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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 21, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RMI.NET, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3153858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CHRISTOPHER J. MELCHER
RMI.NET, INC.
999 EIGHTEENTH STREET, SUITE 2201
DENVER, COLORADO 80202
(303) 672-0700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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COPY TO:
JEFFREY M. KNETSCH
J. DAVID HERSHBERGER
BROWNSTEIN HYATT & FARBER, P.C.
410 SEVENTEENTH STREET, 22ND FLOOR
DENVER, COLORADO 80202
(303) 223-1100
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Approximate date of commencement of proposed sale to public: as soon as
practicable after the registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earliest effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price (1) Registration Fee
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<S> <C> <C>
Debt Securities, Preferred Stock, Common Stock and Warrants(2) $30,000,000.00 $7,920.00
================================================================= ============================ ================
</TABLE>
(1) The maximum aggregate offering price of Debt Securities, Preferred
Stock, Common Stock and Warrants (collectively the "Securities")
registered hereunder will not exceed $30,000,000.00. Pursuant to Rule
457(o), the registration fee is calculated on the aggregate maximum
offering price of all of the Securities registered and does not specify
information about the principal amount, the number of shares or other
denominations of Securities registered.
(2) Includes an indeterminate principal amount of Debt Securities, an
indeterminate number of shares of Preferred stock, an indeterminate
number of shares of Common Stock, and an indeterminate principal amount
of Debt Securities, or number of shares of Preferred Stock or Common
Stock as may be issued upon conversion of, or in exchange for, or upon
exercise of convertible or exchangeable Debt Securities, Preferred
Stock or Warrants (including any securities issuable upon stock splits
and similar transactions pursuant to Rule 416).
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The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
will thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a) may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
SUBJECT TO COMPLETION. DATED JULY 24, 2000.
RMI.NET, INC.
UP TO $30,000,000 OF SECURITIES
RMI.NET, Inc. may offer from time to time up to $30,000,000 of the
following types of securities:
o debt securities, which may be senior debt securities, senior
subordinated debt securities, or subordinated debt securities,
in each case consisting of notes or other unsecured evidences
of indebtedness;
o shares of preferred stock;
o shares of common stock; or
o warrants to purchase debt securities, preferred stock, or
common stock.
The securities may be offered separately, in series, or together in any
combination. We will provide a prospectus supplement each time we issue
securities that will inform you about the securities to be issued and the
specific terms of the offering. Where applicable, the prospectus supplement will
also contain information about any listing of the securities on a national
securities exchange. The supplement may also add, update, or change information
contained in this prospectus. You should read this prospectus and any prospectus
supplement carefully before you invest.
Our common stock is traded on the Nasdaq National Market under the
symbol "RMII." On July __, 2000, the average of the high and low price for our
common stock was $_____ per share.
See "Risk Factors" beginning on page 2 to read about factors you should
consider before you invest.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is July ___, 2000.
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PROFILE OF RMI.NET
RMI.NET began offering Internet access services in 1994 and has grown
from a regional Internet service provider into a premier nationwide e-Commerce,
Web Solutions, and connectivity services provider for small and medium-sized
business enterprises, as well as dial-up residential customers and DSL
customers. We monitor and control our network through our Network Operations
Center in Denver, Colorado. Through our nationwide network of owned and leased
dial-up access sites, customers are able to access the Internet in 100% of the
strategic marketing areas in the United States via a local telephone call. Our
current customer base has grown to approximately 8,000 business customers and
over 100,000 dial-up customers. We offer our customers access to value-added Web
services, including:
o Web site hosting, production, marketing, and training;
o a Web Portal constructed to provide multiple services,
including an online search engine with a large reference
database, an audio feed, a stock quote service, and additional
content; and
o several e-Commerce products and services.
We have built a portfolio of products, services, and skill sets to
develop and deliver comprehensive Internet solutions to small and mid-size
businesses. Based on our belief that a growing number of businesses and
consumers will demand that one company provide all of their e-Commerce/Web
Solution and connectivity needs, we plan to continue to add products and
services to our portfolio. We refer to our strategy as a "One Point-of-Contact"
solution delivery model.
Our customer service philosophy is to understand our customers' needs
so well that we develop and deliver a very high level of value-added services
and after-sales support. We believe that highly differentiated customer service
and technical support is a key competitive asset in the industry, and the ISP
sector in particular. Because the Internet is an evolving and complex medium,
customers require significant technical support. Consequently, we have developed
a comprehensive strategy to attain maximum customer satisfaction and loyalty.
On March 17, 2000, we entered into definitive agreements to acquire all
of the outstanding common stock of Internet Communications Corporation, a
telecommunications and network communications company, headquartered near Denver
in Greenwood Village, Colorado.
Our executive offices are located at 999 Eighteenth Street, North
Tower, Suite 2201, Denver, Colorado 80202 and our telephone number at that
address is (303) 672-0700. We also maintain an Internet site on the World Wide
Web at http://www.rmi.net. Information contained on our Web site is not, and
should not be deemed to be, a part of this prospectus.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision.
WE HAVE A SHORT OPERATING HISTORY, HAVE INCURRED NET LOSSES SINCE OUR INCEPTION,
AND EXPECT FUTURE LOSSES
We started our business in 1993 and began offering Internet access
services in 1994. We have incurred operating losses in every year of our
existence. We incurred net losses of $2.3 million for the year ended December
31, 1996, $4.2 million for the year ended December 31, 1997, $10.7 million for
year ended December 31, 1998, and $24.9 million for the year ended December 31,
1999. In the first quarter of 2000, we incurred a net loss of $7.4 million. As
of March 31, 2000, we have an accumulated deficit of $50.0 million. We may never
be profitable.
In 1998, a proposed merger transaction with Internet Communications
Corporation and related financing transactions were terminated. On March 17,
2000 we again reached an agreement to acquire Internet Communications
Corporation. However, claims by third parties unrelated to Internet
Communications Corporation allegedly arising from the terminated 1998 merger
remain outstanding. We have not agreed that we are responsible for these claims
and have consistently disputed their validity. As a result, we recorded costs,
expenses, and related fees of approximately $6.1 million. Of this amount,
approximately $4.2 million relates to warrants that we issued. Although we are
attempting to agree on a resolution of these disputes that is satisfactory to
all parties, we cannot assure that we will be able to reach an agreement with
all parties. We do not currently have the ability to pay all of these expenses.
IF WE ARE UNABLE TO RAISE ADDITIONAL FUNDS, WE WILL NOT BE ABLE TO MAINTAIN OUR
CURRENT LEVEL OF OPERATIONS OR PURSUE GROWTH OPPORTUNITIES
We intend to expand or open new access sites or make other capital
investments as dictated by customer demand and strategic considerations. To open
new dial-up access sites, known in our industry as points of presence or POPs,
we must spend significant amounts of money for new equipment as well as for
leased telecommunications facilities and advertising. In addition, to expand our
customer base nationwide, we will have to spend significant amounts of money on
additional equipment to maintain the high speed and reliability of our Internet
access services. We may also need to spend significant amounts of cash to:
o fund growth, operating losses, and increased expenses;
o implement our acquisition strategy;
o take advantage of unanticipated opportunities, such as major
strategic alliances or other special marketing opportunities,
acquisitions of complementary businesses or assets, or the
development of new products; and
o respond to unanticipated developments or competitive
pressures.
We will require additional funds through equity, debt, or other external
financing in order to fund our current operations and to achieve our business
plan. We cannot assure that any additional capital resources will be available
to us, or, if available, will be on terms that will be acceptable to us. Any
additional equity financing will dilute the equity interests of existing
security holders. If adequate funds are not available or are not available on
acceptable terms, our ability to execute our business plan and our business
could be materially and adversely affected.
WE FACE INTENSE COMPETITION, AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY, WE MAY
LOSE MARKET SHARE OR BE FORCED TO REDUCE PRICES
We operate in the Internet services market, which is extremely
competitive. Our current and prospective competitors include many large
companies that have substantially greater market presence, financial, technical,
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marketing, and other resources than we have. We compete directly or indirectly
with the following categories of companies:
o established online services, such as America Online, the
Microsoft Network, CompuServe, and Prodigy;
o local, regional, and national Internet service providers, such
as Earthlink, Network, Internet America, PSINet, and Verio;
o national telecommunications companies, such as AT&T, WorldCom,
Sprint, and GTE;
o regional Bell operating companies, such as BellSouth and SBC
Communications;
o computer hardware and software companies, such as
International Business Machines and Microsoft; and
o online cable services, such as At Home and Roadrunner.
Our competition is likely to increase. We believe this will probably happen as
large diversified telecommunications and media companies acquire Internet
service providers and as Internet service providers consolidate into larger,
more competitive companies. Diversified competitors may bundle other services
and products with Internet connectivity services, potentially placing us at a
significant competitive disadvantage. In addition, competitors may charge less
than we do for Internet services, causing us to reduce or preventing us from
raising our fees. As a result, our business may suffer.
IF WE ARE UNABLE TO COMPETE IN THE LOCAL EXCHANGE AND LONG DISTANCE TELEPHONE
MARKET, OUR PROFITABILITY WILL BE ADVERSELY AFFECTED
In 1998, we entered the long distance telephone market. We will compete
directly with inter-exchange carriers and long distance carriers and other long
distance resellers and providers, including large carriers such as AT&T,
WorldCom, Sprint, and new entrants to the long distance market. Many of our
competitors are significantly larger and have substantially greater market
presence and financial, technical, operational, marketing, and other resources.
