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) July 30, 1999
-----------------------------
RMI.NET, Inc.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware
- -------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
001-12063 84-1322326
- ----------------------------------- ---------------------------------------
(Commission File Number) (IRS Employee Identification No.)
999 Eighteenth Street, Suite 2201 80202
- -------------------------------------------------------- ----------------------
(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 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously announced in the Registrant's Quarterly Report on Form
10-Q for the Quarter ended June 30, 1999 and filed with the Securities and
Exchange Commission on August 9, 1999, the Registrant recently acquired Triad
Resources, L.L.C., an Oklahoma limited liability company doing business as
"WebZone" and headquartered in Tulsa, Oklahoma. The Registrant agreed to pay
approximately $5.25 million, payable in the form of 441,175 shares of 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 Triad Resources, L.L.C. prior to the acquisition. WebZone
is an Internet service provider. The Registrant intends to use the assets
acquired in the same manner that Triad Resources, L.L.C. and WebZone utilized
the assets.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Triad Resources, L.L.C. - Audited Financial Statements:
Independent Auditors' Report - PricewaterhouseCoopers
LLP
Balance Sheets as of December 31, 1998, 1997 and 1996
Statements of Operations for the Years Ended December
31, 1998, 1997 and 1996
Statements of Stockholders' Equity (Deficiency) for
the Years Ended December 31, 1998, 1997 and 1996
Statements of Members' Equity (Deficit) for the Years
Ended December 31, 1998, 1997 and 1996
Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996
Notes to Financial Statements
(b) Pro Forma Financial Information:
Pro Forma Condensed Combined Balance Sheet as of June
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 Six Months Ended June 30, 1999
(c) Exhibits:
Exhibit Number Description
---------------------- --------------------------------------------
10.1 Asset Purchase Agreement by and among
RMI.NET, Inc. f/ka Rocky Mountain Internet,
Inc. and Triad Resources, L.L.C. and Ms.
Carol L. Mersch and Mr. Charles A. Bacher
dated as of July 30, 1999
20.1 News Release dated August 3, 1999 announcing
the Acquisition of WebZone.
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: August 26, 1999 By: /s/ CHRISTOPHER J. MELCHER
---------------------------------------
Christopher J. Melcher
Vice President, General Counsel and
Corporate Secretary
TRIAD RESOURCES, L.L.C.
REPORT ON AUDIT OF
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members
Triad Resources, L.L.C.
In our opinion, the accompanying balance sheets and the related statements of
operations, members' equity (deficit) and cash flows present fairly, in all
material respects, the financial position of Triad Resources, L.L.C. (the
"Company") at December 31, 1998, 1997 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
July 6, 1999
1
TRIAD RESOURCES, L.L.C.
BALANCE SHEETS
December 31, 1998, 1997 and 1996
ASSETS 1998 1997 1996
------ --------- -------- ---------
Current assets:
Cash $ 3,789 $ 5,794 $ 4,528
Accounts receivable 25,669 13,455 8,754
Note receivable 15,000 - -
--------- -------- ---------
Total current assets 44,458 19,249 13,282
--------- -------- ---------
Property and equipment, net 543,168 305,602 125,013
--------- -------- ---------
Total assets $ 587,626 $324,851 $ 138,295
--------- -------- ---------
--------- -------- ---------
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 73,726 $ 76,684 $ 109,212
Accrued liabilities 9,802 10,614 7,305
Deferred revenue 89,230 44,362 14,883
Long term obligations, current portion 62,303 53,776 -
Advances from members, current portion 24,964 212,433 122,433
Estimated liability for guarantees of
obligations of investee (Note 6) 101,482 - -
--------- -------- ---------
Total current liabilities 361,507 397,869 253,833
--------- -------- ---------
Long term obligations 140,466 19,533 47,437
Advances from members 62,574 - -
Members' equity (deficit):
Members' equity 165,227 191,711 117,649
Accumulated deficit (142,148) (284,262) (280,624)
--------- -------- ---------
Total members' equity (deficit) 23,079 (92,551) (162,975)
--------- -------- ---------
Total liabilities and members' equity (deficit) $ 587,626 $324,851 $ 138,295
--------- -------- ---------
--------- -------- ---------
The accompanying notes are an integral
part of the financial statements.
