<PAGE> 1
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 (Date of earliest event reported): December 17, 1999
PopMail.com, inc.
(Exact name of registrant as specified in its charter)
Minnesota 0-23243 31-1487885
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4801 West 81st Street, Suite 112, Bloomington, MN 55437
(Address of principal executive offices) (Zip Code)
(Former Name or Former Address, if Changed Since Last Report)
Registrant's telephone number, including area code: (612) 837-9917
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(1) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
ROI Interactive, LLC
We have audited the accompanying balance sheet of ROI Interactive, LLC as
of June 30, 1999, and the related statements of earnings, changes in members'
equity, and cash flows for the year 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 ROI Interactive, LLC as of
June 30, 1999, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
January 21, 2000
2
<PAGE> 3
ROI INTERACTIVE, LLC
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, November 30,
ASSETS 1999 1999
---- ----
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 13,961 $ 48,129
Accounts receivable - less allowance for doubtful
accounts of $2,600 at June 30, 1999 and
November 30, 1999 243,477 291,406
Due from affiliate 32,282 90,302
Prepaid expenses 15,675 8,016
-------- --------
Total current assets 305,395 437,853
FURNITURE AND EQUIPMENT, AT COST
Computer hardware 93,622 145,681
Computer software 12,612 12,965
Furniture and fixtures 6,059 6,059
-------- --------
112,293 164,705
Less accumulated depreciation 28,490 41,442
-------- --------
83,803 123,263
OTHER ASSETS
Capitalized software development costs, less
accumulated amortization of $8,662 and $13,745
at June 30, 1999 and November 30, 1999 27,935 22,852
Other 8,900 7,595
-------- --------
$426,033 $591,563
======== ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Note payable $ 39,793 $129,695
Accounts payable 41,083 113,171
Accrued expenses 107,812 52,681
Sales tax payable 37,147 76,888
Deferred revenue 10,700 -
Other 6,221 10,727
-------- --------
Total current liabilities 242,756 383,162
COMMITMENTS AND CONTINGENCIES - -
MEMBERS' EQUITY 183,277 208,401
-------- --------
$426,033 $591,563
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
ROI INTERACTIVE, LLC
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year ended Five months ended
June 30, November 30,
-------- ------------
1999 1998 1999
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Revenues
Product licenses $ 450,532 $ 127,288 $ 451,908
Website development 245,288 123,990 53,258
Hosting fees 35,276 6,196 49,577
Other 3,089 8,243 38,042
--------- --------- ---------
Total revenue 734,185 265,717 592,785
Operating expenses 704,539 216,747 543,402
--------- --------- ---------
Earnings from operations 29,646 48,970 49,383
Other expenses
Interest expense 8,667 2,334 8,307
Other 2,501 - 4,926
--------- --------- ---------
Earnings before income taxes 18,478 46,636 36,150
Income taxes 1,898 6,995 11,026
--------- --------- ---------
NET EARNINGS $ 16,580 $ 39,641 $ 25,124
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
ROI INTERACTIVE, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD FROM JULY 1, 1998
THROUGH NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Contributed Retained
Capital Earnings Total
----------- -------- ---------
<S> <C> <C> <C>
Members' equity at July 1, 1998 $ 59,600 $ 7,097 $ 66,697
Members' contributions 100,000 - 100,000
Net earnings - 16,580 16,580
-------- ------- --------
Members' equity at June 30, 1999 159,600 23,677 183,277
Net earnings (unaudited) - 25,124 25,124
-------- ------- --------
Members' equity at November 30, 1999 (unaudited) $159,600 $48,801 $208,401
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
ROI INTERACTIVE, LLC
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Five months ended
June 30, November 30,
-------- ------------
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 16,580 $ 39,641 $ 25,124
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 38,464 10,350 18,940
Changes in operating assets and liabilities:
Accounts receivable (225,985) (63,472) (105,949)
Prepaid expenses (14,259) 644 7,659
Other assets (400) - 400
Accounts payable and accrued expenses 130,260 21,219 16,957
Sales tax payable 32,926 16,071 39,741
Other liabilities (4,934) (13,105) (6,194)
---------- -------- ----------
Net cash provided by (used in) operating
activities (27,348) 11,348 (3,322)
