<PAGE>
================================================================================
UNITED STATES
SECURITIES & 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):
September 14, 1999
INTERLIANT, INC.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 0-26115 13-3978980
- ------------------------------ ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
Two Manhattanville Road
Purchase, New York 10577
--------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(914) 640-9000
--------------
(Registrant's telephone number, including area code)
================================================================================
<PAGE>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
On September 14, 1999, Interliant, Inc. ("Interliant") filed a Current
Report on Form 8-K to report the acquisition of Sales Technology Limited ("Sales
Technology"). Pursuant to Item 7 of Form 8-K, Interliant indicated that it would
file certain financial information no later than the date required by Item 7 of
Form 8-K. This Amendment No. 1 is filed to provide the required financial
information.
(a) Consolidated Financial Statements of Business Acquired - Sales Technology
Limited
Report of Independent Auditors
Consolidated Profit and Loss Accounts for the year ended October 31, 1998
and for the nine months ended July 31, 1999 and 1998 (unaudited)
Consolidated Balance Sheets as of October 31, 1998 and July 31, 1999
(unaudited)
Consolidated Statements of Cash Flows for the year ended October 31, 1998
and for the nine months ended July 31, 1999 and 1998 (unaudited)
Notes to the Accounts
(b) Pro Forma Combined Financial Information of Interliant, Inc.
Unaudited pro forma combined condensed balance sheet as of June 30, 1999.
Unaudited pro forma combined condensed statement of operations for the year
ended December 31, 1998 and for the six months ended June 30, 1999
Notes to unaudited pro forma combined condensed financial statements
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Interliant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: November 22, 1999
INTERLIANT, INC
By: /s/ William A. Wilson
--------------------------
William A. Wilson
Chief Financial Officer and Treasurer
3
<PAGE>
(a) Financial Statements of Business Acquired
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Sales Technology Limited
We have audited the accompanying consolidated balance sheet of Sales Technology
Limited as of 31 October 1998 and the related consolidated profit and loss
account and statement of cash flows for the year ended 31 October 1998. 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 United Kingdom auditing standards
which do not differ in any significant respect from United States 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 consolidated financial position of Sales Technology
Limited at 31 October 1998 and the consolidated results of its operations and
its consolidated cash flows for the year ended 31 October 1998, in conformity
with accounting principles generally accepted in the United Kingdom.
ERNST & YOUNG LLP
London, England
November 22, 1999
4
<PAGE>
Sales Technology Limited
- -----------------------------------------------------------------------------
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
Audited Unaudited Unaudited
year 9 months 9 months
ended ended ended
31 October 31 July 31 July
1998 1999 1998
Notes (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
TURNOVER 2 575,832 736,420 323,789
Cost of sales 135,836 314,886 42,993
---------- --------- ---------
Gross profit 439,996 421,534 280,796
Administrative expenses 726,962 442,552 475,564
---------- --------- ---------
OPERATING LOSS 3 (286,966) (21,018) (194,768)
Interest receivable 557 - 557
Interest payable 6 (5,843) (16,429) (1,453)
---------- --------- ---------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (292,252) (37,447) (195,664)
Taxation 7 22,363 - -
---------- --------- ---------
LOSS FOR THE FINANCIAL YEAR (269,889) (37,447) (195,664)
========== ========= =========
</TABLE>
________________________________________________________________________________
There were no recognised gains or losses other than those recorded above
The notes to the financial statements are an integral part of the financial
statements.
5
<PAGE>
Sales Technology Limited
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Audited Unaudited
as at as at
31 October 31 July
1998 1999
Notes (Pounds) (Pounds)
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 8 63,797 122,017
-------- ---------
CURRENT ASSETS
Debtors 9 348,213 335,501
Cash at bank and in hand 16,997 13
-------- ---------
365,210 335,514
CREDITORS: amounts falling due within one year 10 269,575 345,395
-------- ---------
NET CURRENT ASSETS/(LIABILITIES) 95,635 (9,881)
-------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 159,432 112,136
CREDITORS: amounts falling due after more than one year 11 51,247 41,398
-------- ---------
108,185 70,738
======== =========
CAPITAL AND RESERVES
Called up share capital 17 562 562
Share premium 18 137,702 137,702
Capital reserve 18 14,626 14,626
Profit and loss account 18 (44,705) (82,152)
-------- ---------
SHAREHOLDERS' FUNDS 18 108,185 70,738
======== =========
</TABLE>
________________________________________________________________________________
The notes to the financial statements are an integral part of the financial
statements.