We will face stiff price competition and may not be able to compete.
Moreover, the local exchange telephone services market in most states
was only recently opened to competition due to the passage of the 1996
Telecommunications Act and related regulatory rulings. Numerous operating
complexities are associated with providing these services. We will be required
to develop new products, services, and systems and will need to develop new
marketing initiatives to sell these services. Our inability to overcome any of
these operating complexities could have a material adverse effect on us.
IF WE FAIL TO KEEP PACE WITH TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY
STANDARDS, WE MAY LOSE CUSTOMERS
The Internet services market is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs, and frequent
new service and product introductions. Our future success depends, in part, on
our ability to:
o use leading technologies to develop our technical expertise;
o enhance our existing services; and
o develop new services that meet changing customer needs on a
timely and cost-effective basis.
In particular, we must provide customers with the appropriate products,
services, and guidance to best take advantage of the rapidly evolving Internet.
Our failure to respond in a timely and effective manner to new and
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evolving technologies could have a negative impact on our business. Our ability
to compete will also depend upon the continued compatibility of our services
with products offered by various vendors. Although we intend to support emerging
standards in the market for Internet access, industry standards may not be
established. Moreover, if industry standards are established, we may not be able
to conform to these new standards in a timely fashion. Our competitors may
develop services and technologies that will render our services or technology
noncompetitive or obsolete.
We are also at risk to fundamental changes in the way customers access
the Internet. Currently, most customers access Internet services through
computers connected by telephone lines. However, several companies have
developed cable television modems and other "broadband technologies" that
transmit data at substantially faster speeds than the modems that our customers
and we use. We must develop new technology or modify our existing technology to
accommodate new and faster sources of Internet access, including cable
television modems, screen-based telephones, wireless products, televisions, and
other consumer electronic devices. We may not succeed in adapting our Internet
access business to new and faster access devices.
ANY DECLINE IN OUR CUSTOMER RETENTION LEVELS OR OUR PRICES WILL ADVERSELY AFFECT
REVENUES AND PROFITABILITY
Our new customer acquisition costs are substantial relative to the
monthly fees we charge. Accordingly, our long-term success largely depends on
our retention of existing customers. While we continue to invest significant
resources in our infrastructure and technical and customer support capabilities,
it is relatively easy for Internet users to switch to competing providers.
Consequently, our investments may not help customer retention. Any significant
loss of customers will substantially decrease our revenue and cause our business
to suffer.
As a result of competitive pricing pressures in the market for Internet
services, we reduced the prices we charge our Internet customers during 1995,
1997, and 1998. We expect that continued price pressures may cause us to reduce
prices further in order to remain competitive, and we expect that such further
price reductions could adversely effect our results of operations, unless we can
lower our costs commensurate with such price decreases.
IF WE FAIL TO EFFECTIVELY MANAGE OUR GROWTH, THE QUALITY OF OUR SERVICE WILL
DECLINE AND WE WILL LOSE CUSTOMERS
Our rapid growth has and will place a significant strain on our
managerial, operational, financial, and information systems resources. To manage
our growth, we must continue to implement and improve these systems and attract,
train, manage, and retain qualified employees. These demands will require us to
add new management personnel and develop new expertise. In order to successfully
integrate newly acquired assets and continue to implement a nationwide strategy
and network, we must:
o closely monitor service quality, particularly through third
party POPs;
o acquire and install necessary equipment and telecommunications
facilities;
o create and implement marketing strategies in new and existing
markets;
o employ qualified personnel to provide technical and marketing
support for new sites; and
o continue to expand our managerial, operational, and financial
resources to support expansion.
Although we are taking steps to manage our growth effectively, we may not
succeed. If we are unable to manage our growth, our ability to maintain and
increase our customer base will be impaired and our business will suffer.
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IF WE FAIL TO INTEGRATE RESOURCES ACQUIRED THROUGH ACQUISITIONS, WE WILL LOSE
CUSTOMERS AND OUR LIQUIDITY, CAPITAL RESOURCES, AND PROFITABILITY WILL BE
ADVERSELY AFFECTED
Since January 1999, we have acquired the stock or assets of 17
companies and may continue to acquire other companies in the future. As part of
our long-term business strategy, we continually evaluate strategic acquisitions
of businesses and customer accounts. Acquisitions often involve a number of
special risks, including the following:
o we may experience difficulty integrating acquired operations
and personnel;
o we may be unable to retain acquired customers;
o the acquisition may disrupt our ongoing business;
o we may not be able to successfully incorporate acquired
technology and rights into our service offerings and maintain
uniform standards, controls, procedures, and policies;
o the businesses we acquire may fail to achieve the revenues and
earnings we anticipated;
o we may ultimately be liable for contingent and other
liabilities, not previously disclosed to us, of the companies
that we acquire; and
o our resources may be diverted in asserting and defending our
legal rights.
We may not successfully overcome problems encountered in connection with past
and future acquisitions. In addition, acquisitions could materially adversely
affect our operating results by:
o causing us to incur additional debt;
o increasing amortization expenses related to goodwill and other
intangible assets; and
o diluting your ownership interest.
Any of these factors could have a material adverse effect on our business.
IF WE ARE UNABLE TO OBTAIN SUFFICIENT NETWORK CAPACITY FROM OUR INTERNAL AND
LEASED NETWORK, OUR ABILITY TO GROW WILL BE SEVERELY CURTAILED
Our success depends, in part, on the capacity, reliability, and
security of our network. Our network includes computers, servers, routers,
modems, broadband fiber systems, access to third party broadband systems, and
other related hardware and software. Network capacity constraints have occurred
in the past and may occur in the future, in connection with:
o particular dial-up POPs affecting only customers attempting to
use that particular point of presence; and
o system wide services, such as e-mail and news services, which
can affect all customers.
Capacity constraints result in slowdowns, delays, or inaccessibility when
customers try to use a particular service. Poor network performance could cause
customers to terminate their service with us. To reduce the probability of such
problems, we will be required to expand and improve our network. Such expansion
and improvement will be very costly and time consuming. We may not be able to
expand or adapt our network to meet additional demand or changing customer
requirements on a timely basis or at a commercially reasonable cost.
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In order to provide Internet access and other online services to our
customers, we lease access lines from multiple national telecommunications
service providers. We are dependent upon these providers of data communications
facilities. In addition, we have a wholesale usage agreement with PSINet, which
allows us to provide dial-up access to our customers through PSINet's POPs
throughout the United States. We also have other agreements with service
providers on whom we rely to deliver our product and service offerings.
Moreover, PSINet provides network access to some of our competitors. PSINet
could choose to grant these competitors preferential network access, potentially
limiting our customers' ability to access the Internet. Even without such
preferential treatment, increased usage of PSINet's POPs by other Internet
service providers and online service providers may negatively affect access
system performance.
SYSTEM FAILURES CAUSED BY NATURAL DISASTERS COULD INTERRUPT OUR SERVICE AND
ADVERSELY AFFECT OUR REVENUES
We must protect our infrastructure against fire, earthquakes, power
loss, telecommunications failure, computer viruses, security breaches, and
similar events. We do not currently maintain a redundant or backup network hub
for all of our customers. Because we lease our lines from telecommunications
companies and regional Bell operating companies, we are dependent upon these
companies for physical repair and maintenance of the leased lines. We maintain
multiple carrier agreements to reduce the risk of loss of operations from
damage, power failures, telecommunications failures, and similar events.
However, the occurrence of a natural disaster or other unanticipated problems at
our network operations center or any of our POPs may cause interruptions in the
services we provide. In addition, failure of our telecommunications providers to
provide the data communications capacity we require as a result of a natural
disaster, operational disruption, or for any other reason could cause
interruptions in the services we provide. Any damage or failure that causes
interruptions in our operations could have a material adverse effect on us.
OUR NETWORK IS SUBJECT TO SECURITY RISKS AND INAPPROPRIATE USE BY INTERNET USERS
THAT COULD INTERRUPT OUR SERVICE AND CAUSE A DECLINE IN OUR PROFITABILITY
The future success of our business will depend on the security of our
network and the networks of third parties over which we have no control. Despite
implementation of security measures, we remain vulnerable to computer viruses,
sabotage, break-ins, and similar disruptive problems caused by customers or
other Internet users. Any breach of our network security or other inappropriate
use of our network, such as the sending of excessive volumes of unsolicited bulk
e-mail or "spam," could lead to interruptions, delays, or cessation of services
to our customers. Our customers, in turn, could terminate their service or
assert claims against us. Third parties could also potentially jeopardize the
security of confidential information stored in our computer systems or our
customers' computer systems by their inappropriate use of the Internet, which
could cause losses to our customers or us or deter potential customers from
subscribing to our services. Inappropriate use of the Internet includes
attempting to gain unauthorized access to information or systems, commonly known
as "cracking" or "hacking." Although we intend to continue to implement security
measures, "hackers" have circumvented such measures in the past, and others may
be able to circumvent our security measures or the security measures of our
third-party network providers in the future.
