<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 19, 1999
------------------------------
RMI.NET, Inc.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
001-12063 84-1322326
- ---------------------------------- ----------------------------------------
(Commission File Number) (IRS Employee Identification No.)
999 Eighteenth Street, Suite 2201, Denver, Colorado 80202
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 672-0700
-----------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On December 6, 1999, the Registrant filed a Current Report on Form 8-K
(the "Networld Initial Report") describing the acquisition of assets related to
the Internet access business of Networld.com, Inc., a subsidiary of FutureOne,
Inc. This Current Report on Form 8-K/A amends the Networld Initial Report by
including with this Form 8-K/A the financial statements and pro forma financial
information prescribed by Item 7 of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Networld.com, Inc. - Financial Statements:
Report of Independent Auditors - Ernst & Young LLP
Balance Sheet as of September 30, 1999
Statement of Operations for the Year ended September 30, 1999
Statement of Changes in Business Net Assets for the Year ended
September 30, 1999
Statement of Cash Flows for the Year ended September 30, 1999
Notes to Financial Statements
(b) Pro Forma Financial Information:
Pro Forma Condensed Combined Balance Sheet as of September 30,
1999
Pro Forma Condensed Combined Statement of Operations for the Year
Ended December 31, 1998
Pro Forma Condensed Combined Statement of Operations for the Nine
Months Ended September 30, 1999
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10.1 Asset Purchase Agreement by and among RMI.NET, Inc., and Networld.com,
Inc. and FutureOne, Inc. *
20.1 News Release dated November 23, 1999 announcing the Networld.com, Inc.
asset acquisition. *
</TABLE>
- -------------
* Previously filed.
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RMI.NET, Inc.
---------------------------------------
(Registrant)
Date: February 2, 2000 By: /s/ CHRISTOPHER J. MELCHER
-----------------------------------
Christopher J. Melcher
Vice President, General Counsel
and Corporate Secretary
<PAGE> 4
Report of Independent Auditors
The Board of Directors and Stockholders
FutureOne, Inc.
We have audited the accompanying balance sheet of the Internet Access Business
of Networld.com, Inc., a subsidiary of FutureOne, Inc., (the Business) as of
September 30, 1999, and the related statements of operations, changes in
business net assets, and cash flows for the year then ended. These financial
statements are the responsibility of the Business's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Internet Access Business of
Networld.com, Inc. at September 30, 1999, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Internet
Access Business of Networld.com, Inc. will continue as a going concern. As more
fully described in Note 1, the Business has recurring losses, and negative
working capital. These conditions raise substantial doubt about the Business's
ability to continue as a going concern (management's plans in regard to those
matters are also described in Note 1). The financial statements do not include
any adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the outcome of this uncertainty.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
December 29, 1999
F-1
<PAGE> 5
Internet Access Business of Networld.com, Inc.
Balance Sheet
September 30, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Trade accounts receivable, net of allowance for doubtful accounts
of approximately $35,490 $ 59,005
Prepaid expenses 83,669
--------
Total current assets 142,674
Property and equipment, net 492,950
Intangible assets, net 357,425
========
$993,049
========
LIABILITIES AND BUSINESS NET ASSETS
Current liabilities:
Trade accounts payable $481,924
Accrued expenses 21,697
Deferred revenue 50,954
Current portion of capital leases 124,837
--------
Total current liabilities 679,412
Notes payable 29,752
Capital lease payable, less current portion 172,116
BUSINESS NET ASSETS 111,769
--------
$993,049
========
</TABLE>
See accompanying notes.
F-2
<PAGE> 6
Internet Access Business of Networld.com, Inc.
Statement of Operations
Year ended September 30, 1999
<TABLE>
<S> <C>
Service revenues $ 1,554,818
Costs of service revenues (1,532,740)
-----------
Gross profit 22,078
Operating expenses:
General and administrative 972,235
Depreciation and amortization 276,363
Unusual Items 120,175
-----------
Loss from operations (1,346,695)
Interest expense (net) 21,198
-----------
Net loss $(1,367,893)
===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 7
Internet Access Business of Networld.com, Inc.
