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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2000.
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____.
Commission file number 0-27056
Healthcare.com Corporation
--------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2112366
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 Parkway Place, Suite 1100, Marietta, Georgia 30067
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(Address of principal executive offices) (Zip Code)
(770) 423-8450
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(Registrant's telephone number, including area code)
HIE, Inc.
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
The number of shares outstanding of the Company's Common Stock, $ .01 par value
per share, together with associated preferred stock purchase rights (the "Common
Stock"), as of May 9, 2000 was 27,279,127 shares.
Exhibit Index is on Page 16 herein.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HEALTHCARE.COM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,823 $ 5,609
Trade accounts receivable, less allowances of $5,042 and $5,160 at
March 31, 2000 and December 31, 1999, respectively 10,778 6,662
Other current assets 1,685 1,421
-------- --------
Total current assets 18,286 13,692
Purchased software, net of accumulated amortization of $2,086 and $1,931
at March 31, 2000 and December 31, 1999, respectively 1,111 1,266
Capitalized software development costs, net of accumulated amortization of
$961 and $801 at March 31, 2000 and December 31, 1999, respectively 2,600 2,425
Property and equipment, net of accumulated depreciation of $3,274 and
$3,006 at March 31, 2000 and December 31, 1999, respectively 2,793 2,908
Excess of cost over net assets of businesses acquired, less accumulated
amortization of $3,498 and $3,283 at March 31, 2000 and December 31,
1999, respectively 12,298 6,887
Other assets 82 89
-------- --------
Total assets $ 37,170 $ 27,267
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and obligations under capital leases $ 6,333 $ 6,363
Accounts payable, principally trade 2,474 1,211
Accrued liabilities 2,847 1,773
Deferred revenue 5,467 4,583
-------- --------
Total current liabilities 17,121 13,930
Long-term debt and obligations under capital leases, excluding current
installments 341 254
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Total liabilities 17,462 14,184
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Series B Cumulative Convertible Exchangeable Preferred Stock; designated 550
shares; 25 and 65 shares issued and outstanding at March 31,
2000 and December 31, 1999, respectively 161 348
-------- --------
Shareholders' equity:
Preferred stock, without par value. Authorized 20,000 shares:
Designated Series A cumulative preferred stock 500 shares; issued none -- --
Common stock, $.01 par value. Authorized 50,000 shares; issued and
outstanding 27,178 and 25,555 shares at March 31, 2000 and
December 31, 1999, respectively 272 256
Additional paid-in capital 48,831 42,236
Accumulated deficit (29,556) (29,757)
-------- --------
Total shareholders' equity 19,547 12,735
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Total liabilities and shareholders' equity $ 37,170 $ 27,267
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
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HEALTHCARE.COM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
Revenue:
Software $ 2,892 $ 981
Services and other 6,940 4,264
-------- --------
Total revenue 9,832 5,245
-------- --------
Cost of revenue:
Software 465 251
Services and other 4,469 2,294
-------- --------
Total cost of revenue 4,934 2,545
-------- --------
Gross profit 4,898 2,700
-------- --------
Operating expenses:
Sales and marketing 2,256 1,747
Research and development 904 981
General and administrative 1,265 1,639
-------- --------
Total operating expenses 4,425 4,367
-------- --------
Operating earnings (loss) 473 (1,667)
Interest expense, net (249) (101)
-------- --------
Earnings (loss) before income taxes 224 (1,768)
Income taxes -- --
-------- --------
Net earnings (loss) 224 (1,768)
Accretion of Series B Preferred Stock (15)
Series B Preferred Stock dividend requirement (8) --
-------- --------
Net earnings (loss) attributable to
common shareholders $ 201 $ (1,768)
======== ========
Net earnings (loss) per share of common stock:
Basic $ 0.01 $ (0.07)
======== ========
Diluted $ 0.01 $ (0.07)
======== ========
Shares used in the calculation of net
earnings (loss) per share:
Basic 25,895 25,223
======== ========
Diluted 27,221 25,223
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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HEALTHCARE.COM CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
---------------------
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 224 $(1,768)
Adjustments to reconcile net earnings (loss) to net cash used in
operating activities:
Depreciation and amortization 816 582
Increase in trade accounts receivable (4,116) (485)
Increase in other current assets (126) (61)
Increase in accounts payable, principally trade 1,263 547
Increase in accrued liabilities 539 618
Increase (decrease) in deferred revenue 884 (28)
------- -------
Net cash used in operating activities (516) (595)
------- -------
Cash flows from investing activities:
Purchased software -- (19)