6
<PAGE>
Sales Technology Limited
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Audited Unaudited Unaudited
year 9 months 9 months
ended ended ended
31 October 31 July 31 July
1998 1999 1998
Notes (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 3(b) (169,244) (73,802) (122,227)
-------- ------- -------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Bank interest paid (5,341) (14,647) (1,453)
Interest element of finance lease rental payments (502) (1,782) (376)
Interest received 557 - 557
-------- -------- -------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (5,286) (16,429) (1,272)
-------- -------- -------
TAXATION
Corporation tax paid (23,608) - (23,608)
-------- -------- -------
TAX PAID (23,608) - (23,608)
-------- -------- -------
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (65,110) (64,867) (60,524)
Proceeds from sale of tangible fixed assets 2,702 3,031 -
-------- -------- -------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (62,408) (61,836) (60,524)
-------- ------- -------
NET CASH OUTFLOW BEFORE FINANCING (260,546) 152,067) (207,631)
-------- ------- -------
FINANCING
Issue of share capital 97,844 - 97,844
Net movement in short term borrowings 62,576 95,100 -
Net movement in long term borrowings 32,508 - -
Repayments of capital element of finance lease rentals (4,234) (1,780) (3,104)
-------- ------- -------
NET CASH INFLOW FROM FINANCING 188,694 93,320 94,740
-------- ------- --------
DECREASE IN CASH 15 (71,852) (58,747) (112,891)
======== ======= ========
</TABLE>
- -------------------------------------------------------------------------------
The notes to the financial statements are an integral part of the financial
statements.
7
<PAGE>
Sales Technology Limited
--------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 october 1998
1. ACCOUNTING POLICIES
Accounting convention
The accounts are prepared under the historical cost convention, and in
accordance with applicable United Kingdom accounting standards.
Companies Act 1985
These financial statements do not comprise statutory accounts within the
meaning of section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the year ended 31 October 1998 of Sales Technology
Limited and Sales Success Limited, have been delivered to the Registrar of
Companies for England and Wales. The auditors' reports on these accounts
were unqualified.
Sales Technology Limited took advantage of exemptions for small groups
available under the Companies Act 1985 and did not prepare consolidated
statutory accounts for the year ended 31 October 1998.
Basis of consolidation
These financial statements consolidate the accounts of Sales Technology
Limited and its subsidiary undertaking, Sales Success Limited, drawn up to
31 October 1998.
The financial statements at 31 July 1999 and for the nine months ended 31
July 1999 and 1998 are unaudited but, in the opinion of the company's
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended 31 July 1999 are not necessarily
indicative of the results that may be expected for the year ended 31
October 1999.
Goodwill
Negative goodwill arising on the acquisition of the company's wholly owned
subsidiary has been taken to a capital reserve.
Depreciation
Depreciation is provided on all tangible fixed assets at rates calculated
to write off the cost or valuation, less estimated residual value, of each
asset evenly over its expected useful life, as follows:
Leasehold land and buildings - over the lease term
Fixtures and fittings - 25% on cost
Office equipment - 33% - 50% on cost
Motor vehicles - 25% on cost
The carrying values of tangible fixed assets are reviewed for impairment in
periods if events or changes in circumstances indicate the carrying value
may not be recoverable.
Leasing and hire purchase agreements
Assets held under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their useful
lives.
The interest element of the rental obligations is charged to the profit and
loss account over the period of the lease and represents a constant
proportion of the balance of capital repayments outstanding.
Rentals paid under operating leases are charged to income on a straight
line basis over the lease term.
8
<PAGE>
Sales Technology Limited
-----------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 October 1998
Pensions
It is the policy of the company to contribute to defined contribution
pension schemes for certain employees by payment to insurance companies.
The assets of the scheme are held separately from those of the company. The
premiums payable are charged to the profit and loss account. Any difference
between amounts charged to the profit and loss account and contributions
paid is shown as a separately identified liability or asset in the balance
sheet.