2
TRIAD RESOURCES, L.L.C.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
---------- ---------- ----------
Revenues:
Recurring revenues $1,902,664 $ 852,177 $ 128,056
Other 182,847 122,058 39,590
---------- ---------- ----------
2,085,511 974,235 167,646
---------- ---------- ----------
Expenses:
Cost of operations 1,174,119 612,910 288,144
Selling, general and administrative 421,679 215,310 152,158
Depreciation 105,292 50,701 10,801
Loss on sale of property and - 20,590 -
Loss on investment (Note 6) 216,603 48,450 -
---------- ---------- ----------
1,917,693 947,961 451,103
---------- ---------- ----------
Income (loss) from operations 167,818 26,274 (283,457)
---------- ---------- ----------
Interest expense 25,704 29,912 6,178
---------- ---------- ----------
Net income (loss) $ 142,114 $ (3,638) $ (289,635)
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral
part of the financial statements.
3
TRIAD RESOURCES, L.L.C.
STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1998, 1997 and 1996
Members' Accumulated
Equity Deficit Total
--------- --------- --------
Balance at December 31, 1995 $ 14,991 $ 9,011 $ 24,002
Member contributions 102,658 - 102,658
Net income (loss) - (289,635) (289,635)
--------- --------- --------
Balance at December 31, 1996 117,649 (280,624) (162,975)
Member contributions 74,062 - 74,062
Net income (loss) - (3,638) (3,638)
--------- --------- --------
Balance at December 31, 1997 191,711 (284,262) (92,551)
Member distributions (26,484) - (26,484)
Net income (loss) - 142,114 142,114
--------- --------- --------
Balance at December 31, 1998 $ 165,227 $(142,148) $ 23,079
--------- --------- --------
--------- --------- --------
The accompanying notes are an integral
part of the financial statements.
4
TRIAD RESOURCES, L.L.C.
STATEMENTS OF CASH FLOWS
1998 1997 1996
--------- -------- ---------
Cash flows from operating activities:
Net income (loss) $ 142,114 $ (3,638) $(289,635)
Adjustments to reconcile net income to cash
provided by operating activities:
Loss on sale of property and equipment - 20,590 -
Loss on investment 125,752 8,280 -
Depreciation 105,292 50,701 10,801
Decrease (increase) in accounts receivable (12,214) (4,701) (8,754)
(Decrease) increase in accounts payable (2,958) (32,528) 109,212
(Decrease) increase in accrued liabilities (812) 3,309 7,305
(Decrease) increase in deferred revenue 44,868 29,479 14,883
--------- -------- ---------
Net cash provided by (used in) operating activities 402,042 71,492 (156,188)
--------- -------- ---------
Cash flows from investing activities:
Expenditures for property and equipment (342,858) (262,529) (135,814)
Proceeds from disposition of property and equipment - 10,649 -
Acquisition of investment (Note 6) (24,270) (8,280) -
Increase in notes receivable (15,000) - -
--------- -------- ---------
Net cash used in investing activities (382,128) (260,160) (135,814)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from long-term obligations 217,000 107,468 47,437
Repayment of long-term obligations (87,540) (81,596) -
Member contributions (distributions) (26,484) 74,062 102,658
Advances from members - 90,000 122,433
Repayment of advances from members (124,895) - -
--------- -------- ---------
Net cash provided by (used in) financing activities (21,919) 189,934 272,528
--------- -------- ---------
Net increase (decrease) in cash (2,005) 1,266 (19,474)
Cash at beginning of year 5,794 4,528 24,002
--------- -------- ---------
Cash at end of year $ 3,789 $ 5,794 $ 4,528
--------- -------- ---------
--------- -------- ---------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 48,458 $ 12,478 $ 858
--------- -------- ---------
--------- -------- ---------
The accompanying notes are an integral
part of the financial statements.
5
TRIAD RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Triad Resources, L.L.C. (the "Company) (d.b.a.
WebZone") is an Oklahoma limited liability company that operates as an
internet service provider ("ISP") in Tulsa and Oklahoma City, Oklahoma.
The Company was formed in 1993 and began the WebZone operations in June
1996. The Company's presence was established in Oklahoma City in
September 1998.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principals 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.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the related assets or the lesser of the term
of the lease or the useful life of the asset for leasehold
improvements. Maintenance and repairs are charged to expense in the
year incurred and renewals and betterments that extend the useful life
of the asset are capitalized. Gain or loss on disposal of property and
equipment is credited or charged to operations. The estimated useful
life of equipment is five years.
