<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
September 29, 1999
------------------------------------------------------
Date of report (date of earliest event reported)
INTRANET SOLUTIONS, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 0-19817
------------------------ ------------------------
(State of Incorporation) (Commission file number)
41-1652566
------------------------------------
(I.R.S. Employer Identification No.)
8091 Wallace Drive, Eden Prairie, Minnesota 55344
- --------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Telephone Number: (612) 903-2000
-------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
This Amendment No. 1 to Current Report on Form 8-K/A is filed for the purpose of
filing the financial statements of InfoAccess, Inc. ("InfoAccess") required by
Item 7(a) and the pro forma financial information required by Item 7(b).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
The following auditors' report and financial statements for
InfoAccess are attached hereto as Exhibit 99.2:
Report of Independent Certified Public Accountants
Balance Sheets as of December 31, 1997, December 31, 1998 and
September 30, 1999 (unaudited)
Statements of Operations for the Years Ended December 31, 1996,
1997, and 1998, and for the Nine Months Ended September 30, 1998
and 1999 (unaudited)
Statements of Shareholders Equity (Deficit) for the Years Ended
December 31, 1996, 1997 and 1998, and for the Nine Months Ended
September 30, 1999 (unaudited)
Statements of Cash Flows for the Years Ended December 31, 1996,
1997, and 1998, and for the Nine Months Ended September 30, 1998
and 1999 (unaudited)
Notes to Financial Statements
(b) Pro Forma Financial Information
The following unaudited pro forma condensed combined financial
statements are attached hereto as Exhibit 99.3:
Overview
Pro Forma Condensed Combined Balance Sheet at September 30, 1999
Pro Forma Condensed Combined Statement of Operations for the Years
Ended March 31, 1999, 1998 and 1997 and for the Six Months Ended
September 30, 1999.
Notes to Pro Forma Condensed Combined Financial Statements
(c) Exhibits
2 Agreement and Plan of Merger among IntraNet Solutions, Inc.,
IntraNet Solutions (Washington), Inc., InfoAccess, Inc., and
certain Significant Shareholders of InfoAccess, Inc., dated
as of September 16, 1999. (Incorporated by reference to
Exhibit 2 contained in the Company's Current Report on Form
8-K dated September 16, 1999 (File No. 0-19817)).
23 Consent of Independent Certified Public Accountants.
27 Restated Financial Data Schedules for the fiscal years ended
March 31, 1997, March 31, 1998 and March 31, 1999.
99.1 News Release dated September 30, 1999 (previously filed).
99.2 Financial Statements of Business Acquired.
99.3 Pro Forma Financial Information.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
Date: November 29, 1999
INTRANET SOLUTIONS, INC.
(Registrant)
By /s/ Gregg A. Waldon
---------------------------------
Gregg A. Waldon
Chief Financial Officer,
Treasurer and Secretary
(Principal financial and accounting
officer and duly authorized signatory
on behalf of the registrant)
3
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Method of Filing
- ----------- ----------------
<S> <C> <C>
2 Agreement and Plan of Merger among IntraNet Incorporated by
Solutions, Inc., IntraNet Solutions (Washington), reference.
Inc., InfoAccess, Inc., and certain Significant
Shareholders of InfoAccess, Inc., dated as of
September 16, 1999. (Incorporated by reference to
Exhibit 2 contained in the Company's Current
Report on Form 8-K dated September 16, 1999 (File
No. 0-19817)).
23 Consent of Independent Certified Public Accountants. Filed herewith.
27 Restated Financial Data Schedules for the fiscal Filed herewith.
years March 31, 1997, March 31, 1998 and March 31,
1999.
99.1 News Release dated September 30, 1999. Previously filed.
99.2 Financial Statements of Business Acquired. Filed herewith.
99.3 Pro Forma Financial Information. Filed herewith.
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated September 10, 1999 (except for
note K, as to which the date is September 29, 1999) accompanying the financial
statements of InfoAccess, Inc. as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998 included in this Form
8-K/A. We hereby consent to the incorporation by reference of said report in the
Registration Statements of IntraNet Solutions, Inc. and subsidiaries on Form S-8
No. 333-11489, Form S-3 No. 333-14175, Form S-3 No. 333-33437, Form S-3 No.
333-57181, Form S-8 No. 333-66449, Form S-8 No. 333-66451 and Form S-8 No.
333-90843.
/s/GRANT THORNTON LLP
Minneapolis, Minnesota
November 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1998 MAR-31-1999
<PERIOD-END> MAR-31-1997 MAR-31-1998 MAR-31-1999
<CASH> 963,767 1,162,176 2,177,042
<SECURITIES> 0 0 0
<RECEIVABLES> 4,487,018 5,852,964 4,423,079
<ALLOWANCES> 181,500 521,492 314,601
<INVENTORY> 363,633 288,759 112,376
<CURRENT-ASSETS> 6,090,128 7,386,179 7,203,752
<PP&E> 1,660,339 2,134,264 2,257,071
<DEPRECIATION> 874,599 1,183,954 1,338,934
<TOTAL-ASSETS> 9,050,109 9,301,337 8,463,668
<CURRENT-LIABILITIES> 7,074,241 7,154,283 3,490,057
<BONDS> 0 0 0
0 0 0
0 2,003,844 333,969
<COMMON> 90,851 102,471 124,507
<OTHER-SE> 652,445 (492,805) 4,260,409
<TOTAL-LIABILITY-AND-EQUITY> 9,050,109 9,301,337 8,463,668
<SALES> 20,754,950 22,211,581 17,030,430
<TOTAL-REVENUES> 20,754,950 22,211,581 17,030,430
<CGS> 12,906,341 14,162,557 6,641,196
<TOTAL-COSTS> 12,906,341 14,162,557 6,641,196
<OTHER-EXPENSES> 8,598,030 9,801,946 11,532,544
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 97,131 340,096 209,155
<INCOME-PRETAX> (847,294) (2,086,588) (836,923)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (847,294) (2,086,588) (836,923)
<DISCONTINUED> (2,559,756) (2,576,666) (521,464)
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (3,407,050) (4,663,254) (1,358,387)
<EPS-BASIC> (0.43) (0.50) (0.12)
<EPS-DILUTED> (0.43) (0.50) (0.12)
</TABLE>
<PAGE> 1
Exhibit 99.2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
InfoAccess, Inc.