Capitalized software development costs (335) (405)
Capital expenditures (99) (603)
Cash obtained in connection with an acquisition of business 1,000 --
Change in other non-current assets and liabilities, net 7 (2)
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Net cash provided by (used in) investing activities 573 (1,029)
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Cash flows from financing activities:
Series B Preferred Stock dividends (8) --
Principal payments on long-term debt, net (110) (102)
Proceeds from issuances of common stock 275 537
------- -------
Net cash provided by financing activities 157 435
------- -------
Net increase (decrease) in cash and cash equivalents 214 (1,189)
Cash and cash equivalents at beginning of period 5,609 3,167
------- -------
Cash and cash equivalents at end of period $ 5,823 $ 1,978
======= =======
Supplemental disclosures of cash paid for:
Interest $ 174 $ 92
======= =======
Supplemental disclosures of non-cash investing and financing activities:
Issuance of warrants to purchase common stock in connection with
obtaining financing agreement $ 128 $ --
======= =======
Conversion of Series B Preferred Stock into common stock $ 202 $ --
======= =======
Accretion of discount on Series B Preferred Stock $ 15 $ --
======= =======
Acquisition of business:
Fair value of assets acquired, including goodwill $ 5,588 $ --
Fair value of liabilities assumed (582) --
Fair value of common stock issued (5,500) --
Fair value of warrants issued (506) --
------- -------
Net cash obtained in connection with an acquisition of business $(1,000) $ --
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
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HEALTHCARE.COM CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
1. ACCOUNTING POLICIES
The Condensed Consolidated Financial Statements as of March 31, 2000 and
for the three-month periods ended March 31, 2000 and 1999 are unaudited. In
the opinion of management, all adjustments consisting of normal recurring
accruals, necessary for the fair presentation of the consolidated financial
position and results of operations and cash flows for the periods presented
have been included. Results for the interim periods are not necessarily
indicative of results that may be expected for the full year. The condensed
consolidated financial statements include the accounts of Healthcare.com
Corporation and Subsidiary (formerly HIE, Inc.) (the "Company" or
"Healthcare.com").
These Condensed Consolidated Financial Statements should be read in
conjunction with HIE, Inc.'s consolidated financial statements and notes
included in its Annual Report on Form 10-K for the year ended December 31,
1999 (the "1999 Form 10-K") filed with the Securities and Exchange
Commission. HIE, Inc. was renamed Healthcare.com Corporation on April 10,
2000.
The accounting policies followed in the presentation of interim financial
results are the same as those followed on an annual basis. These policies
are presented in Note 1 to the consolidated financial statements included
in the 1999 Form 10-K. All significant intercompany accounts and
transactions have been eliminated. Certain prior year amounts have been
reclassified to conform to current year classifications.
No statements of comprehensive income have been included in the
accompanying interim financial statements since the Company has no other
comprehensive income.
2. ACQUISITION
On March 13, 2000, the Company signed an agreement, effective as of
February 25, 2000, to purchase certain service contracts and other assets
and liabilities of the Integrated Solutions Division ("ISD") of Thermo
Information Solutions Inc. ("Thermo"). ISD, based in Charleston, South
Carolina, designs, implements and manages information technology solutions.
The purchase price consisted of 1,307,345 shares of the Company's common
stock and a warrant to purchase an additional 261,469 shares of the
Company's common stock at any time on or before March 13, 2004 at an
exercise price of $4.207 per share. On the closing date, the fair value of
the common stock issued was $5,500,000, determined by calculating the
average closing price of the common stock several days before and after the
closing date and applying a discount related to certain restrictions on the
common stock. The discount applied to the calculated value of common stock
issued in this transaction is supported by an independent valuation. The
value of the warrant was $506,028 on the closing date, determined using the
Black-Scholes option-pricing model. Thermo has a one-time right,
exercisable at any time on or before September 14, 2000, subject to certain
limitations, to receive additional shares of Healthcare.com common stock in
the event that the average trading price of Healthcare.com common stock
during the 10-day trading period prior to its election is below $4.207 per
share. As part of the transaction, the Company received $1,000,000 in cash
for working capital purposes from Thermo. The acquisition was accounted for
using the purchase method of accounting with the results of operations of
the business acquired included in the Company's results of operations from
the effective date of the transaction. The acquisition resulted in acquired
net assets of approximately $500 and excess of cost over net assets
acquired of approximately $5,626.