To fix problems caused by computer viruses or other inappropriate uses
or security breaches, we may have to interrupt, delay, or cease service to our
customers, which could have a material adverse effect on our business. In
addition, we expect that our customers will increasingly use the Internet for
commercial transactions in the future. Any network malfunction or security
breach could cause these transactions to be delayed, not completed, or completed
with compromised security. As a result, customers or others may assert claims of
liability against us. Further, until more comprehensive security technologies
are developed, the security and privacy concerns of existing and potential
customers may inhibit the growth of the Internet service industry in general and
our customer base and revenue in particular.
IF WE ARE UNABLE TO DELIVER OUR SERVICES VIA THIRD PARTY CARRIERS AND OTHER
SUPPLIERS, WE COULD EXPERIENCE SERVICE DELAYS AND INCREASED COSTS IN EXPANDING
OUR NETWORK
We rely on traditional telecommunications carriers to transmit our
traffic over local and long distance networks. These networks may experience
disruptions and capacity constraints that are not easily remedied. We
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may have no means of replacing these services. In addition, local phone service
is sometimes available only from one company. The benefits of competition and
alternative sources of supply are not present in these markets.
We also depend on certain suppliers of hardware and software
components. We acquire a majority of our networking service components,
including terminal servers and high-performance routers, from Cisco Systems,
Inc., Sun Microsystems, Inc., and Lucent Technologies, Inc. The expansion of our
network places a significant demand on our suppliers, some of which have limited
production capacity. In the past, we have experienced delays in delivery of new
telephone lines, modems, terminal servers, and other equipment. If delays are
severe, all incoming modem lines may become full during peak times, resulting in
busy signals for customers who are trying to connect to RMI.NET. If our
suppliers cannot meet increased demand and we are not able to develop
alternative sources of supply, we could experience delays and increased costs in
expanding our network, difficulty in providing our services, and the loss of
dissatisfied customers.
TO PROTECT OUR PROPRIETARY RIGHTS OR TO AVOID CLAIMS THAT WE INFRINGE THE
PROPRIETARY RIGHTS OF OTHERS, WE MAY BE FORCED TO INCUR SUBSTANTIAL COSTS AND TO
DIVERT VALUABLE MANAGERIAL RESOURCES AWAY FROM OUR BUSINESS OPERATIONS
Our success is dependent in part on our technology and other
proprietary rights. To protect our rights, we rely on a combination of
copyright, trademark, patent and trade secret laws, and contractual
restrictions. We cannot be sure that these steps will be adequate to prevent
misappropriation or infringement of our intellectual property. Nor can we be
sure that competitors will not independently develop technologies that are
substantially equivalent or superior to our proprietary property and technology.
In our industry, competitors often assert intellectual property claims
against one another. The success of our business depends on our ability to
assert and defend our intellectual property rights. Future litigation may have
an adverse impact on our financial condition. These claims could result in
substantial costs and diversion of resources, even if the claim is ultimately
decided in our favor. If a claim is asserted alleging that we infringed the
proprietary technology or information of a third party, we may be required to
seek licenses for such intellectual property. We cannot be sure that such
licenses would be offered or obtained on commercially reasonable terms, if at
all. The failure to obtain the necessary licenses or other rights could have a
material adverse affect on our business.
MR. HANSON HAS A CONTROLLING INTEREST IN RMI.NET, INC. WHICH MAY PREVENT YOU
FROM REALIZING A PREMIUM RETURN ON YOUR INVESTMENT
Our CEO, President, and Chairman of the Board of Directors, Douglas
Hanson has a controlling interest in RMI.NET, Inc. through his direct ownership
of common stock, ability to exercise outstanding options, and voting rights
agreements. As a result, Mr. Hanson has voting control of RMI.NET, Inc. and can
influence all matters that require stockholder approval. Mr. Hanson may
designate the members of our Board of Directors and can decide our operations
and business strategy. You may disagree with Mr. Hanson's management decisions.
As a controlling stockholder, Mr. Hanson also has the power to approve
or reject significant corporate matters, such as mergers, acquisitions, and
other change-in-control transactions. Mr. Hanson's controlling interest could
make it more difficult for a third party to acquire us, even if the acquisition
would be beneficial to you. You may not realize the premium return that
stockholders may realize in conjunction with corporate takeovers.
FUTURE ISSUANCE OF OUR COMMON STOCK PURSUANT TO STOCK OPTION PLANS AND EXERCISE
OF WARRANTS WILL DILUTE YOUR OWNERSHIP INTEREST, AND THE SALE OF SUCH SHARES MAY
NEGATIVELY AFFECT OUR STOCK PRICE
As of July 18, 2000, we have approximately 21,820,016 shares of common
stock outstanding, and have reserved approximately 6,974,000 additional shares
for issuance upon exercise of warrants and stock options, various anti-dilution
provisions contained in the warrants and stock options, and prior acquisitions.
If our stockholders sell substantial amounts of our common stock in the public
market, the market price of our common stock and our publicly traded warrants
could fall. Such sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a price we deem appropriate. We
have issued and plan to issue additional convertible equity and debt securities
in the future. If these securities are exercised or converted, you may
experience significant dilution in the market value of your stock. Our stock
price is highly volatile.
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OUR OUTSTANDING CLASS B WARRANTS COULD RESULT IN SUBSTANTIAL DILUTION OF YOUR
INVESTMENT, A DETRIMENTAL EFFECT ON OUR LIQUIDITY AND ABILITY TO RAISE
ADDITIONAL CAPITAL, AND A SIGNIFICANT DECLINE IN THE VALUE OF OUR COMMON STOCK
In our December 1999 private placement, we sold the following
securities to two institutional investors, Advantage Fund II Ltd. and Koch
Investment Group Limited, for aggregate consideration of $10 million:
o 761,610 shares of common stock;
o Class A Warrants to purchase 182,786 shares of common stock;
and
o Class B Warrants to purchase a potentially unlimited number of
shares of common stock.
The outstanding Class B Warrants carry certain risks, including the potential
for:
o substantial dilution of your investment in RMI.NET;
o a detrimental effect on our ability to raise additional funds;
and
o a decline in the market value of our common stock as a result
of the exercise of the Class B Warrants and subsequent sales
of the common stock.
Each of these risks is discussed in greater detail below.
IF THE MARKET VALUE OF OUR COMMON STOCK DECLINES, WE MAY ISSUE A SUBSTANTIAL
AMOUNT OF COMMON STOCK UPON EXERCISE OF CLASS B WARRANTS AND YOU WILL EXPERIENCE
IMMEDIATE AND SUBSTANTIAL DILUTION
The number of shares that we may issue to holders of RMI.NET's Class B
Warrants is based on the market price of our common stock from May 2000 through
November 2002. In effect, the holders of the Class B Warrants have the
opportunity to profit from a rise in the market price of our common stock, if
any, thereby reducing the risk of loss on their initial investment resulting
from a decline in our stock price. If the market price of our common stock
decreases, we may issue a greater number of shares upon exercise of the Class B
Warrants. There is theoretically no limit on the number of shares of common
stock that we may be required to issue upon exercise of the Class B Warrants.
Your percentage ownership of our common stock could be diluted substantially.
Moreover, because the exercise price of the Class B Warrants is only $0.01 per
share, we will not receive material cash proceeds from the exercise of the Class
B Warrants.
The following chart sets forth the maximum number of shares of common
stock we would issue upon full exercise of the Class B Warrants, assuming that:
o the market price of the common stock decreases to 100%, 75%,
50%, and 25% of the closing price of our common stock on June
7, 2000 ($5.00 per share) at any time over the next two and
one-half years, and stays at that level through November 20,
2002; and
o the institutional investors do not sell any of their common
stock until after November 20, 2002.
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<PAGE> 12
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES ISSUABLE UPON
EXERCISE OF CLASS B WARRANTS AT $0.01 PER
SHARE PERCENTAGE OF OUTSTANDING
MARKET PRICE PER SHARE (THROUGH NOVEMBER 2002) SHARES (1)
------------------------------ ------------------------------------------- ---------------------------
<S> <C> <C>
$5.00 - 100% of closing
price on 6/7/2000 1,629,104 7.0%
$3.75 - 75% of closing price
on 6/7/2000 2,426,009 10.1%
$2.50 - 50% of closing price
on 6/7/2000 4,019,818 15.6%
$1.25 - 25% of closing price
on 6/7/2000 8,801,246 28.9%
</TABLE>
----------
(1) Assumes that all shares to be issued upon exercise of Class B
Warrants are outstanding as of July 18, 2000.
Sales of common stock by holders of Class B Warrants prior to November 2002 will
reduce the number of shares issuable upon exercise of the Class B Warrants.
THE EXISTENCE OF OUR CLASS B WARRANTS MAY HINDER OUR ABILITY TO RAISE ADDITIONAL
CAPITAL
Because of the potential for dilution, as outlined above, we may find
it more difficult to raise additional equity capital while the Class B Warrants
are outstanding. Sources of equity capital may be reluctant to provide needed
operating capital, which could have an adverse affect on our ability to finance
growth opportunities and on our liquidity.
