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) December 23, 1999
-------------------------------
RMI.NET, Inc.
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(Exact name of Registrant as specified in charter)
Delaware
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(State or other jurisdiction of incorporation)
001-12063 84-1322326
- ---------------------------- ----------------------------------------
(Commission File Number) (IRS Employer Identification No.)
999 Eighteenth Street, Suite 2201, Denver, Colorado 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 672-0700
-----------------------------
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
On December 23, 1999, the Registrant entered into an Asset Purchase Agreement
with AIS Network Corporation, pursuant to which the Registrant acquired the
assets related to AIS Network Corporation's Internet communications and
web-hosting services business. The purchase price of the assets acquired was
approximately $3,650,000, payable in the form of 425,967 shares of the
Registrant's common stock. The consideration that the Registrant agreed to
pay was determined through arm's length negotiation. There was no material
relationship between the Registrant and AIS Network Corporation or its
affiliates prior to the transaction. AIS Network Corporation is an Illinois
corporation headquartered in Schaumburg, Illinois. AIS Network Corporation is
a business-to-business full-service solutions company, including dedicated
and dialup Internet access, web design and web hosting, e-commerce and
network integration. The Registrant intends to utilize the assets acquired in
the same manner that AIS Network Corporation utilized the assets prior to
their acquisition by the Registrant. A copy of the Registrant's press release
is attached hereto as Exhibit 20.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) AIS Network Corporation - Financial Statements:
Report of Independent Auditors - Crowe, Chezek and
Company, LLP
Balance Sheets as of December 31, 1998 and September 30,
1999
Statements of Income for the Year Ended December 31,
1998 and for the Nine Months ended September 30, 1998
and 1999
Statements of Stockholders' Equity for the Year Ended
December 31, 1998 and for the Nine Months ended
September 30, 1998 and 1999
Statements of Cash Flows for the Year Ended December 31,
1998 and for the Nine Months ended September 30, 1998
and 1999
Notes to Financial Statements
(b) Pro Forma Financial Information:
Pro Forma Condensed Combined Balance Sheet as of
September 30, 1999
Pro Forma Condensed Combined Statement of Operations for
the Year Ended December 31, 1998
Pro Forma Condensed Combined Statement of Operations for
the Nine Months Ended September 30, 1999
(c) Exhibits:
Exhibit Number Description
------------------- ---------------------------------------
10.1 Asset Purchase Agreement by and among
RMI.NET, Inc., and AIS Network
Corporation.
20.1 News Release dated December 28, 1999
announcing the AIS Network Corporation
asset acquisition.
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.
RMI.NET, Inc.
------------------------------------
(Registrant)
Date: January 6, 2000 By: /s/ CHRISTOPHER J. MELCHER
-----------------------------------
Christopher J. Melcher
Vice President, General Counsel and
Corporate Secretary
REPORT OF INDEPENDENT AUDITORS
AIS Network Corporation
Schaumburg, Illinois
We have audited the accompanying balance sheet of AIS Network Corporation as
of December 31, 1998 and the related statements of income, stockholders'
equity, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AIS Network Corporation as
of December 31, 1998 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Crowe, Chizek and Company LLP
Oak Brook, Illinois
December 10, 1999
1
AIS NETWORK CORPORATION
BALANCE SHEETS
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December 31, September 30,
1998 1999
---- ----
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 119,531 $ 284,504
Trade accounts receivable 189,487 75,366
Prepaid expenses -- 1,000
------------ ------------
Total current assets 309,018 360,870
Property and equipment 293,004 426,407
Accumulated depreciation (103,372) (150,813)
------------ ------------
Net property and equipment 189,632 275,594
------------ ------------
$ 498,650 $ 636,464
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,234 $ 57,279
Payroll and other taxes payable 7,593 19,570
Other 2,457 --
------------ ------------
Total current liabilities 17,284 76,849
Stockholders' equity
Common stock, $1 par value, authorized 1,000 shares;
1,000 shares issued and outstanding 1,000 1,000
Additional paid-in capital 19,400 36,000
Retained earnings and accumulated
proprietor's equity 460,966 522,615
------------ ------------
481,366 559,615
------------ ------------
$ 498,650 $ 636,464
============ ============
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See accompanying notes to financial statements.
