<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 29, 1999
----------------
Internet America, Inc.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 000-25147 86-0778979
------- ----------- ------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Dallas Center, 350 N. St. Paul Street, Suite 3000, Dallas, Texas 75201
-----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 861-2500
--------------
<PAGE> 2
Reference is made to the Current Report on Form 8-K (the "Form 8-K")
filed by Internet America, Inc. on February 16, 1999. The Form 8-K is hereby
amended and restated in its entirety as follows:
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 29, 1999, Internet America, Inc., a Texas corporation (the
"Company"), acquired substantially all of the assets of CompuNet, Inc., a Texas
corporation ("CompuNet"), pursuant to the terms of an Asset Purchase Agreement
dated January 29, 1999, by and among CompuNet, certain securityholders of
CompuNet (the "Securityholders"), the Company and GEEK Assets, Inc., a Texas
corporation and wholly owned subsidiary of the Company. As a result of the
purchase, the Company became the indirect holder of all assets and personal
property and certain liabilities of CompuNet. Those assets include the customer
base and the computer equipment used to provide internet access to customers.
The Company intends to continue such use of those assets.
To the best knowledge of the Company, at the time of the purchase
there was no material relationship between (i) CompuNet and the CompuNet
Securityholders on the one hand and (ii) the Company, or any of its affiliates,
any director or officer of the Company, or any associate of such director or
officer on the other hand.
The aggregate consideration paid by the Company to CompuNet was
approximately $2 million, consisting of 16,910 shares of common stock, par
value $.01 per share, of the Company and the assumption of certain liabilities.
The acquisition consideration was determined by arms-length negotiations
between the parties to the Asset Purchase Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
PAGE
----
(i) Independent Auditors' Report F-1
(ii) Balance Sheets as of December 31, 1997 and 1998 F-2
(iii) Statements of Operations for the years ended
December 31, 1997 and 1998 F-3
(iv) Statements of Shareholder's Deficit for the years
ended December 31, 1997 and 1998 F-4
(v) Statements of Cash Flows for the years ended
December 31, 1997 and 1998 F-5
(vi) Notes to Financial Statements F-6
<PAGE> 3
(b) Proforma financial information (unaudited).
PAGE
----
(i) Pro Forma Balance Sheet at December 31, 1998 P-1
(ii) Pro Forma Statement of Operations for the year
ended June 30, 1997 P-2
(iii) Pro Forma Statement of Operations for the year
ended June 30, 1998 P-3
(iv) Pro Forma Statement of Operations for the six
months ended December 31, 1998 P-4
(v) Notes to Pro Forma Financial Statements P-5
(c) Exhibits.
The following is a list of exhibits filed as part of this Current
Report on Form 8-K:
Exhibit No. Description
- ---------- -----------
2.1 Asset Purchase Agreement dated January 29, 1999, among Internet
America Inc., GEEK Assets, Inc., CompuNet, Inc. and certain
securityholders of CompuNet, Inc.(1)
23.1 Consent of Deloitte & Touche LLP. (2)
99.1 Press Release of Internet America, Inc. dated January 29,
1999.(1)
- --------------------
(1) Previously filed as an Exhibit to the Form 8-K on February 16, 1999.
(2) Filed herewith.
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
EGB, Inc. dba CompuNet, Inc.
We have audited the accompanying balance sheets of EGB, Inc. dba CompuNet, Inc.