IF INSTITUTIONAL INVESTORS SELL LARGE VOLUMES OF THEIR COMMON STOCK WITHIN A
RELATIVELY SHORT PERIOD OF TIME, INCLUDING SHARES TO BE ISSUED UPON EXERCISE OF
THEIR CLASS B WARRANTS, THE VALUE OF OUR COMMON STOCK MAY DECLINE
If the institutional investors sell large volumes of their common stock
within a relatively short period of time, the market price of our common stock
may decrease and allow the institutional investors to convert their Class B
Warrants into a greater amount of our common stock. Further sales of the common
stock issued upon exercise of the Class B Warrants could cause even greater
declines in the price of our common stock. Although holders of the Class B
Warrants are restricted in their ability to engage in short sales and similar
transactions, the downward pressure on the market price caused by exercise of
Class B Warrants and sale of the underlying common stock could encourage short
sales by other investors and further undermine the value of our common stock.
IF THE NUMBER OF SHARES ISSUABLE UPON EXERCISE OF THE CLASS B WARRANTS EXCEEDS
20% OF THE NUMBER OF SHARES OUTSTANDING BEFORE THE DECEMBER 1999 PRIVATE
PLACEMENT, WE MAY BE REQUIRED TO SEEK STOCKHOLDER APPROVAL OF THE CLASS B
WARRANT SHARES
Under the rules of the Nasdaq Stock Market, we are required to obtain
stockholder approval for the issuance of common stock upon exercise of the Class
B Warrants if the number of shares issuable upon exercise of the Class B
Warrants equals or exceeds 20% of the number of shares of common stock
outstanding before the Class B Warrants were issued. On the date the Class B
Warrants were issued, we had 18,865,448 shares of common stock outstanding.
Thus, we will be able to issue 3,773,089 shares upon exercise of Class B
Warrants without obtaining stockholder approval.
However, the terms of the Class B Warrants are structured so that we
will comply with Nasdaq's 20% limitation even if we are unable to obtain
stockholder approval. If the market price of our common stock declines
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<PAGE> 13
and we would need to otherwise issue common stock in excess of the Nasdaq 20%
limitation, we would then have the option of either:
o seeking stockholder ratification of shares to be issued upon
exercise of the Class B Warrants before issuing the underlying
common stock; or
o instead of issuing the common stock, pay a redemption fee
equal to 120% of the average market value of the unissued
common stock over a five-day period immediately preceding the
holder's request for redemption.
Redemption of the underlying common stock that cannot be issued due to the
Nasdaq limitation at a 20% premium could severely diminish our working capital
and harm our ability to raise additional capital. Furthermore, if we are unable
to obtain stockholder approval and we are deemed to have issued 20% or more of
our outstanding common stock in connection with the exercise of Class B
Warrants, we may be required to delist our shares from the Nasdaq National
Market.
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY, WHICH COULD LEAD TO
LOSSES FOR INDIVIDUAL INVESTORS AND COULD DAMAGE OUR REPUTATION AND LEAD TO
COSTLY AND TIME CONSUMING SECURITIES CLASS ACTION LITIGATION
Our financial results may fluctuate significantly because of several
factors, many of which are beyond our control. These factors include:
o costs associated with gaining and retaining customers and
capital expenditures for upgrading our systems and
infrastructure;
o timing and market acceptance of new and upgraded Internet
service introductions, technologies, and services by us and
our competitors;
o loss of customers and seasonal fluctuations in demand for our
services;
o downward pressure on prices due to increased competition;
o changes in our operating expenses, including
telecommunications costs; and
o the effect of potential acquisitions.
Historically, our common stock and publicly traded warrants have traded at
volatile prices. We believe that the market prices will continue to be subject
to significant fluctuations due to various factors and events that may or may
not be related to our performance. If the market value of our common stock
decreased substantially, we could be delisted from the Nasdaq National Market.
Consequently, you could find it difficult or impossible to sell your stock or to
determine the value of your stock. In addition, the stock market has from time
to time experienced significant price and volume fluctuations, which have
particularly affected the market prices of the stocks of Internet-sector
companies and which may be unrelated to the operating performance of such
companies. Furthermore, our operating results and prospects from time to time
may be below the expectations of public market analysts and investors. Any such
event could result in a material decline in the price of your stock.
In the past, there have been class action lawsuits filed against
companies after periods of fluctuations in the market price of their securities.
If we were subject to this type of litigation, it would be a strain on our
personnel and financial resources, and divert management's attention from
running our company. Litigation could also negatively affect our public image
and reputation.
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<PAGE> 14
WE HAVE NO INTENTION TO PAY DIVIDENDS
We have never paid any cash dividends on our common stock. We currently
intend to retain all future earnings, if any, for use in our business and do not
expect to pay any dividends in the foreseeable future.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION, WHICH COULD DECREASE
OUR REVENUES AND INCREASE OUR COSTS
We provide Internet services through data transmissions over public
telephone lines and cable networks. The Federal Communications Commission
governs these transmissions and establishes charges and terms for
communications. As an Internet access provider, we are not subject to direct
regulation by the Federal Communications Commission or any other governmental
agency, other than the regulations applicable to businesses generally. However,
we could become subject to the Federal Communications Commission or other
regulatory agency regulation especially as Internet services and
telecommunication services converge. Changes in the regulatory environment could
decrease our revenue and increase our costs. For example, the Federal
Communications Commission may decide that Internet-based telephone services
should be subject to pay carrier access charges on the same basis as traditional
telecommunications companies.
The Federal Telecommunications Act of 1996 imposed fines on Internet
service providers, in part, for providing access to indecent and obscene
services. The United States Supreme Court found this part of the Federal
Telecommunications Act of 1996 unconstitutional in June 1997. However, on March
12, 1998, the Senate Commerce Committee approved two bills that attempt to
reconstruct these unconstitutional provisions. Although it is too early to
determine the ultimate course of these bills and to evaluate the
constitutionality of the proposals, these provisions, if enacted and upheld,
could expose ISPs such as RMI.NET to liabilities.
Additional laws and regulations may be adopted with respect to the
Internet, covering issues such as Universal Service Fund support payments,
content, user privacy, pricing, libel, obscene material, indecency, gambling,
intellectual property protection and infringement, technology export, and other
controls. Other federal Internet-related legislation has been introduced which
may limit commerce and discourse on the Internet. The Federal Communications
Commission currently is considering:
o whether Internet service providers are regulated
telecommunications providers;
o whether Internet service providers are required to contribute
to the Universal Service Fund; and
o how various companies in the Internet and telecommunications
industries should be classified.
IF WE ARE UNABLE TO RETAIN KEY EXECUTIVES, OUR GROWTH POTENTIAL AND OPERATING
RESULTS WILL BE ADVERSELY AFFECTED
Our success greatly depends on our ability to attract and retain key
technical, sales, marketing, information systems, financial, and executive
personnel. We are especially dependent on the continued services of our senior
management team, particularly Douglas H. Hanson, our Chief Executive Officer,
President, and Chairman of the Board of Directors. The loss of Mr. Hanson or
other senior managers could have a materially detrimental effect on our growth
potential and operating results. All members of our senior management team can
terminate their employment at any time. We do not maintain key person life
insurance on any of our personnel. If we fail to attract, hire, or retain the
necessary personnel, or if we lose the services of any member of our senior
management team, our business could be adversely affected.
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<PAGE> 15
ABOUT RMI.NET
RMI.NET's mission is to become a premier nationwide e-Commerce/Web
Solution and connectivity services provider, distinguished by a state-of-the-art
network and high-quality customer service and support. Key elements to our
business strategy include the following.
PROVIDE A BROAD ARRAY OF E-COMMERCE/WEB SOLUTIONS AND CONNECTIVITY
SERVICES TO SMALL AND MID-SIZE BUSINESSES. We have built a portfolio of
products, services, and skill sets to develop and deliver comprehensive Internet
solutions to small and mid-size businesses. Based on our belief that a growing
number of businesses and consumers will demand that one company provide all of
their e-Commerce/Web Solution and connectivity needs, we plan to continue to add
products and services to our portfolio. We refer to our strategy as a "One
Point-of-Contact" solution delivery model. We believe that our model ensures:
o high-performance, cost-effective network planning, design, and
implementation;
o maintenance of a single point of responsibility and billing; and
o ongoing customer relationships as a technology and business
partner for connectivity and e-commerce solution.
PROVIDE SUPERIOR CUSTOMER SERVICE AND TECHNICAL SUPPORT. Our customer
service philosophy is to understand our customers' needs so well that we develop
and deliver a very high level of value-added services and after-sales support.
We believe that highly differentiated customer service and technical support is
a key competitive asset in the industry, and the ISP sector in particular.
Because the Internet is an evolving and complex medium, customers require
significant technical support. Consequently, we have developed a comprehensive
strategy to attain maximum customer satisfaction and loyalty. This strategy
consists of the following elements:
o maintaining the optimum number of qualified service and technical
support personnel through proactive recruitment, retention, and
training programs;
o utilizing our extranet to provide real-time, interactive customer
service;
o developing an online billing system, enabling customer-controlled
account customization and analysis; and
o improving our service delivery standards and guarantees.
We continually monitor the efficiency of our customer service through
comprehensive customer satisfaction surveys and analysis. Approximately 350
employees, consisting of engineers, technicians, project managers, account
managers, and customer service representatives, are responsible for supporting
our customers nationwide.