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HEALTHCARE.COM CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
The following pro forma financial information presents the combined results
of operations of Healthcare.com and ISD as if the acquisition had occurred
as of the beginning of each period presented, after giving effect to
certain adjustments, including the amortization of goodwill. The pro forma
financial information does not necessarily reflect the results of
operations that would have occurred had Healthcare.com and ISD constituted
a single entity during the quarters ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------
2000 1999
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(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C>
Revenue $13,275 $ 9,743
======= =======
Net earnings (loss) $ 368 $(1,654)
======= =======
Net earnings (loss) per share $ 0.01 $ (0.06)
======= =======
</TABLE>
3. DEBT
On February 24, 2000, the Company entered into an Accounts Receivable
Financing Agreement (the "Agreement") with Silicon Valley Bank (the
"Bank"), which provides for an extension of credit in order to finance
receivables up to $6,000,000. The Agreement term continues through February
15, 2001 and requires finance charges equal to the Bank's prime rate plus
2%. In conjunction with the Agreement, the Company issued a Stock Purchase
Warrant to the Bank, which entitles the holder to purchase 61,539 shares of
the Company's common stock at any time on or before February 23, 2005 at an
exercise price of $4.875 per share.
4. 8.5% SERIES B CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
During the three months ended March 31, 2000, 40,000 shares of the 65,000
originally issued shares of Series B Cumulative Convertible Exchangeable
Preferred Stock were converted into 186,128 shares of common stock.
5. SEGMENT INFORMATION
The Company's reportable segments are strategic business units that offer
different products and services. Beginning January 1, 2000, the Company
operates in two segments: (i) the licensing of integration software
products and performance of related integration services ("Software and
Services") and (ii) services provided by the Company that allow enterprises
to outsource their information technology, integration and application
functions to Healthcare.com ("Solution Sourcing"). Prior to 2000, the
Solution Sourcing business did not separately exist. The significant
portion of the Solution Sourcing business was added upon the acquisition of
ISD. The Company evaluates performance of the segments based on revenue and
gross profit of the segments. The Company does not allocate assets to the
reportable segments. Segment information for the three months ended March
31, 2000 is as follows (in thousands):
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HEALTHCARE.COM CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
2000
------------
(Unaudited)
<S> <C>
Revenue:
Software and Services $ 7,375
Solution Sourcing 2,457
-------
Total revenue $ 9,832
=======
Gross profit:
Software and Services $ 4,355
Solution Sourcing 543
-------
Total gross profit $ 4,898
=======
</TABLE>
6. RELATED PARTY TRANSACTION
Matria Healthcare, Inc., whose Chairman of the Board is also the Chairman
of the Board of Healthcare.com, entered into a software and services
agreement with the Company during the first quarter of 2000. Software
revenue from this transaction totaled $485,000 for the three months ended
March 31, 2000.
7. MAJOR CUSTOMER
One customer accounted for 12% of the Company's total revenue and 17% of
service revenue for the three months ended March 31, 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The words "expect," "anticipate," "intend," "plan," "believe,"
"seek," "estimate" and similar expressions are intended to identify such
forward-looking statements; however, this Report also contains other
forward-looking statements in addition to historical information. Actual results
may differ materially from those indicated in the forward-looking statements;
accordingly, there can be no assurance that such indicated results will be
realized. Among the important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements are the
factors set forth in "Item 1. Business -- Factors That May Affect Future
Performance" in the Company's 1999 Form 10-K filed with the Securities and
Exchange Commission (the "Commission"). By making these forward-looking
statements, the Company does not undertake to update them in any manner except
as may be required by its disclosure obligations in filings it makes with the
Commission under the Federal securities laws.