2
AIS NETWORK CORPORATION
STATEMENTS OF INCOME
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Year Ended Nine Months Ended
---------- -----------------
December 31, September 30, September 30,
1998 1998 1999
------------ -------------- -------------
(Unaudited)
Sales $ 1,125,281 $ 792,545 $ 1,172,263
Cost of sales 231,523 209,297 285,608
---------------- --------------- ---------------
GROSS PROFIT 893,758 583,248 886,655
Operating expenses 618,606 378,097 769,315
---------------- --------------- ---------------
OPERATING INCOME 275,152 205,151 117,340
Other income
Interest income 6,705 3,622 10,809
---------------- --------------- ---------------
NET INCOME $ 281,857 $ 208,773 $ 128,149
================ =============== ===============
Basic and diluted net income per share $ 281.86 $ 208.77 $ 128.15
================ =============== ===============
Weighted average number of common
shares outstanding 1,000 1,000 1,000
================ =============== ===============
Dividends per share $ -- $ -- $ 66.50
================ =============== ===============
- ---------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
3
AIS NETWORK CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
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Retained
Additional Earnings and
Common Stock Paid-in Accumulated
------------ ---------- Proprietor's
Shares Amount Capital Equity
------ ------ ------- ------------
Balance, January 1, 1998 1,000 $ 1,000 $ -- $ 179,109
Net income -- -- -- 281,857
Compensation resulting from
principal stockholder's
transfer of stock to employee 14,400 --
Contributed capital -- -- 5,000 --
------- ------- -------- -----------
Balance, December 31, 1998 1,000 1,000 19,400 460,966
Net income -- -- -- 128,149
Compensation resulting from
principal stockholder's
transfer of stock to employee 9,600 --
Contributed capital -- -- 7,000 --
Dividends -- -- -- (66,500)
------- ------- -------- -----------
Balance, September 30, 1999
(unaudited) 1,000 $ 1,000 $ 36,000 $ 522,615
======= ======= ======== ===========
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
4
AIS NETWORK CORPORATION
STATEMENTS OF CASH FLOWS
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Year Ended Nine Months Ended
---------- -----------------
December 31, September 30, September 30,
1998 1998 1999
------------ ------------- -------------
(Unaudited)
CASH FROM OPERATING ACTIVITIES
Net income $ 281,857 $ 208,773 $ 128,149
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 54,960 27,053 47,440
Stock issued for compensation 14,400 14,400 9,600
Changes in operating assets and liabilities
Accounts receivable (119,270) (932) 114,121
Prepaid expenses and other 1,933 49,585 (1,000)
Accounts payable 4,173 6,100 50,044
Accrued expenses 1,563 -- 10,415
Unearned revenues 894 -- (894)
--------- --------- ----------
Net cash from operating activities 240,510 304,979 357,875
CASH FROM INVESTING ACTIVITIES
Purchase of property and equipment (136,819) (60,050) (133,402)
--------- --------- ----------
Cash from investing activities (136,819) (60,050) (133,402)
CASH FROM FINANCING ACTIVITIES
Dividends paid -- -- (66,500)
Contributed capital 5,000 -- 7,000
--------- --------- ----------
Cash from investing activities 5,000 -- (59,500)
Net increase in cash 108,691 244,929 164,973
Cash and cash equivalents at beginning of period 10,840 10,840 119,531
--------- --------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 119,531 $ 255,769 $ 284,504
========= ========= ==========
Supplemental schedule of noncash
Investing and financing activities
Stock issued for compensation $ 14,400 $ 14,400 $ 9,600
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
5
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 -- DESCRIPTION OF BUSINESS
AIS Network Corporation (the Company) provides business Internet services
which include Internet access, website development, Internet commerce,
website hosting and marketing, and network integration. These services are
provided to both individuals and companies. The Company was incorporated on
October 15, 1997. Prior to that date, the operations were in a sole
proprietorship. On October 15, 1997, the stockholder of the Company had
contributed the business of the sole proprietorship into the Company. This
transaction was accounted for in a manner similar to a pooling of interest.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect certain reported amounts and
disclosures, and actual results may differ from these estimates.