Statement of Changes in Business Net Assets
Year ended September 30, 1999
<TABLE>
<S> <C>
Balance at October 1, 1998 $ 722,640
Net loss (1,367,893)
Contributed assets of GlobalKey, Inc. 146,500
Advances from FutureOne, Inc. 610,522
===========
Balance at September 30, 1999 $ 111,769
===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 8
Internet Access Business of Networld.com, Inc.
Statement of Cash Flows
Year ended September 30, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $(1,367,893)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 276,363
Provision for doubtful accounts (benefit) (7,510)
Deferred revenue 50,954
Provision for unusual item 120,175
Changes in operating assets and liabilities:
Trade accounts receivable 9,236
Prepaid expenses (56,777)
Trade accounts payable 412,045
Accrued expenses (12,702)
-----------
Net cash used in operating activities (576,109)
INVESTING ACTIVITIES
--
-----------
Net cash used in investing activities --
FINANCING ACTIVITIES
Net advances from FutureOne, Inc. 610,522
Principal payments under capital lease obligations (34,413)
-----------
Net cash provided by financing activities 576,109
Increase (decrease) in cash and cash equivalents --
Cash and cash equivalents at beginning of period --
-----------
Cash and cash equivalents at end of period $ --
===========
SUPPLEMENTAL CASH FLOW INFORMATION
Assets acquired under capital lease obligation $ 282,247
===========
GlobalKey, Inc. assets contributed by Future One, Inc. $ 146,500
===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 9
Internet Access Business of Networld.com, Inc.
Notes to Financial Statements
September 30, 1999
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Description of Business
The Internet Access Business of Networld.com, Inc., a subsidiary of FutureOne,
Inc., ("the Business") provides Internet access services as an Internet Service
Provider (ISP). These services are provided to both individuals and companies.
The business is comprised of those ISP operations of Networld.com, Inc.
Basis of Presentation
The accompanying financial statements have been prepared on a going concern
basis, which assumes continuity of operations and realization of assets and
liquidation of liabilities in the ordinary course of business. As shown in the
accompanying statement of operations, the Business incurred a net loss of $1.4
million over the past year and has negative working capital of $537,000 at
September 30, 1999. To meet its immediate cash needs, the Business requires
continued funding from FutureOne, Inc., its parent company, and to increase its
revenue levels through additional customers to cover operating costs. If the
Business is not successful in increasing revenues to attain profitability and/or
to continue to receive the financial support of its parent company, the Business
may not be able to continue in operation.
Revenue and Cost Recognition
The Business charges customers (subscribers) monthly access fees to the Internet
and recognizes the revenue in the month the access is provided. For certain
subscribers billed in advance, the Business recognizes the revenue over the
period the billing covers.
Cash and Cash Equivalents
The Business considers all money market funds with a maturity of three months or
less at the date acquired to be cash equivalents.
Accounts Receivable
Accounts receivable are typically unsecured. The Business performs on going
credit evaluations of its retail customers and maintains reserves for potential
credit losses.
F-6
<PAGE> 10
Internet Access Business of Networld.com, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property and Equipment
Property and equipment is stated at cost. Depreciation of property and equipment
is calculated using the straight-line method over the estimated useful lives of
the assets, generally three years for software and web site costs and five to
seven years for computer related equipment, construction equipment and vehicles.
Intangible Assets
Intangible assets consist of trademarks, goodwill, debt issue costs and licenses
and are capitalized and amortized on a straight-line basis over their expected
useful lives, which range from three to ten years.
Income Taxes
The Business is included in the tax return of FutureOne, Inc. Under the tax
sharing arrangement, the Business is to pay FutureOne, Inc. its taxes due on a
standalone basis. At September 30, 1999, the Business had cumulative losses.
Therefore, there is no income tax expense or benefit.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense was
approximately $35,000 for the year ended September 30, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Comprehensive Loss
As of October 1, 1997, the Business adopted the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS No. 130). Statement 130 establishes new rules for
reporting and display of comprehensive income and its components. Comprehensive
loss is the same as net loss for all periods presented.
