<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
JANUARY 6, 2000
MAIL.COM, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 000-26371 13-3787073
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
11 BROADWAY, 6TH FLOOR
NEW YORK, NY 10004
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code (212) 425-4200
N/A
- --------------------------------------------------------------------------------
Former Name or Former Address, if Changed Since Last Report
<PAGE>
ITEM 5. OTHER EVENTS
On January 6, 2000, Mail.com, Inc. issued a press release announcing
its proposed Rule 144A offering of convertible subordinated notes. A copy of the
press release is attached hereto as Exhibit 99.1 and incorporated herein by
reference.
The notes will not be registered under the Securities Act of 1933 and
may not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements under such act.
In connection with the proposed offering, Mail.com has published
unaudited pro forma condensed combined financial statements giving pro forma
effect to the acquisition of The Allegro Group, Inc., which was completed on
August 20, 1999, and to the pending acquisition of NetMoves Corporation, which
is pending as described in Mail.com's Report on Form 8-K filed December 16,
1999. Such unaudited pro forma financial statements are attached hereto as
Exhibit 99.2 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
99.1 Press Release Dated January 6, 2000 Announcing
Mail.com, Inc.'s Proposed Offering of Subordinated
Convertible Notes.
99.2 Mail.com, Inc. Unaudited Pro Forma Condensed Combined
Financial Statements.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 6, 2000
MAIL.COM, INC.
By: /s/ GARY MILLIN
-------------------------
Gary Millin, President
<PAGE>
EXHIBIT INDEX
Exhibit
99.1 Press Release Dated January 6, 2000 Announcing Mail.com, Inc.'s
Proposed Offering of Subordinated Convertible Notes.
99.2 Mail.com, Inc. Unaudited Pro Forma Condensed Combined Financial
Statements.
<PAGE>
Exhibit 99.1
NEWS ANNOUNCEMENT
FOR IMMEDIATE RELEASE
CONTACT:
Kathleen Holmes Robb
Mail.com, Inc.
Director, Investor Relations
212/425-4200 x376
[email protected]
MAIL.COM TO OFFER CONVERTIBLE NOTES
NEW YORK, NY--JANUARY 6, 2000--Mail.com, Inc. (NASDAQ: MAIL) today announced its
intention to raise $100 million (excluding any over-allotments) through a 144A
offering of convertible subordinated notes. The notes will be convertible, at
the option of the holder, into shares of Mail.com's Class A common stock at a
conversion price to be determined, and will be non-callable for three years.
Proceeds from the Rule 144A offering will be used to develop the Company's
domain name properties and partially fund related acquisitions, finance
international expansion, expand business outsourcing sales and marketing
activities and fund other general corporate purposes.
The notes will not be registered under the Securities Act of 1933 and may not be
offered or sold in the United States absent registration or an applicable
exemption from the registration requirements under such act.
THIS NEWS RELEASE MAY CONTAIN STATEMENTS OF A FORWARD-LOOKING NATURE RELATING TO
THE FUTURE EVENTS OR THE FUTURE FINANCIAL RESULTS OF MAIL.COM. INVESTORS ARE
CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND THAT ACTUAL EVENTS OR
RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, INVESTORS SHOULD
SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR
RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED FROM SUCH FORWARD-LOOKING
STATEMENTS, INCLUDING THE MATTERS SET FORTH IN MAIL.COM'S REPORTS AND DOCUMENTS
FILED FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION.
# # #
<PAGE>
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
ACQUISITION OF THE ALLEGRO GROUP, INC.
On August 20, 1999, Mail.com acquired The Allegro Group, Inc. ("Allegro")
pursuant to the terms of an Agreement and Plan of Merger (the "Allegro Merger
Agreement"). Pursuant to the terms of the Allegro Merger Agreement, Allegro
merged with and into Acquisition Corp. and became a wholly owned subsidiary of
Mail.com. The total purchase price for this transaction was approximately
$20.4 million, including acquisition costs. The consideration payable by
Mail.com in connection with the acquisition of Allegro consisted of the
following: approximately $3.2 million in cash and 1,102,973 shares of Mail.com
Class A common stock valued at approximately $17.1 million. Mail.com also
incurred acquisition costs of approximately $150,000 related to the merger.