We have audited the accompanying balance sheets of InfoAccess,
Inc. as of December 31, 1998 and 1997, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the three years in
the period ended December 31, 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 audits.
We conducted our audits 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 audits provide 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 InfoAccess,
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/GRANT THORNTON LLP
Minneapolis, Minnesota
September 10, 1999, except for note K as
to which the date is September 29, 1999
1
<PAGE> 2
INFOACCESS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------- September 30,
ASSETS 1997 1998 1999
----------- ----------- ---------------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 167,650 $ 226,149 $ 743,599
Accounts receivable, net of allowance for doubtful
accounts of $5,000 in 1997 and 1998 344,378 379,246 470,586
Inventories 55,638 60,375 51,042
Prepaid expenses 63,300 36,849 48,170
Deferred financing costs -- 72,167 --
----------- ----------- -----------
Total current assets 630,966 774,786 1,313,397
PROPERTY AND EQUIPMENT, net 174,222 133,295 74,380
OTHER ASSETS
Software licenses, net of accumulated amortization of
$127,169 in 1998 and $98,000 in 1997 15,500 236,331 191,304
Other 24,310 19,271 --
----------- ----------- -----------
39,810 255,602 191,304
----------- ----------- -----------
$ 844,998 $ 1,163,683 $ 1,579,081
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES
Related party note payable $ -- $ 400,000 $ --
Current maturities of long-term obligations 50,159 44,615 22,374
Accounts payable 98,671 136,214 37,885
Due to IntraNet Solutions, Inc. -- -- 1,183,750
License fees payable -- 200,000 --
Deferred compensation -- 175,000 --
Accrued vacation 72,429 104,636 30,705
Other accrued expenses 55,916 75,272 133,727
Customer deposits 18,850 22,937 23,285
Deferred revenue 268,316 191,776 262,498
----------- ----------- -----------
Total current liabilities 564,341 1,350,450 1,694,224
LONG-TERM OBLIGATIONS, less current maturities 32,832 23,290 20,585
DEFERRED REVENUE, net of current portion 302,247 146,944 55,694
COMMITMENTS -- -- --
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, no par value; 9,803,900 shares authorized 2,023,746 2,029,481 2,529,481
Additional paid-in capital -- 200,000 200,000
Accumulated deficit (2,078,168) (2,586,482) (2,920,903)
----------- ----------- -----------
Total shareholders' equity (deficit) (54,422) (357,001) (191,422)
----------- ----------- -----------
$ 844,998 $ 1,163,683 $ 1,579,081
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 3
INFOACCESS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
--------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues
Product licenses $ 3,100,695 $ 1,937,682 $ 2,476,521 $ 1,575,633 $ 2,500,317
Services 1,463,679 824,104 495,593 421,533 356,965
----------- ----------- ----------- ----------- -----------
Total revenues 4,564,374 2,761,786 2,972,114 1,997,166 2,857,282
Cost of revenues
Product licenses 258,848 197,143 148,361 112,766 96,830
Services 509,489 512,386 226,810 160,147 130,269
----------- ----------- ----------- ----------- -----------
Total costs of revenues 768,337 709,529 375,171 272,913 227,099
----------- ----------- ----------- ----------- -----------
Gross profit 3,796,037 2,052,257 2,596,943 1,724,253 2,630,183
Operating expenses
Sales and marketing 2,111,057 1,375,102 1,425,693 1,026,804 910,569
General and administrative 552,710 730,910 647,449 446,644 541,044
Research and development 820,730 952,970 872,325 633,978 494,764
Merger and acquisition costs -- -- -- -- 909,050
----------- ----------- ----------- ----------- -----------
3,484,497 3,058,982 2,945,467 2,107,426 2,855,427
----------- ----------- ----------- ----------- -----------
Earnings (loss) from operations 311,540 (1,006,725) (348,524) (383,173) (225,244)
Other income (expense)
Interest income (expense) 30,616 (7,987) (154,332) (83,368) (115,483)
Other (742) 6,430 (1,392) 2,139 6,306
----------- ----------- ----------- ----------- -----------
29,874 (1,557) (155,724) (81,229) (109,177)
----------- ----------- ----------- ----------- -----------
Net earnings (loss) $ 341,414 $(1,008,282) $ (504,248) $ (464,402) $ (334,421)
=========== =========== =========== =========== ===========
Earnings (loss) per common share
Basic $ .07 $ (.20) $ (.10) $ (.09) $ (.06)
=========== =========== =========== =========== ===========
Diluted $ .06 $ (.20) $ (.10) $ (.09) $ (.06)
=========== =========== =========== =========== ===========
Weighted average shares outstanding:
Basic 5,000,020 5,051,390 5,256,601 5,250,648 5,281,856
=========== =========== =========== =========== ============
Diluted 5,639,189 5,051,390 5,256,601 5,250,648 5,281,856
=========== =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
INFOACCESS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(DEFICIT) FOR THE PERIOD FROM JANUARY 1, 1996
THROUGH SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Common stock Additional
-------------------------- paid-in Accumulated
Shares Amount capital deficit Total
--------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 5,000,020 $ 1,773,746 $ -- $(1,165,905) $ 607,841
Distributions to shareholders -- -- -- (100,000) (100,000)
Exercise of stock options 122,540 28,184 -- -- 28,184
Common stock repurchased and canceled (122,540) (28,184) -- (32,595) (60,779)
Net earnings -- -- -- 341,414 341,414
--------- ----------- -------- ----------- -----------
Balance at December 31, 1996 5,000,020 1,773,746 -- (957,086) 816,660
Distributions to shareholders -- -- -- (112,800) (112,800)
Issuance of common stock for cash 250,000 250,000 -- -- 250,000
Net loss -- -- -- (1,008,282) (1,008,282)
