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
JUNE 20, 2000
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Date of Report
(Date of earliest event
reported)
INTERNAP NETWORK SERVICES CORPORATION
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(Exact name of registrant as specified in its charter)
Washington 000-27265 91-1896926
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(State or other
jurisdiction of (Commission File (IRS Employer
incorporation) No.) Identification No.)
601 Union St., Suite 1000
Seattle, Washington 98101
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(Address of principal executive offices, including zip code)
(206) 441-8800
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(Registrant's telephone number, including area code)
Page 1 of 8
Exhibit Index on Page 8
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The undersigned Registrant hereby amends in the manner set forth below and in
the pages attached hereto Item 7 and the exhibits of its Current Report on
Form 8-K, filed on June 29, 2000, relating to the Registrant's acquisition of
CO Space, Inc. on June 20, 2000 as described in such Current Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
See Exhibit 99.3 for the audited consolidated financial statements of CO
Space, Inc.
(b) PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial information
gives effect to the acquisition by InterNAP Network Services Corporation
("InterNAP") of CO Space, Inc. ("CO Space"). This transaction has been
accounted for as a purchase. The unaudited pro forma combined condensed
balance sheet is based on the individual historical balance sheets of
InterNAP and CO Space and has been prepared to reflect the acquisition by
InterNAP of CO Space as if the transaction had occured on March 31, 2000. The
unaudited pro forma combined condensed statements of operations are based on
the individual historical statements of operations of InterNAP and CO Space,
and combine the results of operations of InterNAP and CO Space for the three
months ended March 31, 2000 and the year ended December 31, 1999 as if the
acquisition occurred on January 1, 2000 and 1999, respectively.
The unaudited pro forma combined condensed financial information is presented
for illustrative purposes only and is not necessarily indicative of the
financial position or operating results that would have been achieved if the
acquisition had been completed as of the beginning of the periods presented,
nor are they necessarily indicative of the future financial position or
operating results of InterNAP. The pro forma combined condensed financial
information does not give effect to any cost savings or restructuring and
integration costs that may result from the integration of InterNAP's and CO
Space's operations. The costs related to restructuring and integration have
not yet been determined and InterNAP expects to charge these costs to
operations or adjust the purchase price as appropriate under accounting
principles generally accepted in the United States. These additional costs
could be material.
The historical financial information has been derived from the respective
historical financial statements of InterNAP and CO Space and should be read
in conjunction with those financial statements.
Unaudited Pro Forma Combined Condensed Balance Sheet
at March 31, 2000
(in thousands)
Pro Forma Pro Forma
InterNAP CO Space Adjustments Combined
--------- --------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 64,996 $ 11,006 $ (200)(A) $ 75,802
Short-term investments and investment income
receivable....................................... 104,552 104,552
Accounts receivable, net........................... 6,333 8 6,341
Prepaid expenses and other assets.................. 456 227 683
--------- --------- ----------- ---------
Total current assets......................... 176,337 11,241 (200) 187,378
Property and equipment, net........................... 37,776 17,440 55,216
Patents and trademarks, net........................... 157 157
Investments........................................... 17,987 17,987
Intangible assets, net................................ 253,206 (A) 253,206
Deposits and other assets, net........................ 1,281 1,417 2,698
--------- --------- ----------- ---------
Total assets................................. $ 233,538 $ 30,098 $ 253,006 $ 516,642
========= ========= =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities............ $ 10,120 $ 5,262 $ 16,358 (A),(B) $ 31,740
Deferred revenue.................................... 217 550 767
Notes payable, current portion...................... 1,188 472 1,660
Line of credit...................................... 1,525 1,525
Capital Lease obligations, current portion.......... 8,310 212 8,522
--------- --------- ----------- ---------
Total current liabilities.................... 21,360 6,496 16,358 44,214
Deferred revenue...................................... 800 800
Notes payable, less current portion................... 3,049 1,248 4,297
Capital lease obligations, less current portion....... 13,880 219 14,099
