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) MAY 3, 2001 EASYLINK SERVICES CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 000-26371 13-3787073 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation) Identification No.) 399 Thornall Street, Edison, NJ 08837 (Address of principal executive offices) Registrant's telephone number, including area code (732) 906-2000 ITEM 2. ACQUSITION OR DISPOSITION OF ASSETS On May 8, 2001, the Company announced that its majority owned subsidiary Asia.com, Inc. ("Asia.com") has sold its business (the "business") to an investor group under a Shareholding Interest Transfer Agreement. Under the terms of the sale, the buyer paid Asia.com $1.5 million and assumed Asia.com liabilities of up to $1.5 million. The consideration paid to EasyLink was determined as a result of negotiations between the buyer and EasyLink. We expect to record a loss of approximately $100,000 to $200,000 in the second quarter of fiscal 2001. The loss is subject to adjustment based on the actual assets and liabilities sold and actual transaction expenses incurred. See the Company's historical consolidated financial statements included in EasyLink's Annual Report on Form 10-K for the year ended December 31, 2000 and our quarterly report on Form 10-Q for the three months ended March 31, 2001 for additional information. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired Not applicable. (b) Unaudited Pro Forma Condensed Consolidated Financial Information Introduction to Unaudted Pro Forma Condensed Consolidated Financial Statements Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2001 Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 2001 and the three months ended March 31, 2001. Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements (c) Exhibits 99.1 * Shareholding Interest Transfer Agreement by and among eLong, Inc., eLong.com (Beijing), Ltd., Asia.com, Inc., and Easylink Services Corporation (formerly known as Mail.com, Inc.) (incorporated by reference to Exhibit 2 to Form 10-Q for the three months ended March 31, 2001 filed with the SEC on May 15, 2001). * Disclosure schedules and other attachments are omitted, but will be furnished supplementally to the Commission upon request. INTRODUCTION TO UNAUDTED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2000 and three months ended March 31, 2001 gives effect to the sale of the business, as if it had occurred on January 1, 2000 and January 1, 2001, respectively. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2001 gives effect to the sale of the business as if it had occurred on March 31, 2001. EasyLink believes the accounting used for the pro forma adjustments provides a reasonable basis on which to present the unaudited pro forma condensed consolidated financial statements. The pro forma adjustments do not include any returns that we might have earned on the sale proceeds. The unaudited pro forma condensed consolidated statements of operations and unaudited pro forma condensed consolidated balance sheet are unaudited and were derived by adjusting the historical consolidated financial statements of EasyLink, which includes the results of the business. The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and should not be construed to be indicative of EasyLink's consolidated financial position or results of operations had the transaction been consummated on the date assumed and do not project EasyLink's consolidated financial position or results of operations for any future date or period. The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the EasyLink's historical consolidated financial statements and notes thereto included in EasyLink's Annual Report on Form 10-K for the year ended December 31, 2000, as well Form 10-Q for the three months ended March 31, 2001. EASYLINK SERVICES CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (dollars in thousands, except share and per share amounts) EasyLink Services Pro Forma Pro Forma Corporation Adjustments Results ----------------- ----------- ---------- Revenues: Messaging $ 52,698 $ -- $ 52,698 Domain development 8,524 (3,626)2 4,898 ------------ ------------ ------------ Total Revenues 61,222 (3,626) 57,596 Operating expenses: Cost of revenues Messaging 49,201 -- 49,201 Domain development 6,531 (1,309)2 5,222 ------------ ------------ ------------ Total cost of revenues 55,732 (1,309) 54,423 Sales and marketing 66,891 (5,884)2 61,007 General and administrative 45,439 (7,252)2 38,981 (794)3 Product development 19,528 (834)2 18,694 Amortization of goodwill and other intangible assets 60,763 (19,415)2 41,348 Write-off of acquired in-process technology 7,650 -- 7,650 Impairment of intangible assets 7,800 (7,800)2 -- Restructuring charges 18,388 (12,890)2 5,498 Loss on sale of Asia.com -- -- -- ------------ ------------ ------------ Total operating expenses 282,191 (54,590) 227,601 ------------ ------------ ------------ Loss from operations (220,969) (50,964) (170,005) Other income (expense): Interest income 5,194 (242)2 4,952 Interest expense (9,632) -- (9,632) Impairment of investments (4,400) -- (4,400) Loss on equity investment (2,100) -- (2,100) Other, net (104) -- (104) ------------ ------------ ------------ Total other (expense) income, net (11,042) (242) (11,284) Loss before minority interest (232,011) (50,722) (181,289) ------------ ------------ ------------ Minority interest 2,484 -- 2,484 Net loss $ (229,527) (50,722) $ (178,805) ============ ============ ============ Basic and diluted net loss per common share $ (4.01) 4 $ (3.13) ============ ============ Weighted-average basic and diluted shares outstanding 57,178,562 4 57,178,562 ============ ============ See notes to unaudited pro forma condensed consolidated financial statements. EASYLINK SERVICES CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2001 (dollars in thousands) EasyLink Services Pro Forma Pro Forma Corporation Adjustments Results ------------------ ------------ ---------- ASSETS Current Assets: Cash $ 16,577 $ (474) 2 $ 16,809 1,500 2 (794) 3 Marketable securities 21 -- 21 Accounts receivable, net 33,744 (679) 2 33,065 Prepaid expenses and other current assets 4,927 (284) 2 4,643 --------- --------- --------- Total current assets 55,269 (731) 54,538 Property and equipment, net 54,389 (1,529) 2 52,860 Domain assets available for sale 592 -- 592 Investments 11,583 -- 11,583 Restricted investment 1,718 -- 1,718 Debt issuance costs, net 1,416 -- 1,416 Other 4,457 -- 4,457 Goodwill and other intangible assets, net 206,085 -- 206,085 --------- --------- --------- Total assets 335,509 (2,260) 333,249 ========= ========= ========= LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable 25,938 (251) 2 25,687 Accrued expenses 40,169 (756) 2 39,413 Restructuring reserve 3,951 (19) 2 3,932 Current portion of notes payable 13,442 -- 13,442 Current portion of capital lease obligations 10,073 (29) 2 10,044 Current portion of deferred revenue 1,302 (156) 2 1,146 Current portion of domain asset purchase obligations 39 -- 39 Other current liabilities 3,224 (228) 2 2,996 --------- --------- --------- Total current liabilities 98,138 (1,439) 96,699 Capital lease obligations, less current portion 12,762 (61) 2 12,701 Domain asset purchase obligations, less current portion 85 -- 85 Deferred revenue, less current portion 175 -- 175 Notes payable, less current portion 102,850 -- 102,850 --------- --------- --------- Total liabilities 214,010 (1,500) 212,510 Minority interest 14,204 -- 14,204 Commitments and contingencies Stockholders' equity: Common stock, $0.01 par value; 160,000,000 shares authorized: Class A - 150,000,000 shares authorized; 74,891,008 shares issued and outstanding at March 31, 2001 749 -- 749 Class B - 10,000,000 shares authorized issued and outstanding at March 31, 2001 with an aggregate liquidation preference of $1,000 100 -- 100 Additional paid-in capital 482,840 -- 482,840 Deferred compensation (424) -- (424) Subscriptions receivable (33) -- (33) Accumulated other comprehensive loss (204) -- (204) Accumulated deficit (375,733) (1,466) 2 (376,494) 1,500 3 (794) 3 --------- --------- --------- Total stockholders' equity 107,295 28 6,535 --------- --------- --------- Total liabilities and stockholders' equity 335,509 (2,260) 333,249 ========= ========= ========= See notes to unaudited pro forma condensed consolidated financial statements. EASYLINK SERVICES CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 (dollars in thousands, except share and per share amounts) EasyLink Services Pro Forma Pro Forma Corporation Adjustments Results ------------------- ------------ ---------- Revenues: Messaging $ 19,722 $ -- $ 19,722 Domain Development 2,624 (723) 2 1,901 ------------ ------------ ------------ Total Revenues 22,346 (723) 21,623 Operating expenses: Cost of revenues Messaging 18,134 -- 18,134 Domain development 2,904 (362) 2 2,544 ------------ ------------ ------------ Total cost of revenue 21,038 (362) 20,676 Sales and marketing 12,385 (880) 2 11,505 General and administrative 11,842 (1,392) 2 11,244 (794) 3 Product development 3,462 (211) 2 3,251 Amortization of goodwill and other intangible assets 15,803 (3,097) 2 12,706 Impairment of intangible assets 3,567 -- 3,567 Restructuring charges 54,419 (39,138) 2 15,281 Loss on sale of advertising network 2,327 -- 2,327 ------------ ------------ ------------ Total operating expenses 124,843 (45,874) 80,557 Loss from operations (102,497) (43,563) (58,934) Other income (expense): Interest income 344 -- 344 Interest expense (3,172) -- (3,172) Impairment of investments (2,668) -- (2,668) Other, net 74 37 2 111 ------------ ------------ ------------ Total other (expense) income, net (5,422) 37 (5,385) Loss before extraordinary gain (107,919) (43,600) (64,319) Extraordinary gain on conversion of convertible notes 39,349 -- 39,349 ------------ ------------ ------------ Net loss $ (68,570) (43,600) (24,970) ============ ============ ============ Net loss per share: Loss before extraordinary gain $ (1.53) 4 $ (0.91) Extraordinary gain .56 4 .56 ------------ ------------ ------------ Basic and diluted net loss per share $ (0.97) 4 (0.35) ============ ============ ============ Weighted-average basic and diluted shares outstanding 70,528,374 4 70,528,374 ============ ============ ============ See notes to unaudited pro forma condensed consolidated financial statements. Notes to Unaudited Pro Forma Condensed Consolidated Financial Information (Dollars in thousands, except share and per share amounts) (1) Pro Forma Adjustments and Assumptions (a) For purposes of these pro forma condensed consolidated financial statements, EasyLink has assumed that the value of the sale is as follows: Upon the closing of the sale, the Company: (i) Received $1.5 million from the Buyer in cash; (ii) Sold the assets of the business except for certain domain names, which were retained by the Company, and certain other assets, the value of which is not significant; (iii) Buyer assumed up to $1.5 million in liabilities of the business ($xx.x at March 31, 2001); and (iv) Cash proceeds from the sale will be (i) used to pay certain other obligations of Asia.com; (ii) distributed to the minority shareholders as per their ownership percent; and (iii) distributed to the Company as per its ownership percent. (b) As per (ii) and (iii) above, $678,000 in net assets have been sold or abandoned and, accordingly, excluded from the proforma results. (2) Represents the historical unaudited balances of the business which are eliminated as of March 31, 2001 for balance sheet purposes and at the beginning of the earliest periods presented for statement of operation purposes. (3) The following table displays the distribution of proceeds as described in 1(iv), above, as of March 31, 2001: Cash proceeds 1,500 Less: estimated related cash expenses 780 ----- Net proceeds available for distribution 720 ----- Company share 656 ===== Minority interest share 64 ===== (4) The pro forma basic and diluted net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share equals basic net loss per share, as common stock equivalents are anti-dilutive for all pro forma periods presented. SIGNATURES 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. EasyLink Services Corporation Date: May 18, 2001 By: /s/ Debra L. McClister -------------------------------------- Executive Vice President and Chief Financial Officer