<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 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
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>
<CAPTION>
=====================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price per Aggregate Offering Amount of
Securities to be Registered Registered Unit (1) Price Registration Fee
- ---------------------------------- ------------------ -------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 770,952 $5.125 $3,951,129.00 $1,043.10
=====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
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. The
selling stockholders 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 APRIL 28, 2000.
RMI.NET, INC.
770,952 SHARES OF COMMON STOCK
The selling stockholders listed on pages 12-13 are offering 770,952
shares of common stock. RMI.NET will not receive any proceeds from the sale of
common stock by the selling stockholders.
Our common stock is traded on the Nasdaq National Market under the
symbol "RMII." On April 25, 2000, the average of the high and low price for our
common stock was $5.125 per share.
The common stock may be sold on the Nasdaq National Market at
prevailing market prices, in negotiated transactions, or otherwise. See "Plan of
Distribution."
See "Risk Factors" beginning on page 2 to read about factors you should
consider before buying shares of the common stock.
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 April 28, 2000.
<PAGE> 3
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. As of December 31, 1999, we have an accumulated deficit of $42.6 million.
We may never be profitable.
In 1998, a proposed merger transaction with Internet Communications
Corp. and related financing transactions were terminated. On March 17, 2000 we
again reached an agreement to acquire Internet Communications Corp. However,
claims by third parties unrelated to Internet Communications Corp. 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 TO 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, Inc., Internet America, PSINet, and
Verio;
o national telecommunications companies, such as AT&T Corp., MCI
WorldCom, Inc., 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 Corporation; 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, MCI
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.
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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 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
accommodate our increasing size and 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 16
companies and may acquire a number of other companies in the next few months. 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
potential future acquisitions. In addition, an acquisition 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 April 26, 2000, we have approximately 21,682,985 shares of common
stock outstanding, and have reserved approximately 7.0 million 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 March
24, 2000 ($10.00 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 selling stockholders do not sell any of their common stock
until after November 20, 2002.
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<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES ISSUABLE PERCENTAGE OF
UPON EXERCISE OF CLASS B WARRANTS AT OUTSTANDING SHARES AT
MARKET PRICE PER SHARE $0.01 PER SHARE MARCH 24, 2000(1)
(THROUGH NOVEMBER 2002)
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<S> <C> <C>
$10.00 - 100% of closing
price on 3/24/2000 452,400 2.2%
$7.50 - 75% of closing
price on 3/24/2000 831,949 3.9%
$5.00 - 50% of closing
price on 3/24/2000 1,628,568 7.4%
$2.50 - 25% of closing
price on 3/24/2000 4,019,568 16.5%
</TABLE>
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(1) Assumes that all shares to be issued upon exercise of Class B
Warrants are outstanding as of March 24, 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.
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<PAGE> 11
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 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> 12
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 us. 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.
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
financing plans and the outcome of any contingencies are forward-looking
statements. These statements can
11
<PAGE> 13
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."
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 April 26, 2000, we have 21,682,985
shares of common stock issued and outstanding.
This prospectus covers the 770,952 shares offered for resale by the
selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth information regarding the ownership of
our common stock by the selling stockholders and the maximum number of shares
that may be sold pursuant to this prospectus.
12
<PAGE> 14
<TABLE>
<CAPTION>
Shares Which May Shares Owned After
Number of Shares be Sold Pursuant Offering(1)
Owned Before the to this ------------------------------
Selling Stockholder Offering Prospectus Number Percentage
- ------------------------------------- -------------------- ------------------- ------------ -------------
<S> <C> <C> <C> <C>
William S. Burney, Jr. 11,809 11,809 -0- *
Daniel Lundahl 422,559 253,877 168,682 *
Jeff Schneider 1,362 681 681 *
Ted Berger 682 341 341 *
Rick Dwyer 682 341 341 *
Trent Olson 682 341 341 *
Ronald M. Stevenson(2) 88,894 16,873 72,021 *
Kenneth Covell(2) 31,152 1,152 30,000 *
Jeremy Black(2) 76,037 1,537 74,500 *
ENGINENUMBER9.COM 484,000 484,000 -0- *
</TABLE>
- -------------------------------------
* Less than one percent.