--------- ----------- -------- ----------- -----------
Balance at December 31, 1997 5,250,020 2,023,746 -- (2,078,168) (54,422)
Common stock repurchased and canceled (5,525) (1,459) -- (4,066) (5,525)
Exercise of stock options 30,035 7,194 -- -- 7,194
Issuance of warrants -- -- 200,000 -- 200,000
Net loss -- -- -- (504,248) (504,248)
--------- ----------- -------- ----------- -----------
Balance at December 31, 1998 5,274,530 2,029,481 200,000 (2,586,482) (357,001)
Exercise of warrants (unaudited) 500,000 500,000 -- -- 500,000
Net loss (unaudited) -- -- -- (334,421) (334,421)
--------- ----------- -------- ----------- -----------
Balance at September 30, 1999 (unaudited) 5,774,530 $ 2,529,481 $200,000 $(2,920,903) $ (191,422)
========== =========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
INFOACCESS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 341,414 $(1,008,282) $ (504,248) $ (464,402) $ (334,421)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation 111,247 134,241 101,038 70,971 79,147
Amortization of software licenses 20,000 23,000 29,169 8,375 45,027
Amortization of deferred financing costs -- -- 127,833 76,113 72,167
Changes in operating assets and liabilities:
Accounts receivable (197,841) 379,298 (34,868) (28,204) (91,340)
Inventories (968) (5,165) (4,737) (29,108) 9,333
Prepaid expenses 12,453 (2,217) 31,490 52,038 7,950
Accounts payable 89,531 (66,368) 37,543 (64,341) (98,329)
License fees payable -- -- -- -- (200,000)
Deferred compensation -- -- 238,170 (32,565) (248,931)
Accrued expenses 95,658 (74,301) (11,607) 108,763 58,455
Customer deposits 22,130 (26,842) 4,087 -- 348
Deferred revenue 168,062 (89,364) (231,843) 17,159 (20,528)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities 661,686 (736,000) (217,973) (285,201) (721,122)
Cash flows from investing activities:
Purchase of property and equipment (170,623) (91,515) (22,126) (17,733) (20,232)
Purchase of software license -- (13,500) (50,000) -- --
Proceeds from sale of property and equipment 8,091 3,868 -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities (162,532) (101,147) (72,126) (17,733) (20,232)
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
INFOACCESS, INC.
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------ -------------
1996 1997 1998 1998 1999
-------- --------- ---------- --------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from exercise of stock options and sale of
common stock $ 28,184 $ 250,000 $ 7,194 $ 7,194 $ 500,000
Proceeds from advances on line of credit -- 71,633 400,000 300,000 100,000
Payment of long-term obligations (51,784) (46,005) (53,071) (41,237) (524,946)
Common stock repurchased (60,779) -- (5,525) (4,900) --
Distributions to shareholders (100,000) (112,800) -- -- --
Due to IntraNet Solutions, Inc. -- -- -- -- 1,183,750
--------- --------- --------- --------- -----------
Net cash provided by (used in)
financing activities (184,379) 162,828 348,598 261,057 1,258,804
--------- --------- --------- --------- -----------
Net increase (decrease) in cash and
cash equivalents 314,775 (674,319) 58,499 (41,877) 517,450
Cash and cash equivalents at beginning of year 527,194 841,969 167,650 167,650 226,149
--------- --------- --------- --------- -----------
Cash and cash equivalents at end of year $ 841,969 $ 167,650 $ 226,149 $ 125,773 $ 743,599
========= ========= ========= ========= ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 10,184 $ 7,987 $ 154,332 $ 83,368 $ 115,483
========= ========= ========= ========= ===========
</TABLE>
Supplemental disclosure of noncash financing and investing activities:
----------------------------------------------------------------------
During 1998, the Company acquired $37,985 of equipment by entering into
capital lease obligations.
During 1998, the Company issued 500,000 warrants at $1.00 per share as part
of a line of credit agreement. The warrants were valued at $.40 per
warrant, which increased deferred financing costs and additional paid-in
capital by $200,000 (see notes C and F).
At December 31, 1998, $200,000 of capitalized software licenses were
payable pursuant to a non-refundable license agreement entered into during
1998.
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
INFOACCESS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF ACCOUNTING POLICIES
InfoAccess, Inc. (the Company) is a leading technology supplier of HTML and
XML content publishing solutions. The Company, located in Bellevue,
Washington, launched its HTML Transit software products in January 1998. The
Transit software product family provides high-powered Web site content
management publishing tools, including automatic HTML and XML publishing
conversion that enables organizations to quickly develop, build and manage
Internet, extranet and enterprise Web applications.
The accompanying financial statements as of September 30, 1999 and for the
nine months September 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 nine months ended September 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:
Cash and Cash Equivalents
The Company considers money market accounts and any highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
Inventories
Inventories consisting primarily of diskettes, manuals, and packaging
materials, are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment, including leasehold improvements, are recorded at
cost. Depreciation is provided using the straight-line method over the
shorter of the estimated useful lives of three to five years, or the lease
term. Maintenance, repairs, and minor renewals are expensed when incurred.
Software Licenses
The Company acquired various software licenses for use in its products. The
licenses are recorded at cost, and amortized over estimated useful lives of
three to five years.