1. ACCOUNTING POLICIES (continued)
Deferred taxation
Deferred taxation is provided on the liability method on all timing
differences which are expected to reverse in the future without being
replaced, calculated at the rate at which it is estimated that taxation
will be payable.
Advance corporation tax which is expected to be recoverable in the future
is deducted from the deferred taxation balance.
Deferred tax assets are only recognised if recovery without replacement by
equivalent debit balances is reasonably certain.
2. TURNOVER
Turnover, which is stated net of value added tax, represents amounts
invoiced to third parties in respect of the group's continuing activity,
the design and implementation of computerised sales management systems and
computer consultancy services.
All turnover arises from within the United Kingdom.
3. OPERATING LOSS
(a) This is stated after charging/(crediting):
<TABLE>
<CAPTION> 31 Oct
1998
(Pounds)
<S> <C>
Auditors' remuneration 4,500
Depreciation of owned fixed assets 22,275
Depreciation of assets held under finance leases and hire
purchase contracts 3,011
Operating lease rentals - land and buildings 34,868
Profit on sale of tangible fixed assets (423)
=======
</TABLE>
(b) Reconciliation of operating loss to net cash outflow from operating
activities:
<TABLE>
<CAPTION> 31 Oct
1998
(Pounds)
<S> <C>
Operating loss (286,966)
Depreciation 25,286
Decrease in operating debtors and prepayments 59,800
Increase in operating creditors and accruals 32,636
--------
(169,244)
========
</TABLE>
9
<PAGE>
Sales Technology limited
------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 October 1998
31 Oct
4. DIRECTORS' REMUNERATION 1998
(Pounds)
Emoluments 135,655
Compensation to directors for loss of office 9,375
--------
145,030
========
No.
Members of defined contribution pension schemes 1
=======
5. STAFF COSTS
31 Oct
1998
(Pounds)
Wages and salaries 222,946
Social security 41,199
Other pension costs 2,400
--------
266,545
========
The average weekly number of employees during the year was
31 Oct
1998
No.
Operational 9
Administration 4
----
13
====
6. INTEREST PAYABLE
31 Oct
1998
(Pounds)
Interest on loans partially repayable within five years 5,341
Interest on finance leases 502
--------
5,843
========
7. TAXATION
31 Oct
1998
(Pounds)
Based on the loss for the year:
Corporation tax 22,363
=======
10
<PAGE>
Sales Technology Limited
--------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 October 1998
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Short
leasehold Fixtures and Motor Office
improvements fittings vehicles equipment Total
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Cost :
At 1 November 1997 - 4,046 26,559 49,335 79,940
Additions 4,586 24,376 - 36,148 65,110
Disposals - - (14,515) - (14,515)
------- --------- -------- -------- -------
At 31 October 1998 4,586 28,422 12,044 85,483 130,535
------- --------- -------- -------- -------
Depreciation:
At 1 November 1997 - 2,739 10,442 40,084 53,265
Provided during the year 358 2,750 6,640 15,538 25,286
Disposals - - (11,813) - (11,813)
------- --------- -------- -------- -------
At 31 October 1998 358 5,489 5,269 55,622 66,738
------- --------- -------- -------- -------
Net book value:
At 31 October 1998 4,228 22,933 6,775 29,861 63,797
======= ========= ======== ======== =======
At 1 November 1997 - 1,307 16,117 9,251 26,675
======= ========= ======== ======== =======
</TABLE>
The net book value of office equipment above includes an amount of
(Pounds)6,775 in respect of assets held under finance leases and hire
purchase contracts.
9. DEBTORS
<TABLE>
<CAPTION>
31 Oct
1998
(Pounds)
<S> <C>
Trade debtors 265,378
Other debtors 42,534
Corporation tax 22,363
Prepayments 17,938
--------
348,213
========
</TABLE>
Other debtors includes (Pounds)30,000 in respect of a rent deposit which is
repayable upon expiry of the lease under which it was paid. This is due to
expire in 2008.
11
<PAGE>
Sales Technology Limited
---------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 October 1998
10. CREDITORS: amounts falling due within one year
<TABLE>
<CAPTION>
31 Oct
1998
(Pounds)
<S> <C>
Bank loans (note 12) 62,576
Obligations under finance leases and hire purchase contracts (note 13) 1,100
Trade creditors 53,757
Other taxes and social security costs 40,689
Accruals and deferred income 111,453
---------
269,575
=========
</TABLE>
The bank loan is secured by a fixed and floating charge over all the assets
of Sales Success Limited. In addition the bank loan is secured by an
unlimited cross company guarantee between Sales Success Limited and Sales
Technology Limited.