(the "Company") as of December 31, 1997 and 1998, and the related statements of
operations, shareholder's 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, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1997 and 1998,
and the results of its operations and its cash flows for the years then ended
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, TX
April 14, 1999
F-1
<PAGE> 5
EGB, INC. DBA COMPUNET, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
-------------------------------
ASSETS 1997 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 21,864 $ 6,247
Accounts receivable, net of allowance for uncollectible accounts
of $38,000 and $46,551 in 1997 and 1998, respectively 152,301 77,602
Prepaid expenses and other current assets -- 1,496
----------- -----------
Total current assets 174,165 85,345
PROPERTY AND EQUIPMENT - Net 75,706 158,907
OTHER ASSETS - Net 239,967 121,868
----------- -----------
TOTAL $ 489,838 $ 366,120
=========== ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Trade accounts payable $ 191,256 $ 273,423
Accrued liabilities 92,093 161,778
Current portion of capital lease obligations 23,168 35,833
Current maturities of long-term debt 56,682 70,255
Notes payable to related parties -- 311,186
Deferred revenue 116,991 273,079
----------- -----------
Total current liabilities 480,190 1,125,554
CAPITAL LEASE OBLIGATIONS, net of current portion 16,434 102,246
LONG-TERM DEBT, net of current portion 629,771 559,505
----------- -----------
Total liabilities 1,126,395 1,787,305
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDER'S DEFICIT:
Common stock, no par value; 20,000,000 shares authorized, 1 share
issued and outstanding in 1997 and 1998 -- --
Additional paid-in capital 83,000 83,000
Accumulated deficit (719,557) (1,504,185)
----------- -----------
Total shareholder's deficit (636,557) (1,421,185)
----------- -----------
TOTAL $ 489,838 $ 366,120
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE> 6
EGB, INC. DBA COMPUNET, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1998
----------- -----------
<S> <C> <C>
REVENUES $ 1,424,492 $ 1,197,969
OPERATING COSTS AND EXPENSES:
Connectivity and operations 1,003,208 1,148,844
Sales and marketing 114,376 36,720
General and administrative 412,784 495,714
Depreciation and amortization 198,129 196,308
Impairment of equipment 264,184 --
----------- -----------
Total 1,992,681 1,877,586
----------- -----------
LOSS FROM OPERATIONS (568,189) (679,617)
INTEREST EXPENSE 77,383 105,011
----------- -----------
NET LOSS $ (645,572) $ (784,628)
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 7
EGB, INC. DBA COMPUNET, INC.
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDER'S DEFICIT
YEARS ENDED DECEMBER 31, 1997 AND 1998
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONAL TOTAL
COMMON STOCK PAID-IN ACCUMULATED SHAREHOLDER'S
-------------------------------
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 1 $ -- $ 83,000 $ (73,985) $ 9,015
Net loss -- -- -- (645,572) (645,572)
------- ------- ----------- ----------- -----------
Balance, December 31, 1997 1 -- 83,000 (719,557) (636,557)
Net loss -- -- -- (784,628) (784,628)
------- ------- ----------- ----------- -----------
Balance December 31, 1998 1 $ -- $ 83,000 $(1,504,185) $(1,421,185)
======= ======= =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 8
EGB, INC. DBA COMPUNET, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (645,572) $ (784,628)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 198,129 196,308
Loss on impairment 264,184 --
Changes in operating assets and liabilities:
Accounts receivable, net (143,340) 74,699
Prepaid expenses and other current assets -- (1,496)
Other assets 25,000 --
Accounts payable and accrued liabilities 283,349 151,852
Deferred revenue 116,991 156,088
----------- -----------
Net cash provided by (used in) operating activities 98,741 (207,177)
----------- -----------
INVESTING ACTIVITIES - Purchases of property
and equipment (103,359) (39,766)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from notes payable to related parties -- 311,186
Principal payments on long-term debt and capital leases (56,490) (79,860)
----------- -----------
Net cash provided by (used in) financing activities (56,490) 231,326
----------- -----------
NET DECREASE IN CASH (61,108) (15,617)
CASH, BEGINNING OF PERIOD 82,972 21,864
----------- -----------
CASH, END OF PERIOD $ 21,864 $ 6,247
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 77,630 $ 93,217
=========== ===========
Equipment acquired under capital leases $ 46,545 $ 121,644
=========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 9
EGB, INC. DBA COMPUNET, INC.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - EGB, Inc. dba CompuNet, Inc. (the "Company"), was incorporated
in Texas on October 10, 1996, and is a provider of Internet access,
serving both individual and corporate customers in the Dallas/Ft. Worth
area. As described more fully in footnote 9, on January 29, 1999,
substantially all of the assets and the recorded liabilities (except for
the note payable to related parties) of the Company were sold to Internet
America, Inc. ("Internet America"), a Texas Corporation.
The Company has experienced cumulative operating losses, and its
operations are subject to certain risks and uncertainties including, among
others, risks associated with technology and regulatory trends, evolving
industry standards, dependence on its network infrastructure and
suppliers, growth and acquisitions, actual and prospective competition by
entities with greater financial and other resources, the development of
the Internet market and need for additional capital or refinancing of
existing obligations. There can be no assurance that the Company will be
successful in becoming profitable or generating positive cash flow in the
future.