Revenue Recognition
The Company recognizes revenue from licensing of software products at the
date of acceptance by the customer. Certain licenses require continuing
service, support, and performance by the Company, and accordingly a portion
of the revenue is deferred until the future service, support, and performance
are provided.
7
<PAGE> 8
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
Revenue from custom engineering contracts is recognized using the
percentage-of-completion method of accounting. Unearned revenue is classified
as deferred revenue.
The Company provides services under software maintenance agreements which
usually have a term of one year. Maintenance service consists of technical
support, which includes telephone consultation, problem resolution, and
software updates. Customers are typically billed in advance for the term of
the maintenance agreement, and revenue is recognized on a straight-line basis
over the term of the agreement. Unearned maintenance revenue is classified as
deferred revenue.
The Company adopted Statement of Position, or 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 January 1, 1998. SOP 97-2 and
SOP 98-4 provide guidance for recognizing revenue on software transactions
and supercede 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 December 31, 1999. All other provisions of SOP
98-9 are effective for transactions entered into after December 31, 1999. The
Company believes the adoption of SOP 98-9 will not have a material effect on
its financial statements results or financial condition.
Recently Issued Accounting Standards
In February 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or SOP, 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1
establishes the accounting for costs of software products developed or
purchased for internal use, including when such costs should be capitalized.
SOP 98-1 was adopted on January 1, 1999, and such adoption did not have a
material impact on the financial statements.
The Company adopted SFAS No. 130, Reporting Comprehensive Income, effective
January 1, 1998. SFAS No. 130 established standards for the reporting and
display of an amount representing comprehensive income and its components as
part of the Company's basic financial statements. Comprehensive income
includes certain non-owner changes in equity that currently are excluded from
net income. Because the company historically has not experienced transactions
that would be included in comprehensive income, the adoption of SFAS No. 130
did not have any effect on the financial position, results of operations, or
cash flows of the Company.
Product Development
Statement of Financial Accounting Standards No. 86, Accounting for the Costs
of Computer Software to Be Sold, Leased or Otherwise Marketed, requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established at completion
of a commercially viable working model. To date, the period between achieving
technological feasibility to the Company's products and the general release
of the products has been short.
8
<PAGE> 9
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
Accordingly, the Company has not capitalized any software development costs
and has, instead, charged all such costs to research and development expense
as incurred.
Net Earnings (Loss) per Common Share
The Company's basic net earnings (loss) per share amounts have been computed
by dividing net earnings (loss) by the weighted average number of outstanding
common shares. The Company's fully diluted net earnings (loss) per share is
computed by dividing net earnings (loss) by weighted average number of
outstanding common shares and common share equivalents relating to stock
options, when dilutive. For each of the years ended December 31, 1997, and
1998, the Company incurred net losses and therefore basic and diluted per
share amounts are the same. Common stock equivalents as of December 31, 1997
and 1998 included 684,938 and 664,730 shares related to stock options and
warrants. For the year ended December 31, 1996, shares of common stock
equivalents related to stock options were included in the computation of
diluted net earnings per share. Anti-dilutive common stock options and
warrants were 93,000, 165,500, and 828,250 at December 31, 1996, 1997, and
1998.
Advertising
The Company expenses the cost of advertising as it is incurred. Advertising
expense for the years ended December 31, 1996, 1997 and 1998 was $451,321,
$303,376 and $151,782.
Income Taxes
The Company, with the consent of its shareholders, has elected under the
Internal Revenue Code to be taxed as an S corporation. As such, the
shareholders of the Company are subject to federal and state income taxes on
their proportionate share of the Company's taxable income. Accordingly, no
provision has been made in the financial statements for income taxes.
Stock-Based Compensation
The Company utilizes the intrinsic value method for stock-based compensation.
Under this method, compensation expense is recognized for the amount by which
the market value price of the common stock on the date of grant exceeds the
exercise price of an option.
Accounting 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 could differ from those estimates.
9
<PAGE> 10
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Computer equipment and software $486,844 $379,425
Office furniture and equipment 192,718 188,633
Leasehold improvements 9,899 9,899
-------- --------
689,461 577,957
Less accumulated depreciation and amortization 515,239 444,662
-------- --------
$174,222 $133,295
======== ========
</TABLE>
NOTE C - RELATED PARTY NOTE PAYABLE
The Company has an uncollateralized line of credit with a related party which
provides for borrowings of up to $500,000. Advances are due on May 8, 1999
and accrue interest payable monthly at 10% (see note F). Subsequent to year
end, the company defaulted on the line of credit agreement.
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Note payable to a bank at $2,985 per month plus interest at prime plus 1.25%
(effective rates of 9% and 9.75% at December 31, 1998 and 1997);
collateralized by property and equipment, due November 1, 1999 (a) $68,650 $32,800
Other 14,341 35,105
------- -------
82,991 67,905
Less current maturities 50,159 44,615
------- -------
$32,832 $23,290
======= =======
</TABLE>
(a) The loan agreement contains certain restrictive covenants regarding
minimum levels of tangible net worth and working capital. As of December
31, 1998, the Company was not in compliance with these covenants. As of
September 10, 1999, the bank has not exercised its remedies under the
loan agreement.
Future maturities of long-term obligations are as follows:
1999 $44,615
2000 12,855
2001 10,435
-------
$67,905
=======
10
<PAGE> 11
NOTE E - EMPLOYEE BENEFIT PLAN
The Company maintains a qualified retirement plan for eligible employees that
contains salary deferral provisions as provided by Section 401(k) of the
Internal Revenue Code. Plan participants may contribute up to 15% of their
annual salary. The Company matches 50% of employee contributions, with a
maximum contribution of 5% of the employee's annual salary. Total
contributions to the plan by the Company for the years ended December 31,
1996, 1997 and 1998 were $56,374, $65,466 and $49,768.