11. CREDITORS: amounts falling due after more than one year
<TABLE>
<CAPTION>
31 Oct
1998
(Pounds)
<S> <C>
Bank loan (note 12) 32,508
Convertible loan stock 7,950
Accruals and deferred income 10,789
--------
51,247
========
</TABLE>
The convertible loan stock can be converted into 53 ordinary shares of
(Pounds)1 each at any time. Once issued, the shares will rank pari passu
with the existing ordinary shares in issue. The convertible loan stock does
not attract interest and cannot be repaid. The convertible loan stock is
owned by David Yuile, a director of the company.
12. LOANS
<TABLE>
<CAPTION>
31 Oct
1998
(Pounds)
<S> <C>
Wholly repayable within five years:
Bank loan 95,084
Less: included in creditors: amounts falling due within one year (62,576)
-------
32,508
=======
Amounts repayable:
in one year or less or on demand 62,576
between one and two years 12,576
between two and five years 19,932
-------
95,084
=======
</TABLE>
12
<PAGE>
Sales Technology Limited
--------------------------------------------------------------------------
TO THE ACCOUNTS
At 31 October 1998
13. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
31 Oct
1998
(Pounds)
Amounts payable:
within one year 1,160
Less: Finance charges allocated to future periods 60
=======
1,100
=======
14. DEFERRED TAXATION
Deferred tax amounts which have not been recognised are as
follows:
31 Oct
1998
(Pounds)
Capital allowances in arrears of depreciation 627
Tax losses 33,895
--------
34,522
========
15. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDS
31 Oct
1998
(Pounds)
DECREASE IN CASH (71,852)
Cash outflow from decrease in lease financing 4,234
Loan repayments 4,916
New loans (100,000)
----------
Change in net debt resulting from cash flows (162,702)
----------
MOVEMENT IN NET DEBT IN THE YEAR (162,702)
NET FUNDS AT 1 NOVEMBER 83,515
----------
NET DEBT AT 31 OCTOBER (NOTE 16) (79,187)
==========
16. ANALYSIS OF NET FUNDS/(DEBT)
<TABLE>
<CAPTION>
At At
1 November Cash 31 October
1997 flow 1998
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Cash at bank and in hand 88,849 (71,852) 16,997
Bank loans due within one year - (62,576) (62,576)
Bank loans due after one year - (32,508) (32,508)
Finance leases (5,334) 4,234 (1,100)
------ ------- -------
83,515 162,702 (79,187)
====== ======= =======
</TABLE>
13
<PAGE>
Sales Technology Limited
---------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 October 1998
17. SHARE CAPITAL
<TABLE>
<CAPTION>
Allotted, called up
Authorised and fully paid
1998 1998
No. (Pounds)
<S> <C> <C>
Ordinary shares of (Pounds)1 each 70,000 562
======== ========
</TABLE>
During the year the company issued 61 ordinary shares of (Pounds)1 each, at
a premium of (Pounds)1,603 per share, for cash consideration of
(Pounds)97,843. The shares were issued to fund the working capital of the
business.
18. RECONCILIATION OF SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
Share Share Capital Profit and
capital premium reserve loss account Total
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
At 1 November 1997 501 39,919 14,626 225,184 280,230
Share issue 61 97,783 97,844
Retained loss for the year (269,889) (269,889)
-------- ----------- ------ ----------- ----------
At 31 October 1998 562 137,702 14,626 (44,705) 108,185
-------- ----------- ------ ----------- ----------
</TABLE>
The capital reserve relates to negative goodwill arising on the acquisition
of the company's wholly owned subsidiary, Sales Success Limited.
19. OTHER FINANCIAL COMMITMENTS
Annual commitments under non-cancellable operating leases are as follows:
Land and
buildings
1998
(Pounds)
Operating leases which expire:
over five years 55,275
==========
20. TRANSACTIONS WITH DIRECTORS
During the year, a car was sold to S McQuillan, one of the directors, for
(Pounds)3,125. This is considered to be the market value of the vehicle.