MAXIMIZE NETWORK UTILIZATION. Through our world-class network and
partnership agreements with third-party providers, we provide Internet access to
100% of the strategic market areas in the United States. We plan to continue to
selectively add data centers and access points where we can add value for the
customers. Historically, the ISP industry has been divided between ISPs focused
on business customers and those focused on residential dial-up customers. Our
business strategy is to maximize network utilization 24 hours a day by targeting
daytime business users and marketing to fill evening use by residential users.
In addition, we operate a national fully-meshed Internet backbone, linking eight
U.S. cities - Atlanta, Chicago, Dallas, Los Angeles, McLean (Virginia), New
York, San Francisco, and Washington, D.C. and offering service from ten cities -
Bloomington (Illinois), Chicago, Kansas City, Las Vegas, Los Angeles, Phoenix,
San Francisco, Seattle, Tulsa, and Tucson.
SELECTIVELY TARGET KEY CITIES TO EXPAND NATIONWIDE. We plan to expand
our sales efforts nationally by aggressively targeting areas where there are
favorable demographics and a large concentration of businesses. We plan to
emphasize markets where we have existing facilities and to actively market and
sell business connectivity services and e-Commerce/Web Solution applications.
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<PAGE> 16
TAKE ADVANTAGE OF SIGNIFICANT CONSOLIDATION AND ACQUISITION
OPPORTUNITIES. We believe that the Internet industry is undergoing structural
changes with an increasing use of the Internet for mission-critical
applications. These changes create demand for high-quality network operations,
customer service, and technical support. We also believe that there was
previously and may continue to be in the future a market opportunity to
consolidate Internet-based e-Commerce/Web Solution companies, and Internet
technologies. To exploit this previous opportunity, we acquired all of the
outstanding common stock or substantially all of the assets of 23 companies.
RMI.NET'S DIVISIONS AND SERVICES.
OVERVIEW. The following chart summarizes the services we offer through
our two divisions: e-Commerce/Web Solutions Division and Connectivity Services
Division.
<TABLE>
<CAPTION>
DIVISION SERVICES DESCRIPTION
----------------------------------- -------------------------- -----------------------------------------------
<S> <C> <C>
WEB SOLUTIONS DIVISION Web Site Production Design, development, and implementation of
customer Web sites
Web Site Hosting A customer's Web site is "hosted" on RMI's
servers and connected to the Internet via a
high-speed connection
WebZone(TM).com Portal constructed to provide multiple
services, including a proprietary search
engine with large database of reference
information, an audio feed, a stock quote
service, and wide range of high-value content
e-Sell(TM)/e-Commerce Turnkey solution for setting up an Internet
store or "shopping cart" application online
Web Site Marketing Design, development, and execution of
advertising and marketing strategies which
result in increased traffic and viewing of
customer Web sites
Traffic Builder Plus(TM) Unique Web site marketing program whereby
customer Web sites are marketed exclusively
to targeted Internet users
Web Training Various levels of Internet training for
customers, including basic access training
AdAdapt (TM) Web-based, hosted application software, which
provides interactive advertising delivery,
reporting, and automated advertising campaign
management for Internet Web sites.
Domain Hosting Domain hosting service provides customers a
place to register and maintain their domain
name.
Data Center/Co-Location Seven secure data centers operated nationwide
for co-locating and managing equipment for
customers(TM) who need large amounts of
bandwidth and prefer outsourcing the
operations
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
DIVISION SERVICES DESCRIPTION
----------------------------------- -------------------------- -----------------------------------------------
<S> <C> <C>
CONNECTIVITY SERVICES DIVISION Digital Subscriber Line Dedicated and frame-relay networks to carry
(DSL) voice and data for business and residential
customers
Dedicated Access Fractional T-1, T3, Metropolitan Area
Ethernet, or greater Internet access provided
to a customer's office
Dial-Up Service Nationwide Internet access for consumer and
small business customers using modems to dial
into RMI's network
Wireless Access Evolving technology allowing up to 100Mbps
wireless Internet access (currently available
only in the Denver, Tucson, and Phoenix metro
areas)
e-Phone Long distance telephone calling service using
low-cost IP Telephony technology
Traditional Long Distance Traditional long distance services
Service
Local Phone Services (CLEC) Traditional local exchange telephone service
on a resale or facilities-owned basis
throughout Colorado
</TABLE>
WEB SOLUTIONS DIVISION.
WEB SITE PRODUCTION. Web site production encompasses the design,
development, and implementation of customer Web sites. These sites may be public
domain sites or private sites, which are sometimes referred to as extranets or
intranets. The functionality of these sites will continue to evolve and require
a great deal of graphic design talent as well as high-end programming skills. We
have built a talent pool of such resources, which we will leverage to generate
high-margin revenues from this segment.
WEB SITE HOSTING. Web site hosting provides an ongoing revenue stream
from customers for whom we host a Web site on Web servers located in our data
center. All access made to these Web sites by the customer and the Internet
community as a whole is processed on our servers. The advantage to our customers
is high-speed, high availability access to sites by their targeted audiences.
WEBZONE(TM).com. A Web Portal constructed to provide multiple services,
including:
o a proprietary search engine linked to our large and rapidly
growing database of reference information on the World Wide Web;
o an audio feed;
o a stock quote service;
o on-line purchasing mechanism;
o news service; and
o additional content.
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<PAGE> 18
The search engine also contains certain features, including:
o Preview buttons - permit users to see a site's content without
waiting for a full download of the site's graphics;
o Fuzzy Links - provide visitors with a handy way to search for
related but perhaps not specifically targeted information; and
o Site Mapping - provides a simple and visual way to see a site's
structure.
Finally, the WebZone(TM) Portal also contains the ability to host numerous
banner advertisements, which we can offer to our customers as part of a Web
marketing package.
E-SELL(TM)/E-COMMERCE. We provide turnkey software package solutions
for e-Commerce. Small to medium-sized businesses can quickly implement online
store fronts to sell their products and services over the Internet, thereby
reaching customers that are not geographically accessible. Rather than simply
offering a Web site, our e-Commerce customers can act as a true Internet store,
providing:
o a dynamic, interactive shopping experience for the customer;
o secure credit card transactions;
o "behind the scenes" functionality, such as inventory management
and custom reporting; and
o fast, efficient, and low-cost implementation of a true,
database-driven Internet store.
Competing packages require the involvement of technical experts, consultants, or
developers to set up and configure a store. Because of these additional "soft
costs," implementation costs usually reach several times the basic cost of the
package and implementation time can be weeks or months. By contrast, an
e-SELL(TM) store can be up and running in hours. Furthermore, e-SELL(TM) is
scalable and expandable as a business grows, because it is based on an open
architecture - Microsoft Windows NT and BackOffice. While competing packages
often utilize proprietary programming languages or tools (many started out as
Macintosh or Unix products), e-SELL(TM) is an extension to the industry-standard
BackOffice platform, enabling easy customization. In addition, any
industry-standard database can be connected, furthering the ease of integration
with merchants' existing information systems.
WEB SITE MARKETING. Our sales and marketing department has developed
strategic advertising and search-result optimizing programs that are designed to
dramatically increase traffic and viewing of customer Web sites. We believe that
our Web site marketing program strongly compliments our other Web solution
products.
TRAFFIC BUILDER PLUS(TM). An exclusive Internet marketing program
through which customer Web sites are targeted exclusively to Internet users.
This service includes sophisticated search engine submission and management
techniques, cross-linking related Web sites, posting to relevant news groups,
and customizing banner ad campaigns. The pricing for this service varies
dramatically based on a customer's budget and desired results.
WEB TRAINING. We provide a training program available to all our
customers. Interested customers can schedule their employees at our
multiple-workstation, state-of-the-art training center located at our corporate
headquarters, for various levels of Internet training, ranging from basic access
training to advanced HTML programming. Customized, one-on-one training is also
available, either at our headquarters or at the customer's site.
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<PAGE> 19
DATA CENTER/CO-LOCATION. As more people use the Internet to shop for
products and services, the demands on shared server resources are increasing. We
offer businesses an alternative to shared server resources by co-locating their
servers in our data center. Our secure business data center provides redundant
connections to the Internet through our Tier 1 backbone, redundant power
supplies, video monitoring, tape backups, locking cabinets, and 24 by 7 network
monitoring, customer service and support, providing customers with a
cost-effective alternative to maintaining their own server.
CONNECTIVITY SERVICES DIVISION
DIGITAL SUBSCRIBER LINE (DSL). DSL services are provided to both
residential and commercial customers in over 50 major markets nationwide. These
connections also include a wide range of options, primarily related to the type
of DSL provided and bandwidth associated with the connection. We provide
Asymmetric DSL (ADSL), with speeds ranging from 128kbps to 1.5Mbps; Symmetric
DSL (SDSL), with speeds ranging from 192kbps to 1.5Mbps; and ISDN DSL (IDSL),
with speeds of 144kbps.
DEDICATED ACCESS SERVICE. Our dedicated access services are provided
primarily to commercial customers. Our wide range of connectivity options
tailored to the needs of the customer includes a private port or dedicated
modem, ISDN connections, frame-relay connections, T-1 (1.54 Mbps) connections,
and T3 (45 Mbps), or fractional T3 connections. This type of connectivity
ensures a dedicated connection and is generally used to connect local area
networks, wide area networks, or server applications to the Internet. A
dedicated connection requires a dedicated telecommunications facility, ranging
from an analog phone line, ISDN, frame-relay circuit, leased line T-1, or leased
line T3 and a router, and a device to convert digital signal to serial
interface, usually referred to as a CSU/DSU.