The consideration payable by Mail.com was determined as a result of
negotiations between Mail.com and Allegro. The number of shares of Mail.com
Class A common stock issued to Allegro stockholders was determined based on the
exchange rate of 2,750.5561 shares of Mail.com Class A common stock for each
share of Allegro common stock.
The acquisition has been accounted for using the purchase method of
accounting. Mail.com has allocated a portion of the purchase price to the fair
market value of the acquired assets and assumed liabilities of Allegro as of the
date of acquisition. The excess of the purchase price over the fair market value
of the acquired assets and assumed liabilities of Allegro has been allocated to
goodwill and other intangible assets. Goodwill and other intangible assets are
being amortized over a period of 3 years, the expected period of benefit.
Approximately $900,000 of the purchase price was allocated to in-process
technology based upon an independent appraisal which determined that the new
versions of MailZone technology acquired from Allegro had not been developed
into the platform required by Mail.com at the date of acquisition. The fair
value of purchased existing and in-process technologies was determined by
management using a risk-adjusted income valuation approach. Because such
in-process technologies had not reached the stage of technological feasibility
at the acquisition date and had no alternative future use, this amount was
immediately written off on the date of the acquisition. As a result, Mail.com
will be required to expend significant capital expenditures to successfully
integrate and develop the new versions of the MailZone technology, for which
there is considerable risk that such technology will not be successfully
developed, and if such technology is successfully developed, there will be no
alternative use for the technology. The MailZone technology is an enabling
technology for email communications and includes message management, license,
traffic and reporting. Accordingly, Mail.com's historical statement of
operations for the nine months ended September 30, 1999 reflect a write-off of
the amount of purchase price allocated to acquired in-process technology of
$900,000.
Mail.com allocated the excess purchase price over the fair value of net
tangible assets acquired to identified intangible assets. In performing this
allocation, Mail.com considered, among other factors, the attrition rate of the
active users of the technology at the date of acquisition and the research and
development projects in-process at the date of acquisition. With regard to the
in-process research and development projects, Mail.com considered, among other
factors, the stage of development of each project at the time of acquisition,
the importance of each project to the overall development plan, and the
projected incremental cash flows from the projects when completed and any
associated risks. Associated risks included the inherent difficulties and
uncertainties in completing each project and thereby achieving technological
feasibility and risks related to the impact of potential changes in future
target markets.
Mail.com will incur in excess of approximately $600,000 related primarily to
salaries, to develop the in-process technology into commercially viable products
over the next year. Remaining development
<PAGE>
efforts are focused on addressing security issues, architecture stability and
electronic commerce capabilities, and completion of these projects will be
necessary before revenues are produced. Mail.com expects to begin to benefit
from the purchased in-process research and development by its fiscal year 2000.
If these projects are not successfully developed, Mail.com may not realize the
value assigned to the in-process research and development projects. In addition,
the value of the other acquired intangible assets may also become impaired.
ACQUISITION OF NETMOVES CORPORATION
On December 11, 1999, Mail.com entered into a definitive agreement and
intends to acquire NetMoves Corporation ("NetMoves") for approximately
$163.9 million including acquisition costs pursuant to the terms of the merger
agreement previously filed with the Securities and Exchange Commission. Pursuant
to the terms of the merger agreement, Mast Acquisition Corp., which is a wholly
owned subsidiary of Mail.com, will merge with and into NetMoves and NetMoves
will become a wholly-owned subsidiary of Mail.com. Pursuant to the merger,
NetMoves stockholders will be entitled to receive 0.385336 of a share of
Mail.com Class A common stock for each issued and outstanding share of NetMoves
common stock. Based on NetMoves' capitalization on December 11, 1999, the
consideration payable by Mail.com in connection with the acquisition of NetMoves
will consist of the following:
- 6,343,904 shares of Mail.com Class A common stock valued at approximately
$154.6 million;
- The assumption by Mail.com of options to purchase shares of NetMoves'
common stock, par value of $.01 per share, to be exchanged for options to
purchase approximately 1.0 million shares of Mail.com Class A common
stock. The options were valued at approximately $7.8 million. Such options
have an aggregate exercise price of approximately $6.6 million;
- The assumption by Mail.com of warrants to purchase shares of NetMoves'
common stock, par value of $.01 per share, to be exchanged for warrants to
purchase approximately 58,000 shares of Mail.com Class A common stock. The
warrants were valued at approximately $852,000. Such warrants have an
aggregate exercise price of approximately $496,000. Mail.com has the right
to cause some of the warrants to be converted into NetMoves common stock
prior to the merger; and
- Mail.com also anticipates acquisition costs of approximately $600,000
related to the merger.