REVENUE RECOGNITION - The Company recognizes revenue as services are
rendered. Services paid in advance or subject to refund are recorded as
deferred revenue.
CREDIT RISK - The Company's accounts receivable potentially subjects the
Company to credit risk, as collateral is generally not required. The
Company's risk of loss is limited due to advance billings to customers
for services, the use of pre-approved charges to customer credit cards,
and the ability to terminate access on delinquent accounts.
FINANCIAL INSTRUMENTS - The carrying amounts of cash, accounts
receivable, accounts payable and accrued liabilities approximate fair
value because of the short maturity of these instruments. The fair values
for debt and lease obligations, which have fixed interest rates, do not
differ materially from their carrying values.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the assets, ranging from three to five
years.
EQUIPMENT UNDER CAPITAL LEASE - The Company leases certain of its data
communication and other equipment under agreements accounted for as
capital leases. The assets and liabilities under capital leases are
recorded at the lesser of the present value of aggregate future minimum
lease payments, including estimated bargain purchase options, or the fair
value of the assets under lease. Assets under capital lease are
depreciated over the shorter of their estimated useful lives or the
related lease term.
ACQUIRED SUBSCRIBER BASE - The Company capitalizes specific costs
incurred for the purchase of subscriber bases from other Internet Service
Providers ("ISPs"). The subscriber acquisition costs include the actual
fee paid to the selling ISPs as well as the assumption of deferred
service obligations and legal expenses specifically related to the
transactions. Amortization is provided using the straight- line method
over three years commencing when the subscriber base is received. The
acquired subscriber base, net of accumulated amortization, is included in
other assets.
LONG-LIVED ASSETS - On an annual basis, the Company reviews the values
assigned to long-lived assets, such as property and equipment and acquired
subscriber base, to determine if any impairments are other than temporary.
Provisions for asset impairments are based on discounted cash flow
projections in accordance with Statement of Financial Accounting Standards
("SFAS") NO. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," and such assets are written down
to their estimated fair values. Management believes that the long-lived
assets in the accompanying balance sheets are properly valued. An
impairment loss of $264,184 related to the write-down of data
communications equipment was recognized during the year ended December 31,
1997.
F-6
<PAGE> 10
ADVERTISING EXPENSES - The Company accounts for advertising costs as
expenses in the period in which they are incurred. Advertising expenses
for the years ended December 31, 1997 and 1998 were $60,841 and $15,428,
respectively.
INCOME TAXES - Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the carrying
amount of existing assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to reverse.
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
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 significantly
from these estimates.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998, Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued and is effective for fiscal years
beginning after June 15, 1999. SFAS 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it is, the type of
hedge transaction. The Company believes the adoption of the standard will
not have a material impact on the Company's results of operations or
financial position. The Company has not evaluated the impact on the
results of operations or financial position of adopting SFAS 133.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998
<S> <C> <C>
Data communications and office equipment $ 60,359 $ 203,945
Furniture and fixtures 34,225 34,225
Computer software 6,078 23,902
----------- -----------
100,662 262,072
Less accumulated depreciation and amortization (24,956) (103,165)
----------- -----------
$ 75,706 $ 158,907
=========== ===========
</TABLE>
Property under capital lease, primarily data communications equipment
included above, amounted to $46,545 and $168,189 at December 31, 1997 and
1998, respectively. Included in accumulated depreciation and amortization
are amounts related to property under capital lease of $9,873 and $52,836
at December 31, 1997 and 1998, respectively. Depreciation expense charged
to operations was $82,442 and $78,209 for the years ended December 31,
1997 and 1998, respectively, and included $9,873 and $42,963,
respectively, pertaining to property under capital lease.
