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