F-7
<PAGE> 11
Internet Access Business of Networld.com, Inc.
Notes to Financial Statements (continued)
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of the immediate or short-term maturity of these
financial instruments. The fair value of capital leases is determined using
current applicable interest rates as of the balance sheet date and approximates
the carrying value of such capital leases.
2. ACQUISITIONS
On November 12, 1998, FutureOne, Inc. acquired the ISP of GlobalKey, Inc., then
contributed the assets of GlobalKey to operations of the Business, in a purchase
business combination for consideration of 50,000 shares of the FutureOne, Inc.'s
common stock with a fair value at date of issuance of $2.93 per share for a
total consideration of $146,500. In January 1999, the Internet access supplier
terminated service to the Business because of prior payment disputes with
GlobalKey. The small number of customers acquired from GlobalKey have been lost
and the value of the customers and associated goodwill have been written off as
an unusual item.
A summary of the purchase price allocations for this acquisition is as follows:
<TABLE>
<CAPTION>
LESS:
GOODWILL FUTUREONE,
TANGIBLE AND LESS: INC. NET CASH
ASSETS CUSTOMER LIABILITIES COMMON PAID
ACQUIRED LIST ASSUMED STOCK ISSUED (RECEIVED)
-------------- -------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
GlobalKey, Inc. 20,000 126,500 - (146,500) -
</TABLE>
The following table sets forth the unaudited pro forma results of operations as
if the acquisition was consummated at the beginning of the immediately preceding
year for the year ended September 30, 1999 (unaudited):
Revenues $ 1,556,000
Net loss (1,371,000)
F-8
<PAGE> 12
Internet Access Business of Networld.com, Inc.
Notes to Financial Statements (continued)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30, 1999:
<TABLE>
<S> <C>
Furniture and fixtures $ 17,399
Computers and other equipment 659,815
Software 92,086
---------
769,300
Less accumulated depreciation and amortization (276,350)
=========
$ 492,950
=========
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consists of the following at September 30, 1999:
<TABLE>
<S> <C>
Organization costs $ 353
Customer lists 150,458
Goodwill 279,478
Trademarks 645
Debt issuance costs, capital leases 165,000
---------
595,934
Less amortization (238,509)
---------
$ 357,425
=========
</TABLE>
5. LEASES
The Business has equipment under capital leases. The Business also leases office
facilities under noncancelable operating leases that expire in various years
through December 2001.
F-9
<PAGE> 13
Internet Access Business of Networld.com, Inc.
Notes to Financial Statements (continued)
5. LEASES (CONTINUED)
Future minimum payments under capital leases and noncancelable operating leases
with initial terms of one year or more consisted of the following at September
30, 1999:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
2000 $ 140,724 $233,902
2001 140,093 85,158
2002 41,003 --
2003 -- --
2004 -- --
Thereafter -- --
--------- --------
Total minimum lease payments 321,820 $319,060
========
Less amounts representing interest (24,867)
---------
Present value of net minimum lease payments 296,953
Less current portion (124,837)
---------
$ 172,116
=========
</TABLE>
In June 1997, the Business entered into the first of three leasing arrangements
with El Camino Resources, Ltd. Under the terms of the first lease, El Camino
provided $150,000 of available credit. This lease for the equipment requires
payments of $5,690 per month, for a term of 30 months, and includes a buyout
provision equal to the fair market value of the leased equipment at the end of
the lease, but not to exceed 20 percent of original cost. In conjunction with
the lease arrangement, FutureOne, Inc. issued 250,000 shares of its common stock
to El Camino.
During the year ended September 30, 1999, the Business has entered into a second
lease with El Camino for $150,000. The lease requires payments of $5,406 per
month for a term of 30 months, and includes a buyout provision equal to the fair
market value of the leased equipment at the end of the lease, but not to exceed
20 percent of the original cost. During the year ended September 30, 1999, the
Business has entered into a third lease with El Camino for $250,000 of which
$163,000 was funded at September 30, 1999. The lease will require payments of
$9,483 per month once the lease is fully funded, for a term of 30 months, and
includes a buyout provision equal to the fair market value of the leased
equipment at the end of the lease, but not to exceed 20 percent of original
cost.