OVERVIEW
The Company was incorporated in Georgia in June 1994 as Healthdyne
Information Enterprises, Inc., a wholly-owned subsidiary of Healthdyne, Inc.,
and was initially focused on providing enterprise-wide clinical information
management solutions for healthcare delivery networks. In November 1995,
Healthdyne, Inc. distributed all of the outstanding shares of HIE common stock
in a spin-off. In October 1997, HIE redefined its strategic direction to focus
on providing software products and services to support the enterprise-wide
integration of information. As part of its new strategic focus, HIE (1) acquired
HUBLink, Inc., a privately-held integration software product company, in May
1998 in a pooling-of-interests transaction and (2) sold assets related to
certain non-strategic consulting services to Superior Consultant Holdings
Corporation in December 1998. On March 13, 2000, the Company signed an
agreement, effective as of February 25, 2000, to purchase certain service
contracts and other assets of ISD. ISD, based in Charleston, South Carolina,
designs, implements and manages information technology solutions. On April 10,
2000, the name of the Company was changed from HIE, Inc. to Healthcare.com
Corporation as part of the Company's introduction of a new healthcare,
business-to-business product strategy.
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (1) the Company's total
revenue and (2) unless otherwise indicated, the percentage of total revenue for
each component included in the Company's Condensed Consolidated Statements of
Operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
March 31,
-----------------------
2000 1999
-------- -------
(UNAUDITED)
<S> <C> <C>
Total revenue (in thousands) $ 9,832 $ 5,245
======= =======
Revenue:
Software 29% 19%
Services and other 71% 81%
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Total revenue 100% 100%
------- -------
Cost of revenue:
Software (as a percentage of software revenue) 16% 26%
Services and other (as a percentage of
services and other revenue) 64% 54%
Total cost of revenue 50% 49%
------- -------
Gross profit 50% 51%
------- -------
Operating expenses:
Sales and marketing 23% 33%
Research and development 9% 19%
General and administrative 13% 31%
------- -------
Total operating expenses 45% 83%
------- -------
Operating earnings (loss) 5% (32)%
Interest expense, net (3)% (2)%
------- -------
Earnings (loss) before income taxes 2% (34)%
Income taxes 0% 0%
------- -------
Net earnings (loss) 2% (34)%
======= =======
</TABLE>
9
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COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUE. Revenue increased 87% to $9.8 million for the three months ended March
31, 2000 from $5.2 million for the three months ended March 31, 1999. The
Company experienced increases in both software revenue and services and other
revenue.
Software. Software revenue increased 195% to $2.9 million for the three
months ended March 31, 2000 from $1.0 million for the three months ended March
31, 1999. As a percentage of total revenue, software revenue increased to 29% in
the three months ended March 31, 2000 from 19% for the three months ended March
31, 1999. The dollar increase in software revenue was primarily attributable to
an expanded market, which now includes e-Health vendors, for the Company's
existing software products. The increase in software revenue as a percentage of
total revenue resulted from the software revenue increasing at a higher
percentage than the services and other revenue.
Services and other. Services and other revenue increased 63% to $6.9
million for the three months ended March 31, 2000 from $4.3 million for the
three months ended March 31, 1999. Services and other revenue as a percentage of
total revenue decreased to 71% for the three months ended March 31, 2000 from
81% for the three months ended March 31, 1999. The dollar increase in services
and other revenue was primarily due to additional service revenue from the
acquisition of ISD effective February 25, 2000. The decrease in services and
other revenue as a percentage of total revenue resulted primarily from the
increase in software revenue discussed above.
COST OF REVENUE. Total cost of revenue increased 94% to $4.9 million for the
three months ended March 31, 2000 from $2.5 million for the three months ended
March 31, 1999.
Software. Cost of software revenue increased $214,000 to $465,000 for
the three months ended March 31, 2000 from $251,000 for the three months ended
March 31, 1999. As a percentage of software revenue, cost of software revenue
decreased to 16% for the three months ended March 31, 2000 from 26% for the
three months ended March 31, 1999. Cost of software revenue increased due to an
increase in amortization of capitalized software and an increase in royalty
expense for the three months ended March 31, 2000, compared to the three months
ended March 31, 1999. The decrease in cost of software revenue as a percentage
of software revenue was a result of the significant dollar increase in software
revenue.