F-7
<PAGE> 11
3. ASSETS
Other assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998
<S> <C> <C>
Acquired subscriber base $ 377,216 $ 377,216
Deposits 25,000 26,639
Other 925 925
----------- -----------
403,141 404,780
Less accumulated amortization (163,174) (282,912)
----------- -----------
$ 239,967 $ 121,868
=========== ===========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998
<S> <C> <C>
Note payable to a financial institution maturing
December 31, 2003, bearing interest at 10.5%,
with principal and interest payable monthly $ 508,453 $ 451,760
Note payable in connection with the acquisition of
a subscriber base, due December 31, 2003, bearing
interest at 8%, interest payable monthly for the first
three years, and principal and interest
payable monthly during 2000 through 2003 178,000 178,000
----------- -----------
686,453 629,760
Less current portion (56,682) (70,255)
----------- -----------
$ 629,771 $ 559,505
=========== ===========
</TABLE>
Pursuant to an asset purchase agreement dated January 29, 1999, Internet
America paid the outstanding principal related to the above debt totaling
$629,760 and the related accrued interest on the notes payable to third
parties. See Note 9 for further information related to the sale of the
Company.
5. NOTES PAYABLE TO RELATED PARTIES
During 1998, the Company executed two promissory notes payable to related
parties for $80,000 and $231,186, bearing interest at 8% and 15%,
respectively. The notes are due on December 31, 1999.
F-8
<PAGE> 12
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities under operating leases.
Rental expense under these leases was approximately $32,277 and $37,493
for the years ended December 31, 1997 and 1998, respectively. At December
31, 1998, future minimum lease payments on capital and operating leases
were approximately as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1999 $ 58,444 $ 30,448
2000 48,998 32,625
2001 42,701 16,313
2002 31,896 --
2003 5,316 --
----------- -----------
Total minimum lease payments 187,355 $ 79,386
===========
Less amounts representing interest (49,276)
-----------
Present value of minimum capitalized lease payments 138,079
Less current portion (35,833)
-----------
Long-term capitalized lease obligations $ 102,246
===========
</TABLE>
The Company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's financial position, results of operations and
cash flows.
7. INCOME TAXES
No provision for income taxes has been recognized for the years ended
December 31, 1997 and 1998 as the Company has incurred net operating
losses for income tax purposes since inception and has no carryback
potential. The Company has provided a valuation allowance for net
deferred tax assets, as it is more likely than not that these assets will
not be realized.
F-9
<PAGE> 13
Deferred tax assets and liabilities as of December 31, 1997 and 1998,
consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 351,482 $ 454,678
Allowance for doubtful accounts 72,093 49,685
Depreciation and amortization 62,187 83,716
----------- -----------
Total deferred tax assets 485,762 588,079
Valuation allowance (485,762) (588,079)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $1,025,000 for federal income tax purposes.
A reconciliation of the income tax provision computed at statutory tax
rates to the income tax provision for the years ended December 31, 1997
and 1998 is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998
<S> <C> <C>
Federal income tax benefit at statutory rate (34)% (34)%
State tax benefit, net of federal benefit (3) (3)
Adjustment due to deferred tax asset valuation allowance 37 37
--- ---
Total income tax provision 0% 0%
=== ===
</TABLE>
8. SUBSEQUENT EVENT
On January 29, 1999, Internet America acquired substantially all of the
assets and assumed certain liabilities (except the notes payable to the
related parties) of the Company pursuant to an asset purchase agreement by
and among the Company, the shareholder of the Company, Internet America,
and GEEK Assets, Inc., a Texas corporation and wholly owned subsidiary of
Internet America. GEEK Assets, Inc. exchanged 16,910 shares of common
stock of its parent, Internet America, for the net assets of the Company.
The combination was accounted for as a pooling of interests.
F-10
<PAGE> 14
INTERNET AMERICA, INC.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
(unaudited)
The following unaudited condensed pro forma balance sheet as of December 31,
1998 and the unaudited condensed pro forma statements of operations for the
years ended June 30, 1997 and 1998 and the six months ended December 31, 1998
reflect the acquisition of EGB, Inc. dba CompuNet, Inc. ("CompuNet") by Internet
America, Inc. (the "Company") as if the combination occurred at the beginning of
the earliest period presented. The acquisition has been accounted for as a
pooling of interests under the provisions of Accounting Principles Board Opinion
No. 16, "Business Combinations."
The condensed pro forma statements of operations for the years ended June 30,
1997 and 1998 and the six months ended December 31, 1998 are based upon the
historical financial statements of the Company for the years ended June 30,
1997 and 1998 and the six month period ended December 31, 1998 and the
historical financial statements of CompuNet for the period from October 10,
1996 (inception) to June 30, 1997, the year ended June 30, 1998 and the six
month period ended December 31, 1998.