(1) Assumes all shares offered are sold.
(2) Serves as an employee of RMI.NET.
Except as otherwise noted, none of the selling stockholders, nor their
officers, directors and major shareholders, has held any material relationship
with RMI.NET or any of its affiliates within the past three years other than as
an owner of RMI.NET's securities.
PLAN OF DISTRIBUTION
The common stock covered by this prospectus may be offered and sold
from time to time by the selling stockholders or by their pledgees, donees,
transferees or other successors in interest, including in one or more of the
following transactions:
o on the Nasdaq National Market;
o in the over-the-counter market;
o in transactions other than on the Nasdaq National Market or in
the over-the-counter market;
o through brokers or dealers, or in direct transactions with
purchasers;
o in connection with short sales;
o by pledge to secure debts and other obligations;
o in connection with the writing of options, in hedge
transactions, and in settlement of other transactions in
standardized or over-the-counter options; or
o in a combination of any of the above transactions.
The selling stockholders may sell their shares at prevailing market
prices, at prices related to prevailing market prices, at negotiated prices, or
at fixed prices. There is no assurance that the selling stockholders will sell
any or all of their common stock. Brokers and dealers that are used will either
receive discounts or commissions from the selling stockholders, or will receive
commissions from the purchasers.
13
<PAGE> 15
The selling stockholders may also elect to sell their shares pursuant
to Rule 144 under the Securities Act of 1933. We have agreed to indemnify the
selling stockholders against certain liabilities, including liabilities arising
under the Securities Act of 1933.
LEGAL OPINION
For the purposes of this offering, Christopher J. Melcher, Vice
President and General Counsel of RMI.NET, Inc., has given his opinion as to the
validity of the shares offered by the selling stockholders. As of April 26,
2000, Mr. Melcher beneficially owns 18,000 shares of RMI.NET common stock.
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 Current Report on Form 8-K filed April 3, 2000;
o Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders; 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
14
<PAGE> 16
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
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.
15
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors....................................................................................................2
Cautionary Note About Forward-Looking Statements...............................................................11
Description of Common Stock....................................................................................12
Selling Stockholders...........................................................................................12
Plan of Distribution...........................................................................................13
Legal Opinion..................................................................................................14
Experts........................................................................................................14
Where You Can Find More Information............................................................................14
</TABLE>
COMMON STOCK
$0.001 PAR VALUE
RMI.NET, INC.
PROSPECTUS
APRIL 28, 2000
<PAGE> 18
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 and Nasdaq filing fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC Registration Fee $ 1,043.00
Nasdaq Filing Fee 15,419.00
Printing and Engraving 1,000.00
Legal Fees and Expenses 5,000.00
Accounting Fees and Expenses 5,000.00
Miscellaneous 3,000.00
----------
TOTAL $30,462.00
==========
</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
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore
II-1
<PAGE> 19
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
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
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 Subscription Agreement) (28)
4.16 Form of Class B Warrant (Annex II to Subscription Agreement) (28)
4.17 Form of Registration Rights Agreement (Annex IV to Subscription
Agreement) (28)
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)
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)
II-2
<PAGE> 20
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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") *
27.01 Financial Data Schedule (27)
- -------------------------
* Filed herewith.
** Portions of these documents have been omitted pursuant to a request for
confidential treatment.
(1) Incorporated by reference from 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 from the Registrant's Quarterly Report on
Form 10-QSB for the quarter
II-3
<PAGE> 21
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) filed on Schedule 14A on February 13, 1998.
(7) Incorporated by reference to the Registrant's Definitive Proxy
Statement (Appendix B) filed on Schedule 14A on February 13, 1998.