Cash flows from investing activities:
Purchase of furniture and equipment (95,256) (28,286) (52,412)
---------- -------- ----------
Net cash used in investing activities (95,256) (28,286) (52,412)
Cash flows from financing activities:
Net proceeds from note payable 39,793 - 89,902
Net proceeds (payments) - notes payable from
members (57,275) 24,693 -
Members' contributions 100,000 - -
---------- -------- ----------
Net cash provided by financing activities 82,518 24,693 89,902
---------- -------- ----------
Net increase (decrease) in cash (40,086) 7,755 34,168
Cash at beginning of period 54,047 54,047 13,961
---------- -------- ----------
Cash at end of period $ 13,961 $ 61,802 $ 48,129
========== ======== ==========
Supplemental disclosures
Cash paid for interest $ 8,377 $ 2,463 $ 8,597
Cash paid for income taxes 7,635 8,923 17,380
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
ROI INTERACTIVE, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ROI Interactive, LLC (the "Company"), a Texas limited liability company,
was incorporated on June 1, 1998. The Company is a "permission marketing"
and affinity-based, e-mail communications and marketing company,
concentrating primarily on the needs of businesses in the broadcast, media,
sports and entertainment industries located throughout the United States.
The financial statements as of November 30, 1999 and for the five months
ended November 30, 1999 and 1998 are unaudited, but in the opinion of
management include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation thereof. The results of
operations for the five months ended November 30, 1999 and 1998 are not
necessarily indicative of the results for the full year.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Furniture and Equipment
Furniture and equipment is stated at cost less accumulated depreciation.
Depreciation is provided using accelerated and straight-line methods for
financial reporting purposes and accelerated methods for tax purposes over
estimated useful lives of three to seven years.
Software Development Costs
Software development costs are capitalized once the technological
feasibility of the project is established. The amount of software
development costs capitalized is subject to limitations based on the net
realizable value of the potential product. Costs capitalized are amortized
on the straight-line method over three years, the estimated economic life
of the product.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to credit risk
consist primarily of accounts receivable. The Company grants credit to
customers in the ordinary course of business, but generally does not
require collateral or any other security to support amounts due. The
Company maintains an allowance for potential credit losses, which have
historically been within management's expectations.
<PAGE> 8
NOTE A - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Revenue Recognition
Product license revenue is recognized when a contract has been executed,
the product has been delivered, all significant contractual obligations
have been satisfied and collection of the related receivable is probable.
Website development revenues are recognized as stages of development are
completed, while hosting fees are recognized in the month the services are
provided.
The Company adopted Statement of Position (SOP) 97-2, Software Revenue
Recognition, and SOP 98-4, Deferral of the Effective Date of a Provision of
SOP 97-2, Software Revenue Recognition, as of June 1, 1998. SOP 97-2 and
SOP 98-4 provide guidance for recognizing revenue on software transactions
and supersede SOP 91-1, Software Revenue Recognition. The adoption of SOP
97-2 and SOP 98-4 did not have a material effect on the Company's financial
results.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9 Modification of SOP 97-2, Software Revenue Recognition,
With Respect to Certain Transactions. For the Company, SOP 98-9 amends SOP
98-4 to extend the deferral of the application of certain passages of SOP
97-2 provided by SOP 98-4 through June 30, 1999. All other provision of SOP
98-9 are effective for transactions entered into after June 30, 1999. The
Company believe the adoption of SOP 98-9 will not have a material effect on
its financial statements.
Income Taxes
The Company has elected to be taxed at the corporate rather than the member
level. The difference between the statutory and effective tax rates is due
to differences in depreciation for financial reporting and tax purposes.