In addition to the rollover of existing options contemplated by the merger
agreement, Thomas Murawski, NetMoves' President, Chief Executive Officer and
Chairman of the board of directors, as an employee of Mail.com will receive
options from Mail.com to purchase Mail.com Class A common stock based on the
exchange ratio and equivalent to 600,000 options to purchase NetMoves' common
stock, with an exercise price equal to the lesser of $23.35650 per share and the
market price of Mail.com Class A common stock as of the close of business on the
date the merger is consummated.
The consideration payable by Mail.com was determined as a result of
negotiations between Mail.com and NetMoves. The number of shares of Mail.com
Class A common stock to be issued to NetMoves stockholders was determined based
on the exchange rate of 0.385336 shares of Mail.com Class A common stock for
each share of NetMoves common stock.
The acquisition is expected to be accounted for using the purchase method of
accounting. Mail.com intends to allocate a portion of the purchase price to the
fair market value of the acquired assets and assumed liabilities of NetMoves as
of the date of the closing. For pro forma purposes, Mail.com used the
announcement date of the intended acquisition as its basis for determining its
preliminary allocation of the purchase price. The excess of the purchase price
over the fair market value of the acquired assets and assumed liabilities of
NetMoves has been preliminarily allocated to goodwill and other intangible
assets. Goodwill and other intangible assets are expected to be amortized over a
period of 3 years, the expected estimated period of benefit. The purchase price
allocation is preliminary and is subject to change depending upon the final
outcome of the valuation and appraisals of the fair market value of the acquired
<PAGE>
assets and assumed liabilities of NetMoves at the date of acquisition, as well
as the potential identification of certain intangible assets such as customer
lists, etc.
Mail.com is in process of performing an independent valuation of NetMoves
estimated acquired in-process technology, etc. Approximately $18.0 million of
the purchase price of NetMoves is expected to be allocated to in-process
technology based upon a preliminary independent appraisal which determined that
the new versions of the various fax technologies acquired from NetMoves had not
been developed into the platform required by Mail.com by the anticipated
acquisition date. The preliminary fair value of purchased existing and
in-process technologies was determined by management using a risk-adjusted
income valuation approach. As a result, Mail.com will be required to expend
significant capital expenditures to successfully integrate and develop the new
versions of various fax technologies, for which there is considerable risk that
such technologies will not be successfully developed, and if such technologies
are not successfully developed, there will be no alternative use for the
technologies. The various fax technologies are enabling technologies for fax
communications and include message management and reporting. Accordingly, on the
date of acquisition, Mail.com's statements of operations will reflect a
write-off of the amount of purchase price allocated to in-process technology of
$18 million. For purposes of the pro forma financial information, the estimated
amount of the in-process technology ($18 million) is the mid point of the
preliminary estimated range of acquired in-process technology of $16 to
$20 million. This range is based upon a preliminary analysis. Because such
in-process technologies is not expected to reach the stage of technological
feasibility by the anticipated acquisition date and is expected to have no
alternative future use, this amount shall be immediately written-off by Mail.com
and has been reflected in the pro forma balance sheet as a charge to
stockholders' equity.
Mail.com intends to allocate the excess purchase price over the fair value
of net tangible assets acquired to identified intangible assets. In performing
this allocation, Mail.com considered, among other factors, the attrition rate of
the active users of the technology at the date of acquisition and the research
and development projects in-process at the date of acquisition. With regard to
the in-process research and development projects, Mail.com considered, among
other factors, the stage of development of each project at the time of
acquisition, the importance of each project to the overall development plan, and
the projected incremental cash flows from the projects when completed and any
associated risks. Associated risks included the inherent difficulties and
uncertainties in completing each project and thereby achieving technological
feasibility and risks related to the impact of potential changes in future
target markets.