NOTE F - SHAREHOLDERS' EQUITY
Common Stock Warrant
In connection with the line of credit from a related party (note C), the
Company issued a stock purchase warrant, valued at $200,000 and recorded
deferred financing costs. These costs are being amortized through May 1999,
the life of the related party debt. The warrant represents the right to
purchase up to 500,000 shares of the Company's common stock at an exercise
price of $1 per share. The warrants expire on May 29, 2008.
Stock Options
As of December 31, 1998, 833,330 options to purchase shares were outstanding
and exercisable under the Company's 1990 Amended and Restated Stock Option
Plan. Of those, 800,680 options at $.23 will expire if not exercised by
November 8, 2000, and 32,650 options at $.55 per share will expire if not
exercised by March 23, 2000.
In March 1995, the Company adopted the 1995 Stock Option Plan (the Plan)
which provides for non-qualified and incentive common stock options for
officers, directors, employees, and consultants. The Board of Directors is
authorized to administer the Plan and establish the stock option terms,
including the grant price, vesting period, and the terms of the stock option.
Options generally vest over a period of five years and expire at the earlier
date of three months after termination of employment or ten years after date
of grant. At December 31, 1998, 373,750 options to purchase shares were
outstanding under the Plan. The Company reserved 1,000,000 shares of common
stock for issuance under the Plan. Upon change of control of the Company, the
vesting schedule set forth in the option agreement continues to apply to the
options granted for the exchanged stock or vest immediately upon a change in
control for cash consideration.
11
<PAGE> 12
NOTE F - SHAREHOLDERS' EQUITY - Continued
A summary of stock option plan activity for the years ended December 31,
1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
----------- ---------
<S> <C> <C>
Outstanding at January 1, 1996 1,128,780 $ .26
Granted 164,500 .50
Exercised (122,540) .23
Expired (207,500) .50
---------
Outstanding at December 31, 1996 963,240 .27
Granted 165,500 1.00
Expired (67,500) .50
---------
Outstanding at December 31, 1997 1,061,240 .37
Granted 196,250 .90
Exercised (30,035) .24
Expired (20,375) .83
---------
Outstanding at December 31, 1998 1,207,080 $ .45
========= =====
</TABLE>
At December 31, 1996, 1997 and 1998, 887,740, 841,628 and, 844,985 of
outstanding options were exercisable.
The following table summarizes information about the stock options
outstanding at December 31, 1998:
Options outstanding Options exercisable
------------------------------ ---------------------
Weighted
average Weighted Weighted
remaining average average
Range of Number contractual exercise Number exercise
Exercise Price outstanding life price exercisable price
-------------- ----------- ----------- -------- ----------- --------
$.10 $ 20,000 9.8 $ .10 $ 20,000 $ .10
$.23 800,680 1.8 .23 800,680 .23
$.50 - $.55 58,150 3.8 .52 24,305 .53
$1.00 328,250 9.1 1.00 -- --
---------- --------
$1,207,080 6.5 $ .45 $844,985 $ .24
========== === ======== ======== =======
The pro forma effect of accounting for stock options using the fair value
method is immaterial.
12
<PAGE> 13
NOTE G - COMMITMENTS
Operating Leases
The Company leases office facilities in Bellevue, Washington. The Company
also leases certain equipment under an operating lease. Total rent expense
under operating leases net of sublease income was $177,989, $190,106 and
$185,781 for the years ended December 31, 1996, 1997 and 1998, respectively.
Minimum future rental commitments under operating leases as of December 31,
1998, net of sublease arrangements of $55,881 in 1999, are as follows:
1999 $225,704
2000 288,304
2001 293,103
2002 121,481
--------
$928,592
========
Software Royalties
The Company has entered into several software royalty agreements whereby it
is required to pay a royalty based on sales. During the years ended December
31, 1996, 1997 and 1998 royalty expense totaled $127,184, $70,621 and
$84,469.
NOTE H - SIGNIFICANT CUSTOMERS
The Company had revenues from one customer totaling $668,511 (14.6% of
revenues) in 1996 and $282,719 (10.2% of revenues) in 1997 and revenues from
another customer totaling $382,060 (13.0% of revenues) in 1998.
Accounts receivable from these customers were $71,417, $15,150 and $2,204 at
December 31, 1996, 1997 and 1998, respectively.
13
<PAGE> 14
NOTE I - SEGMENTS OF BUSINESS AND GEOGRAPHIC AREA INFORMATION
Effective January 1, 1998, the Company adopted SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. SFAS No. 131 did not
have a significant effect as the Company operates as a single segment.
A summary of the Company's operations by geographic area follows:
Year ended December 31,
----------------------------------------------
1996 1997 1998
---------- ---------- ----------
Revenues:
United States $3,725,195 $1,954,103 $1,503,521
Europe 527,376 518,875 1,168,147
Canada 149,229 288,808 131,463
Other 162,574 -- 168,983
---------- ---------- ----------
$4,564,374 $2,761,786 $2,972,114
========== ========== ==========
Sales are attributed to countries or region based on the location of the
customer. All identifiable assets were located in the United States.
NOTE J - RISKS AND UNCERTAINTIES
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the year 2000 and thereafter.
If year 2000 modifications are not properly completed either by the Company
or entities with whom the Company conducts business, the Company's revenues
and financial condition could be adversely impacted.
NOTE K - SUBSEQUENT EVENTS
Agreement and Plan of Merger
On September 16, 1999, the Company entered into an agreement and plan of
merger with IntraNet Solutions, Inc. a Minnesota corporation. Under terms of
the agreement, each share of the Company's common stock and common stock
options will be converted into the right to receive 0.31230 shares of common
stock and common stock options of IntraNet Solutions, Inc. The merger closed
on September 29, 1999. The results of operations for the one-day period ended
September 30, 1999 were immaterial.