Advertising
The Company expenses advertising costs as incurred. Advertising expense was
approximately $24,000 for the year ended June 30, 1999 and $8,500 and
$7,500 for the five month periods ended November 30, 1999 and 1998.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from those
estimates.
<PAGE> 9
NOTE B - NOTE PAYABLE
Note payable consists of an unsecured bank line-of-credit that provides for
borrowings up to $50,000, with interest at 1% above the bank's prime
lending rate (effective rate of 8.75% at June 30, 1999 and 9.5% at November
30, 1999). Effective August 2, 1999, the line availability was increased to
$150,000. The line is due on February 2, 2000 and bears interest at 1%
above the bank's prime lending rate.
NOTE C - LEASE COMMITMENTS
The Company conducts its operations in a leased facility with rental
expense of approximately $23,000 for the year ended June 30, 1999. The
Company's lease expired May 31, 1999; through July 31, 1999 the Company has
been renting on a month-to-month basis. Beginning in August 1999, the
Company has conducted its operations in a facility being rented by
PopMail.com, inc. ("PopMail"). PopMail charges the Company approximately
$3,500 per month, their proportionate share of the rental payments.
NOTE D - SUBSEQUENT EVENT
On December 3, 1999, the Company, became a wholly-owned subsidiary of
PopMail. PopMail purchased substantially all of the assets and assumed
substantially all of the liabilities of the Company. Due from affiliate
represents acquisition related expenses to be reimbursed by PopMail at the
closing of the purchase.
NOTE E - MEMBERS' EQUITY
The contributed capital portion of Members' equity represents capital
contributions of individuals who have purchased a portion of the ownership
of the Company. Each $10,000 contribution made during fiscal 1999
purchased a 1% share of the Company.
<PAGE> 10
(2) PRO FORMA FINANCIAL INFORMATION.
PRO FORMA UNAUDITED FINANCIAL STATEMENTS
The following pro forma unaudited condensed combined financial statements are
prepared to reflect the acquisition of substantially all of the assets and
assumption of substantially all liabilities of ROI Interactive LLC (ROI)
effective December 3, 1999 by the registrant, PopMail.com, inc. (PopMail)
accounted for as a purchase. The pro forma unaudited condensed combined
financial information consists of pro forma unaudited condensed combined
statements of operations for the year ended January 3, 1999, and eleven months
ended November 30, 1999, and a pro forma unaudited condensed combined balance
sheet as of November 30, 1999. The pro forma unaudited condensed combined
statements of operations give effect to the acquisition as if the transaction
had occurred on December 29, 1997. The pro forma unaudited condensed combined
balance sheet gives effect to the acquisition as if it had occurred on November
30, 1999.
The PopMail column of the pro forma unaudited condensed combined statements of
operations are presented to reflect the previous merger between Cafe Odyssey,
Inc. and PopMail, which was effective September 1, 1999, as if it had occurred
on December 29, 1997.
The pro forma unaudited condensed combined financial statements give effects to
certain adjustments, including: (1) the issuance of 2,750,000 PopMail common
shares; (2) the elimination of affiliated balance sheet items, and (3) resulting
goodwill created by the acquisition as well as related amortization expense.
The periods presented conform to the fiscal year of the registrant.