Mail.com intends to incur in excess of approximately $12.0 million related
primarily to salaries, to develop the in-process technology into commercially
viable products over the next year. Remaining development efforts are focused on
addressing security issues, architecture stability and electronic commerce
capabilities, and completion of these projects will be necessary before revenues
are produced. Mail.com expects to begin to benefit from the purchased in-process
research and development by its fiscal year 2000. If these projects are not
successfully developed, Mail.com may not realize the value assigned to the
in-process research and development projects. In addition, the value of the
other acquired intangible assets may also become impaired.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed combined Statement of
Operations (the "Pro Forma Statement of Operations") for the year ended
December 31, 1998 and nine months ended September 30, 1999 gives effect to the
Allegro and NetMoves acquisitions as if they had occurred on January 1, 1998.
The Pro Forma Statement of Operations are based on historical results of
operations of Mail.com, Allegro and NetMoves for the year ended December 31,
1998 and nine months ended September 30, 1999 (approximately seven and one-half
months for Allegro).
The Unaudited Pro Forma Condensed Combined Balance Sheet (the "Pro Forma
Balance Sheet") gives effect to the acquisition of NetMoves as if the
acquisition had occurred on September 30, 1999. The
<PAGE>
acquisition of Allegro occurred during the third quarter of 1999 and,
accordingly, the Allegro acquisition is reflected in Mail.com's historical
balance sheet as of September 30, 1999. The Pro Forma Statement of Operations
and Pro Forma Balance Sheet and accompanying notes (the "Pro Forma Financial
Information") should be read in conjunction with and are qualified by the
historical financial statements of Mail.com, NetMoves and Allegro
previously filed with the Securities and Exchange Commission.
The Pro Forma Financial Information is intended for informational purposes
only and is not necessarily indicative of the future financial position or
future results of operations of Mail.com after the acquisition of Allegro and
NetMoves, or of the financial position or results of operations of Mail.com that
would have actually occurred had the acquisition of Allegro and NetMoves been
effected on January 1, 1998.
<PAGE>
MAIL.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
NETMOVES
MAIL.COM, INC. CORPORATION ADJUSTMENTS PRO FORMA
-------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 53,469 $ 8,966 $ -- $ 62,435
Accounts receivable, net................... 2,400 3,400 -- 5,800
Prepaid expenses and other current
assets................................... 1,290 432 -- 1,722
-------- ------- -------- --------
Total current assets..................... 57,159 12,798 -- 69,957
Property and equipment, net.................. 26,035 6,100 -- 32,135
Domain assets, net........................... 4,145 -- -- 4,145
Partner advances............................. 19,842 -- -- 19,842
Investments in affiliated companies.......... 5,854 -- -- 5,854
Goodwill and other intangible assets, net.... 19,352 2,190 132,278(b) 153,820
Restricted investment........................ 1,000 -- -- 1,000
Other assets................................. 380 -- -- 380
-------- ------- -------- --------
Total assets............................. $133,767 $21,088 $132,278 $287,133
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 8,028 $ 1,976 $ -- $ 10,004
Accrued expenses........................... 6,322 2,720 -- 9,042
Capital lease obligations.................. 3,866 63 -- 3,929
Domain asset purchase obligations.......... 268 -- -- 268
Current portion of long-term debt.......... -- 1,166 -- 1,166
Deferred revenue........................... 914 -- -- 914
Other current liabilities.................. 2,988 -- -- 2,988
-------- ------- -------- --------
Total current liabilities................ 22,386 5,925 -- 28,311
Capital lease obligations, less current
portion.................................... 9,094 145 -- 9,239
Domain asset purchase obligations, less
current portion............................ 184 -- -- 184
Long-term debt, less current portion......... -- 1,429 -- 1,429
Deferred revenue............................. 953 -- -- 953
-------- ------- -------- --------
Total liabilities........................ 32,617 7,499 -- 40,116
(13,589)(b)
(18,000)(b)
Stockholders' equity......................... 101,150 13,589 163,867(b) 247,017
-------- ------- -------- --------
Total liabilities and stockholders'
equity................................. $133,767 $21,088 $132,278 $287,133
======== ======= ======== ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
<PAGE>
MAIL.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THE ALLEGRO GROUP, NETMOVES
MAIL.COM, INC. INC. CORPORATION ADJUSTMENTS PRO FORMA
-------------- ------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.................. $ 1,495 $4,326 $21,117 $ -- $ 26,938
------------ ------ ------- --------- -----------