B Raynes, a director, has options to subscribe for 100 ordinary shares of
(Pounds)1 each in the company. In addition there is an agreement for B
Raynes to be awarded shares based on the performance of the group over the
first five years. One ordinary share would be issued for every thousand
pounds of profit for the year up to a maximum of 250 ordinary shares. At 31
October 1998 B Raynes had been awarded a total of 250 profit related
options.
14
<PAGE>
Sales Technology Limited
-------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
At 31 October 1998
21. OTHER RELATED PARTY TRANSACTIONS
During the year, Sales Success Limited paid J Raynes, the wife of B Raynes,
a director, (Pounds)6,350 for accountancy services. This is considered to
be the open market value of the services.
Adding Information Limited is a company controlled by J Raynes. During the
year, Adding Information Limited charged Sales Success Limited
(Pounds)5,375 for accountancy work. At the year end an amount of
(Pounds)3,375 was owed to Adding Information Limited by Sales Success
Limited, and is included within trade creditors. These amounts are
considered the market value of the services provided.
Included within trade debtors is an amount of (Pounds)1,346 due from Dowell
& Associates who are one of the shareholders of Sales Technology Limited.
15
<PAGE>
(b) Pro Forma Combined Financial Information of Interliant, Inc.
The following unaudited pro forma combined condensed financial statements
are presented for illustrative purposes only and are not necessarily indicative
of the combined financial position or results of operations for future periods
or the results of operations or financial position that actually would have been
realized had Interliant and Sales Technology been a combined company during the
specified periods. The unaudited pro forma combined condensed financial
statements, including the related notes, are qualified in their entirety by
reference to, and should be read in conjunction with, the historical
consolidated financial statements and related notes thereto of Interliant,
included in its registration statement on Form S-1, filed on March 15, 1999, as
amended, and Sales Technology, included elsewhere in this filing.
The following unaudited pro forma combined condensed financial statements
give effect to the acquisition of Sales Technology using the purchase method of
accounting. The pro forma combined condensed financial statements are based on
the respective historical audited and unaudited consolidated financial
statements and related notes of Interliant and Sales Technology. The pro forma
adjustments are preliminary and based on management's estimates of the value of
the tangible and intangible assets acquired.
The actual adjustments may differ materially from those presented in these
pro forma financial statements. A change in the pro forma adjustments would
result in a reallocation of the purchase price affecting the value assigned to
the long-term tangible and intangible assets or, in some circumstances, result
in a charge to the statement of operations. The effect of these changes on the
statement of operations will depend on the nature and amounts of the assets and
liabilities adjusted.
The unaudited pro forma combined condensed balance sheet assumes that the
acquisition took place on June 30, 1999, and combines Interliant's unaudited
June 30, 1999 consolidated balance sheet with Sales Technology's unaudited July
31, 1999 consolidated balance sheet. The pro forma combined condensed statements
of operations assume all of the acquisitions completed through the date of this
report took place as of January 1, 1998, and combines Interliant's audited
consolidated statement of operations for the year ended December 31, 1998 and
unaudited consolidated statement of operations for the six months ended June 30,
1999, with Sales Technology's audited statement of operations for the year ended
October 31, 1998 and unaudited statement of operations for the six months ended
July 31, 1999, respectively.
The financial statements of Sales Technology have been translated into U.S.
Dollars in accordance with FASB Statement No. 52, Foreign Currency Translation.
The balance sheet of Sales Technology has been converted at the exchange rate in
effect as of July 31, 1999, and the statements of operations have been converted
using the average exchange rates for each of the periods presented.