DIAL-UP SERVICE. We offer nationwide dial-up service with unlimited
usage, including high-speed modem access using V.90 technology and a
high-quality, high-availabilty connection due to the redundancy that has been
built into our network. Through third party partnerships, we provide dial-up
access to customers in over 230 metro locations nationwide.
INTERNET BACKBONE ACCESS. Since acquiring the assets of DataXchange
Network, Inc. in December 1998, we have further expanded our reach into the
national interconnects at MAE-East, MAE-West, a pending install at AADS-NAP in
Chicago, and scheduled installations at MAE-LA and MAE-Dallas. With these
locations and traffic peering agreements with some of today's largest providers,
RMI.NET is strongly positioned to provide its own fully independent Internet
backbone service.
TRADITIONAL LONG DISTANCE SERVICE. We have an agreement with Global
Crossing, permitting us to offer a full line of traditional long distance
services. We currently offer the following services:
o 1+ long distance, switched and dedicated;
o 1-800 service - switched and dedicated;
o pre-paid and standard calling cards;
o conference calling; and
o integrated voice response services.
LOCAL PHONE SERVICES (CLEC). We have been certified as a competitive
local exchange carrier or CLEC in the states of California, Colorado, Illinois,
Kansas, Maryland, Missouri, Nevada, New York, Ohio, Oregon, South Carolina,
Washington, and West Virginia.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference may
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. We intend the
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding our
expected financial position and operating results, our business strategy, our
17
<PAGE> 20
financing plans and the outcome of any contingencies are forward-looking
statements. These statements can sometimes be identified by our use of
forward-looking words such as "may," "believe," "plan," "will," "anticipate,"
"estimate," "expect," "intend" and other phrases of similar meaning. Known and
unknown risks, uncertainties and other factors could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.
Although we believe that our expectations that are expressed in these
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from our expectations, including the following:
o we may lose subscribers or fail to grow our customer base;
o we may not be able to sustain our current growth or to
successfully integrate new customers or assets obtained
through acquisitions;
o we may fail to compete with existing and new competitors;
o we may not adequately respond to technological developments
impacting the Internet;
o we may fail to implement proper security measures to protect
our network from inappropriate use, which could overload our
network's capacity and cause us to experience a major system
failure;
o we may issue a substantial number of shares of our common
stock upon exercise of Class B Warrants, especially if the
market value of our stock declines, thereby causing
significant dilution in the value of your investment;
o we may fail to settle outstanding litigation; and
o we may not be able to find needed financing.
This list is intended to identify some of the principal factors that could cause
actual results to differ materially from those described in the forward-looking
statements included elsewhere in this report. These factors are not intended to
represent a complete list of all risks and uncertainties inherent in our
business, and should be read in conjunction with the more detailed cautionary
statements included in this prospectus under the caption "Risk Factors."
USE OF PROCEEDS
We plan to use the net proceeds from the sale of securities for general
corporate purposes, including working capital, capital expenditures, and
possibly the repayment or refinancing of debt and call of outstanding warrants.
Each time we sell securities pursuant to this prospectus, we will provide a
prospectus supplement that will contain information about how we intend to use
the net proceeds from the securities sold.
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities, together with other securities or
separately, in one or more series. If we issue a series of debt securities
pursuant to this prospectus, an Indenture defining the terms of the particular
debt securities will be filed as an exhibit to the registration statement. The
debt securities may or may not be traded separately. We will also describe the
particular terms of each series of debt securities in a prospectus supplement,
including the following where applicable:
o the designation, the aggregate principal amount, and the
authorized denominations if other than $1,000 and integral
multiples of $1,000;
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<PAGE> 21
o the percentage of their principal amount at which the debt
securities will be issued;
o the date or dates on which the debt securities will mature;
o the rate or rates at which the debt securities will bear
interest, if any, or the method of determination of such rate
or rates;
o the date or dates from which such interest, if any, shall
accrue, the dates on which such interest, if any, will be
payable and the method of determining holders to whom any of
the interest shall be payable;
o the prices, if any, at which, and the dates at or after which,
we may or must repay, repurchase or redeem the debt
securities;
o any collateral or other assets that will serve as security for
the debt;
o the relative rank to all other secured or unsecured debt,
including any restrictions on our ability to issue additional
debt securities ranking senior to the applicable series of
debt;
o any conversion or exchange privileges;
o the designation and terms of any securities issuable upon
conversion of the debt securities;
o the terms and conditions under which the indenture and related
debt agreements may be modified;
o the events of default and requirement to notify the trustee of
a default;
o the identity of the depository and the trustee under the
indenture pursuant to which the debt securities are to be
issued;
o the exchanges, if any, on which the debt securities may be
listed; and
o any additional material covenants and terms included in the
indenture and related debt agreements.
DESCRIPTION OF PREFERRED STOCK
We may issue preferred stock, together with other securities or
separately, in one or more series. If we issue preferred stock pursuant to this
prospectus, a Certificate of Designation defining the terms of each series of
preferred stock will be filed as an exhibit to the registration statement. The
preferred stock will be evidenced by certificates, which may or may not be
traded separately. We will describe the particular terms of each series of
preferred stock in a prospectus supplement, including the following where
applicable:
o the designation, number of shares, and stated value per share;
o the amount of liquidation preference in the event of a
voluntary or involuntary liquidation, winding-up, or
dissolution of our company;
o the initial public offering price at which shares of preferred
stock will be sold;
o the dividend rate or rates, or method of determining the
dividend rate, including whether dividends will be cumulative
or non-cumulative;
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<PAGE> 22
o the dates on which dividends shall be payable, the date from
which dividends shall accrue, and the record dates for
determining the holders entitled to such dividends;
o the designation and terms of any securities issuable upon
conversion of the preferred stock;
o any mandatory or optional redemption and sinking fund
provisions;
o any voting rights;
o any conversion or exchange privileges;
o the exchanges on which the preferred stock may be listed; and
o any additional material terms of the preferred stock.
DESCRIPTION OF COMMON STOCK
The description of our common stock, $0.001 par value, is included in
our Registration Statement on Form 8-A, which was filed with the Securities and
Exchange Commission on August 14, 1996. We have incorporated our Registration
Statement on Form 8-A by reference. As of July 18, 2000, we have approximately
21,820,016 shares of common stock issued and outstanding.
DESCRIPTION OF WARRANTS
We may issue, together with other securities or separately, warrants to
purchase debt securities, preferred stock, or common stock. The warrants may be
issued in one or more series. If we issue warrants pursuant to this prospectus,
a form of warrant agreement will be filed as an exhibit to the registration
statement. The warrants will be evidenced by warrant certificates, which may or
may not be traded separately from the underlying securities. We will describe
the particular terms of the warrants in a prospectus supplement, including the
following where applicable:
o the principal amount of debt securities or the number of
shares of preferred stock or common stock, as the case may be,
purchasable upon exercise of the warrants along with the
relevant exercise price;
o the offering price of the warrants;
o the date on which the right to exercise the warrants shall
commence and the date on which such right shall expire;
o the designation and terms of the debt securities or preferred
stock, as the case may be, issuable upon exercise of the
warrants;
o the procedures and conditions relating to the exercise of the
warrants;
o a discussion of any material United States federal income tax
considerations applicable to the exercise of the warrants;
o the terms of any mandatory or optional call provisions;
o the price or prices at which the warrants may be redeemed;
20
<PAGE> 23
o antidilution provisions of the warrants, if any;
o the exchanges on which the warrants may be listed; and
o any other material terms of the warrants.
In general, holders of warrants will not have any of the rights of holders of
the debt securities, preferred stock or common stock, as the case may be, until
they exercise their warrants. In the case of warrants to purchase debt, holders
will not be entitled to payments of principal, premium, or interest, if any, on
the debt securities purchasable until they exercise their warrants. In the case
of warrants to purchase preferred stock and common stock, holders will not be
entitled to vote or to receive dividend payments until they exercise their
warrants.
PLAN OF DISTRIBUTION
We may offer the securities:
o directly to purchasers;
o to or through Ladenburg Thalmann & Co. Inc., or other
underwriters; or
o to dealers, agents, or institutional investors; or
o to any combination of the entities referred to above.
Regardless of the method used to distribute the securities, we will
provide a prospectus supplement that will disclose:
o the identity of any underwriters, dealers, or agents who
purchase our securities;
o the material terms of the distribution, including the specific
terms of the securities sold and the consideration received;
o the amount of any compensation, discounts, or commissions to
be received by the underwriters, dealers, agents,
institutional investors or other purchasers;
o the terms of any indemnification provisions, including
indemnification from liabilities under the federal securities
laws; and
o the nature of any transaction by an underwriter, dealer, or
agent during the offering that is intended to stabilize or
maintain the market price of the common stock.
LEGAL OPINIONS
Unless otherwise specified in the prospectus supplement accompanying
this prospectus, Christopher J. Melcher, Vice President and General Counsel of
RMI.NET, Inc., will provide an opinion for us regarding the validity of the
securities. As of July 18, 2000, Mr. Melcher beneficially owns 18,000 shares of
RMI.NET common stock.