Operating expenses:
Cost of revenues........ 2,891 2,318 15,017 -- 20,226
Sales and marketing..... 6,680 892 6,640 -- 14,212
General and
administrative........ 3,482 1,443 4,382 -- 9,307
Product development..... 1,573 135 2,110 -- 3,818
Amortization of goodwill
and intangible
assets................ -- -- -- 6,692(a) 50,785
44,093(b)
Patent litigation
settlement............ -- -- 1,025 -- 1,025
------------ ------ ------- --------- -----------
Total operating
expenses............ 14,626 4,788 29,174 50,785 99,373
------------ ------ ------- --------- -----------
Loss from
operations.......... (13,131) (462) (8,057) (50,785) (72,435)
------------ ------ ------- --------- -----------
Other income:
Gain on sale of
investment............ 438 -- -- -- 438
Other income............ 277 10 229 -- 516
Interest expense........ (109) (38) (257) -- (404)
------------ ------ ------- --------- -----------
Total other income
(expense), net...... 606 (28) (28) -- 550
------------ ------ ------- --------- -----------
Net loss.................. $ (12,525) $ (490) $(8,085) $ (50,785) $ (71,885)
============ ====== ======= ========= ===========
Basic and diluted net loss
per common share........ $ (0.86) $ (3.26)(c)
============ ===========
Weighted-average basic and
diluted shares 1,102,973(c)
outstanding............. 14,607,915 6,343,904(c) 22,054,792(c)
============ ========= ===========
</TABLE>
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
<PAGE>
MAIL.COM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
THE ALLEGRO NETMOVES
MAIL.COM, INC. GROUP, INC. (1) CORPORATION ADJUSTMENTS PRO FORMA
-------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues....................... $ 6,593 $2,966 $17,135 $ -- $ 26,694
----------- ------ ------- ---------- -----------
Operating expenses:
Cost of revenues............. 7,720 1,604 12,920 -- 22,244
Sales and marketing.......... 17,083 688 5,971 -- 23,742
General and administrative... 7,207 356 4,396 -- 11,959
Product development.......... 4,643 599 1,685 -- 6,927
Amortization of goodwill and
intangible assets.......... 725 -- -- 4,294(a) 38,089
33,070(b)
Write-off of acquired
in-process technology...... 900 -- -- -- 900
----------- ------ ------- ---------- -----------
Total operating expenses... 38,278 3,247 24,972 37,364 103,861
----------- ------ ------- ---------- -----------
Loss from operations....... (31,685) (281) (7,837) (37,364) (77,167)
----------- ------ ------- ---------- -----------
Other income:
Other income................. 1,098 14 89 -- 1,201
Interest expense............. (355) (27) (97) -- (479)
----------- ------ ------- ---------- -----------
Total other income
(expense), net........... 743 (13) (8) -- 722
Net loss....................... (30,942) (294) (7,845) (37,364) (76,445)
Cumulative dividends on
settlement of contingent
obligations to preferred
stockholders................. 14,556 -- -- -- 14,556
----------- ------ ------- ---------- -----------
Net loss attributable to
common stockholders...... $ (45,498) $ (294) $(7,845) $ (37,364) $ (91,001)
=========== ====== ======= ========== ===========
Basic and diluted net loss per
common share................. $ (1.69) $ (2.65)(c)
=========== ===========
Weighted-average basic and
diluted shares outstanding... 1,102,973(c)
==========
26,891,270 6,343,904(c) 34,338,147(c)
=========== ========== ===========
</TABLE>
- ------------------------
(1) Represents The Allegro Group, Inc. from January 1, 1999 to August 20, 1999
(date of acquisition).
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Information.
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
(1) PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
(a) The following represents the allocation of the purchase price over the
actual fair values of the acquired assets and assumed liabilities of Allegro
at August 20, 1999, the date of acquisition. The purchase price allocation
is as follows:
<TABLE>
<S> <C>
Assets acquired:
Cash...................................................... $ 25
Accounts receivable....................................... 516
Other assets.............................................. 84
Property and equipment.................................... 757
Goodwill and intangibles.................................. 20,077
-------
21,459
In-process technology....................................... 900
Liabilities assumed......................................... (1,989)
-------
Purchase price.............................................. $20,370
=======
</TABLE>
The pro forma adjustments reflect twelve months of amortization expense for
the year ended December 31, 1998 and approximately seven and one-half months
of amortization expense for the period from January 1, 1999 through its date
of acquisition (August 20, 1999), assuming the Allegro transaction had
occurred on January 1, 1998. The value of the goodwill and intangible assets
at January 1, 1998 would have been approximately $20.1 million. Goodwill and
other intangible assets will be amortized over the expected period of
benefit of three years.
