services and increasing its field sales efforts. In the fourth quarter, 1998, the Company entered into several agency agreements with large affinity groups that have secured a significant increase in new long distance and calling card customers which has generated new long distance and post paid calling card revenue in the first quarter 1999. In total, however, revenues continue to decrease as the Company completes this transition. Management believes that these new relationships will generate sufficient revenues to return the Company to profitability in 1999. In addition, the Company has entered into a merger agreement with another Communications Company that, if successfully completed, will enable it to combine resources and reduce operating costs. If the Company is unable to generate sufficient revenues to return to profitability or meet or renegotiate its future commitments, additional capital will be required to meet its working capital needs. BASIS OF ACCOUNTING - The accompanying financial statements have been prepared on the accrual basis of accounting. Customer billings and collections for telecommunication services are performed in-house and by third party service providers. Certain accounts receivable represents the amount customers owe the Company for services provided. Certain 900 receivables are offset by the payable for services provided. Revenues and expenses are recorded in the period earned and incurred, respectively. 900 charge backs for unpaid calls are passed through to the Company's customers. Amounts are withheld on all 900 customers to protect the Company from losses due to excessive charge backs. The Company established an allowance for bad debt on all long distance billings based on historical experience. The reserve balance is reviewed and adjusted monthly based on management's best estimate. CASH EQUIVALENTS - For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. 7 IDEALDIAL CORPORATION NOTES TO FINANCIAL STATEMENTS MARKETABLE SECURITIES - Marketable securities consist of corporate stocks and bonds. The securities are classified as trading securities and are stated at market. Realized and unrealized gains are included in the income statement. EQUIPMENT - Equipment is recorded at cost. Depreciation is computed using the straight-line method over the estimated useful life of the equipment, generally five years. Repairs and maintenance are charged to expense as incurred. Material expenditures, which increase the life of an asset, are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of equipment sold, or otherwise disposed of, and the related accumulated depreciation or amortization is removed from the accounts, and any gains or losses are reflected in current operations. Depreciation expense charged to operations was $231,000 and $139,000 for the years ended December 31, 1998 and 1997. Equipment consists of the following at December 31, 1998: Telecommunications equipment $ 2,039,000 Software 283,000 Furniture and fixtures 58,000 ------------- 2,380,000 Less: accumulated depreciation (1,411.000) ------------- $ 969,000 =============
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and circumstances indicate that the cost of long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset's carrying amount to determine if a write-down to market value or discounted cash flow value is required. No impairment has been taken for the year ended December 31, 1998 and 1997. INCOME TAXES - The Company has elected to be an S-Corporation for income tax reporting purposes, passing all taxable income or losses to the individual stockholder. Therefore, no provision for income taxes has been reflected in the accompanying financial statements. REVENUE RECOGNITION - The Company recognizes revenue during the period of performance of the related services. CONCENTRATION OF CREDIT RISK - Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly effected by changes in economic or other conditions. The Company does not have a significant exposure to any individual customer or counterparty, with the possible exception of its providers (see Note 3), who provide communication services to the Company. In addition, a company that was owned by the sole stockholder was a significant customer during 1997 (see Note 4). FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair values of the Company's financial 8 IDEALDIAL CORPORATION NOTES TO FINANCIAL STATEMENTS instruments, which includes cash, trade receivables and accounts payable, approximates their carrying value in the financial statements at December 31, 1998. USE OF ESTIMATES - The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. The Company makes significant estimates as to the amount of holdback to reserve for its customers' refused calls, allowance for doubtful accounts, and for the amount of its unearned income on calling cards. 2. NOTES PAYABLE AND CAPITAL LEASES: NOTE PAYABLE - BANK - The Company has a note payable with a bank for $450,000, due November 1999, with interest payable monthly at the bank's prime rate (7.75% at December 31, 1998), collateralized by all accounts receivable and personal property of the Company and personally guaranteed by the stockholder. CAPITAL LEASES - The Company leases certain equipment which have been recorded as capital leases. Obligations under these capital leases have been recorded at the present value of future minimum lease payments, discounted at a rate of approximately 10%. The capitalized cost of $469,000 less accumulated amortization of $42,000 is included in property and equipment at December 31, 1998. The following is a schedule of future minimum lease payments under capital leases at December 31, 1998:
For the Years Ended December 31, -------------------------------- 1999 $178,000 2000 178,000 2001 104,000 -------- Future minimum lease payment 460,000 Less amount representing interest (51,000) -------- Present value of net minimum lease payments 409,000 Less current portion (145,000) -------- $264,000 ========
Subsequent to December 31, 1998, the Company entered into another capital lease with the same financing company for $155,000 under the same terms as the existing leases. 3. COMMITMENTS AND CONTINGENCIES: The Company has a service agreement with one of its providers whereby it is granted certain discounts on long distance rates based on anticipated volume over a five-year period, with monthly minimums for current months. Historically, the Company has not met its monthly minimums and has renegotiated the terms of the agreement with the provider. In March 1999, the agreement was renegotiated and the required monthly minimums again were adjusted under the agreements. The Company's minimum monthly usage is $150,000 through July 1999, then escalates to $500,000 per month beginning in August 1999, through July 2000, then escalates to $2,000,000 per month through October 2002. For 9 IDEALDIAL CORPORATION NOTES TO FINANCIAL STATEMENTS 1998, the Company believes it has met its minimum commitment. However, subsequent to year-end, revenues have fallen below its monthly commitment. The Provider has not yet billed the Company for its minimum amounts and the Company believes it will be able to renegotiate the commitment whereby past deficiencies will be offset by future increases in its commitment as has happened in the past. However, neither party has directly commenced such renegotiations due to the proposed sale of the Company. The Company has also granted the Provider a security interest in all the Company's assets and general intangibles in connection with this commitment. OPERATING LEASES - The Company leases its office facilities under non-cancelable operating leases. Rent expense for the years ended December 31, 1998 and 1997 was $145,000 and $147,000, respectively. At December 31, 1998, future minimum lease obligations under leases with these terms in excess of one year are the following:
For the Years Ended December 31, -------------------------------- 1999 $176,000 2000 178,000 2001 118,000 ------- $472,000 =======
LITIGATION - The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of its business and have not been fully adjudicated. The company is unable to estimate the magnitude of its exposure at this time, but believes such actions will be resolved without any adverse material consequence. If required, it will vigorously contest such actions. 4. RELATED PARTY TRANSACTIONS: One of the Company's major customers is a 900-line service account owned by the Company's sole stockholder. During the years ended December 31, 1998 and 1997, this customer accounted for $3,480,000 and $5,420,000 of the Company's revenue, respectively. Subsequent to December 31, 1998 the stockholder sold the Company to an unrelated third party which plans to remain a long-term customer. Concurrent with the sale, the seller established an escrow account of $450,000 in the name of the Company for potential charge-backs, which were related to service prior to the sale. As of December 31, 1998 Customer Deposits and Holdbacks included approximately $120,000 related to this 900 customer for charge-backs. Subsequent to year-end and in conjunction with the sale, $100,000 of this amount was contributed to the Company's paid-in capital. Accounts payable also included $71,000 payable to this 900 customer as of December 31, 1998. As of December 31, 1998, the Company held a $150,000 convertible note as an investment in which the Company's stockholder was a director. Subsequent to year-end, the stockholder purchased this note from the Company for cash. 10 SELECTIVE UNAUDITED PRO FORMA CONSENSED 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, 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 three months ended March 31, 1999 and the year ended December 31, 1998 give effect to the acquisitions as if they had been consummated at the beginning of such year. These pro forma statements of operations combines the historical consolidated statements of operations for the periods reported for the Company, IdealDial Corporation and August 5th Corporation (d/b/a Dave's World). The unaudited pro forma condensed combined balance sheet as of March 31, 1999 gives effect to the acquisition as if it had been consummated on that date. This pro forma balance sheet combines the historical consolidated balance sheet at that date for the Company and for IdealDial 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. 11 PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1999 (UNAUDITED)
IDEALDIAL PRO FORMA PRO FORMA PRO FORMA RMI.NET, INC. CORPORATION SUBTOTAL ADJUSTMENTS (B) COMBINED ------------- ----------- --------- --------------- --------- (Dollars in Thousands) ASSETS CURRENT ASSETS Cash and cash equivalents 4,039 318 4,357 - 4,357 Trade receivables less allowance for doubtful accounts 2,318 1,121 3,439 - 3,439 Inventories 147 - 147 - 147 Other 631 86 717 - 717 Total Current Assets 7,135 1,525 8,660 - 8,660 PROPERTY AND EQUIPMENT, net 6,112 1,023 7,135 - 7,135 Goodwill, net 16,790 - 16,790 1,634 (1) 18,424 Other 489 19 508 - 508 Total Assets 30,526 2,567 33,093 1,634 34,727 --------- ------- ------- --------- -------- --------- ------- ------- --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable 4,198 582 4,780 - 4,780 Current maturities of long term debt and capital lease obligations 1,543 647 2,190 - 2,190 Deferred revenue 777 27 804 - 804 Accrued payroll & related taxes 375 375 - 375 Accrued expenses & other 1,589 752 2,341 - 2,341 Total Current Liabilites 8,482 2,008 10,490 - 10,490 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 2,818 328 3,146 - 3,146 Total liabilites 11,300 2,336 13,636 - 13,636 - REDEEMABLE CONVERTIBLE PREFERRED STOCK 6,748 - 6,748 - 6,748 Stockholders' Equity Common Stock 10 125 135 - 135 Additional paid in capital 33,204 1,353 34,557 (1,353)(3) 33,204 1,740 1,740 Accumulated deficit (20,736) (1,247) (21,983) 1,247 (2) (20,736) Unearned compesation - - - - - 12,478 231 12,709 1,634 14,343 30,526 2,567 33,093 1,634 34,727 --------- ------- ------- --------- -------- --------- ------- ------- --------- --------