REVENUE RECOGNITION - Recurring revenues consist of monthly fees
charged to customers for internet access and other ongoing services
related to monthly internet service and are recognized over the period
services are provided. Other revenues which include set-up fees charged
to customers when their accounts are activated, domain name
registration fees, web design and miscellaneous equipment sales are
recognized as the service is performed or the equipment is delivered to
the customer.
ADVERTISING - The Company expenses advertising costs as incurred.
During the years ended December 31, 1998, 1997 and 1996, the Company
incurred $109,677, $41,352 and $25,759, respectively in advertising
costs.
INCOME TAXES - Under applicable provisions of the Internal Revenue
Code, the Company is not taxed as a corporation, as its earnings are
taxed to the individual members. Therefore, no provision for federal
and state income taxes has been made in the accompanying financial
statements.
6
TRIAD RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
2. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998, 1997 and 1996 is comprised
of the following:
1998 1997 1996
-------------------- ---------------------- --------------------
Computer equipment $ 658,388 $ 353,284 $ 131,791
Furniture and fixtures 21,160 1,133 1,133
Leasehold improvements 15,981 2,255 -
Software 8,386 4,385 2,890
Accumulated depreciation (160,747) (55,455) (10,801)
-------------------- ---------------------- --------------------
$ 543,168 $ 305,602 $ 125,013
-------------------- ---------------------- --------------------
-------------------- ---------------------- --------------------
Property under capital lease, primarily computer equipment
included above, aggregated $107,468, at December 31, 1998 and 1997.
Included in accumulated depreciation are amounts related to property
under capital lease of $42,000 and $21,000 at December 31, 1998 and
1997, respectively. Depreciation expense included $21,000 in both 1998
and 1997 pertaining to property under capital lease.
7
TRIAD RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
3. LONG-TERM OBLIGATIONS AND LINE OF CREDIT
The Company's long-term obligations at December 31, 1998, 1997
and 1996 were as follows:
1998 1997 1996
--------- -------- ---------
Bank line of credit ($100,000 facility) bearing
interest at the WSJ prime rate plus 1%
(8.75% at December 31, 1998), expiring
in July 2000 $ 28,066 $ 17,066 $ 47,437
Long-term loan payable in monthly installments
of $2,208, plus intereest at 9.05%, final
maturity in April 2000 86,125 - -
Long-term loan payable in monthly installments
of $2,778, plus interest at varying rates,
final maturity in August 2001 86,111 - -
Capital lease obligation payable in monthly
installments, plus interest at 9.25%,
with the balance due in January 1999 2,467 56,243 -
--------- -------- ---------
202,769 73,309 47,437
Less current maturities (62,303) (53,776) -
--------- -------- ---------
$ 140,466 $ 19,533 $ 47,437
--------- -------- ---------
--------- -------- ---------
Maturities of the Company's long-term obligations are as
follows:
1999 $ 62,303
2000 87,902
2001 45,939
2002 6,625
---------
$202,769
---------
---------
8
TRIAD RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
4. RELATED PARTY TRANSACTIONS
The Company periodically receives advances from its members
which amounts due include interest at 8.5%. Amounts due under the
advances at December 31, 1998, 1997 and 1996 were $87,538, $212,433 and
$122,433, respectively. Interest expense on such advances was $7,562,
$17,434 and $5,320 for the years ended December 31, 1998, 1997 and
1996, respectively. Prior to 1998, no specific repayment terms existed
with respect to the advances, and the amounts due were classified as
current liabilities. In 1998, certain advances were repaid and the
remaining advance was established with monthly installments payable
over a 48-month period.
Costs of shared services between the Company and a company
with common ownership are allocated to the Company based on
management's estimate of all such costs that are applicable to the
Company. Management believes these allocations are reasonable based on
their knowledge of the Company's historical operations. The Company was
charged $91,692, $117,665 and $100,800 by the affiliate for the years
ended December 31, 1998, 1997 and 1996, respectively, representing
corporate costs for such shared services, including rent, insurance and
other general and administrative expenses.
5. COMMITMENTS
The Company leases certain office facilities under
noncancelable operating leases expiring at various dates through 2001.