F-10
<PAGE> 14
Internet Access Business of Networld.com, Inc.
Notes to Financial Statements (continued)
5. LEASES (CONTINUED)
Property and equipment includes the following amounts for leases that have been
capitalized as of September 30, 1999:
<TABLE>
<S> <C>
Equipment $ 437,599
Less accumulated amortization (84,133)
---------
$ 353,466
=========
</TABLE>
Amortization of leased assets is included in depreciation and amortization
expense.
Rental expense for the year ended September 30, 1999 was approximately $240,000.
6. UNUSUAL ITEMS
In January 1999, the Internet access supplier terminated service to the Business
because of prior payment disputes with GlobalKey, Inc. The customers acquired
from GlobalKey, Inc. have been lost and the unamortized value of the customer
list and goodwill acquired from GlobalKey, Inc. has been charged as an expense
totaling $120,175, which is included in operations as an unusual item.
7. YEAR 2000 ISSUE (UNAUDITED)
The Business experienced no significant problems in the transition to the Year
2000. The Business does not feel it has any continued exposure to the Year 2000
problem.
8. SUBSEQUENT EVENTS
Subsequent to September 30, 1999, the Business' sole stockholder entered into an
agreement to sell the assets of the Company.
F-11
<PAGE> 15
SELECTIVE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial information
presented below has been derived from the unaudited or audited historical
financial statements of the Company, Networld.com, Inc., AIS Network
Corporation, Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources
L.L.C. (d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a
Dave's World) and reflects management's present estimate of pro forma
adjustments, including a preliminary estimate of the purchase price allocations,
which ultimately may be different.
The acquisition is being accounted for using the purchase method of accounting.
Accordingly, assets acquired and liabilities assumed are recorded at their
estimated fair values, which are subject to further adjustment based upon
appraisals or other analyses, with appropriate recognition given to the effect
of the Company's borrowing rates and income tax rates.
The unaudited pro forma combined statements of operations for the nine months
ended September 30, 1999 and the year ended December 31, 1998 give effect to the
acquisitions as if they had been consummated at the beginning of each period.
These pro forma statements of operations combine the historical consolidated
statements of operations for the periods reported for the Company, Networld.com,
Inc., AIS Network Corporation, Wolfe Internet Access L.L.C., ACES Research,
Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation and August
5th Corporation (d/b/a Dave's World).
The unaudited pro forma condensed combined balance sheet as of September 30,
1999 gives effect to the acquisitions as if they had been consummated on that
date. The pro forma balance sheet combines the historical consolidated balance
sheet at that date for the Company, Networld.com, Inc., and AIS Network
Corporation.
The unaudited pro forma condensed combined financial statements may not be
indicative of the results that actually would have occurred if the transaction
described above had been completed and in effect for the periods indicated or
the results that may be obtained in the future. The unaudited pro forma
condensed combined financial data presented below should be read in conjunction
with the audited and unaudited historical financial statements and related notes
thereto of the Company and the financial statements and notes of the acquired
companies.
