<PAGE>
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)
<PAGE>
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
<PAGE>
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
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
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
</TABLE>
1
<PAGE>
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
<PAGE>
IDEALDIAL CORPORATION
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1998
------------- -------------
<S> <C> <C>
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
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
3
<PAGE>
IDEALDIAL CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
December 31,
------------------------------------
1997 1998
---------------- --------------
<S> <C> <C>
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)
================ ==============
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
4
<PAGE>
IDEALDIAL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------
NUMBER ADDITIONAL ACCUMULATED
OF SHARES AMOUNT PAID-IN CAPITAL DEFICIT TOTAL
------------ ------------ --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
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)
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS
5
<PAGE>
IDEALDIAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
December 31,
-----------------------------------
1997 1998
--------------- -----------
<S> <C> <C>
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
=============== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
6
<PAGE>
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
<PAGE>
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:
<TABLE>
<S> <C>
Telecommunications equipment $ 2,039,000
Software 283,000
Furniture and fixtures 58,000
-------------
2,380,000
Less: accumulated depreciation (1,411.000)
-------------
$ 969,000
=============
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
<S> <C>
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
========
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
<S> <C>
1999 $176,000
2000 178,000
2001 118,000
-------
$472,000
=======
</TABLE>
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
<PAGE>
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
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
IDEALDIAL PRO FORMA PRO FORMA PRO FORMA
RMI.NET, INC. CORPORATION SUBTOTAL ADJUSTMENTS (B) COMBINED
------------- ----------- --------- --------------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
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
--------- ------- ------- --------- --------
--------- ------- ------- --------- --------
</TABLE>
12
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
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
------- -------
------- -------
</TABLE>
13
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------------------------
IDEALDIAL PRO FORMA PRO FORMA PRO FORMA
RMI.NET, INC. CORPORATION SUBTOTAL ADJUSTMENTS (B) COMBINED
------------- ----------- --------- --------------- ---------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
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
------- -------
------- -------
</TABLE>
14
<PAGE>
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