REVENUE RECOGNITION: The Company charges customers (subscribers) monthly
access fees to the Internet and recognizes the revenue in the month the
access is provided. For certain subscribers billed in advance, the Company
recognizes the revenue over the period the billing covers. Revenue for other
services provided, including web site development, west site hosting, and
other services, are recognized as the service is performed.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of the Company's
financial instruments which include cash and receivables, approximates fair
value due to the short maturities of those instruments.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid debt
instruments with maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Improvements and betterments are capitalized; maintenance and repairs are
charged to operations as incurred. Depreciation is provided for financial
reporting and income tax purposes using straight-line and accelerated
methods, respectively, over the estimated useful asset lives.
SEGMENT REPORTING: Effective January 1, 1997, the Company adopted Statement
of Financial Accounting Standards No. 131, "Disclosures About Segment of
Enterprise and Related Information" (FAS 131). FAS 131 changes the way
companies report financial and descriptive information about reportable
segments in annual financial statements and interim financial reports issued
to stockholders. The Company operates in one market segment, the providing of
Internet services. The Company operates in one geographical segment, the
United States of America. All of the Company's sales are made to customers in
the United States of America.
- -----------------------------------------------------------------------------
(Continued)
6
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EARNINGS PER COMMON SHARE: Basic and diluted earnings per common share is net
income divided by the weighted average number of common shares outstanding
during the period.
ADVERTISING COSTS: Advertising costs, expensed as incurred, were $6,373 in
1998.
INTERIM FINANCIAL INFORMATION: The financial information as of September 30,
1999 and for the nine months ended September 30, 1998 and 1999 is unaudited
but, in the opinion of management, includes all adjustments, consisting of
only normal recurring adjustments, that the Company considers necessary for a
fair presentation of the financial position, operating results, and cash
flows for such periods. Results for the nine months ended September 30, 1999
are not necessarily indicative of results for the full year or any future
period.
RECENTLY ISSUED ACCOUNTING STANDARDS: In June 1998, the Financial Accounting
Standards Board issued FAS 133, "Accounting for Derivative Instruments and
Hedging Activities." The Company is required to adopt FAS 133 for the year
ending December 31, 2001. FAS 133 establishes methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Because the Company holds no
derivative financial instruments and does not currently engage in hedging
activities, adoption of FAS 133 is expected to have no material impact on the
Company's financial position or results of operations.
NOTE 3 -- PROVISION FOR INCOME TAXES
The Company has elected to have its income taxed under Section 1362 of the
Internal Revenue Code which provides that, in lieu of corporate income tax,
the Company's taxable income is taxed at the stockholder's level. Therefore,
the statement of income does not include any provision for federal income
taxes.
- -----------------------------------------------------------------------------
(Continued)
7
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Furniture and equipment $ 43,992
Computer equipment 25,049
Computer servers 80,642
Computer workstations 25,500
Networking equipment 117,821
-----------
293,004
Less accumulated depreciation 103,372
-----------
$ 189,632
===========
NOTE 5 -- RELATED PARTY TRANSACTIONS
During 1998, the Company paid an entity which is related through common
ownership $217,139 for operating expenses and property and equipment which
the related entity paid on the Company's behalf. These costs are comprised of
the following:
Repairs $ 3,863
Telephone 4,099
Insurance 26,999
Utilities 7,010
Cost of sales 15,204
Rent 31,315
Vehicle expenses 2,844
Office expense 3,485
Property and equipment purchases 111,269
Internet fees 3,830
Other 7,221
-----------
$ 217,139
===========
At December 31, 1998 there were no amounts due to this entity.