21
<PAGE> 24
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule as of December 31, 1999 and 1998 and for each
of the two years in the period ended December 31, 1999 included in our Annual
Report on Form 10-K for the year ended December 31, 1999, as set forth in their
report, which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Baird, Kurtz and Dobson, independent accountants,
have audited our consolidated financial statements and schedule for the year
ended December 31, 1997 included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's and Baird, Kurtz & Dobson's reports, given on their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at www.sec.gov. You may also read and copy
any document we file at the SEC's Public Reference Rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. The Public Reference Room in
Washington, D.C. is located at 450 Fifth Street, N.W. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Rooms.
Our common stock is listed on the Nasdaq National Market. Reports,
proxy statements, and other information concerning RMI.NET can be reviewed at
the offices of Nasdaq Operations, 1735 "K" Street, N.W., Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934:
o Annual Report on Form 10-K for the year ended December 31,
1999;
o Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders;
o Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
o Current Reports on Form 8-K and amendments filed April 3, May
24, and July 7, 2000; and
o the description of our common stock contained in our
registration statement on Form 8-A, filed August 14, 1996.
We have also filed a registration statement on Form S-3 with the SEC under the
Securities Act of 1933. This prospectus does not contain all of the information
set forth in the registration statement. You should read the registration
statement for further information about our company and the common stock. You
may request a copy of these filings at no cost. Please direct your requests to:
Christopher J. Melcher
Vice President and General Counsel
RMI.NET, Inc.
999 Eighteenth Street, Suite 2201
Denver, Colorado 80202
(303) 672-0700
22
<PAGE> 25
You may also want to refer to our web site at www.rmi.net. However, our web site
is not a part of this prospectus.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. RMI.NET and the selling
stockholders are not making an offer of the common stock in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front page of those documents.
23
<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Profile of RMI.NET........................................................... 2
Risk Factors................................................................. 3
About RMI.NET................................................................ 13
Cautionary Note About Forward-Looking Statements............................. 17
Use of Proceeds.............................................................. 18
Description of Debt Securities............................................... 18
Description of Preferred Stock............................................... 19
Description of Common Stock.................................................. 20
Description of Warrants...................................................... 20
Plan of Distribution......................................................... 21
Legal Opinion................................................................ 21
Experts...................................................................... 22
Where You Can Find More Information.......................................... 22
</TABLE>
COMMON STOCK
$0.001 PAR VALUE
RMI.NET, INC.
PROSPECTUS
JULY ___, 2000
<PAGE> 27
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the SEC
registration fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC Registration Fee $ 7,920.00
Nasdaq Filing Fee 20,000.00
Rating Agency and Trustees' Fees 10,000.00
Printing and Engraving 10,000.00
Legal Fees and Expenses 25,000.00
Accounting Fees and Expenses 15,000.00
Miscellaneous 5,000.00
----------
TOTAL $92,920.00
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 8 of the Registrant's Certificate of Incorporation, as amended,
provides:
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as to liability (i) for any breach
of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for
violations of Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law hereafter is
amended to eliminate or limit further the liability of a director,
then, in addition to the elimination and limitation of liability
provided by the preceding sentence, the liability of each director
shall be eliminated or limited to the fullest extent provided or
permitted by the amended Delaware General Corporation Law. Any repeal
or modification of this Article 8 shall not adversely affect any right
or protection of a director under this Article 8 as in effect
immediately prior to such repeal or modification with respect to any
liability that would have accrued, but for this Article 8, prior to
such repeal or modification.
Section 5.1 of the Registrant's bylaws provides, in general, that the
Registrant shall, to the fullest extent permitted by the DGCL, as now or
hereafter in effect, indemnify any person who was or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether criminal, civil, administrative, or investigative (a "Proceeding"), by
reason of the fact that he is or was a director or officer of the Registrant,
or, by reason of the fact that such officer or director is or was serving at the
request of the Registrant as a director, office, employee, or agent of another
corporation, partnership, joint venture, trust, association, or other
enterprise, against all liability and loss suffered and expenses (including
attorneys' fees), judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement reasonably incurred by him in connection with such
Proceeding, including any Proceeding by or on behalf of the Registrant and will
advance all reasonable expenses incurred by or on behalf of any such person in
connection with any Proceeding, whether prior to or after final disposition of
such Proceeding. Section 5.8 of the bylaws also provides that the Registrant may
also indemnify and advance expenses to employees or agents who are not officers
or directors of the Registrant.
The Registrant has purchased a directors' and officers'
liability insurance contract that provides, within stated limits, reimbursement
either to a director or officer whose actions in his capacity result in
liability, or to the Registrant, in the event it has indemnified the director or
officer.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
the Registrant, the Registrant has been informed that in the opinion of the
II-1
<PAGE> 28
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. No dealer, salesman or any other
person has been authorized in connection with this Offering to give any
information or to make any representations other than those contained in this
prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Registrant. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such an offer or solicitation. Neither the delivery of this prospectus
nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the circumstances of the Registrant
or the facts herein set forth since the date hereof.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
1.01 Form of Underwriting Agreement ***
2.01 Agreement and Plan of Reorganization and Liquidation by and Among
Rocky Mountain Internet, Inc., DataXchange Network, Inc., and
Certain of the Shareholders of DataXchange Network, Inc., dated as
of December 8, 1998(10)
3.01 Amended and Restated Certificate of Incorporation(15)
3.02 Bylaws(1)
3.03 Certificate of Designations of Series B Convertible Preferred
Stock(13)
4.01 Form of Stock Certificate(1)
4.02 Warrant Agreement between Rocky Mountain Internet, Inc. and Douglas
H. Hanson dated October 1, 1997(5)
4.03 1996 Employees' Stock Option Plan(1)
4.04 1996 Non-Employee Directors' Stock Option Plan(1)
4.05 1997 Non-Qualified Stock Option Plan(4)
4.06 1997 Stock Option Plan(6)
4.06.1 First Amendment to Non-Qualified Stock Option Agreement pursuant to
the 1997 Stock Option Plan(13)
4.06.2 First Amendment to Incentive Stock Option Agreement pursuant to the
1997 Stock Option Plan(13)
4.07 1998 Employees' Stock Option Plan(10)
4.08 1998 Non-Employee Directors' Stock Option Plan(8)
4.09 Subscription Agreement, dated as of December 10, 1998, by and
between Rocky Mountain Internet, Inc. and Koch Industries,
Inc.(12)
4.10 Subscription Agreement, dated as of December 10, 1998, by and
between Rocky Mountain Internet, Inc. and Advantage Fund II
Ltd.(12)
4.11 Form of Common Stock Purchase Warrant issued to Koch Industries,
Inc., Advantage Fund II Ltd., Wharton Capital Partners Ltd., Leslie
Bines, and Neidiger Tucker Bruner Inc.(12)
4.12 Form of Registration Rights Agreement between Rocky Mountain
Internet, Inc. and (i) Koch Industries, Inc.; and (ii) Advantage
Fund II Ltd.(12)
4.13 Form of Registration Rights Agreement between Rocky Mountain
Internet, Inc. and (i) Wharton Capital Partners Ltd.; (ii) Leslie
Bines; and (iii) Neidiger Tucker Bruner Inc.(12)
4.14 Form of Subscription Agreement dated as of December 7, 1999(28)
4.15 Form of Class A Warrant (Annex I to Exhibit 4.14 Subscription
Agreement)(28)
4.16 Form of Class B Warrant (Annex II to Exhibit 4.14 Subscription
Agreement)(28)
4.17 Form of Registration Rights Agreement (Annex IV to Exhibit 4.14
Subscription Agreement)(28)
4.18 2000 Employees' Stock Option Plan(29)
4.19 Employees' Stock Purchase Plan(29)
4.20 Form of Registration Rights Agreement(30)
4.21 Form of Indenture ***
4.22 Certificate of Designation of Preferred Stock ***
4.23 Form of Warrant Agreement ***
5.01 Opinion and Consent of Christopher J. Melcher, Esq., as to legality
of securities being registered. ***
10.01 Agreement of Lease between Denver-Stellar Associates Limited
Partnership, Landlord and Rocky Mountain Internet, Inc., Tenant(2)
10.02 Sublease Agreement-February 26, 1997-1800 Glenarm, Denver, CO(3)
10.03 Carrier Services Switchless Agreement Between Frontier
Communications of the West, Inc. and Rocky Mountain Broadband,
Inc.**(12)
II-2
<PAGE> 29
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
10.04 Wholesale Usage Agreement Between PSINet Inc. and Rocky Mountain
Internet, Inc.**(12)
10.05 PacNet Reseller Agreement between PacNet Inc. and Rocky Mountain
Internet, Inc.**(12)
10.06 Operating Agreement of The Mountain Area EXchange LLC(12)
10.07 Software License and Consulting Services Agreement Between Rocky
Mountain Internet, Inc. and Novazen Inc.**(12)
10.08 Merger Agreement among Rocky Mountain Internet, Inc., RMI-INI,
Internet Now, Hutchinson Persons, Leslie Kelly, Taufik, Islam,
Susan Coupal, and Gary Kim, dated November 20, 1998(9)
10.09 Asset Purchase Agreement between Rocky Mountain Internet, Inc. and
Unicom Communications Corporation dated as of November 24, 1998(9)
10.10 Asset Purchase Agreement among Rocky Mountain Internet, Inc.,
Stonehenge Business Systems Corporation, Todd Keener, and Danette
Keener, dated as of November 30, 1998(9)