<PAGE> 11
ROI INTERACTIVE, LLC
PRO FORMA UNAUDITED CONDENSED COMBINED BALANCE SHEET
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Pro forma Pro forma
ASSETS PopMail ROI adjustments combined
------- --- ----------- --------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 348,272 $ 48,129 $ - $ 396,401
Accounts receivable, net 163,463 291,406 - 454,869
Due from affiliate - 90,302 (90,302)(1) -
Inventories 101,979 - - 101,979
Other current assets 196,846 8,016 - 204,862
------------ ----------- ----------- ------------
Total current assets 810,560 437,853 (90,302) 1,158,111
PROPERTY AND EQUIPMENT, NET 15,711,033 123,263 - 15,834,296
OTHER ASSETS 489,339 30,447 - 519,786
GOODWILL 29,223,557 - 6,038,797 (1) 35,262,354
------------ ----------- ----------- ------------
$ 46,234,489 $ 591,563 $ 5,948,495 $ 52,774,547
============ =========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 1,695,000 $ 129,695 $ - $ 1,824,695
Accounts payable 1,442,905 165,852 - 1,608,757
Convertible promissory notes payable 2,150,000 - - 2,150,000
Current portion of long-term obligations 3,193,833 - - 3,193,833
Accrued expenses 617,045 87,615 - 704,660
------------ ----------- ----------- ------------
Total current liabilities 9,098,783 383,162 - 9,481,945
DEFERRED RENT 3,620,578 - - 3,620,578
LONG-TERM OBLIGATIONS, less current portion 562,045 - - 562,045
COMMITMENTS AND CONTINGENCIES - - - -
SHAREHOLDERS' EQUITY
Preferred stock 26,238,750 - - 26,238,750
Common stock 104,329 - 27,500 (1) 131,829
Additional paid-in capital 32,928,205 159,600 (159,600)(1) 39,057,601
6,129,396 (1)
Retained earnings (deficit) (25,918,201) 48,801 (48,801)(1) (25,918,201)
Less common stock subscribed (400,000) - - (400,000)
------------ ----------- ----------- ------------
32,953,083 208,401 5,948,495 39,109,979
------------ ----------- ----------- ------------
$ 46,234,489 $ 591,563 $ 5,948,495 $ 52,774,547
============ =========== =========== ============
</TABLE>
<PAGE> 12
ROI INTERACTIVE, LLC
NOTES TO PRO FORMA UNAUDITED CONDENSED
COMBINED BALANCE SHEET
NOVEMBER 30, 1999
(1) Reflects the issuance of shares and transaction expenses to effect the
acquisition of ROI by PopMail, the elimination of shareholders equity
accounts of ROI, and costs incurred by ROI to be reimbursed by PopMail as
follows:
<TABLE>
<CAPTION>
Common stock
------------
<S> <C>
PopMail common stock issued, par value of $.01 2,750,000
Price per share/fair value per warrant 2.25 (a)
----------
Total 6,187,500
Plus transaction expenses of ROI acquisition 150,000
----------
Total consideration and costs 6,337,500
Net book value of ROI assets less liabilities (208,401)
Elimination of ROI costs to be reimbursed (90,302)
----------
Goodwill created $6,038,797
==========
</TABLE>
(a) The price per share is based on the closing price of the PopMail
common stock on December 3, 1999.
<PAGE> 13
ROI INTERACTIVE, LLC
PRO FORMA UNAUDITED CONDENSED COMBINED
STATEMENT OF OPERATIONS
ELEVEN MONTHS ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Pro forma Pro forma
PopMail ROI adjustments combined
------- --- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 11,088,767 $ 1,017,843 $ - $ 12,106,610
Costs and expenses:
Food, beverages and retail costs 2,875,717 - - 2,875,717
Restaurant operating expenses 7,619,205 - - 7,619,205
Restaurant depreciation 1,187,965 - - 1,187,965
Amortization of goodwill 9,240,324 - 1,845,188 (1) 11,085,512
Pre-opening expenses 572,932 - - 572,932
General, administrative and development expenses 3,593,710 995,122 - 4,588,832
------------ ----------- ----------- ------------
Total costs and expenses 25,089,853 995,122 1,845,188 27,930,163
------------ ----------- ----------- ------------
Income (loss) from operations (14,001,086) 22,721 (1,845,188) (15,823,553)
Interest expense, net 1,030,704 14,722 - 1,045,426