In addition, the Company received $40,000 for Internet services provided to
the entity described above. At December 31, 1998, there were no amounts due
from this entity.
The Company's office facilities are leased from the above entity on a
month-to-month basis.
- -----------------------------------------------------------------------------
(Continued)
8
AIS NETWORK CORPORATION
NOTES TO FINANCIAL STATEMENTS
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NOTE 6 -- STOCKHOLDERS' EQUITY
In accordance with Staff Accounting Bulletin Topic 1-B, the Company recorded
compensation expense of $14,400 and $9,600 (unaudited) during 1998 and 1999,
respectively, resulting from transfers of the principal stockholder's stock
(10 shares of common stock) to certain employees.
NOTE 7 -- SUBSEQUENT EVENT
Subsequent to September 30, 1999, the Company's stockholders entered into
negotiations to sell the assets of the Company.
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9
AIS NETWORK CORPORATION
Schaumburg, Illinois
FINANCIAL STATEMENTS
CONTENTS
Page
----
REPORT OF INDEPENDENT AUDITORS.......................................... 1
FINANCIAL STATEMENTS
BALANCE SHEETS..................................................... 2
STATEMENTS OF INCOME............................................... 3
STATEMENTS OF STOCKHOLDERS' EQUITY................................. 4
STATEMENTS OF CASH FLOWS........................................... 5
NOTES TO FINANCIAL STATEMENTS...................................... 6
AIS NETWORK CORPORATION
Schaumburg, Illinois
FINANCIAL STATEMENTS
SELECTIVE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following selected unaudited pro forma combined financial information
presented below has been derived from the unaudited or audited historical
financial statements of the Company, AIS Network Corporation, Wolfe Internet
Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a WebZone),
IdealDial Corporation and August 5th Corporation (d/b/a Dave's World) and
reflects management's present estimate of pro forma adjustments, including a
preliminary estimate of the purchase price allocations, which ultimately may
be different.
The acquisition is being accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed are recorded
at their estimated fair values, which are subject to further adjustment based
upon appraisals and other analysis, with appropriate recognition given to the
effect of the Company's borrowing rates and income tax rates.
The unaudited pro forma combined statements of operations for the nine
months ended September 30, 1999 and the year ended December 31, 1998 give
effect to the acquisitions as if they had been consummated at the beginning
of such period. These pro forma statements of operations combines the
historical consolidated statements of operations for the periods reported for
the Company, AIS Network Corporation, Wolfe Internet Access L.L.C., ACES
Research, Inc., Triad Resources L.L.C. (d/b/a WebZone), IdealDial Corporation
and August 5th Corporation (d/b/a Dave's World).
The unaudited pro forma condensed combined balance sheet as of September
30, 1999 gives effect to the acquisitions as if they had been consummated on
that date. This pro forma balance sheet combines the historical consolidated
balance sheet at that date for the Company, and AIS Network Corporation.
The unaudited pro forma condensed combined financial statements may not
be indicative of the results that actually would have occurred if the
transaction described above had been completed and in effect for the periods
indicated or the results that may be obtained in the future. The unaudited
pro forma condensed combined financial data presented below should be read in
conjunction with the audited and unaudited historical financial statements
and related notes thereto of the Company.