16
<PAGE>
PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
Sales
Interliant Technology Pro Forma
Historical Limited (a) Adjustments Pro Forma
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,269,491 $ 21 $ 62,780,000 (1),(4) $ 66,049,512
Cash-restricted 1,256,772 - 1,256,772
Accounts receivable, net 5,166,477 382,659 5,549,136
Prepaid and other current assets 1,002,576 154,143 1,156,719
-------------- ------------- -------------- --------------
Total current assets 10,695,316 536,823 62,780,000 74,012,139
-------------- ------------- -------------- --------------
Furniture, fixtures and equipment, net 12,417,328 195,227 12,612,555
Intangibles, net 77,486,021 3,200,000 (4) 80,686,021
Other assets 3,130,370 (2,000,000)(1) 1,130,370
-------------- ------------- -------------- --------------
Total assets $ 103,729,035 $ 732,050 $ 63,980,000 $ 168,441,085
============== ============= ============== ==============
Liabilities and stockholders' equity
Current liabilities:
Notes payable and current portion of
long-term debt $ 10,983,866 $ 371,115 (10,725,000)(3),(4) $ 629,981
Accounts payable 3,994,192 38,035 4,032,227
Accrued expenses 6,679,260 143,483 (677,753)(1) 6,144,990
Deferred revenue 4,347,112 4,347,112
-------------- ------------- -------------- --------------
Total current liabilities 26,004,430 552,633 (11,402,753) 15,154,310
-------------- ------------- -------------- --------------
Long-term debt, less current portion 1,660,970 - 1,660,970
Long-term liabilities 53,516 53,516
Series A redeemable convertible preferred stock 13,000,000 - (13,000,000)(2) -
Stockholders' equity:
Preferred stock
Common stock 325,676 899 108,432 (1),(2),(4) 435,007
Additional paid-in capital 96,102,605 233,044 88,166,279 (1),(2),(4) 184,501,928
Deferred compensation (634,304) - (634,304)
Accumulated deficit (32,730,342) (108,042) 108,042 (32,730,342)
-------------- ------------- -------------- --------------
Total stockholders' equity 63,063,635 125,901 88,382,753 151,572,289
-------------- ------------- -------------- --------------
Total liabilities and stockholders' equity $ 103,729,035 $ 732,050 $ 63,980,000 $ 168,441,085
============== ============= ============== ==============
</TABLE>
(a) Balance sheet presented as of July 31, 1999, which represents
acquiree's most recent quarter end.
17
<PAGE>
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Companies Companies Sales
Interliant Acquired in Acquired in Technology Pro Forma
Historical 1998 (5) 1999 (6) Acquisition (12) Adjustments Pro Forma
---------- -------- -------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service revenues $ 4,905,027 $ 3,795,026 $34,280,078 $ 961,639 $ 43,941,770
Costs and expenses: -
Cost of service revenues 3,236,385 1,308,850 17,496,707 226,846 (1,050,921) (7) 21,217,867
Sales and marketing 2,555,035 82,289 6,966,463 9,603,787
General and administrative 6,848,565 3,482,143 10,331,041 1,171,799 2,497,463 (7), (8) 24,331,011
Depreciation 696,039 121,121 3,040,130 42,228 3,899,518
Amortization of intangibles 2,439,426 - - 22,221,057 (9) 24,660,483
------------ ----------- ----------- ----------- ------------- ------------
Total costs and expenses 15,775,450 4,994,403 37,834,341 1,440,873 23,667,599 83,712,666
------------ ----------- ----------- ----------- ------------- ------------
Operating income (loss) (10,870,423) (1,199,377) (3,554,263) (479,234) (23,667,599) (39,770,896)
Interest income (expense) 138,073 (178,451) (841,326) (8,828) (890,532)
Gain on litigation settlement - 266,518 266,518
Other income (expense) - (142,243) (142,243)
------------ ----------- ----------- ----------- ------------- ------------
Income (loss) before income
tax (10,732,350) (1,377,828) (4,271,314) (488,062) (23,667,599) (40,537,153)
Provision for income tax 12,000 100,800 (37,346) (75,454) (10) -
------------ ----------- ----------- ----------- ------------- ------------
Net income (loss) $(10,732,350) $(1,389,828) $(4,372,114) $ (450,716) $ (23,592,145) $(40,537,153)
============ =========== =========== =========== ============= ============
Net loss per share - basic
and diluted $ (1.22) $ (2.48)
Weighted-average shares
outstanding 8,799,432 16,360,172
</TABLE>
18
<PAGE>
Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Companies Sales
Interliant Acquired in Technology Pro Forma
Historical 1999 (11) Acquisition (12) Adjustments Pro Forma
---------- --------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Service revenues $ 16,081,813 $ 5,818,821 $ 832,062 $ 22,732,696
Costs and expenses:
Cost of service revenues 9,339,143 2,933,339 355,782 12,628,264
Sales and marketing 5,969,136 1,692,276 - 7,661,412
General and administrative 11,501,942 2,385,843 465,529 14,353,314