Services and other. Cost of services and other revenue increased 95% to
$4.5 million for the three months ended March 31, 2000 from $2.3 million for the
three months ended March 31, 1999. As a percentage of services and other
revenue, cost of services and other revenue increased to 64% for the three
months ended March 31, 2000 from 54% for the three months ended March 31, 1999.
The dollar increase in cost of services and other revenue was primarily
attributable to the acquisition of ISD during the first quarter of 2000. The
increase in cost of services and other revenue as a percentage of services and
other revenue was primarily attributable to the addition of service contracts
obtained upon the acquisition of ISD, which have higher cost of services than
previously existing contracts.
OPERATING EXPENSES:
Sales and marketing. Sales and marketing expense increased 29% to $2.3
million for the three months ended March 31, 2000 from $1.7 million for the
three months ended March 31, 1999. Sales and marketing expense as a percentage
of total revenue decreased to 23% for the three months ended March 31, 2000 from
33% for the three months ended March 31, 1999. The dollar increase in sales and
marketing expense was primarily due to increases in salaries and commissions,
coupled with marketing to an expanded market, including e-Health vendors. The
decrease in sales and marketing expense as a percentage of revenue was a result
of the increase in software and service revenue during the three months ended
March 31, 2000.
Research and development. Research and development expense decreased 8%
to $904,000 for the three months ended March 31, 2000 from $981,000 for the
three months ended March 31, 1999. Research and development expense as a
percentage of total revenue decreased to 9% for the three months ended March 31,
2000
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from 19% for the three months ended March 31, 1999. Research and development
expense decreased due to a decrease in expenses for contract labor and other
general research and development expenditures. Capitalized research and
development costs were $335,000 and $405,000 for the three months ending March
31, 2000 and 1999, respectively.
General and administrative. General and administrative expense
decreased 23% to $1.3 million for the three months ended March 31, 2000 from
$1.6 million for the three months ended March 31, 1999. General and
administrative expense as a percentage of total revenue decreased to 13% for the
three months ended March 31, 2000 from 31% for the three months ended March 31,
1999. The dollar decrease is a result of decreases in consulting fees, travel
expenses and other general administrative expenses. The decrease in general and
administrative expense as a percentage of total revenue was primarily due to the
increase in software sales for the three months ended March 31, 2000.
INTEREST EXPENSE, NET. Net interest expense increased $148,000 to $249,000 for
the three months ended March 31, 2000 from $101,000 for the three months ended
March 31, 1999. The increase in interest expense resulted from increases in
short-term debt.
INCOME TAX EXPENSE. The Company had no provision for income taxes for either the
three months ended March 31, 2000 or 1999 as a result of Healthcare.com
utilizing net operating loss carryforwards in 2000 and having a net operating
loss for 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $1.2 million at March 31, 2000
compared to negative working capital of $238,000 at December 31, 1999. The
working capital increase was primarily attributable to the acquisition of ISD.
Net cash used in operating activities totaled $516,000 for the three
months ended March 31, 2000 compared to net cash used in operating activities of
$595,000 for the three months ended March 31, 1999. This decreased use of cash
of $79,000 was primarily due to net earnings for the three months ended March
31, 2000 versus a net loss for the three months ended March 31, 1999, coupled
with increases in accounts payable and deferred revenue, partially offset by an
increase in trade accounts receivable during the three months ended March 31,
2000.
Net cash provided by investing activities was $573,000 for the three
months ended March 31, 2000 compared to net cash used in investing activities of
$1.0 million for the three months ended March 31, 1999. This difference of $1.1
million was primarily due to cash obtained in connection with the ISD
acquisition and a decrease in capital expenditures during the three months ended
March 31, 2000.
Net cash provided by financing activities was $157,000 for the three
months ended March 31, 2000 compared to net cash provided by financing
activities of $435,000 for the three months ended March 31, 1999. This decrease
of $278,000 in cash provided is primarily the result of a decrease in proceeds
from stock option exercises during the three months ended March 31, 2000
compared to the three months ended March 31, 1999.
On December 31, 1999, the Company entered into an Amended and Restated
Loan and Security Agreement with Silicon Valley Bank (the "Bank"), which
provides for a revolving line of credit up to $3.0 million subject to certain
borrowing base limitations described in the agreement. The revolving line of
credit matures on December 31, 2000, bears interest at the Bank's prime rate
(9.0% at March 31, 2000) and is secured by $3.0 million of cash equivalents.
