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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 20, 2000
(Date of earliest event reported): July 10, 2000
NET2000 COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
000-26209 51-0384995
(Commission File No.) (IRS Employer Identification No.)
2180 Fox Mill Road
Herndon, VA 20171
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (800) 825-2000
This Form 8-K/A amends Registrant's previously filed Current Report on Form 8-K
dated July 10, 2000.
-------------------------
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The undersigned registrant, Net2000 Communications, Inc., a Delaware
corporation (the "Company"), hereby amends its Current Report on Form 8-K
previously filed with the Securities and Exchange Commission on July 10, 2000,
relating to the Company's acquisition of Frebon International Corporation, a
Virginia corporation ("Frebon"), on July 7, 2000, by means of the Company
acquiring all of the issued and outstanding stock of Frebon in exchange for cash
and Company stock. This Form 8-K/A includes the financial statements and pro
forma financial information which had been omitted from the previously filed
document as permitted by Item 7(a)(4) of Form 8-K. The financial statements and
pro forma financial information are filed herewith.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
See Exhibit 99.1 for unaudited interim and audited annual
financial statements of Frebon International Corporation.
(b) PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma condensed combined financial
statement, including the notes thereto, is qualified in its entirety by
reference to, and should be read in conjunction with, the historical financial
statements and notes thereto for the fiscal year ended December 31, 1999
included in the Company's Prospectus for its initial public offering of common
stock, as filed with the Securities and Exchange Commission on March 6, 2000,
and the historical financial statements and notes thereto of Frebon, included as
exhibits herein.
The following unaudited pro forma condensed combined financial
statement gives effect to the Company's acquisition of Frebon, which was
accounted for as a purchase. The unaudited pro forma condensed combined
statement of operations gives effect to the merger, assuming that the
acquisition had occurred as of the beginning of the period for the results of
operations disclosures and as of June 30, 2000 for balance sheet disclosures.
The unaudited pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred if the mergers had been consummated
at the beginning of the periods presented, nor is it necessarily indicative of
future operating results or financial position.
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NET2000 COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Net2000 Frebon Adjustments Combined
--------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 72,141 $ 213 $(9,050) (a) $ 63,304
Investments available for sale 57,085 -- -- 57,085
Restricted cash 3,667 -- -- 3,667
Accounts receivable, net of allowance
for doubtful accounts 11,791 4,090 (401) (d) 15,480
Inventory -- 1,850 (155) (d) 1,695
Other current assets 1,128 354 -- 1,482
--------------- ------------- ----------------- ---------------
Total current assets 145,812 6,507 (9,606) 142,713
Property and equipment, net of
accumulated depreciation 127,344 914 (133) (d) 128,125
Intangible assets -- -- 18,670 (a) 18,670
Other noncurrent assets 8,500 54 -- 8,554
Unamortized debt discount 2,186 -- -- 2,186
--------------- ------------- ----------------- ---------------
Total assets $ 283,842 $ 7,475 $ 8,931 $300,248
=============== ============= ================= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 5,988 $ 4,214 $ -- $ 10,202
Accrued expenses and other
current liabilities 26,180 5,376 462 (d) 32,018
--------------- ------------- ----------------- ---------------
Total current liabilities 32,168 9,590 462 42,220
Related party noncurrent liabilities 15,495 -- -- 15,495
Other noncurrent liabilities 98 -- -- 98
Long-term debt 55,252 236 -- 55,488
Stockholders' equity (deficit):
Common stock, $0.01 par value; 379 37 (33) (a) 383
Additional capital 317,248 214 6,071 (a) 323,533
Deferred stock compensation (8,005) -- -- (8,005)
Accumulated deficit (128,793) (2,602) 2,431 (128,964)
--------------- ------------- ----------------- ---------------
Total stockholders' equity 180,829 (2,351) 8,469 186,947
--------------- ------------- ----------------- ---------------
Total liabilities and stockholders'
equity $ 283,842 $ 7,475 $ 8,931 $300,248
=============== ============= ================= ===============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
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NET2000 COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Net2000 Frebon Adjustments Combined
--------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 27,693 $10,510 $ -- $ 38,203
Operating costs and expenses:
Operating costs 22,375 8,005 -- 30,380
Selling, general and administrative
(exclusive of non-cash compensation
expense shown below) 41,162 4,160 45,322
Non-cash compensation expense 1,646 -- -- 1,646
Depreciation and amortization 3,865 206 3,734 (b) 7,805
--------------- ------------- ----------------- ---------------
Loss from operations (41,355) (1,861) (3,734) (46,950)
Other income (expenses):
Settlement of supplier dispute 3,500 -- -- 3,500
Miscellaneous income 91 33 -- 124
Interest income 1,060 18 -- 1,078
Interest expense (2,089) (250) 200 (c) (2,139)
--------------- ------------- ----------------- ---------------
Loss before provision for income taxes (38,793) (2,060) (3,534) (44,387)
Provision for income taxes -- (135) (135)
--------------- ------------- ----------------- ---------------
Net loss $ (38,793) $(1,925) $ (3,534) $ (44,252)
=============== ============= ================= ===============