12 PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
HISTORICAL --------------------------------------------------------------------------------------- PREVIOUSLY REPORTED IDEALDIAL PRO FORMA PRO FORMA PRO FORMA RMI.NET, INC. ACQUISITIONS CORPORATION SUBTOTAL ADJUSTMENTS (B) COMBINED ------------- ------------ ----------- --------- --------------- --------- (Amount in Thousands, Except Per Share Data) Revenue Communication Services 7,974 1,995 9,499 19,468 0 19,468 Web Solutions 2,113 0 0 2,113 0 2,113 ------- ------- ------- ------- ---- ------- 10,087 1,995 9,499 21,581 0 21,581 ------- ------- ------- ------- ---- ------- Cost of revenue earned Communication Services 3,471 926 7,811 12,208 0 12,208 Web Solutions 50 0 0 50 0 50 ------- ------- ------- ------- ---- ------- 3,521 926 7,811 12,258 0 12,258 ------- ------- ------- ------- ---- ------- Gross profit 6,566 1,069 1,688 9,323 0 9,323 ------- ------- ------- ------- ---- ------- General, selling and administrative expenses 9,184 972 2,173 12,329 0 12,329 Cost related to unsuccessful merger attempt 6,071 0 0 6,071 0 6,071 Depreciation and amortization 1,789 134 231 2,154 874 (5) 3,028 ------- ------- ------- ------- ---- ------- Operating loss (10,478) (37) (716) (11,231) (874) (12,105) ------- ------- ------- ------- ---- ------- Other income (expense) Interest expense (320) (57) (57) (434) 0 (434) Interest Income 51 0 0 51 0 51 Other income (expense), net 78 21 77 176 0 176 ------- ------- ------- ------- ---- ------- (191) (36) 20 (207) 0 (207) ------- ------- ------- ------- ---- ------- Net loss (10,669) (73) (696) (11,438) (874) (12,312) ------- ------- ------- ------- ---- ------- ------- ------- ------- ------- ---- ------- Preferred stock dividends 33 33 Net loss applicable to common Stockholders (10,702) (12,345) Basic and Diluted loss per share from continuing operations (1.39) (1.53) ------- ------- ------- ------- Average number of common shares outstanding (5) 7,690 8,061 ------- ------- ------- -------
13 PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
HISTORICAL ------------------------------------------------------------------------------ IDEALDIAL PRO FORMA PRO FORMA PRO FORMA RMI.NET, INC. CORPORATION SUBTOTAL ADJUSTMENTS (B) COMBINED ------------- ----------- --------- --------------- --------- (Amount in Thousands, Except Per Share Data) Revenue Communication Services 4,407 2,005 6,412 0 6,412 Web Solutions 856 0 856 0 856 ------- ------- ------- ------ ------- 5,263 2,005 7,268 0 7,268 ------- ------- ------- ------ ------- Cost of revenue earned Communication Services 2,548 1,570 4,118 0 4,118 Web Solutions 6 0 6 0 6 ------- ------- ------- ------ ------- 2,554 1,570 4,124 0 4,124 ------- ------- ------- ------ ------- Gross profit 2,709 435 3,144 0 3,144 ------- ------- ------- ------ ------- General, selling and administrative expenses 4,690 535 5,225 0 5,225 Cost related to unsuccessful merger attempt 0 0 0 0 0 Depreciation and amortization 1,143 66 1,209 75 (4) 1,284 ------- ------- ------- ------ ------- Operating loss (3,124) (166) (3,290) (75) (3,365) ------- ------- ------- ------ ------- Other income (expense) Interest expense (85) (32) (117) 0 (117) Interest Income 22 1 23 0 23 Other income (expense), net 0 0 0 0 0 ------- ------- ------- ------ ------- (63) (31) (94) 0 (94) ------- ------- ------- ------ ------- Net loss (3,187) (197) (3,384) (75) (3,459) ------- ------- ------- ------ ------- ------- ------- ------- ------ ------- Preferred stock dividends 99 99 Net loss applicable to common Stockholders (3,286) (3,558) Basic and Diluted loss per share from continuing operations (0.33) (0.35) ------- ------- ------- ------- Average number of common shares outstanding (5) 9,767 9,914 ------- ------- ------- -------
14 NOTES TO THE PRO FORMA CONSENSED COMBINED FINANCIAL DATA (UNAUDITED) (A) BASIS OF PRESENTATION The accompanying unaudited pro forma condensed combined balance sheet is presented as of March 31, 1999. The accompanying unaudited pro forma condensed combined statements of operations are presented for the three months ended March 31, 1999 and the year ended December 31, 1998. (B) PRO FORMA ADJUSTMENTS The following pro forma adjustments have been made to the unaudited condensed combined balance sheet as of March 31, 1999 and the unaudited condensed combined statements of operations for the three months ended March 31, 1999 and the year ended December 31, 1998: (1) To reflect the 146,611 shares of RMI stock valued at $1.7 million which is the number of shares issued in connection with the acquisition of IdealDial Corporation. 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 $1.6 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 January 1, 1998. (4) To adjust for revenues and expenses for the acquisition of IdealDial Corporation as if such acquisition had been completed as of January 1, 1999. (5) To adjust for revenues and expenses for the acquisition of IdealDial Corporation as if such acquisition had been completed as of January 1, 1998. 15 -----END PRIVACY-ENHANCED MESSAGE-----