On February 24, 2000, the Company entered into an Accounts Receivable
Financing Agreement (the "Agreement") with the Bank, which provides for an
extension of credit in order to finance receivables up to $6.0
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million. The Agreement term continues through February 15, 2001 and requires
finance charges equal to the Bank's prime rate plus 2%. In conjunction with the
Agreement, the Company issued a Stock Purchase Warrant to the Bank, which
entitles the holder to purchase 61,539 shares of the Company's common stock at
any time on or before February 23, 2005 at an exercise price of $4.875 per
share.
On March 13, 2000, the Company signed an agreement, effective as of
February 25, 2000, to purchase certain service contracts and other assets and
liabilities of the Integrated Solutions Division ("ISD") of Thermo Information
Solutions Inc. ("Thermo"). ISD, based in Charleston, South Carolina, designs,
implements and manages information technology solutions. The purchase price
consisted of 1,307,345 shares of the Company's common stock and a warrant to
purchase an additional 261,469 shares of the Company's common stock at any time
on or before March 13, 2004 at an exercise price of $4.207 per share. On the
closing date, the fair value of the securities issued was $5,500,000, determined
by calculating the average closing price of the common stock several days before
and after the closing date and applying a discount related to certain
restrictions on the common stock. The discount applied to the calculated value
of common stock issued in this transaction is supported by an independent
valuation. The value of the warrant was $506,028 on the closing date, determined
using the Black-Scholes option-pricing model. Thermo has a one-time right,
exercisable at any time on or before September 14, 2000, subject to certain
limitations, to receive additional shares of HIE common stock in the event that
the average trading price of HIE common stock during the 10-day trading period
prior to its election is below $4.207 per share. As part of the transaction, the
Company received $1,000,000 in cash for working capital purposes from Thermo.
Based on the Company's business plan and business model projections,
the Company believes that currently available cash, anticipated cash flow from
operations and borrowings under existing or future credit facilities will be
sufficient to meet Healthcare.com's requirements for at least the next twelve
months. Healthcare.com may seek to raise additional financing to support
expansion, develop new or enhanced applications and services, respond to
competitive pressures, acquire complementary businesses or technologies or take
advantage of favorable market conditions. In such event, or if the Company's
cash needs or plans change, Healthcare.com may seek to raise additional funds by
incurring debt, or by issuing equity securities, by entering into strategic
relationships or through other arrangements. There can be no assurance, however,
that Healthcare.com will be able to raise any additional amounts on reasonable
terms, if at all.
YEAR 2000
The Year 2000 issue refers generally to the data structure and
processing problem that may prevent systems from properly processing
date-sensitive information beginning on January 1, 2000. HIE formed a Year 2000
task force which systematically evaluated all existing systems, products and key
external relationships to ascertain material Year 2000 issues and solutions.
These efforts were to ensure that its computer products were Year 2000 ready and
that its internal core information technology ("IT and non-IT systems") were
Year 2000 ready.
The Company successfully implemented its Year 2000 program as evidenced
by the continued successful operation of its computer products and core internal
IT and non-IT systems. Further, the Company has not encountered any significant
problems with its third party customers, financial institutions, vendors and
others with whom it conducts business. To date, we have not experienced any Year
2000 problems. If any of our third-party suppliers experience Year 2000
disruptions, the Company may incur costs to develop alternative ways of managing
the affected aspects of the business. The Company will continue to monitor its
product performance and core IT and non-IT systems throughout 2000 to ensure
ongoing performance. While there can be no assurance that no Year 2000-related
issues may arise, as of March 31, 2000, the Company believes, based on
information currently available, that Year 2000 related events are not likely to
have a material effect on its results of operations, financial condition or
liquidity. Healthcare.com did not incur any material costs directly associated
with its Year 2000 readiness efforts.