The condensed pro forma financial statements are not necessarily indicative of
the Company's results of operations that might have occurred had the
acquisition been completed at inception, or indicative of the Company's
consolidated financial position or results of operations for any future date or
period.
These unaudited pro forma financial statements should be read in conjunction
with the historical financial statements and notes thereto of CompuNet included
elsewhere in this document and the financial statements of Internet America,
Inc. referred to above.
<PAGE> 15
INTERNET AMERICA, INC.
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1998
(unaudited)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------------------------------ -------------- -------------
INTERNET COMPUNET, INTERNET
AMERICA, INC. INC. AMERICA, INC.
------------ ------------ ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 17,761,993 $ 6,247 $ 17,768,240
Trade receivables, net 267,716 77,602 345,318
Prepaid expenses and other current assets 134,976 1,496 136,472
------------ ------------ ------------
Total current assets 18,164,685 85,345 18,250,030
PROPERTY AND EQUIPMENT, net 1,463,835 158,907 1,622,742
OTHER ASSETS, net 427,375 121,868 549,243
------------ ------------ ------------
$ 20,055,895 $ 366,120 $ 20,422,015
============ ============ ============
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Trade accounts payable $ 1,051,995 $ 273,423 $ 1,325,418
Accrued liabilities 655,346 161,778 817,124
Deferred revenue 1,927,789 273,079 2,200,868
Current maturities of long-term debt -- 70,255 70,255
Current maturities of capital lease obligations 106,395 35,833 142,228
Notes payable to related parties -- 311,186 (311,186)(1) --
------------ ------------ -------------
Total current liabilities 3,741,525 1,125,554 4,555,893
CAPITAL LEASE OBLIGATIONS, net of current
portion -- 102,246 102,246
LONG-TERM DEBT, net of current portion -- 559,505 559,505
------------ ------------ -------------
Total liabilities 3,741,525 1,787,305 5,217,644
------------ ------------ -------------
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock 62,860 -- 169 (2) 63,029
Additional paid-in capital 22,697,916 83,000 311,017 (1) 23,091,933
Accumulated deficit (6,446,406) (1,504,185) (7,950,591)
------------ ------------ ------------
Total shareholder's equity (deficit) 16,314,370 (1,421,185) 15,204,371
------------ ------------ ------------
$ 20,055,895 $ 366,120 $ 20,422,015
============ ============ ============
</TABLE>
P-1
<PAGE> 16
INTERNET AMERICA, INC.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- ------------
INTERNET COMPUNET, INTERNET
AMERICA, INC. INC. AMERICA, INC.
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Access $ 8,177,300 $ 643,440 $ 8,820,740
Business services 1,044,689 -- 1,044,689
Other 248,933 -- 248,933
------------ ------------ ------------
Total 9,470,922 643,440 10,114,362
------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Connectivity and operations 6,185,100 412,649 6,597,749
Sales and marketing 1,912,265 67,288 1,979,553
General and administrative 2,747,225 143,114 2,890,339
Depreciation and amortization 1,618,089 44,352 1,926,625
Impairment of equipment 350,787 264,184 350,787
------------ ------------ ------------
Total 12,813,466 931,587 13,745,053
------------ ------------ ------------
OPERATING LOSS (3,342,544) (288,147) (3,630,691)
INTEREST EXPENSE, NET 480,985 28,658 509,643
------------ ------------ ------------
NET LOSS $ (3,823,529) $ (316,805) $ (4,140,334)
============ ============ ============
NET LOSS PER COMMON SHARE:
BASIC $ (1.12) $ (1.21)
============ ============
DILUTED $ (1.12) $ (1.21)
============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC 3,417,808 3,434,718 (2)
DILUTED 3,417,808 3,434,718 (2)
</TABLE>
P-2
<PAGE> 17
INTERNET AMERICA, INC.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ -------------
INTERNET COMPUNET, PRO FORMA INTERNET
AMERICA, INC. INC. ADJUSTMENTS AMERICA, INC.