Future minimum lease payments are as follows:
1999 $54,733
2000 18,009
2001 18,009
-------
$90,751
-------
-------
Total rental expense for 1998, 1997 and 1996 was $58,791,
$20,623 and $17,799, respectively.
9
TRIAD RESOURCES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
6. INVESTMENT
In 1997, the Company acquired a 50% interest in an
internet-based environmental, health and safety information services
company. The Company has accounted for this investment under the equity
method of accounting; accordingly, the investment has been adjusted for
the Company's proportionate share of the losses of the investee
totalling $125,752 and $8,280 in 1998 and 1997, respectively. The
Company has guaranteed debt of the investee up to $200,000 (of which
$191,750 of the debt was owed by the investee at December 31, 1998).
Associated with the Company's recording of its equity in the losses of
the investee, a liability related to this guarantee of $101,482 has
been recorded at December 31, 1998.
The Company has also dedicated certain of its employees to the
development of the investee's internet operations for which the Company
will not be compensated. The costs associated with these services
totalling $90,851 and $40,170 in 1998 and 1997, respectively, have been
expensed as a component of the Company's loss on investment in the
accompanying statements of operations.
7. SUBSEQUENT EVENT
On April 14, 1999, the Company signed a letter of intent to
sell the assets associated with its ISP operations for an amount to be
derived based on specified Company operations in 1999.
10
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, 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 six months
ended June 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, 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 June 30, 1999
gives effect to the acquisition as if it had been consummated on that date. This
pro forma balance sheet combines the historical consolidated balance sheet at
that date for the Company and for Triad Resources L.L.C. (d/b/a WebZone).
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.
11
Pro Forma Condensed Combined Balance Sheet
As of June 30, 1999
(Unaudited)
-------------------------------------------------------------------------------------------
Triad Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Resources LLC Subtotal Adjustments (B) Combined
-------------------------------------------------------------------------------------------
(Dollars in Thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4,423 18 4,441 - 4,441
Trade receivables less allowance for
doubtful accounts 4,687 74 4,761 - 4,761
Inventories 237 - 237 - 237
Other 840 16 856 - 856
-------------------------------------------------------------------------------------------
Total Current Assets 10,187 108 10,295 - 10,295
-------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net 8,270 742 9,012 - 9,012
Goodwill, net 21,637 - 21,637 4,885 (1) 26,522
Other 117 61 178 - 178
-------------------------------------------------------------------------------------------
Total Assets 40,211 911 41,122 4,885 46,007
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 4,361 86 4,447 - 4,447
Current maturities of long term
debt and capital lease
obligations 1,919 140 2,059 - 2,059
Deferred revenue 1,076 - 1,076 - 1,076
Accrued payroll & related taxes 408 408 - 408
Accrued expenses & other 2,070 142 2,212 - 2,212
-------------------------------------------------------------------------------------------
Total Current Liabilites 9,834 368 10,202 - 10,202
-------------------------------------------------------------------------------------------
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS 3,227 178 3,405 - 3,405
-------------------------------------------------------------------------------------------
Total liabilites 13,061 546 13,607 - 13,607
-
REDEEMABLE CONVERTIBLE PREFERRED STOCK 4,594 - 4,594 - 4,594
Stockholders' Equity
Common Stock 12 - 12 - 12
Additional paid in capital 47,422 50 47,472 (50)(3) 47,422
5,250 5,250
Accumulated deficit (24,878) 315 (24,563) (315) (2) (24,878)
Unearned compesation - - - - -
-------------------------------------------------------------------------------------------
22,556 365 22,921 4,885 27,806
-------------------------------------------------------------------------------------------
40,211 911 41,122 4,885 46,007
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
12
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1998
(Unaudited)
Historical
---------------------------------------------------------------------------------
Previously
Reported Triad Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions Resources LLC Subtotal Adjustments (B) Combined
---------------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
Revenue
Communication Services 7,974 11,494 2,086 21,554 0 21,554
Web Solutions 2,113 0 0 2,113 0 2,113
---------------------------------------------------------------------------------
10,087 11,494 2,086 23,667 0 23,667
---------------------------------------------------------------------------------
Cost of revenue earned
