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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report September 18, 1998
(Date of earliest event reported: July 6, 1998)
VERIO INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-24219 84-1339720
(Commission File Number) (I.R.S. Employer Identification No.)
8005 SOUTH CHESTER STREET, SUITE 200, 80112
ENGLEWOOD, COLORADO (Zip Code)
(Address of Principal Executive Offices)
(303) 645-1900
(Registrant's Telephone Number, Including Area Code)
With a copy to:
Gavin B. Grover, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
NTX, Inc.
Balance Sheet
June 30, 1998
Statement of Operations,
Nine Months Ended June 30, 1998
Statement of Stockholders' Deficit,
Nine Months Ended June 30, 1998
Statement of Cash Flows,
Nine Months Ended June 30, 1998
Notes to Financial Statements,
June 30, 1998
(b) Pro Forma Financial Information.
Required pro forma financial information was filed under cover
of Form 10-Q on August 13, 1998
(c) Exhibits.
23.1 Consent of Independent Auditors
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INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS
VERIO INC.:
We have audited the accompanying balance sheet of NTX, Inc. as of June 30, 1998,
and the related statements of operations, stockholders' deficit, and cash flows
for the nine months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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 NTX, Inc. as of June 30, 1998,
and the results of its operations and its cash flows for the nine months then
ended, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
August 5, 1998
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NTX, INC.
BALANCE SHEET
JUNE 30, 1998
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<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 91,373
Restricted cash 537,572
Receivables:
Trade, net of allowance for doubtful accounts of $337,063 1,080,965
Other 25,000
Prepaid expenses and other 20,523
---------
Total current assets 1,755,433
Equipment and leasehold improvements, net (note 2) 525,942
Other assets, net 21,231
---------
Total assets $ 2,302,606
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 721,248
Accrued liabilities 346,370
Deferred revenue 1,904,564
---------
Total current liabilities 2,972,182
---------
Stockholders' deficit (note 3):
Common stock, no par value, 4,210,524 shares authorized,
issued and outstanding 3,640,000
Accumulated deficit (4,309,576)
---------
Total stockholders' deficit (669,576)
---------
Commitments (note 4)
Total liabilities and stockholders' deficit $ 2,302,606
=========
</TABLE>
See accompanying notes to financial statements.
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NTX, INC.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1998
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<TABLE>
<S> <C>
Revenue:
Web hosting $ 3,552,716
Domain name registration 2,733,506
Other 316,320
----------
Total revenue 6,602,542
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Costs and expenses:
Operating 1,315,039
Selling, general and administrative 5,750,785
Stock-based compensation (note 3) 3,640,000
Depreciation and amortization 124,818
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Total costs and expenses 10,830,642
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Loss from operations (4,228,100)
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Other income (expense):
Interest income 6,131
Interest expense (380)
----------
Net loss $ (4,222,349)
==========
</TABLE>
See accompanying notes to financial statements.
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NTX, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED JUNE 30, 1998
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<TABLE>
<CAPTION>
Total
Members' Common Accumulated stockholders'
deficit stock deficit deficit
-------- ------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCES AT OCTOBER 1,
1997 $(160,936) - - (160,936)
Contributions from
members 73,709 - - 73,709
Issuance of common stock in
connection with
reincorporation 87,227 - (87,227) -
Stock-based compensation
expense (note 3) - 3,640,000 - 3,640,000
Net loss - - (4,222,349) (4,222,349)
------- --------- --------- ---------
BALANCE AT JUNE 30, 1998 $ - 3,640,000 (4,309,576) (669,576)
======= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
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NTX, INC.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1998
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<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss $(4,222,349)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 124,818
Provision for bad debts 259,499
Stock-based compensation expense 3,640,000
Changes in operating assets and liabilities:
Trade and other accounts receivable (1,118,363)
Prepaid expenses and other (20,523)
Accounts payable 434,822
Accrued liabilities 209,994
Deferred revenue 1,469,194
Other assets, net (21,231)
---------
Net cash provided by operating activities 755,861
---------
Cash flows from investing activities:
Purchases of equipment and leasehold improvements (419,386)
Restricted cash (461,841)
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Net cash used by investing activities (881,227)
---------
Cash flows from financing activities - contributions from members 73,709
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Net decrease in cash (51,657)
Cash at the beginning of period 143,030
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Cash at end of period $ 91,373
=========
</TABLE>
See accompanying notes to financial statements.