Depreciation 2,100,306 600,520 34,500 2,735,326
Amortization of intangibles 8,784,915 - 3,545,327 (9) 12,330,242
------------ ------------ --------- ----------- -------------
Total costs and expenses 37,695,442 7,611,978 855,811 3,545,327 49,708,558
------------ ------------ --------- ----------- -------------
Operating income (loss) (21,613,629) (1,793,157) (23,749) (3,545,327) (26,975,862)
Interest income (expense) (114,427) (151,300) (18,563) (284,290)
Other income (expense) (112,188) - (112,188)
------------ ------------ --------- ----------- -------------
Income (loss) before income tax (21,840,244) (1,944,457) (42,312) (3,545,327) (27,372,340)
Provision for income tax - 13,313 (13,313) (10) -
------------ ------------ --------- ----------- -------------
Net income (loss) $(21,840,244) $ (1,957,770) $ (42,312) $(3,532,014) $ (27,372,340)
============ ============ ========== =========== =============
Net loss per share - basic and
diluted $ (0.77) $ (0.89)
Weighted-average shares
outstanding 28,369,440 30,753,026
</TABLE>
Notes to Pro Forma Condensed Combined Financial Information
The following adjustments were applied to Interliant's Consolidated
Financial Statements and the financial data of the companies acquired by
Interliant since January 1, 1998 to arrive at the unaudited Pro Forma Combined
Financial Information.
(1) To record receipt of proceeds of $72.9 million from the sale of
8,050,000 shares of common stock in an Initial Public Offering (IPO) in
July 1999 at $10.00 per share, net of underwriters' discounts and
commissions and offering costs payable directly by Interliant.
(2) To reflect conversion of 2,647,658 shares of Series A redeemable
convertible preferred stock into an equal number of shares of common
stock upon consummation of IPO.
(3) To reflect repayment of debt in the amount of $10.4 million upon
completion of the IPO.
(4) To reflect purchase consideration for acquisition of Sales Technology
Limited completed on September 14, 1999, consisting of cash of $0.4
million, repayment of $0.3 million of assumed bank debt, and the
issuance of 235,410 shares of common stock valued at $11.23 per share,
the elimination of the acquired company's net equity and record
intangible assets arising from the acquisition. Future contingent
consideration payments up to $3.65 million have not been recorded for
pro forma purposes since the determination will not be made until
December 31, 2000.
19
<PAGE>
(5) The following table presents the statements of operations for acquisitions
completed during 1998 for the period January 1, 1998 through the respective
acquisition dates. Acquisitions that were deemed insignificant as per Rule
3-05 of Regulation S-X are aggregated in the Other Acquisitions column.
<TABLE>
<CAPTION>
Clever Tri-Star Host B.N. Technology GEN Other Total Companies
Computers Web Creations America dba ICOM International Acquisitions Acquired in 1998
--------- ------------- ------- -------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Service revenues $ 518,320 $ 256,953 $ 533,159 $ 982,376 $ 618,867 $ 885,351 $ 3,795,026
-
Costs and expenses: -
Cost of service revenues 102,197 103,232 230,435 153,919 365,933 353,134 1,308,850
Sales and marketing 52,770 29,519 82,289
General and administrative 381,537 183,521 629,727 984,223 800,177 502,958 3,482,143
Depreciation 9,557 63,642 10,817 5,518 31,587 121,121
---------------------------------------------------------------------------------------------------
Total costs and expenses 483,734 296,310 976,574 1,148,959 1,201,147 887,679 4,994,403
---------------------------------------------------------------------------------------------------
Operating income (loss) 34,586 (39,357) (443,415) (166,583) (582,280) (2,328) (1,199,377)
Interest income (expense) (368) (156,399) (4,051) (10,021) (7,612) (178,451)
---------------------------------------------------------------------------------------------------
Income (loss) before income tax 34,586 (39,725) (599,814) (170,634) (592,301) (9,940) (1,377,828)
Provision for income tax 12,000 12,000
---------------------------------------------------------------------------------------------------
Net income (loss) $ 22,586 $ (39,725) $(599,814) $ (170,634) $ (592,301) $ (9,940) $ (1,389,828)
===================================================================================================
</TABLE>
(6) The following table presents the statements of operations for acquisitions
completed during 1999 for the period January 1, 1998 through December 31,
1998. Acquisitions that were deemed insignificant as per Rule 3-05 of
Regulation S-X are aggregated in the Other Acquisitions column.