Communication Services 3,471 8,737 1,174 13,382 0 13,382
Web Solutions 50 0 0 50 0 50
---------------------------------------------------------------------------------
3,521 8,737 1,174 13,432 0 13,432
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Gross profit 6,566 2,757 912 10,235 0 10,235
---------------------------------------------------------------------------------
General, selling and administrative expenses 9,184 3,145 639 12,968 0 12,968
Cost related to unsuccessful merger attempt 6,071 0 0 6,071 0 6,071
Depreciation and amortization 1,789 365 105 2,259 1,851(5) 4,110
---------------------------------------------------------------------------------
Operating loss (10,478) (753) 168 (11,063) (1,851) (12,914)
---------------------------------------------------------------------------------
Other income (expense)
Interest expense (320) (114) (26) (460) 0 (460)
Interest Income 51 0 0 51 0 51
Other income (expense), net 78 98 0 176 0 176
---------------------------------------------------------------------------------
(191) (16) (26) (233) 0 (233)
---------------------------------------------------------------------------------
Net loss (10,669) (769) 142 (11,296) (1,851) (13,147)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Preferred stock dividends 33 33
Net loss applicable to common Stockholders (10,702) (13,180)
Basic and Diluted loss per share from (1.39) (1.55)
continuing operations ----------- --------
----------- --------
Average number of common shares 7,690 8,500
outstanding (5) ----------- --------
----------- --------
13
Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 30, 1999
(Unaudited)
Historical
----------------------------------------------------------------------------------
Previously
Reported Triad Pro Forma Pro Forma Pro Forma
RMI.NET, Inc. Acquisitions Resources LLC Subtotal Adjustments (B) Combined
----------------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
Revenue
Communication Services 9,801 3,059 1,645 14,505 0 14,505
Web Solutions 1,851 0 0 1,851 0 1,851
----------------------------------------------------------------------------------
11,652 3,059 1,645 16,356 0 16,356
----------------------------------------------------------------------------------
Cost of revenue earned
Communication Services 5,406 2,315 926 8,647 0 8,647
Web Solutions 511 0 0 511 0 511
----------------------------------------------------------------------------------
5,917 2,315 926 9,158 0 9,158
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Gross profit 5,735 744 719 7,198 0 7,198
----------------------------------------------------------------------------------
General, selling and administrative expenses 10,222 875 205 11,302 0 11,302
Cost related to unsuccessful merger attempt 0 0 0 0 0 0
Depreciation and amortization 2,605 112 46 2,763 611(4) 3,374
----------------------------------------------------------------------------------
Operating loss (7,092) (243) 468 (6,867) (611) (7,478)
----------------------------------------------------------------------------------
Other income (expense)
Interest expense (228) (29) (12) (269) 0 (269)
Interest Income 68 1 1 70 0 70
Other income (expense), net 0 0 0 0 0 0
----------------------------------------------------------------------------------
(160) (28) (11) (199) 0 (199)
----------------------------------------------------------------------------------
Net loss (7,252) (271) 457 (7,066) (611) (7,677)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Preferred stock dividends 178 178
Net loss applicable to common Stockholders (7,430) (7,855)
Basic and Diluted loss per share from
continuing operations (0.73) (0.72)
-------- --------
-------- --------
Average number of common shares
outstanding (5) 10,141 10,727
-------- --------
-------- --------
14
NOTES TO THE PRO FORMA CONSENSED
COMBINED FINANCIAL DATA
(UNAUDITED)
(A) BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed combined balance sheet is
presented as of June 30, 1999. The accompanying unaudited pro forma condensed
combined statements of operations are presented for the three months ended
June 30, 1999 and the year ended December 31, 1998.
(B) PRO FORMA ADJUSTMENTS The following pro forma adjustments have been made to
the unaudited condensed combined balance sheet as of June 30, 1999 and the
unaudited condensed combined statements of operations for the six months ended
June 30, 1999 and the year ended December 31, 1998:
(1) To reflect the 439,493 shares of RMI stock valued at $5.3 million
which is the number of shares issued in connection with the acquisition
of Triad Resources L.L.C. (d/b/a WebZone). 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
$4.9 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 January 1, 1998.
(4) To adjust for revenues and expenses for the acquisition of Triad
Resources L.L.C. (d/b/a WebZone) and IdealDial Corporation as if such
acquisitions had been completed as of January 1, 1999.
(5) To adjust for revenues and expenses for the acquisition of Triad
Resources L.L.C. (d/b/a WebZone) and IdealDial Corporation as if such
acquisition had been completed as of January 1, 1998.
15