Mail.com may be required to record additional contingent purchase payments
for the Allegro acquisition based on future performance levels. Basic and
diluted net loss per share excludes the effect of additional purchase price
of up to $19.2 million including the issuance of up to 2 million shares of
Class A common stock (based on the minimum deemed fair market value of such
shares of $8.00 per share) whose payout and issuance is contingent on
Allegro achieving certain revenue and spending levels in fiscal year 2000.
The contingent consideration would consist of up to $3.2 million payable in
cash, additional bonus payments of $800,000 and up to $16.0 million payable
in shares of Mail.com Class A common stock based on the market value of such
stock at the time of payment (but such market value shall be deemed to be
not less than $8.00 per share). The minimum level of performance required by
Allegro in fiscal 2000 that would require payout of any of the $20 million
and issuance of up to 2 million shares of Class A common stock is specified
revenue and spending levels as defined. If the entire $4.0 million is paid
($3.2 million of purchase price and additional bonus payments of $800,000)
and all of the $16 million in value of contingent Class A common shares are
issued (2 million common shares based upon the minimum assumed fair market
value per share of $8.00), $19.2 million of additional purchase price,
$800,000 of expense and approximately $6.4 million of additional annual
amortization expense will result. If all these contingent shares were
included in the basic and diluted net loss per common share calculation,
basic and diluted net loss per common share would have been ($3.29) and
($2.64) for the year ended December 31, 1998 and the nine months ended
September 30, 1999, respectively.
(b) The following represents the preliminary allocation of the purchase price
over the historical net book values of the acquired assets and assumed
liabilities of NetMoves at September 30, 1999, and is for illustrative pro
forma purposes only. Actual fair values will be based on financial
information as of the
<PAGE>
acquisition date. Assuming the transaction had occurred on September 30,
1999, the preliminary allocation would have been as follows:
<TABLE>
<S> <C>
Assets acquired:
Cash...................................................... $ 8,966
Accounts receivable....................................... 3,400
Other assets.............................................. 2,622
Property and equipment.................................... 6,100
Goodwill and intangibles.................................. 132,278
--------
151,366
In-process technology....................................... 18,000
Liabilities assumed......................................... (7,499)
--------
Purchase price.............................................. $163,867
========
</TABLE>
This allocation is preliminary and may be subject to change upon evaluation
of the fair value of NetMoves' acquired assets and liabilities as of the
acquisition date as well as the potential identification of certain
intangible assets.
- The pro forma adjustments reflect twelve months of amortization expense
for the year ended December 31, 1998 and nine months of amortization
expense for the period from January 1, 1999 through September 30, 1999
assuming the transaction had occurred on January 1, 1998. The preliminary
value of the goodwill and intangible assets at January 1, 1998 would have
been approximately $132.3 million. Goodwill and other intangible assets
will be amortized over the expected estimated period of benefit of three
years;
- For purposes of the pro forma financial information, the estimated amount
of the in-process technology ($18 million) is the mid point of the
preliminary estimated range of acquired in-process technology of $16 to
$20 million. This range is based upon a preliminary analysis. Because such
in-process technologies is not expected to reach the stage of
technological feasibility by the anticipated acquisition date and is
expected to have no alternative future use, this amount shall be
immediately written-off by Mail.com and has been reflected in the pro
forma balance sheet as a charge to stockholders' equity; and
- The pro forma adjustment reconciles the historical balance sheet of
NetMoves at September 30, 1999 to the allocated purchase price of NetMoves
of $163.9 million assuming the transaction had occurred on September 30,
1999.
(c) The pro forma basic and diluted net loss per common share is computed by
dividing the net loss attributable to common stockholders by the weighted
average number of common shares outstanding. The calculation of the weighted
average number of shares outstanding assumes that 1,102,973 of Mail.com's
common stock issued in connection with its acquisition of Allegro and the
6,343,904 of Mail.com's Class A common stock expected to be issued in
connection with its planned acquisition of NetMoves were outstanding for
the entire period. Diluted net loss per share equals basic net loss per
share, as common stock equivalents are anti-dilutive for all pro forma
periods presented.