------------- ----------- ----------- -------------
REVENUES:
<S> <C> <C> <C> <C>
Access $ 9,565,815 $ 1,271,534 $10,837,349
Business services 1,036,145 -- 1,036,145
Other 41,312 -- 41,312
----------- ----------- -----------
Total 10,643,272 1,271,534 11,914,806
----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Connectivity and operations 4,508,781 1,181,399 5,690,180
Sales and marketing 1,140,279 107,520 1,247,799
General and administrative 1,919,325 536,917 2,456,242
Depreciation and amortization 1,473,779 112,298 1,586,077
----------- ----------- -----------
Total 9,042,164 1,938,134 10,980,298
----------- ----------- -----------
OPERATING INCOME (LOSS) 1,601,108 (666,600) 934,508
INTEREST EXPENSE, NET 571,106 67,640 (20,539)(1) 618,207
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX 1,030,002 (734,240) 316,301
INCOME TAX EXPENSE 24,000 -- 24,000
----------- ----------- -----------
NET INCOME (LOSS) $ 1,006,002 $ (734,240) $ 292,301
=========== =========== ===========
NET INCOME PER COMMON SHARE:
BASIC $ 0.28 $ 0.08
=========== ===========
DILUTED $ 0.21 $ 0.06
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC 3,532,221 16,910(2) 3,549,131
DILUTED 4,783,319 16,910(2) 4,800,229
</TABLE>
P-3
<PAGE> 18
INTERNET AMERICA, INC.
PRO FORMA CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
INTERNET COMPUNET, PRO FORMA INTERNET
AMERICA, INC. INC. ADJUSTMENTS AMERICA, INC.
------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
REVENUES:
Access $ 5,791,434 $ 558,539 $ 6,349,973
Business services 531,546 -- 531,546
Other 44,841 -- 44,841
----------- ----------- -----------
Total 6,367,821 558,539 6,926,360
----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Connectivity and operations 2,522,972 545,277 3,068,249
Sales and marketing 1,546,432 10,016 1,556,448
General and administrative 1,217,860 231,198 1,449,058
Depreciation and amortization 787,970 99,275 887,245
----------- ----------- -----------
Total 6,075,234 885,766 6,961,000
----------- ----------- -----------
OPERATING INCOME (LOSS) 292,587 (327,227) (34,640)
INTEREST EXPENSE, NET 105,768 40,309 (20,539)(1) 125,538
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX 186,819 (367,536) (160,178)
INCOME TAX EXPENSE 10,000 -- 10,000
----------- ----------- -----------
NET INCOME (LOSS) $ 176,819 $ (367,536) $ (170,178)
=========== =========== ===========
NET INCOME PER COMMON SHARE:
BASIC $ 0.05 $ (0.04)
=========== ===========
DILUTED $ 0.03 $ (0.04)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC 3,878,305 16,910(2) 3,895,215
DILUTED 5,848,830 16,910(2) 3,895,215
</TABLE>
P-4
<PAGE> 19
INTERNET AMERICA, INC.
NOTES TO CONDENSED PRO FORMA FINANCIAL STATEMENTS
(1) Notes payable to related parties were not assumed by Internet America,
Inc. as a part of the combination. Adjustment reflects the decrease in
notes payable as a contribution of capital and the decrease in interest
expense related to the notes payable to related parties.
(2) Reflects the exchange of 16,910 shares of common stock of Internet
America, Inc. for the net assets of CompuNet. The combination was
accounted for as a pooling of interests.
P-5
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNET AMERICA, INC.
Date: April 16, 1999 By: /s/ Michael T. Maples
----------------------
Michael T. Maples,
President and Chief Executive Officer
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
2.1 Asset Purchase Agreement, dated January 29,1999, among Internet
America Inc., GEEK Assets, Inc., CompuNet, Inc. and certain
securityholders of CompuNet, Inc. (1)
23.1 Consent of Deloitte & Touche LLP. (2)
99.1 Press Release of Internet America, Inc. dated January 29, 1999.
(1)
</TABLE>
- --------------------
(1) Previously filed as an Exhibit to the Form 8-K on February 16, 1999.
(2) Filed herewith.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements on
Form S-8 of Internet America, Inc. (Nos. 333-70461, 333-72109 and 333-72111) of
our report dated April 14, 1999, relating to the financial statements of EGB,
Inc. dba CompuNet, Inc. for the years ended December 31, 1997 and 1998,
appearing in this Current Report on Form 8-K/A of Internet America, Inc. dated
April 16, 1999.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
April 16, 1999