Warrant Exercise (unaudited)
On September 27, 1999, the stock purchase warrant described in note F was
exercised, resulting in the issuance of 500,000 shares of the Company's
common stock at $1 per share.
14
<PAGE> 1
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statements of operations
reflect the pro forma consolidated results of operations of IntraNet Solutions,
Inc. ("IntraNet Solutions") for the years ended March 31, 1999, 1998, and 1997,
and six months ended September 30, 1999 with those of InfoAccess, Inc.
("InfoAccess") for the years ended December 31, 1998, 1997, and 1996, and six
months ended September 30, 1999, after giving effect to the September 16, 1999
Agreement and Plan of Merger (the "Merger Agreement") between IntraNet Solutions
and InfoAccess, under the assumptions set forth in the accompanying notes. The
unaudited pro forma condensed combined balance sheet combines the September 30,
1999 historical consolidated condensed balance sheet of IntraNet Solutions with
the September 30, 1999 historical condensed balance sheet of InfoAccess after
giving effect to the Merger Agreement, under the assumptions set forth in the
accompanying notes. The pro forma condensed combined financial statements should
be read in conjunction with the accompanying explanatory notes, the Merger
Agreement dated September 16, 1999, the historical financial statements and
related notes of IntraNet Solutions previously filed and the financial
statements of InfoAccess appearing elsewhere in this Current Report on Form 8-K.
The periods presented conform to the fiscal year of the Registrant. The results
of operations for the three months ended March 31, 1999 of InfoAccess were, for
this presentation, recorded directly to retained earnings, having a positive
effect of approximately $213,000.
1
<PAGE> 2
INTRANET SOLUTIONS, INC. AND INFOACCESS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
INTRANET PRO FORMA PRO FORMA
SOLUTIONS INFOACCESS ADJUSTMENTS COMBINED
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 2,518,002 $ 743,599 $ -- $ 3,261,601
Short-term investments................................ 25,858,354 -- 25,858,354
Accounts receivable, net.............................. 4,471,996 470,586 4,942,582
Current maturities of notes receivable................ 97,000 -- 97,000
Due from InfoAccess, Inc. ............................ 1,183,750 -- (1,183,750)(a) --
Inventories........................................... 140,697 51,042 191,739
Prepaid royalties..................................... 679,108 8,170 687,278
Prepaid expenses and other current assets............. 268,582 40,000 308,582
------------- ------------ ----------- ------------
Total current assets.................................... 35,217,489 1,313,397 (1,183,750) 35,347,136
Notes receivable, net of current maturities............. 52,244 -- 52,244
Property and equipment, net............................. 1,297,193 74,380 1,371,573
Software licenses, net.................................. -- 191,304 191,304
Other................................................... 495,800 -- 495,800
------------- ------------ ----------- ------------
Total assets............................................ $ 37,062,726 $ 1,579,081 $(1,183,750) $ 37,458,057
============= ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations........... $ 173,177 $ 22,374 $ -- $ 195,551
Accounts payable...................................... 625,137 37,885 663,022
Due to IntraNet Solutions, Inc........................ -- 1,183,750 (1,183,750)(a) --
Deferred revenues..................................... 848,176 262,498 1,110,674
Commissions payable................................... 302,254 19,951 322,205
Deferred compensation................................. -- 30,705 30,705
Accrued acquisition costs............................. 1,625,618 -- 1,625,618
Accrued expenses...................................... 399,639 137,061 536,700
------------- ------------ ----------- ------------
Total current liabilities............................... 3,974,001 1,694,224 (1,183,750) 4,484,475
Long-term obligations, net of current maturities 15,183 20,585 35,768
Deferred revenue, net of current portion................ -- 55,694 55,694
------------- ------------ ----------- ------------
Total liabilities....................................... 3,989,184 1,770,503 (1,183,750) 4,575,937
------------- ------------ ----------- ------------
Commitments and contingencies........................... -- --
Shareholders' equity (deficit):
Common stock.......................................... 151,090 2,529,481 (2,511,447)(b) 169,124
Additional paid-in capital............................ 44,179,385 200,000 2,511,447 (b) 46,890,832
Accumulated deficit................................... (11,256,933) (2,920,903) -- (14,177,836)
------------- ------------ ----------- ------------
Total shareholders' equity (deficit).................. 33,073,542 (191,422) -- 32,882,120
------------- ------------ ----------- ------------
Total liabilities and shareholders' equity (deficit).... $ 37,062,726 $ 1,579,081 $(1,183,750) $ 37,458,057
============= ============ =========== ============
</TABLE>
See accompanying notes to the pro forma condensed combined financial statements.