Pro Forma Condensed Combined Balance Sheet
As of September 30, 1999
(Unaudited)
-----------------------------------------------------------------------
AIS Network Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Corporation Subtotal Adjustments (B) Combined
-----------------------------------------------------------------------
(Dollars in Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $6,213 $285 $6,498 $0 $6,498
Trade receivables less allowance
for doubtful accounts 4,681 75 4,756 - 4,756
Inventories 223 - 223 - 223
Other 1,123 1 1,124 - 1,124
--------------------------------------------------------------------
Total Current Assets 12,240 361 12,601 - 12,601
--------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net 9,881 275 10,156 - 10,156
Goodwill, net 35,451 - 35,451 3,091 (1) 38,542
Other 548 - 548 - 548
--------------------------------------------------------------------
Total Assets $58,120 $636 $58,756 $3,091 $61,847
====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $3,480 $ 57 $3,537 $0 $3,537
Current maturities of long term debt and
capital lease obligations 2,465 - 2,465 - 2,465
Deferred revenue 2,184 - 2,184 - 2,184
Accrued payroll & related taxes 657 20 677 - 677
Accrued expenses & other 1,931 - 1,931 - 1,931
---------------------------------------------------------------------
Total Current Liabilites 10,717 77 10,794 - 10,794
---------------------------------------------------------------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 2,742 - 2,742 - 2,742
---------------------------------------------------------------------
Total liabilites 13,459 77 13,536 - 13,536
-
REDEEMABLE CONVERTIBLE PREFERRED STOCK 1,928 - 1,928 - 1,928
Stockholders' Equity
Common Stock 18 1 19 (1) (2) 18
Additional paid in capital 73,048 36 73,084 (36) (2) 73,048
3,650 (1) 3,650
Accumulated deficit (30,333) 522 (29,811) (522) (2) (30,333)
Unearned compensation - - - - -
---------------------------------------------------------------------
42,733 559 43,292 3,091 46,383
---------------------------------------------------------------------
$58,120 $636 $58,756 $3,091 $61,847
=====================================================================
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1998
(Unaudited)
Historical
-----------------------------------------------------------------------------------
Previously
Reported AIS Network Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions (A) Corporation Subtotal Adjustments (B) Combined
-----------------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
Revenue
Communication Services $ 7,974 $17,645 $1,125 $26,744 $0 $26,744
Web Solutions 2,113 0 2,113 0 2,113
---------------------------------------------------------------------------------
10,087 17,645 1,125 28,857 0 28,857
---------------------------------------------------------------------------------
Cost of revenue earned
Communication Services 3,471 11,314 232 15,017 0 15,017
Web Solutions 50 0 50 0 50
---------------------------------------------------------------------------------
3,521 11,314 232 15,067 0 15,067
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Gross profit 6,566 6,331 893 13,790 0 13,790
---------------------------------------------------------------------------------
General, selling and
administrative expenses 9,184 6,594 574 16,352 0 16,352
Cost related to unsuccessful
merger attempt 6,071 0 0 6,071 0 6,071
Depreciation and amortization 1,789 3,037 44 4,870 4,320 (3) 9,190
---------------------------------------------------------------------------------
Operating income (loss) (10,478) (3,300) 275 (13,503) (4,320) (17,823)
---------------------------------------------------------------------------------
Other income (expense)
Interest expense (320) (157) 0 (477) 0 (477)
Interest Income 51 7 58 0 58
Other income (expense), net 78 212 0 290 0 290
----------------------------------------------------------------------------------
(191) 55 7 (129) 0 (129)
----------------------------------------------------------------------------------
Net loss ($10,669) ($3,245) $282 ($13,632) ($4,320) ($17,952)
==================================================================================
Preferred stock dividends $33 $33
Net loss applicable to common
Stockholders ($10,702) ($17,985)
============ ============
Basic and Diluted loss per share from
continuing operations (4) ($1.39) ($1.81)
============ ============
Average number of common shares
outstanding (4) 7,690 1,797 426 9,913
========================================= ============
Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 1999
(Unaudited)
Historical
-----------------------------------------------------------------------------------
Previously
Reported AIS Network Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions (A) Corporation Subtotal Adjustments (B) Combined