Preferred stock accretion (21,537) -- -- (21,537)
--------------- ------------- ----------------- ---------------
Net loss available to common stockholders $ (60,330) $(1,925) $ (3,534) $ (65,789)
=============== ============= ================= ===============
Pro forma net loss available to common
Shareholder $ (38,793) $(1,925) $ (3,534) $ (44,252)
=============== ============= ================= ===============
Basic and diluted loss per share $ (5.97) (6.26)
=============== ============= ================= ===============
Pro forma basic and diluted loss per share $ (1.57) (1.76)
=============== ============= ================= ===============
Shares used in calculation of loss per share:
Basic and diluted 10,113,042 10,513,042
Pro forma basic and diluted 24,786,087 25,186,087
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
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NET2000 COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Net2000 Frebon Adjustments Combined
------------ ------------ ---------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 23,789 $ 6,876 $ $ 30,665
Operating costs and expenses:
Operating costs 18,741 4,768 23,509
Selling, general and administrative
(exclusive of non-cash compensation
expense shown below) 34,324 3,233 37,557
Non-cash compensation expense 1,630 -- 1,630
Depreciation and amortization 5,768 53 1,867 (b) 7,688
------------ ------------ ------------ ------------
Loss from operations (36,674) (1,178) (1,867) (39,719)
Other income (expenses):
Miscellaneous income 4 27 -- 31
Interest income 3,940 5 -- 3,945
Interest expense (3,392) (145) 145 (c) (3,392)
------------ ------------ ------------ ------------
Loss before provision for income taxes (36,122) (1,291) (1,722) (39,135)
Provision for income taxes -- -- -- --
Net loss before extraordinary item (36,122) (1,291) (1,722) (39,135)
Extraordinary debt extinguishment loss (4,724) -- -- (4,724)
Net Loss $ (40,846) $ (1,291) $ (1,722) $ (43,859)
------------ ------------ ------------ ------------
Preferred stock accretion (3,759) -- -- (3,759)
------------ ------------ ------------ ------------
Net loss available to common stockholders $ (44,605) $ (1,291) $ (1,722) $ (47,618)
============ ============ ============ ============
Pro forma net loss available to common
Shareholder $ (40,846) $ (1,291) $ (1,722) $ (43,859)
============ ============ ============ ============
Basic and diluted loss per share:
Available to common stockholders
Before extraordinary item $ (1.43) $ (1.52)
Extraordinary loss (0.17) (0.17)
------------ ------------ ------------ ------------
$ (1.60) $ (1.69)
============ ============ ============ ============
Pro forma basic and diluted loss per share:
Available to common stockholders
Before extraordinary item $ (1.09) $ (1.17)
Extraordinary loss (0.14) (0.14)
------------ ------------ ------------ ------------
$ (1.23) $ (1.31)
============ ============ ============ ============
Shares used in calculation of loss per share:
Basic and diluted 27,845,216 28,245,216
Pro forma basic and diluted 33,166,210 33,566,210
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed combined financial statements.
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NET2000 COMMUNICATIONS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
On July 7, 2000, the Company acquired FreBon International Corporation, a
privately-held provider of interactive video services. The purchase price at
closing consisted of 400,000 shares of common stock valued at $6,075 and cash
payments totaling $9,050. In addition, the Company assumed debt totaling $2,800.
Earnout provisions could provide for additional cash or stock consideration up
to $15,000 based on the achievement of certain revenue targets over the next
year as defined in the purchase agreement. The transaction has been accounted
for as a purchase with the majority of the purchase price being allocated to
acquired intangibles.
The allocation of the purchase price is summarized below (in thousands):
<TABLE>
<S> <C>
Net assets acquired $ (3,419)
Contracts 1,500
Goodwill 17,170
--------
$ 15,251
========
</TABLE>
The amounts attributable to the established contracts will be amortized over
their relative lives and goodwill will be amortized over its estimated useful
life of five years.
2. PRO FORMA ADJUSTMENTS
(a) To reflect the purchase price (cash of $9,050 and common stock valued
at $6,075) and the resulting intangible assets of $18,670.
(b) To reflect the amortization of goodwill and the established contract
asset as if the acquisition had occurred at the beginning of the
period.
(c) To adjust interest expense incurred on bank debt as if the debt was
paid off at acquisition at the beginning of the period.
(d) To adjust acquired assets and liabilities to fair value.
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(c) EXHIBITS
The following Exhibits are filed as part of this report:
2.1 Stock Purchase Agreement dated as of June 28, 2000 by and
among Net2000 Communications Group, Inc., Frebon International
Corporation, and Bonnie L. Horner and Fred J. Mueller
23.1 Consent of Brown, Dakes & Wannall, P.C., Independent Auditors
99.1 Financial Statements for Frebon International Corporation
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.
NET2000 COMMUNICATIONS, INC.
a Delaware corporation
Dated: September 20, 2000 By: /s/ Donald E. Clarke
--------------------------------
Donald E. Clarke
Chief Financial Officer, Executive Vice
President and Treasurer
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EXHIBIT INDEX
2.1 Stock Purchase Agreement dated as of June 28, 2000 by and
among Net2000 Communications Group, Inc., Frebon International
Corporation, and Bonnie L. Horner and Fred J. Mueller
23.1 Consent of Brown, Dakes & Wannall, P.C., Independent Auditors
99.1 Financial Statements for Frebon International Corporation