------------ ----------- ----------- ------------
Income (loss) before income taxes (15,031,790) 7,999 (1,845,188) (16,868,979)
Income taxes - 5,720 (5,720) -
------------ ----------- ----------- ------------
Net income (loss) (15,031,790) 2,279 (1,839,468) (16,868,979)
Preferred stock dividends and accretion ( 3,338,461) - - (3,338,461)
------------ ----------- ----------- ------------
Income (loss) attributable to common shareholders $(18,370,251) $ 2,279 $(1,839,468) $(20,207,440)
============ =========== =========== ============
Basic and diluted net loss per share
Net loss $ (1.33) $ (1.20)
============ ============
Loss attributable to common shareholders $ (1.62) $ (1.44)
============ ============
Basic and diluted weighted average outstanding
shares 11,329,510 - 2,750,000 14,079,510
============ =========== =========== ============
</TABLE>
<PAGE> 14
ROI INTERACTIVE, LLC
PRO FORMA UNAUDITED CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 3, 1999
<TABLE>
<CAPTION>
Pro forma Pro forma
PopMail ROI adjustments combined
------- --- ----------- --------
<S> <C> <C> <C> <C>
Net revenues $ 6,982,126 $ 345,155 $ - $ 7,327,281
Costs and expenses:
Food, beverage and retail costs 1,897,492 - - 1,897,492
Restaurant operating expenses 5,038,104 - - 5,038,104
Restaurant depreciation 940,186 - - 940,186
Amortization of goodwill 9,862,172 - 2,012,932 (1) 11,875,104
Pre-opening expenses 732,851 - - 732,851
Loss on impairment of restaurant related assets 2,000,000 - - 2,000,000
Selling, general, administrative and development
expenses 5,413,022 287,724 - 5,700,746
------------- ---------- ------------- -------------
25,883,827 287,724 2,012,932 28,184,483
------------- ---------- ------------- -------------
Income (loss) from operations (18,901,701) 57,431 (2,012,932) (20,857,202)
Interest expense (net) 111,530 2,382 - 113,912
------------- ---------- ------------- -------------
Income (loss) before income taxes (19,013,231) 55,049 (2,012,932) (20,971,114)
Income taxes - 8,529 (8,529) -
------------- ---------- ------------- -------------
Net income (loss) $ (19,013,231) $ 46,520 $ (2,004,403) $ (20,971,114)
============= ========== ============= =============
Basic and diluted net loss per share $ (0.84) $ (1.95)
============= =============
Basic and diluted weighted average outstanding
shares 8,000,131 - 2,750,000 10,750,131
============= ========== ============= =============
</TABLE>
<PAGE> 15
ROI INTERACTIVE, LLC
NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 3, 1999 AND
ELEVEN MONTHS ENDED NOVEMBER 30, 1999
The pro forma unaudited condensed combined statements of operations reflect
amortization of goodwill associated with the transaction.
(1) Reflects goodwill arising from the merger of $6,038,797 amortized on a
straight-line basis over three years.
<PAGE> 16
(3) EXHIBITS. The following documents are filed as an exhibit to this Form
8-K/A and are incorporated herein by reference:
<TABLE>
<CAPTION>
Exhibit
No. Description
--- -----------
<S> <C>
23.1 Consent of Grant Thornton LLP.
</TABLE>
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 thereunto duly authorized.
POPMAIL.COM, INC.
Date: February 14, 2000 By: /s/ Stephen King
---------------------------------
Name: Stephen King
Title: Chief Executive Officer
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 21, 2000, accompanying the
financial statements of ROI Interactive, LLC as of June 30, 1999 and for the
year then ended included in this Form 8-K of PopMail.com, inc. We hereby consent
to the incorporation by reference of said report in the Registration Statements
of PopMail.com, inc. on Forms S-3 (File No. 333-80241, File No. 333-85243, File
No. 333-88199, File No. 333-96109 and File No. 333-93317) and on Forms S-8 (File
No. 333-62729 and File No. 333-62747).
/s/ Grant Thornton LLP
Minneapolis, Minnesota
February 14, 2000