-----------------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
Revenue
Communication Services $17,859 $6,912 $1,172 $25,943 $0 $25,943
Web Solutions 2,924 0 2,924 0 2,924
----------------------------------------------------------------------------------
20,783 6,912 1,172 28,867 0 28,867
----------------------------------------------------------------------------------
Cost of revenue earned
Communication Services 9,969 4,050 286 14,305 0 14,305
Web Solutions 873 0 873 0 873
---------------------------------------------------------------------------------
10,842 4,050 286 15,178 0 15,178
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Gross profit 9,941 2,862 886 13,689 0 13,689
---------------------------------------------------------------------------------
General, selling and
administrative expenses 17,497 2,639 721 20,857 0 20,857
Depreciation and amortization 4,880 1,139 48 6,067 1,700 (3) 7,767
---------------------------------------------------------------------------------
Operating income (loss) (12,436) (916) 117 (13,235) (1,700) (14,935)
---------------------------------------------------------------------------------
Other income (expense)
Interest expense (369) (46) 0 (415) 0 (415)
Interest Income 121 2 11 134 0 134
Other income (expense), net 0 58 0 58 0 58
---------------------------------------------------------------------------------
(248) 14 11 (223) 0 (223)
---------------------------------------------------------------------------------
Net loss ($12,684) ($902) $128 ($13,458) ($1,700) ($15,158)
==================================================================================
Preferred stock dividends $199 $199
Net loss applicable to common
Stockholders ($12,883) ($15,357)
========= ========
Basic and Diluted loss per share from
continuing operations (4) ($1.09) ($1.08)
========= ========
Average number of common shares
outstanding (4) 11,806 1,797 426 14,029
======================================== ========
NOTES TO THE PRO FORMA CONSENSED
COMBINED FINANCIAL DATA
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combined balance sheet is
presented as of September 30, 1999. The accompanying unaudited pro forma
condensed combined statements of operations are presented for the nine
months ended September 30, 1999 and the year ended December 31, 1998.
(A) PREVIOUSLY REPORTED ACQUISITIONS: The accompanying unaudited pro forma
condensed combined statements of operations presented for the nine months
ended September 30, 1999 and the year ended December 31, 1998 included the
condensed statements of operations for the respective periods ended for
Wolfe Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C.
(d/b/a WebZone), IdealDial Corporation and August 5th Corporation (d/b/a
Dave's World).
(B) PRO FORMA ADJUSTMENTS: The following pro forma adjustments have been made
to the unaudited condensed combined balance sheet as of September 30, 1999
and the unaudited condensed combined statements of operations for the nine
months ended September 30, 1999 and the year ended December 31, 1998.
(1) To reflect the 425,967 shares of RMI stock valued at $3.7 million,
which is the number of shares issued in connection with the acquisition of
AIS Network Corporation. The excess purchase price over the fair value of
the assets acquired has been allocated to goodwill. The pro forma
adjustment reflects the incremental goodwill in the amount of $3.1 million.
Shares of Common Stock issued for the acquisition were recorded at fair
market value as based on the current market price of RMI's publicly traded
stock. The final allocation of the purchase price will be made after the
appropriate appraisals or analyses are performed. Upon completion of the
appraisals and in accordance with the terms thereof, the excess purchase
price currently allocated to goodwill will be allocated to the appropriate
asset classifications, including customer list and goodwill. While goodwill
will be amortized over a period of five years, customer list or other
identified intangibles may be amortized over shorter periods, which would
therefore increase amortization expense.
(2) To eliminate the equity accounts of the acquisition.
(3) To adjust amortization expense due to increase in the carrying value of
goodwill, using a life of five years, as if such acquisitions had been
completed as of the beginning of such periods.
(4) The Basic and Diluted loss per share from continuing operations and the
average number of common shares outstanding for the pro forma combined
amounts gives effect to the results as if AIS Network Corporation, Wolfe
Internet Access L.L.C., ACES Research, Inc., Triad Resources L.L.C. (d/b/a
WebZone), IdealDial Corporation and August 5th Corporation (d/b/a Dave's
World) had been completed at the beginning of such periods.