12
<PAGE> 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is subject to interest rate risk on its line of credit
(variable rate debt), convertible note payable (fixed rate debt) and obligations
under capital leases (fixed rate debt). The Company's primary market risk
exposure relates to (i) the interest rate risk on long-term and short-term
borrowings, (ii) the impact of interest rate movements on its ability to meet
interest expense requirements and (iii) the impact of interest rate movements on
the Company's ability to obtain adequate financing for future operations. The
Company manages interest rate risk on its outstanding long-term and short-term
debt through its use of fixed and variable rate debt. While the Company cannot
predict or manage its ability to refinance existing debt or the impact interest
rate movements will have on its existing debt, management continues to evaluate
its financial position on an on-going basis.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
The Company issued warrants to purchase 61,539 shares of the Company's
common stock to Silicon Valley Bank (the "Bank") on February 24, 2000 in
conjunction with an Accounts Receivable Financing Agreement. See Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." This transaction was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), as a transaction not involving a public offering. In
addition, the Bank is a sophisticated investor and had access to information
about the Company.
The Company issued 1,307,345 shares of common stock and a warrant to
purchase 261,469 shares of common stock to Thermo Information Solutions Inc.
("Thermo") on March 13, 2000. See Item 2 "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources." This transaction was exempt from registration under Section 4(2) of
the Securities Act, as a transaction not involving a public offering. In
addition, Thermo is a sophisticated investor and had access to information about
the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
----------- -----------
11 Statements of Computation of Per Share
Earnings (Loss).
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on January 27,
2000, reporting under Item 5 thereof the amendment and
restatement of a credit facility as well as the issuance of an
earnings release, and filing certain exhibits under Item 7
thereof.
The Company filed a current report on Form 8-K on March 9,
2000, reporting under Item 5 thereof entry into an accounts
receivable financing agreement and filing certain exhibits
under Item 7 thereof.
The Company filed a current report on Form 8-K on March 28,
2000, reporting under Item 2 thereof the acquisition of the
Integrated Solutions Division of Thermo Information Solutions
Inc. and filing certain exhibits under Item 7 thereof.
14
<PAGE> 15
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 thereunto duly authorized.
Healthcare.com Corporation
May 15, 2000 By: /s/ Joseph A. Blankenship
--------------------------------------------
Joseph A. Blankenship
Senior Vice President - Chief Financial
Officer, Treasurer and Secretary (duly
authorized officer and principal accounting
officer)
15
<PAGE> 16
EXHIBIT INDEX
Exhibit No. Description
11 Statements of Computation of Per Share
Earnings (Loss).
27 Financial Data Schedule (for SEC use only).
16
<PAGE> 1
HEALTHCARE.COM CORPORATION AND SUBSIDIARY EXHIBIT 11
STATEMENTS OF COMPUTATION OF PER SHARE EARNINGS (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
-------- --------
<S> <C> <C>
Net earnings (loss) attributable to common
shareholders $ 201 $ (1,768)
======== ========
Weighted average number of common
shares outstanding 25,895 25,223
======== ========
Basic net earnings (loss) per common share $ 0.01 $ (0.07)
======== =======
Shares used in diluted net earnings (loss) per
share calculation:
Weighted average number of common
shares outstanding 25,895 25,223
Additional shares assumed outstanding
from dilutive stock options and warrants
used in diluted earnings (loss) per share
calculation 1,326 -- (1)
-------- -------
27,221 25,223
======== =======
Diluted net earnings (loss) per common share $ 0.01 $ (0.07)
======== =======
</TABLE>
(1) Since stock options and warrants are antidilutive to the diluted net
loss per common share calculation, stock options and warrants are not
considered in such diluted loss per share calculation for the three
months ended March 31, 1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
HEALTHCARE.COM CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND THE CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 5,823
<SECURITIES> 0
<RECEIVABLES> 15,820
<ALLOWANCES> 5,042
<INVENTORY> 0
<CURRENT-ASSETS> 18,286
<PP&E> 6,067
<DEPRECIATION> 3,274
<TOTAL-ASSETS> 37,170
<CURRENT-LIABILITIES> 17,121
<BONDS> 0
0
0
<COMMON> 272
<OTHER-SE> 19,275
<TOTAL-LIABILITY-AND-EQUITY> 37,170
<SALES> 0
<TOTAL-REVENUES> 9,832
<CGS> 0
<TOTAL-COSTS> 4,984
<OTHER-EXPENSES> 4,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 252
<INCOME-PRETAX> 224
<INCOME-TAX> 0
<INCOME-CONTINUING> 224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
