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) August 1, 2004 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.) 33 Knightsbridge Road Piscataway, NJ 08854 (Address of principal executive offices) Registrant's telephone number, including area code: (732) 652-3500 N/A --- Former Name or Former Address, if Changed Since Last Report ITEM 2. ACQUSITION OR DISPOSITION OF ASSETS On August 1, 2004, the Company sold its MailWatch service line and certain assets related thereto (the "MailWatch business") to Infocrossing, Inc. Under the terms of the sale, Infocrossing paid to the Company a purchase price consisting of $3.5 million in cash and 123,193 shares of Infocrossing common stock. The shares of common stock have not been registered for resale under federal or state securities laws and may be resold only in compliance with applicable registration requirements or any available exemption. The consideration paid to EasyLink was determined as a result of negotiations between Infocrossing and EasyLink. In connection with the sale, the Company and Infocrossing entered into a Transition Services Agreement under which the Company will provide Infocrossing certain transition services for a period after the closing. The net book value of assets for the MailWatch service line that were included in the sale amounted to $1.1 million and $0.8 million as of December 31, 2003 and June 30, 2004, respectively. See the Company's historical consolidated financial statements included in EasyLink's Annual Report on Form 10-K for the year ended December 31, 2003 and our quarterly report on Form 10-Q for the period ended June 30, 2004 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 Financial Information The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2003 and the six months ended June 30, 2004 gives effect to the sale of the MailWatch service line as if it had occurred on January 1, 2003. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2004 gives effect to the sale of the business as if it had occurred on June 30, 2004. The Company 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 except that only directly attributable costs are included in the proforma adjustments as costs of the MailWatch service line. No allocation of other costs, particularly sales and marketing and general and administrative expenses, has been made in the proforma adjustments. Furthermore, the proforma adjustments do no include any costs reductions that the Company could have achieved without the MailWatch service line. The pro forma adjustments also do not include any returns that we might have earned on the sale proceeds. The unaudited pro forma condensed consolidated statement of operations and unaudited pro forma condensed consolidated balance sheet are unaudited and were derived by adjusting the historical consolidated financial statements of the Company, which includes the results of the MailWatch service line. The unaudited pro forma condensed consolidated financial statements are provided for informational purposes only and should not be construed to be indicative of the Company's consolidated financial position or results of operations had the transaction been consummated on the date assumed and do not project the Company'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 Company's historical consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003. 2 EasyLink Services Corporation PROFORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year ended December 31, 2003 Six months ended June 30, 2004 -------------------------------------- -------------------------------------- Proforma Proforma As reported Adjustments Proforma As reported Adjustments Proforma ----------- ----------- -------- ----------- ----------- -------- Revenues .......................... $ 101,347 $ 4,669 $ 96,678 $ 48,390 $ 2,042 $ 46,348 Cost of revenues .................. 49,553 2,061 47,492 20,090 888 19,202 --------- --------- --------- --------- --------- --------- Gross profit ...................... 51,794 2,608 49,186 28,300 1,154 27,146 --------- --------- --------- --------- --------- --------- Sales and marketing ............... 18,379 --- 18,379 9,280 --- 9,280 General and administrative ........ 24,405 184 24,221 12,064 94 11,970 Product development ............... 6,383 395 5,988 3,358 221 3,137 Amortization of goodwill and other intangible assets ..... 2,066 --- 2,066 1,033 --- 1,033 Restructuring charges ............. 1,478 --- 1,478 --- --- --- --------- --------- --------- --------- --------- --------- Total operating expenses .......... 52,711 579 52,132 25,735 315 25,420 --------- --------- --------- --------- --------- --------- Income (loss) from operations ..... (917) 2,029 (2,946) 2,565 839 1,726 Other income (expense), net: Gain on debt restructurings and settlements .................. 54,078 --- 54,078 --- --- --- Other income (expense), net ....... (1,275) --- (1,275) (217) (217) --- --------- --------- --------- --------- --------- --------- Total other income (expense), net . 52,803 --- 52,803 (217) --- (217) --------- --------- --------- --------- --------- --------- Income from continuing operations before income taxes ............. 51,886 2,029 49,857 2,348 839 1,509 Provision for Federal and state income taxes .......... --- --- --- 200 64 136 --------- --------- --------- --------- --------- --------- Net income from continuing operations ...................... $ 51,886 $ 2,029 $ 49,857 $ 2,148 $ 775 $ 1,373 ========= ========= ========= ========= ========= ========= Basic net income from continuing operations per share ............ $ 1.47 $ 0.06 $ 1.41 $ 0.05 $ 0.02 $ 0.03 ========= ========= ========= ========= ========= ========= Diluted net income from continuing operations per share ............ $ 1.46 $ 0.06 $ 1.40 $ 0.05 $ 0.02 $ 0.03 ========= ========= ========= ========= ========= ========= Weighted-average basic shares outstanding .............. 35,402 35,402 35,402 43,963 43,963 43,963 Weighted-average diluted shares outstanding .............. 35,653 35,653 35,653 44,604 44,604 44,604 See accompanying notes to unaudited condensed consolidated financial statements 3 EASYLINK SERVICES CORPORATION UNAUDITED PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (In thousands) June 30, 2004 -------------------------------------- Proforma As reported Adjustments Proforma ----------- ----------- -------- ASSETS Current assets: Cash and cash equivalents......................................... $5,761 $3,500 $9,261 Accounts receivable, net.......................................... 10,949 10,949 Assets held for sale.............................................. 807 (807) -- Prepaid expenses and other current assets....................................... 2,243 2,243 ------ ------- ------ Total current assets.............................................. 19,760 2,693 22,453 ------ ------- ------ Property and equipment, net....................................... 8,482 8,482 Goodwill and other intangible assets, net..................................... 16,541 16,541 Other assets...................................................... 1,255 1,500 2,755 ------- ------ ------- Total assets...................................................... $46,038 $4,193 $50,231 ======= ====== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................. $7,898 $7,898 Accrued expenses.................................................. 12,690 12,690 Current portion of notes payable.................................. 4,406 4,406 Other current liabilities......................................... 4,448 1,577 6,025 ----- ----- ------ Total current liabilities......................................... 29,442 1,577 31,019 ------ ----- ------ Notes payable, less current portion............................... 7,780 7,780 Other long term liabilities....................................... 1,736 1,736 ------ ------ ------ Total liabilities................................................. 38,958 1,577 40,535 ------ ------ ------ Stockholders' equity: Common stock...................................................... 441 441 Additional paid-in capital........................................ 553,235 553,235 Accumulated other comprehensive loss.............................. (409) (409) Accumulated deficit............................................... (546,187) 2,616 (543,571) -------- ----- -------- Total stockholders' equity........................................ 7,080 2,616 9,696 ------- ------ ------- Total liabilities and stockholders' equity........................ $46,038 $4,193 $50,231 ======= ====== ======= See accompanying notes to unaudited condensed consolidated financial statements 4 EasyLink Services Corporation Notes to Unaudited Proforma Condensed Consolidated Financial Statements 1. The proforma adjustments in the proforma condensed consolidated statements of operations for the year ended December 31, 2003 and the six months ended June 30, 2004 include the elimination of revenues for the MailWatch service line and the elimination of only directly attributable costs of the MailWatch service line. The gain on the sale of the MailWatch Service line and the related tax effect of the transaction are not reflected in the proforma condensed consolidated statements of operations for any period. No adjustments are included in the proforma condensed consolidated statements of operations for any period that would represent income from cost reimbursements under the Transitions Services Agreement related to the sale as these amounts are not expected to have a continuing impact on the Company. 2. The proforma adjustments to the unaudited proforma condensed consolidated balance sheet as of June 30, 2004 include the proceeds from the sale of $3.5 million in cash and restricted stock valued at approximately $1.5 million and the related tax effect of the sale of approximately $1.6 million. 5 (c) Exhibits 99.1* Asset Purchase Agreement, dated July 31, 2004, by and between EasyLink Services Corporation, a Delaware corporation, EasyLink Services USA, Inc., a Delaware corporation, Infocrossing Services, Inc., a Delaware corporation, and Infocrossing, Inc., a Delaware corporation. 99.2* Transition Services Agreement, dated July 31, 2004, by and between EasyLink Services Corporation and Infocrossing Services, Inc. * Disclosure schedules and other attachments are omitted, but will be furnished supplementally to the Commission upon request. 6 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. Dated: August 16, 2004 EASYLINK SERVICES CORPORATION By: s/Michael Doyle -------------------------------- Michael Doyle, Vice President and Chief Financial Officer 7 INDEX TO EXHIBITS Exhibit No. Description 99.1* Asset Purchase Agreement, dated July 31, 2004, by and between EasyLink Services Corporation, a Delaware corporation, EasyLink Services USA, Inc., a Delaware corporation, Infocrossing Services, Inc., a Delaware corporation, and Infocrossing, Inc., a Delaware corporation. 99.2* Transition Services Agreement, dated July 31, 2004, by and between EasyLink Services Corporation and Infocrossing Services, Inc. * Disclosure schedules and other attachments are omitted, but will be furnished supplementally to the Commission upon request.