<PAGE> 16
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Previously
Reported Networld.com Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions(A) Inc. Subtotal Adjustments(B) Combined
------------- --------------- ----------- --------- -------------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,213 $ 285 $ -- $ 6,498 $ -- $ 6,498
Trade receivables less allowance for
doubtful accounts 4,681 75 59 4,815 -- 4,815
Inventories 223 -- -- 223 -- 223
Other 1,123 1 84 1,208 -- 1,208
-------- -------- -------- -------- -------- --------
Total Current Assets 12,240 361 143 12,744 -- 12,744
-------- -------- -------- -------- -------- --------
PROPERTY AND EQUIPMENT, net 9,881 275 493 10,649 -- 10,649
Goodwill, net 35,451 -- 357 35,808 5,732 41,540
Other 548 -- -- 548 -- 548
-------- -------- -------- -------- -------- --------
Total Assets $ 58,120 $ 636 $ 993 $ 59,749 $ 5,732 $ 65,481
======== ======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,480 $ 57 $ 482 $ 4,019 $ 0 $ 4,019
Current maturities of long term debt
and capital lease obligations 2,465 -- 124 2,589 -- 2,589
Deferred revenue 2,184 -- 51 2,235 -- 2,235
Accrued payroll & related taxes 657 20 -- 677 -- 677
Accrued expenses & other 1,931 -- 22 1,953 -- 1,953
-------- -------- -------- -------- -------- --------
Total Current Liabilities 10,717 77 679 11,473 -- 11,473
-------- -------- -------- -------- -------- --------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 2,742 -- 202 2,944 -- 2,944
-------- -------- -------- -------- -------- --------
Total liabilities 13,459 77 881 14,417 -- 14,417
REDEEMABLE CONVERTIBLE PREFERRED STOCK 1,928 -- -- 1,928 -- 1,928
Stockholders' Equity
Common Stock 18 1 -- 19 (1)(2) 18
Additional paid in capital 73,048 36 -- 73,084 (36)(2) 79,451
6,403 (1)
Accumulated deficit (30,333) 522 112 (29,699) (634)(2) (30,333)
-------- -------- -------- -------- -------- --------
42,733 559 112 43,404 5,732 49,136
-------- -------- -------- -------- -------- --------
$ 58,120 $ 636 $ 993 $ 59,749 $ 5,732 $ 65,481
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE> 17
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------------------------------
Previously
Reported Networld.com Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions(A) Inc. Subtotal Adjustments(B) Combined
------------- --------------- ------------ --------- -------------- ---------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Communication Services $ 7,974 $ 18,770 $ 1,143 $ 27,887 $ -- $ 27,887
Web Solutions 2,113 -- -- 2,113 -- 2,113
10,087 18,770 1,143 30,000 -- 30,000
-------- -------- -------- -------- -------- --------
Cost of revenue earned
Communication Services 3,471 11,546 938 15,955 -- 15,955
Web Solutions 50 -- -- 50 -- 50
-------- -------- -------- -------- -------- --------
3,521 11,546 938 16,005 -- 16,005
-------- -------- -------- -------- -------- --------
Gross profit 6,566 7,224 205 13,995 -- 13,995
-------- -------- -------- -------- -------- --------
General, selling and administrative
expenses 9,184 7,168 984 17,336 -- 17,336
Cost related to unsuccessful merger
attempt 6,071 -- -- 6,071 -- 6,071
Depreciation and amortization 1,789 3,081 161 5,031 4,849 (3) 9,880
-------- -------- -------- -------- -------- --------
Operating income (loss) (10,478) (3,025) (940) (14,443) (4,849) (19,292)
-------- -------- -------- -------- -------- --------
Other income (expense)
Interest expense (320) (157) (10) (487) -- (487)
Interest Income 51 7 -- 58 -- 58
Other income (expense), net 78 212 -- 290 -- 290
-------- -------- -------- -------- -------- --------
(191) 62 (10) (139) -- (139)
-------- -------- -------- -------- -------- --------
Net loss $(10,669) $ (2,963) $ (950) $(14,582) $ (4,849) $(19,431)
======== ======== ======== ======== ======== ========
Preferred stock dividends $ 33 $ 33
Net loss applicable to common
Stockholders $(10,702) $(19,464)
======== ========
Basic and Diluted loss per share
from continuing operations(4) $ (1.39) $ (1.89)
======== ========
Average number of common shares
outstanding(4) 7,690 2,223 354 10,267
======== ======== ======== ========
</TABLE>
<PAGE> 18
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------------------------------------
Previously
Reported Networld.com Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions(A) Inc. Subtotal Adjustments(B) Combined
------------- --------------- ------------ --------- -------------- ---------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Communication Services $ 17,859 $ 8,084 $ 1,180 $ 27,123 $ -- $ 27,123
Web Solutions 2,924 -- -- 2,924 -- 2,924