<TABLE>
<CAPTION>
Net Daemons Interliant Other Companies
Telephonetics Digiweb Associates Texas Acquisitions Acquired in 1999
------------- ------- ---------- ----- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Service revenues $ 2,769,606 $2,685,676 $ 5,770,024 $ 21,172,869 $ 1,881,903 $ 34,280,078
Costs and expenses:
Cost of service revenues 823,161 923,310 3,211,532 11,880,983 657,721 17,496,707
Sales and marketing 31,577 6,722,996 211,890 6,966,463
General and administrative 2,605,725 578,993 2,161,094 4,137,668 847,561 10,331,041
Depreciation 74,758 246,329 135,129 2,525,530 58,384 3,040,130
--------------------------------------------------------------------------------------------
Total costs and expenses 3,503,644 1,780,209 5,507,755 25,267,177 1,775,556 37,834,341
--------------------------------------------------------------------------------------------
Operating income (loss) (734,038) 905,467 262,269 (4,094,308) 106,347 (3,554,263)
Interest income (expense) (7,369) (16,829) (101,485) (715,643) (841,326)
Gain (loss) on litigation settlement 600,000 (333,482) 266,518
Other income (expense) (144,735) 2,492 (142,243)
--------------------------------------------------------------------------------------------
Income (loss) before income tax (741,407) 888,638 160,784 (4,354,686) (224,643) (4,271,314)
Provision for income tax 100,800 100,800
--------------------------------------------------------------------------------------------
Net income (loss) $ (741,407) $ 888,638 $ 59,984 $ (4,354,686) $ (224,643) $ (4,372,114)
============================================================================================
</TABLE>
(7) To reclassify Interliant Texas customer service costs to conform to
Interliant, Inc.'s presentation.
20
<PAGE>
(8) To record amortization of stock based compensation awarded to employees and
owners of acquired businesses in connection with employment and/or
consulting agreements.
(9) To record amortization of intangibles arising as a result of acquisitions
for the period from January 1, 1998 to acquisition date based on
amortization periods ranging from one to five years.
(10) To record elimination of income tax provision due to consolidated pre-tax
loss.
(11) The following table presents the statements of operations for acquisitions
completed during 1999 for the period January 1, 1999 through the
respective acquisition dates. Acquisitions that were deemed insignificant
as per Rule 3-05 of Regulation S-X are aggregated in the Other
Acquisitions column.
<TABLE>
<CAPTION>
Net Daemons Interliant Other Companies
Telephonetics Digiweb Associates Texas Acquisitions Acquired in 1999
------------- ------- ---------- ----- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Service revenues $ 331,182 $ 237,300 $ 836,289 $3,501,602 $ 912,448 $ 5,818,821
Costs and expenses:
Cost of service revenues 47,387 62,003 466,929 2,149,276 207,744 2,933,339
Sales and marketing 69,711 12,122 1,508,576 101,867 1,692,276
General and administrative 201,261 82,979 285,395 1,289,018 527,190 2,385,843
Depreciation 6,000 25,000 16,206 532,192 21,122 600,520
----------------------------------------------------------------------------------------------
Total costs and expenses 324,359 169,982 780,652 5,479,062 857,923 7,611,978
----------------------------------------------------------------------------------------------
Operating income (loss) 6,823 67,318 55,637 (1,977,460) 54,525 (1,793,157)
Interest income (expense) (1,873) (148,460) (967) (151,300)
----------------------------------------------------------------------------------------------
Income (loss) before income tax 6,823 67,318 53,764 (2,125,920) 53,558 (1,944,457)
Provision for income tax 13,313 13,313
==============================================================================================
Net income (loss) $ 6,823 $ 67,318 $ 40,451 $(2,125,920) $ 53,558 $ (1,957,770)
==============================================================================================
</TABLE>
(12) The Pro Forma Combined Statement of Operations for the twelve months ended
December 31, 1998 includes the results of operations for Sales Technology
for the twelve months ended October 31, 1998. The Pro Forma Combined
Statement of Operations for the six months ended June 30, 1999 includes
the results of operations for Sales Technology for the six months ended
July 31, 1999.
21