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Total liabilities............................ 38,289 8,763 16,358 63,410
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Redeemable, convertible preferred stock............... 33,028 (33,028)(D)
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Commitments and contingencies
Stockholder's equity (deficit)
Common stock........................................ 134 50 (50)(C) 141
7
Additional paid-in capital.......................... 289,534 11,134 (11,134)(D) 548,276
258,742 (C)
Full recourse notes receivable...................... (766) (766)
Deferred stock compensation......................... (14,154) (10,750) 10,750 (D) (14,154)
Accumulated deficit................................. (80,081) (11,361) 11,361 (D) (80,081)
Accumulated comprehensive loss...................... (184) (184)
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Total shareholders' equity (deficit)......... 195,249 (11,693) 269,676 453,232
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Total liabilities and shareholders' equity
(deficit).................................. $ 233,538 $ 30,098 $ 253,006 $ 516,642
========= ========= =========== =========
See accompanying notes to the unaudited pro forma combined condensed
financial information
Unaudited Pro Forma Combined Condensed Income Statement
(in thousands)
Three Months ended March 31, 2000 Twelve Months ended December 31, 1999
------------------------------------------------ ------------------------------------------------
CO Pro Forma Pro Forma CO Pro Forma Pro Forma
InterNAP Space Adjustments Combined InterNAP Space Adjustments Combined
-------- ------- ----------- --------- -------- ------- ----------- ---------
Revenues...................... $ 8,891 $ 209 $ 9,100 $ 12,520 $ 258 $ $ 12,778
-------- ------- ----------- --------- -------- ------- ----------- ---------
Costs and expenses
Cost of network and
customer support.......... 15,326 2,557 17,883 27,412 2,706 30,118
Product development......... 1,578 1,578 3,919 3,919
Sales and marketing......... 7,689 852 8,541 17,523 488 18,011
General and
administrative............ 4,388 1,694 6,082 8,328 2,970 11,298
Amortization of deferred
stock compensation........ 3,074 529 3,603 7,569 89 7,658
Amortization of
intangibles............... $ 21,101 (A) 21,101 $ 84,402 (A) 84,402
-------- ------- ----------- --------- -------- ------- ----------- ---------
Total operating cost
and expenses.......... 32,055 5,632 21,101 58,788 64,751 6,253 84,402 155,406
-------- ------- ----------- --------- -------- ------- ----------- ---------
Loss from operations.......... (23,164) (5,423) (21,101) (49,688) (52,231) (5,995) (84,402) (142,628)
Other income (expense)
Interest income............. 2,926 104 3,030 3,388 38 3,426
Interest and
financing expense........ (385) (385) (1,074) (1,074)
-------- ------- ----------- --------- -------- ------- ----------- ---------
Net loss............... $(20,623) $(5,319) $ (21,101) $(47,043) $(49,917) $(5,957) $ (84,402) $(140,276)
======== ======= =========== ========= ======== ======= =========== =========
Basic and diluted net
loss per share............. $ (0.16) $ (0.34) $ (1.31) $ (3.13)
======== ========= ======== =========
Weighted average shares
used in computing
basic and diluted net
loss per share............. 132,526 6,881 (E) 139,407 37,994 6,881 (E) 44,875
======== =========== ========= ======== =========== =========
See accompanying notes to the unaudited pro forma combined condensed
financial information
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
PRO FORMA BASIS OF PRESENTATION AND ADJUSTMENTS
The unaudited pro forma balance sheet as of March 31, 2000 has been prepared
based upon the historical financial statements of InterNAP and CO Space as if
the transaction had occurred on March 31, 2000. The unaudited pro forma combined
condensed statements of operations are based on the individual statements of
operations of InterNAP and CO Space and combine the results of operations of
InterNAP and CO Space for the three months ended March 31, 2000 and the year
ended December 31, 1999 as if the acquisition occurred on January 1, 2000 and
1999, respectively.
Pursuant to the merger agreement, upon completion of the merger, InterNAP issued
6,881,005 shares of its common stock and paid $200,000 in cash in exchange for
all outstanding shares of CO Space capital stock based on the exchange ratio as
set forth in the merger agreement. Additionally, options and warrants for
purchase of CO Space common stock converted to options and warrants to purchase
InterNAP common stock based on the exchange ratio as set forth in the merger
agreement. The exchange ratio is dependent upon the average closing price of
InterNAP common stock during the ten trading days ending on the second trading
day immediately preceding the closing date of the merger. The exchange ratio
becomes fixed, however, if the average closing price is greater than $34.02675
or less than $27.72550. The exchange ratio was calculated to be 0.24488 based
upon the merger agreement.
PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(A) InterNAP estimates the purchase price for CO Space to be approximately
$275.3 million based on the consideration to be paid to CO Space
shareholders including common stock issued, assumption of options and
warrants, plus acquisition related expenses incurred. For purposes of
estimating the value of the purchase consideration for the pro forma
presentation, the value of the InterNAP common stock to be issued was
based on the closing price of InterNAP's common stock on June 16,
2000, the date the total number of shares to be issued was determined per
the merger agreement, multiplied by the InterNAP shares to be issued
based upon the exchange ratio set forth in the merger agreement. The fair
value of options and warrants to be assumed was estimated using the
Black Scholes valuation model. InterNAP is currently in the process of
finalizing its assessment of the fair value of the net assets acquired.
For purposes of the preparation of the pro form combined condensed
financial information, InterNAP has allocated $21.3 million of the
purchase price to tangible assets acquired and liabilities assumed based
on the book value as of March 31, 2000. The remainder has been allocated
to intangible assets which include: completed real estate leases, customer
relationships, workforce in place, trademarks and goodwill. Based on an
estimated useful life of three years for such intangible assets, the
unaudited pro forma combined condensed financial information includes
adjustments of $21.1 million and $84.4 million for amortization expense
for the three months ended March 31, 2000 and year ended December 31,
1999, respectively. The allocation of the purchase price to tangible and
intangible assets, as well as the related amortization expense may change
materially as a result of the completion of InterNAP's evaluation of the
fair value or the net assets acquired and changes in purchase
consideration.
(B) Increase in accrued expenses for estimated acquisition related expenses.
(C) Increase in shareholders' equity for the issuance of shares of InterNAP
common stock issued at the completion of the acquisition of CO Space.
(D) Elimination of CO Space equity and redeemable preferred stock accounts.
(E) The unaudited pro forma combined per share amounts are based on the pro
forma combined weighted average number of shares of InterNAP common stock,
which equals InterNAP's weighted average number of shares of InterNAP
common stock outstanding for the period plus shares of InterNAP common
stock that are expected to be issued at the completion of the acquisition
of CO Space. All potential common stock equivalents of InterNAP and CO
Space have been excluded from the calculation of pro forma net loss from
operations per common share as their inclusion would be anti-dilutive.
(c) EXHIBITS
The following exhibits are filed as part of this report:
Exhibit
Number Description
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2.1* Agreement and Plan of Merger and Reorganization,
dated as of May 26, 2000, by and among Registrant,
Cowboy Acquisition Corp., a Delaware corporation, and
CO Space, Inc., a Delaware corporation (without
disclosure schedules).
2.2* Amendment No. 1 to Agreement and Plan of Merger and
Reorganization, dated as of June 12, 2000, by and
among Registrant, Cowboy Acquisition Corp., a
Delaware corporation, and CO Space, Inc., a Delaware
corporation (without exhibits).
4.1* Form of Registration Rights Agreement by and among
Registrant, stockholders of CO Space, Inc., a
Delaware corporation, and CO Space Stockholders'
Agent LLC, a Delaware limited liability company.
99.1* Press Release entitled "InterNAP Announces Agreement
to Purchase CO Space," issued May 30, 2000.
99.2* Press Release entitled "InterNAP Completes
Acquisition of CO Space," issued June 20, 2000.
99.3 CO Space, Inc. Consolidated Financial Statements (Audited).
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* - Previously filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
INTERNAP NETWORK SERVICES
CORPORATION
Dated: September 5, 2000 By: /s/ Paul E. McBride
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Paul E. McBride
Senior Vice President and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
2.1* Agreement and Plan of Merger and Reorganization,
dated as of May 26, 2000, by and among Registrant,
Cowboy Acquisition Corp., a Delaware corporation, and
CO Space, Inc., a Delaware corporation (without
disclosure schedules).
2.2* Amendment No. 1 to Agreement and Plan of Merger and
Reorganization, dated as of June 12, 2000, by and
among Registrant, Cowboy Acquisition Corp., a
Delaware corporation, and CO Space, Inc., a Delaware
corporation (without exhibits).
4.1* Form of Registration Rights Agreement by and among
Registrant, stockholders of CO Space, Inc., a
Delaware corporation, and CO Space Stockholders'
Agent LLC, a Delaware limited liability company.
99.1* Press Release entitled "InterNAP Announces Agreement
to Purchase CO Space," issued May 30, 2000.
99.2* Press Release entitled "InterNAP Completes
Acquisition of CO Space," issued June 20, 2000.
99.3 CO Space, Inc. Consolidated Financial Statements (Audited).
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* - Previously filed.