-------- -------- -------- -------- -------- --------
20,783 8,084 1,180 30,047 -- 30,047
-------- -------- -------- -------- -------- --------
Cost of revenue earned
Communication Services 9,969 4,336 1,154 15,459 -- 15,459
Web Solutions 873 -- -- 873 -- 873
-------- -------- -------- -------- -------- --------
10,842 4,336 1,154 16,332 -- 16,332
-------- -------- -------- -------- -------- --------
Gross profit 9,941 3,748 26 13,715 -- 13,715
-------- -------- -------- -------- -------- --------
General, selling and administrative
expenses 17,497 3,360 1,044 21,901 -- 21,901
Depreciation and amortization 4,880 1,187 248 6,315 2,324(3) 8,639
-------- -------- -------- -------- -------- --------
Operating income (loss) (12,436) (799) (1,266) (14,501) (2,324) (16,825)
-------- -------- -------- -------- -------- --------
Other income (expense)
Interest expense (369) (46) (19) (434) -- (434)
Interest Income 121 13 -- 134 -- 134
Other income (expense), net -- 58 -- 58 -- 58
-------- -------- -------- -------- -------- --------
(248) 25 (19) (242) -- (242)
-------- -------- -------- -------- -------- --------
Net loss $(12,684) $ (774) $ (1,285) $(14,743) $ (2,324) $(17,067)
======== ======== ======== ======== ======== ========
Preferred stock dividends $ 199 $ 199
Net loss applicable to common
Stockholders $(12,883) $(17,266)
======== ========
Basic and Diluted loss per share
from continuing operations(4) $ (1.09) $ (1.20)
======== ========
Average number of common shares
outstanding(4) 11,806 2,223 354 14,383
======== ======== ======== ========
</TABLE>
<PAGE> 19
NOTES TO THE PRO FORMA CONDENSED
COMBINED FINANCIAL DATA
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combined balance sheet is
presented as of September 30, 1999. The accompanying unaudited pro forma
condensed combined statements of operations are presented for the nine months
ended September 30, 1999 and the year ended December 31, 1998.
(A) PREVIOUSLY REPORTED ACQUISITIONS: The accompanying unaudited pro forma
condensed combined balance sheet presented as of September 30, 1999
includes the balance sheet as of September 30, 1999 of AIS Network
Corporation. The accompanying unaudited pro forma condensed combined
statements of operations presented for the nine months ended September 30,
1999 and the year ended December 31, 1998 include the condensed statements
of operations for the respective periods ended for AIS Network Corporation,
Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C.
(d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a
Dave's World).
(B) PRO FORMA ADJUSTMENTS: The following pro forma adjustments have been made
to the unaudited condensed combined balance sheet as of September 30, 1999
and the unaudited condensed combined statements of operations for the nine
months ended September 30, 1999 and the year ended December 31, 1998.
(1) To reflect the issuance of 353,519 shares of RMI stock valued at $2.8
million, in connection with the acquisition of Networld.com, Inc., and the
issuance of 425,967 shares of RMI stock valued at $3.7 million, in
connection with the acquisition of AIS Network Corporation. The $5.7
million excess of the purchase price over the fair value of the assets
acquired has been allocated to goodwill. Shares of Common Stock issued in
the acquisitions were recorded at fair market value as based on the current
market price of RMI's publicly traded stock. The final allocation of the
purchase price will be made after the appropriate appraisals or other
analyses are performed. Upon completion of the appraisals or other analyses
and in accordance with the terms thereof, the excess purchase price
currently allocated to goodwill may be reallocated to the appropriate asset
classifications, including customer list and goodwill. While goodwill will
be amortized over a period of five years, customer list or other identified
intangibles may be amortized over shorter periods, which would therefore
increase amortization expense.
(2) To eliminate the equity accounts of the acquired companies.
(3) To adjust amortization expense for the increase in goodwill, using a life
of five years, as if such acquisitions had been completed as of the
beginning of such periods.
(4) The Basic and Diluted loss per share from continuing operations and the
average number of common shares outstanding for the pro forma combined
amounts gives effect to the results as if Networld.com, Inc., AIS Network
Corporation, Wolfe Internet Access L.L.C., ACES Research, Inc., Triad
Resources L.L.C. (d/b/a WebZone), IdealDial Corporation and August 5th
Corporation (d/b/a Dave's World) had been completed at the beginning of
such periods.