2
<PAGE> 3
INTRANET SOLUTIONS, INC. AND INFOACCESS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Intranet
Solutions Infoaccess
----------------------------
March 31, December 31, Pro Forma Pro Forma
1999 1998 Adjustments Combined
-----------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product licenses......................................... $ 6,826,952 $ 2,476,521 $ 9,303,473
Services................................................. 1,601,743 495,593 2,097,336
Hardware integration and support......................... 5,629,621 -- 5,629,621
------------- ------------- -------------
Total revenues............................................ 14,058,316 2,972,114 17,030,430
------------- ------------- -------------
Cost of revenues:
Product licenses......................................... 662,741 148,361 811,102
Services................................................. 1,002,601 226,810 1,229,411
Hardware integration and support......................... 4,600,683 -- 4,600,683
------------- ------------- -------------
Total cost of revenues.................................... 6,266,025 375,171 6,641,196
------------- ------------- -------------
Gross profit.............................................. 7,792,291 2,596,943 10,389,234
------------- ------------- -------------
Operating expenses:
Sales and marketing...................................... 4,315,646 1,425,693 5,741,339
General and administrative............................... 2,929,037 647,449 3,576,486
Research and development................................. 1,342,394 872,325 2,214,719
------------- ------------- -------------
Total operating expenses.................................. 8,587,077 2,945,467 11,532,544
------------- ------------- -------------
Loss from operations...................................... (794,786) (348,524) (1,143,310)
Other:
Gain on sale of hardware integration unit................ 516,934 -- 516,934
Interest income (expense), net .......................... (54,823) (154,332) (209,155)
Other ................................................... -- (1,392) (1,392)
------------- -------------- --------------
Loss from continuing operations........................... (332,675) (504,248) (836,923)
Discontinued operations:
Loss on sale of distribution group...................... (111,103) -- (111,103)
Loss from operations of distribution group.............. (410,361) -- (410,361)
-------------- ------------- --------------
Net loss ................................................. (854,139) (504,248) (1,358,387)
Preferred stock dividends and accretion................... (718,333) -- (718,333)
-------------- ------------- --------------
Loss attributable to common shareholders ................. $ (1,572,472) $ (504,248) $ (2,076,720)
============== ============== ==============
Loss per common share - basic:
Continuing operations................................... $ (0.03) $ (0.31) $ (0.08)
Net loss................................................ $ (0.09) $ (0.31) $ (0.12)
Loss attributable to common shareholders................ $ (0.17) $ (0.31) $ (0.19)
Loss per common share - diluted:
Continuing operations................................... $ (0.03) $ (0.31) $ (0.08)
Net loss................................................ $ (0.09) $ (0.31) $ (0.12)
Loss attributable to common shareholders................ $ (0.17) $ (0.31) $ (0.19)
Weighted average common shares outstanding - basic........ 9,508,886 1,641,637 11,150,523
Weighted average common shares outstanding - diluted...... 9,508,886 1,641,637 11,150,523
</TABLE>
See accompanying notes to the pro forma condensed combined financial statements.
3
<PAGE> 4
INTRANET SOLUTIONS, INC. AND INFOACCESS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Intranet
Solutions Infoaccess
----------------------------
March 31, December 31, Pro Forma Pro Forma
1998 1997 Adjustments Combined
-----------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product licenses......................................... $ 2,563,339 $ 1,937,682 $ 4,501,021
Services................................................. 409,335 824,104 1,233,439
Hardware integration and support......................... 16,477,121 -- 16,477,121
------------- ------------- -------------
Total revenues............................................ 19,449,795 2,761,786 22,211,581
------------- ------------- -------------
Cost of revenues:
Product licenses......................................... 285,271 197,143 482,414
Services................................................. 284,517 512,386 796,903
Hardware integration and support......................... 12,883,240 -- 12,883,240
------------- ------------- -------------
Total cost of revenues.................................... 13,453,028 709,529 14,162,557
------------- ------------- -------------
Gross profit.............................................. 5,996,767 2,052,257 8,049,024
------------- ------------- -------------
Operating expenses:
Sales and marketing...................................... 3,130,885 1,375,102 4,505,987
General and administrative............................... 2,369,011 730,910 3,099,921
Research and development................................. 1,243,068 952,970 2,196,038
------------- ------------- -------------
Total operating expenses.................................. 6,742,964 3,058,982 9,801,946
------------- ------------- -------------
Loss from operations...................................... (746,197) (1,006,725) (1,752,922)
Other:
Interest income (expense), net ......................... (332,109) (7,987) (340,096)
Other................................................... -- 6,430 6,430
------------- ------------- -------------
Loss from continuing operations........................... (1,078,306) (1,008,282) (2,086,588)
Discontinued operations:
Loss from operations of distribution group.............. (2,576,666) -- (2,576,666)
------------- ------------- --------------
Net loss ................................................. (3,654,972) (1,008,282) (4,663,254)
Preferred stock dividends and accretion................... (1,664,889) -- (1,664,889)
-------------- ------------- --------------
Loss attributable to common shareholders ................. $ (5,319,861) $ (1,008,282) $ (6,328,143)
============= ============= =============
Loss per common share - basic:
Continuing operations................................... $ (0.14) $ (0.64) $ (0.22)
Net loss................................................ $ (0.47) $ (0.64) $ (0.50)
Loss attributable to common shareholders................ $ (0.68) $ (0.64) $ (0.67)
Loss per common share - diluted:
Continuing operations................................... $ (0.14) $ (0.64) $ (0.22)
Net loss................................................ $ (0.47) $ (0.64) $ (0.50)
Loss attributable to common shareholders................ $ (0.68) $ (0.64) $ (0.67)
Weighted average common shares outstanding - basic........ 7,844,190 1,577,549 9,421,739
Weighted average common shares outstanding - diluted...... 7,844,190 1,577,549 9,421,739
</TABLE>
See accompanying notes to the pro forma condensed combined financial statements.