10.11 Commitment letter dated December 10, 1998 from Advantage Fund Ltd.
to Rocky Mountain Internet, Inc.(12)
10.12 Agreement and Plan of Merger by and between Rocky Mountain
Internet, Inc. and August 5th Corporation, d/b/a Dave's World dated
February 2, 1999(14)
10.13 Asset Purchase Agreement by and among Rocky Mountain Internet,
Inc., ImageWare Technologies, L.L.C., and Communication Network
Services, L.L.C. dated February 5, 1999(14)
10.14 Agreement and Plan of Merger by and among Rocky Mountain Internet,
Inc. d/b/a/ RMI.NET, Inc. and IdealDial Corporation.(16)
10.15 Agreement and Plan of Merger by and among Rocky Mountain Internet,
Inc. d/b/a/ RMI.NET, Inc. and Internet Connect, Inc.(16)
10.16 Agreement and Plan of Merger and Reorganization by and among Rocky
Mountain Internet, Inc. d/b/a/ RMI.NET, Inc. and Colorado Mountain
Net, Inc. dated June 16, 1999(17)
10.17 Stock Exchange Agreement between Rocky Mountain Internet, Inc.
d/b/a RMI.NET, Inc. and Roger L. Penner (CommerceGate) dated June
24, 1999(18)
10.18 Asset Purchase Agreement by and between Rocky Mountain Internet,
Inc. d/b/a RMI.NET, Inc. and CyberDesic Communications Corporation,
Inc. dated June 28, 1999(19)
10.19 Asset Purchase Agreement by and among RMI.NET, Inc. f/k/a Rocky
Mountain Internet, Inc. and Triad Resources, LLC dated July 30,
1999(20)
10.20 Asset Purchase Agreement by and among RMI.NET, Inc. and ACES
Research, Inc. dated July 30, 1999(21)
10.21 Asset Purchase Agreement by and among RMI.NET, Inc. and Novo Media
Group, Inc. dated August 30, 1999(22)
10.22 Asset Purchase Agreement by and among RMI.NET, Inc. and Wolfe
Internet Access, LLC dated August 31, 1999(23)
10.23 Asset Purchase Agreement by and among RMI.NET, Inc. and
Networld.com, Inc. and FutureOne, Inc. dated November 19, 1999 (24)
10.24 Asset Purchase Agreement by and among RMI.NET, Inc. and Western
Regional Networks, Inc. dated November 24, 1999(25)
10.25 Asset Purchase Agreement by and among RMI.NET, Inc. and AIS Network
Corporation dated December 23, 1999(26)
16.01 Letter re change in certifying accountant(11)
21.01 Subsidiaries of the Registrant(27)
23.01 Consent of Ernst & Young LLP ***
23.02 Consent of Baird, Kurtz & Dobson ***
23.03 Consent of Christopher J. Melcher, Esq. (included in Exhibit
5.01)***
24.01 Power of Attorney (included in Part II of this Registration
Statement under the caption "Signatures") *
25.01 Statement of Eligibility of Trustee on Form T-1 ***
27.01 Financial Data Schedule(27)
----------
* Filed herewith.
** Portions of these documents have been omitted pursuant to a request for
confidential treatment.
*** To be filed by amendment or by a Current Report on Form 8-K pursuant to
Item 601(b) of Regulation S-K.
**** To be filed separately pursuant to Section 305(b)(2) of the Trust
Indenture Act of 1939.
II-3
<PAGE> 30
(1) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2 (Reg. No. 333-05040C) and amendments thereto, as previously
filed with the Securities and Exchange Commission.
(2) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1996.
(3) Incorporated by reference to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1996.
(4) Incorporated by reference to the Registrant's Registration Statement on
Form S-8, as previously filed with the Securities and Exchange
Commission on September 26, 1997.
(5) Incorporated by reference to the Registrant's Current Report on Form
8-K dated October 6, 1997.
(6) Incorporated by reference to the Registrant's Definitive Proxy
Statement (Appendix A) on Schedule 14A filed on February 13, 1998.
(7) Incorporated by reference to the Registrant's Definitive Proxy
Statement (Appendix B) on Schedule 14A filed on February 13, 1998.
(8) Incorporated by reference to the Registrant's Definitive Proxy
Statement (Appendix C) on Schedule 14A filed on February 13, 1998.
(9) Incorporated by reference to the Registrant's Current Report on Form
8-K dated November 20, 1998.
(10) Incorporated by reference to the Registrant's Current Report on Form
8-K dated December 8, 1998.
(11) Incorporated by reference to the Registrant's Current Report on Form
8-K dated December 9, 1998.
(12) Incorporated by reference to the Registrant's Current Report on Form
8-K dated December 10, 1998.
(13) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Reg. No. 333-52731) and amendments thereto, as previously
filed with the Securities and Exchange Commission.
(14) Incorporated by reference to the Registrant's Current Report on Form
8-K dated February 2, 1999.
(15) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
(16) Incorporated by reference to the Registrant's Current Report on Form
8-K/A dated June 11, 1999.
(17) Incorporated by reference to the Registrant's Current Report on Form
8-K dated June 16, 1999.
(18) Incorporated by reference to the Registrant's Current Report on Form
8-K dated June 23, 1999.
(19) Incorporated by reference to the Registrant's Current Report on Form
8-K dated June 28, 1999.
(20) Incorporated by reference to the Registrant's Current Report on Form
8-K dated July 30, 1999.
(21) Incorporated by reference to the Registrant's Current Report on Form
8-K dated July 30, 1999.
(22) Incorporated by reference to the Registrant's Current Report on Form
8-K dated August 30, 1999.
(23) Incorporated by reference to the Registrant's Current Report on Form
8-K dated August 31, 1999.
(24) Incorporated by reference to the Registrant's Current Report on Form
8-K dated November 19, 1999.
(25) Incorporated by reference to the Registrant's Current Report on Form
8-K dated November 24, 1999.
(26) Incorporated by reference to the Registrant's Current Report on Form
8-K dated December 23, 1999.
(27) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1999, as previously filed with the
Securities and Exchange Commission.
(28) Incorporated by reference to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-95185) and amendments thereto, as previously
filed with the Securities and Exchange Commission.
(29) Incorporated by reference to the Registrant's 2000 Definitive Proxy
Statement on Schedule 14A filed on May 1, 2000.
(30) Incorporated by reference to the Registrant's Current Report on Form
8-K/A dated March 17, 2000.
II-4
<PAGE> 31
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the 1934 Act)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-5
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on July 24, 2000.
RMI.NET, INC.
a Delaware corporation
By: /s/ Douglas H. Hanson
---------------------
Name: Douglas H. Hanson
Title: Chief Executive Officer, President, and
Chairman of the Board of Directors
(Principal Executive Officer)
POWER OF ATTORNEY
We, the undersigned officers and directors of RMI.NET, Inc. hereby
severally constitute Douglas H. Hanson, Christopher J. Melcher, and Michael D.
Dingman, Jr., and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below the Registration Statement filed herewith and any and
all amendments to said Registration Statement, and generally to do all such
things in our name and behalf in our capacities as officers and directors to
enable RMI.NET, Inc. to comply with the provisions of the Securities Act of
1933, as amended, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorneys, or any of them, to said Registration Statement and any
and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Douglas H. Hanson Chief Executive Officer, President, July 24, 2000
--------------------------- and Chairman of the Board of
Douglas H. Hanson Directors (Principal Executive
Officer)
/s/ Michael D. Dingman, Jr. Treasurer (Principal Financial July 24, 2000
--------------------------- Officer and Principal Accounting
Michael D. Dingman, Jr. Officer)
/s/ D.D. Hock Director July 24, 2000
---------------------------
D.D. Hock
</TABLE>
II-6
<PAGE> 33
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Robert W. Grabowski Director July 24, 2000
---------------------------
Robert W. Grabowski
/s/ Lewis H. Silverberg Director July 24, 2000
---------------------------
Lewis H. Silverberg
/s/ Michael T. Victor Director July 24, 2000
---------------------------
Michael T. Victor
</TABLE>
II-7
<PAGE> 34
INDEX TO EXHIBITS*
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.01 Form of Underwriting Agreement(1)
4.21 Form of Indenture(1)
4.22 Certificate of Designation of Preferred Stock(1)
4.23 Form of Warrant Agreement(1)
5.01 Opinion and Consent of Christopher J. Melcher, Esq., as to legality
of securities being registered(1)
23.01 Consent of Ernst & Young LLP(1)
23.02 Consent of Baird, Kurtz & Dobson(1)
23.03 Consent of Christopher J. Melcher, Esq. (included in Exhibit
5.01)(1)
24.01 Power of Attorney (included in Part II of this Registration
Statement under the caption "Signatures") (1)
25.01 Statement of Eligibility of Trustee on Form T-1(2)
</TABLE>
----------
* Excludes exhibits incorporated by reference. For a list of exhibits
incorporated by reference, refer to "Item 16. Exhibits" above.
(1) To be filed by amendment or by a Current Report on Form 8-K pursuant to
Item 601(b) of Regulation S-K.
(2) To be filed separately pursuant to Section 305(b)(2) of the Trust Indenture
Act of 1939.