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NTX, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
NTX, Inc. d/b/a TABNet (the Company), was incorporated as a subchapter
S Corporation in the State of California on November 24, 1997. Prior to
incorporation as a subchapter S Corporation, the Company was operating
as NTX, L.L.C., a limited liability corporation. All assets and
liabilities of the L.L.C. were contributed to the Company upon
incorporation and recorded at historical cost. The Company provides web
hosting and domain name registration services to customers primarily in
the United States.
Effective July 7, 1998, Verio Inc. acquired 100% of the outstanding
common stock of the Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from
those estimates.
RESTRICTED CASH
Restricted cash represents the retained portion of customer payments by
the Company's credit card merchant bank processors and is restricted
for a period of approximately six months after each payment
transaction.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost, less
accumulated depreciation. Depreciation is recorded over the estimated
useful lives of the assets ranging from 3 to 5 years using the
straight-line method. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the asset.
Costs for normal repairs and maintenance are expensed as incurred.
LONG-LIVED ASSETS
The Company evaluates the carrying value of its long-lived assets under
the provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of (Statement No. 121). Statement No. 121
requires impairment losses to be recognized on long-lived assets used
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in operations, including goodwill, when indications of impairment are
present and the undiscounted future cash flows estimated to be
generated by those assets are less than the assets' carrying amount. If
such assets are impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds their
fair value. Assets to be disposed of are reported at the lower of the
carrying amount or fair value, less costs to sell.
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NTX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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REVENUE RECOGNITION
Web hosting and domain name registration revenue is recognized as the
services are provided. Set-up fees are recognized when installation is
completed. The Company records deferred revenue for accounts billed
and/or collected in advance.
INCOME TAXES
No provision for income taxes has been included in the accompanying
financial statements for the nine months ended June 30, 1998 due to the
Company's status as a limited liability corporation and subchapter S
Corporation. Accordingly, net losses for the period were included in
the respective individual tax returns of the members and stockholders.
STOCK-BASED COMPENSATION
The Company accounts for its stock-based employee compensation using
the intrinsic value based method prescribed by Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations (APB 25). The Company has no options
outstanding at June 30, 1998, and no formal stock option plan in place.
The Company will provide the pro forma disclosures of net loss as if
the fair value based method of accounting for the stock-based
compensation, as prescribed by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123),
had been applied, in the future as applicable.
CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not
recognized for financial statement purposes. Management estimates that
the fair values of all financial instruments as of June 30, 1998
approximate their carrying amounts based on their terms and interest
rates. The use of different market assumptions and/or estimation
methodologies may have a significant effect on the estimated fair
values.
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(2) EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consisted of the following at June
30, 1998:
<TABLE>
<S> <C>
Internet and computer equipment $ 668,307
Furniture and leasehold improvements 52,396
-------
720,703
Less accumulated depreciation (194,761)
-------
$ 525,942
=======
</TABLE>
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NTX, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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(3) STOCKHOLDERS' DEFICIT
During the nine months ended June 30, 1998, the Company granted rights
to acquire a specific percentage ownership in the Company to four
employees as compensation. The Company recorded stock-based
compensation expense of $3,640,000 which, in the opinion of the
Company's Board of Directors, represented fair value at the date of
grant.
(4) COMMITMENTS
The Company leases its facilities under long-term operating leases
expiring at various dates through 2003. Future minimum lease payments
consist of the following at June 30, 1998:
<TABLE>
<S> <C>
Year ending June 30:
1999 $ 120,148
2000 70,188
2001 23,610
2002 22,920
2003 19,100
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Total minimum lease payments $ 255,966
=======
</TABLE>
Rent expense totaled $78,688 for the nine months ended June 30, 1998.
The Company has entered into marketing agreements for internet search
engines and an agreement which provides for internet access. Future
payments under these noncancelable agreements as of June 30, 1998 are
as follows:
<TABLE>
<S> <C>
Year ending June 30:
1999 $ 4,672,300
2000 1,438,500
</TABLE>
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SIGNATURES
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.
VERIO INC.
By: /s/ CARLA HAMRE DONELSON
------------------------
Carla Hamre Donelson
Vice President, General
Counsel and Secretary
Dated: September 18, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
23.1 Consent of Independent Auditors
</TABLE>
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EXHIBIT 23.1
Consent of Independent Auditors
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The Board of Directors
Verio Inc.:
We consent to the inclusion of our report dated August 5, 1998, with respect to
the balance sheet of NTX, Inc. as of June 30, 1998, and the related statements
of operations, stockholders' deficit and cash flows for the nine months then
ended, which report appears in the Form 8-K/A of Verio Inc. dated September 18,
1998.
KPMG Peat Marwick LLP
Denver, Colorado
September 18, 1998