4
<PAGE> 5
INTRANET SOLUTIONS, INC. AND INFOACCESS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Intranet
Solutions Infoaccess
------------------------------
March 31, December 31, Pro Forma Pro Forma
1997 1996 Adjustments Combined
-------------------------------------------------------------
Revenues:
<S> <C> <C> <C>
Product licenses......................................... $ 885,620 $ 3,100,695 $ 3,986,315
Services................................................. 28,282 1,463,679 1,491,961
Hardware integration and support......................... 15,276,674 -- 15,276,674
------------- ------------- -------------
Total revenues............................................ 16,190,576 4,564,374 20,754,950
------------- ------------- -------------
Cost of revenues:
Product licenses......................................... 229,935 258,848 488,783
Services................................................. 13,537 509,489 523,026
Hardware integration and support......................... 11,894,532 -- 11,894,532
------------- ------------- -------------
Total cost of revenues.................................... 12,138,004 768,337 12,906,341
------------- ------------- -------------
Gross profit.............................................. 4,052,572 3,796,037 7,848,609
------------- ------------- -------------
Operating expenses:
Sales and marketing...................................... 2,014,160 2,111,057 4,125,217
General and administrative............................... 1,983,591 552,710 2,536,301
Research and development................................. 1,115,782 820,730 1,936,512
------------- ------------- -------------
Total operating expenses.................................. 5,113,533 3,484,497 8,598,030
------------- ------------- -------------
Income (loss) from operations............................. (1,060,961) 311,540 (749,421)
Other:
Interest income (expense), net ......................... (127,747) 30,616 (97,131)
Other................................................... -- (742) (742)
------------- ------------- --------------
Income (loss) from continuing operations.................. (1,188,708) 341,414 (847,294)
Discontinued operations:
Loss from operations of distribution group.............. (2,559,756) -- (2,559,756)
------------- ------------- --------------
Net income (loss) ........................................ $ (3,748,464) $ 341,414 $ (3,407,050)
============= ============= =============
Income (loss) per common share - basic:
Continuing operations................................... $ (0.19) $ 0.22 $ (0.11)
Net income (loss) ...................................... $ (0.58) $ 0.22 $ (0.43)
Income (loss) per common share - diluted:
Continuing operations................................... $ (0.19) $ 0.19 $ (0.11)
Net income (loss) ...................................... $ (0.58) $ 0.19 $ (0.43)
Weighted average common shares outstanding - basic........ 6,418,111 1,561,506 7,979,617
Weighted average common shares outstanding - diluted...... 6,418,111 1,761,119 7,979,617
</TABLE>
See accompanying notes to the pro forma condensed combined financial statements.
5
<PAGE> 6
INTRANET SOLUTIONS, INC. AND INFOACCESS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Intranet Pro Forma Pro Forma
Solutions Infoaccess Adjustments Combined
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product licenses......................................... $ 5,448,541 $ 1,575,054 $ 7,023,595
Services................................................. 1,721,273 276,175 1,997,448
------------- ------------- -------------
Total revenues............................................ 7,169,814 1,851,229 9,021,043
------------- ------------- -------------
Cost of revenues:
Product licenses......................................... 666,112 59,055 725,167
Services................................................. 872,235 92,749 964,984
------------- ------------- -------------
Total cost of revenues.................................... 1,538,347 151,804 1,690,151
------------- ------------- -------------
Gross profit.............................................. 5,631,467 1,699,425 7,330,892
------------- ------------- -------------
Operating expenses:
Sales and marketing...................................... 3,395,088 600,372 3,995,460
General and administrative............................... 1,395,316 382,241 1,777,557
Research and development................................. 843,350 303,583 1,146,933
Merger and acquisition costs............................. 1,063,154 909,050 1,972,204
------------- ------------- -------------
Total operating expenses.................................. 6,696,908 2,195,246 8,892,154
------------- ------------- -------------
Loss from operations...................................... (1,065,441) (495,821) (1,561,262)
Interest income (expense), net ........................... 445,674 (51,480) 394,194
------------- -------------- -------------
Net loss ................................................. $ (619,767) $ (547,301) $ (1,167,068)
============== ============== ==============
Net loss per common share - basic ........................ $ (0.05) $ (0.33) $ (0.08)
Net loss per common share - diluted ...................... $ (0.05) $ (0.33) $ (0.08)
Weighted average common shares outstanding - basic........ 13,438,353 1,649,524 15,087,877
Weighted average common shares outstanding - diluted...... 13,438,353 1,649,524 15,087,877
</TABLE>
See accompanying notes to the pro forma condensed combined financial statements.
6
<PAGE> 7
INTRANET SOLUTIONS, INC. AND SUBSIDIARIES
Notes to Pro Forma Condensed Combined Financial Statements (unaudited)
(1) Basis of Presentation
On September 29, 1999 (the "Effective Date"), Intranet Solutions, Inc.
("IntraNet Solutions") completed its acquisition of InfoAccess, Inc.
("InfoAccess"). Pursuant to the terms of the Agreement and Plan of Merger (the
"Merger Agreement") among IntraNet Solutions, IntraNet Solutions (Washington),
Inc. (the "Merger Sub"), a wholly owned subsidiary of IntraNet Solutions,
InfoAccess and certain Significant Shareholders of InfoAccess, dated as of
September 16, 1999, the Merger Sub was merged with and into InfoAccess (the
"Merger")and InfoAccess became a wholly owned subsidiary of IntraNet Solutions.
Each share of InfoAccess common stock outstanding as of the time of the merger
was converted into the right to receive 0.31230 shares of common stock of
IntraNet Solutions, subject to the reservation of 10% of the aggregate amount of
such shares to satisfy potential claims for indemnification by IntraNet
Solutions under the Merger Agreement. An aggregate of 1,803,385 shares of common
stock of IntraNet Solutions were issued in the merger in exchange for the
5,774,530 shares of common stock of InfoAccess outstanding at the time of the
merger.
The unaudited pro forma condensed combined financial statements are presented
for illustrative purposes only, giving effect to the Merger as accounted for by
the pooling of interests method.
(2) Pro Forma Adjustments
(a) Reflects the elimination of intercompany charges incurred
post-acquisition between IntraNet Solutions and InfoAccess.
(b) Reflects the issuance of 1,803,385 shares of IntraNet Solutions stock
in exchange for all the outstanding shares of InfoAccess common stock
as of September 29, 1999.
(3) Until the time of the merger, InfoAccess had elected under Subchapter S of
the Internal Revenue Code not to be taxed as a corporation. Due to combined
pro-forma losses of InfoAccess and IntraNet Solutions, no income tax provision
has been recorded in the accompanying pro forma condensed combined statements of
operations.
7