(8) Incorporated by reference to the Registrant's Definitive Proxy
Statement (Appendix C) filed on Schedule 14A 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 from 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 from 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.
II-4
<PAGE> 22
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 April 28, 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 April 28, 2000
- ----------------------------------------- and Chairman of the Board of
Douglas H. Hanson Directors (Principal Executive
Officer)
/s/ Michael D. Dingman, Jr. Treasurer (Principal Financial April 28, 2000
- ----------------------------------------- Officer and Principal Accounting
Michael D. Dingman, Jr. Officer)
/s/ D.D. Hock Director April 28, 2000
- -----------------------------------------
D.D. Hock
</TABLE>
II-5
<PAGE> 23
<TABLE>
<S> <C> <C>
/s/ Mary Beth Vitale Director April 28, 2000
- -----------------------------------------
Mary Beth Vitale
/s/ Robert W. Grabowski Director April 28, 2000
- -----------------------------------------
Robert W. Grabowski
/s/ Lewis H. Silverberg Director April 28, 2000
- -----------------------------------------
Lewis H. Silverberg
</TABLE>
EXHIBIT INDEX *
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
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)
</TABLE>
- -----------
* Excludes exhibits incorporated by reference. For a list of exhibits
incorporated by reference, refer to "Item 16. Exhibits" above.
(1) Filed herewith.
II-6
<PAGE> 1
EXHIBIT 5.01
LETTERHEAD OF RMI.NET, INC.
April 27, 2000
RMI.NET, Inc.
999 Eighteenth Street, Suite 2201
Denver, Colorado 80202
Re: Registration of Common Stock; Registration Statement on Form S-3
Ladies and Gentlemen:
I have acted as counsel to RMI.NET, Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, pursuant to the Company's Registration Statement on Form S-3
(the "Registration Statement"), of a public offering of up to 770,952 shares of
common stock, $0.001 par value (the "Shares"), of the Company. All of the Shares
are being sold by the Selling Security Holders identified in the "Selling
Security Holders" section of the Registration Statement (the "Selling Security
Holders").
In this capacity, I have examined the Registration Statement (including
all amendments thereto), the Company's Certificate of Incorporation and
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents, and other instruments of the
Company relating to the authorization and issuance of the Shares to be sold by
the Selling Security Holders and other matters as we have deemed relevant and
necessary as a basis for the opinion hereinafter set forth.
In conducting our examination I have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such documents.
Based upon the foregoing, and in reliance thereon, we are of the
opinion that the Shares, when issued and delivered against payment therefor,
will be legally and validly issued, fully paid, and non-assessable.
I hereby consent to the incorporation of this opinion into the
Registration Statement as Exhibit 5.1 thereto and to the reference to our firm
under the heading "Legal Matters" in the prospectus constituting a part of the
Registration Statement.
Very truly yours,
/s/ CHRISTOPHER J. MELCHER
II-7
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of RMI.NET, Inc. for
the registration of 770,952 shares of its common stock and to the incorporation
by reference therein of our report dated March 30, 2000, with respect to the
consolidated financial statements and schedule of RMI.NET, Inc. as of December
31, 1999 and 1998 and each of the two years in the period ended December 31,
1999, included in its Annual Report (Form 10-K) for the year ended December 31,
1999, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Denver, Colorado
April 27, 2000
<PAGE> 1
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
RMI.NET, Inc.
Denver, Colorado
We hereby consent to the incorporation by reference in this
Registration Statement of RMI.NET, Inc. on Form S-3, of our report included in
Form 10-K, dated February 27, 1998, with respect to the statements of income,
stockholders' equity (deficit), and cash flows of RMI.NET, Inc. for the year
ended December 31, 1997. We also consent to the reference to us under the
heading "Experts" in such registration statement.
/s/ BAIRD KURTZ & DOBSON
Denver, Colorado
April 27, 2000
