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AMENDMENT NO. 2
on
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): SEPTEMBER 2, 1999 (JUNE 14,
1999)
MEDICONSULT.COM, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 333-73059 84-1341886
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1330 AVENUE OF THE AMERICAS, 17TH FLOOR, NEW YORK, NEW YORK 10019
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 841-7300
JARDINE HOUSE, 33 REID ST., 4TH FLOOR, HAMILTON, BERMUDA HM12
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
In the Current Report on Form 8-K filed on June 29, 1999 (the "Form
8-K") the Registrant reported that, pursuant to a Merger Agreement and Plan of
Reorganization ("Agreement") effective as of June 1, 1999 among the Registrant,
Cyber-Tech, Inc. ("Cyber-Tech") and the shareholders of Cyber-Tech, the
Registrant acquired all of the capital stock of Cyber-Tech. The merger
consideration paid in the Cyber-Tech Transaction consisted of $3,315,000 in cash
and 257,000 shares of Registrant's Common Stock (subject to a final purchase
price adjustment pursuant to Section 2.3(c) of the Agreement). The amount of
merger consideration was determined by arms-length negotiations among the
parties. In addition, in connection with the merger, Mediconsult.com (US), Ltd.,
a wholly-owned subsidiary of the Registrant, entered into employment,
consulting, and non-competition agreements with the two former shareholders of
Cyber-Tech, and one key employee of Cyber-Tech. The Registrant and the
shareholders of Cyber-Tech also entered into an Escrow Agreement with respect to
certain of the shares of the Registrant's Common Stock issued to the former
Cyber-Tech shareholders.
Cyber-Tech has developed and provides high quality content and tools
focused on heart disease and related areas that have attracted a large and
growing number of visitors to the www.heartinfo.com Web site.
The Registrant funded the cash portion of the merger consideration,
other cash payments and the fees and expenses associated with the Cyber-Tech
Transaction through cash on hand.
The Form 8-K did not include the Condensed Consolidated Financial Data
required by Item 7(a) or the Pro Forma Condensed Consolidated Financial Data
required by Item 7(b). This Form 8-K/A amends Item 7 of the Form 8-K by
including such financial information.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
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[Letterhead}
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS OF CYBER-TECH, INC.
In our opinion, the accompanying balance sheets and the related statements of
earnings and retained earnings and of cash flows present fairly, in all material
respects, the financial position of CYBER-TECH, INC. as of December 31, 1998 and
1997, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles in the
United States of America. 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 auditing standards generally accepted in
the United States of America 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.
PricewaterhouseCoopers
Hamilton, Bermuda
August 30, 1999
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CYBER-TECH, INC.
Balance Sheet
AS OF DECEMBER 31, 1998 AND 1997
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<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 493,038 $ 33,253
Accounts receivable 20,000 0
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TOTAL CURRENT ASSETS 513,038 33,253
Property and equipment 8,387 30,841
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TOTAL ASSETS $ 521,425 $ 64,094
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LIABILITIES
Accounts payable and accrued liabilities $ 17,065 $ 0
Loan from shareholders 0 101,294
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TOTAL LIABILITIES 17,065 101,294
SHAREHOLDERS' EQUITY
Common stock, no par value, 1,000 voting shares and 960 non-voting shares
authorized, issued and outstanding 0 0
Additional paid-in capital 122,346 32,095
Retained earnings 382,014 (69,295)
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TOTAL SHAREHOLDERS' EQUITY 504,360 (37,200)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 521,425 $ 64,094
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The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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CYBER-TECH, INC.
Statements of Earnings and Retained Earnings
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
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<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
REVENUES $ 989,677 $ 327,276
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EXPENSES
Cost of Sales 50,000 0
General Expenses 493,324 352,056
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Total expenses 543,324 352,056
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OPERATING INCOME 446,353 (24,780)
Interest income 15,181 5,308
Income tax expense $ (10,225) $ (175)
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NET INCOME 451,309 (19,647)
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RETAINED EARNING- BEGINNING OF YEAR (69,295) (49,648)
RETAINED EARNING- END OF YEAR $ 382,014 $ (69,295)
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The accompanying notes are an integral part of these financial statements.
</TABLE>
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CYBER-TECH, INC.
Statements of Cash Flows
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
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<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 451,309 $ (19,647)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation expense 22,454 168
Accounts receivable (20,000) 0
Accounts payable and accrued liabilities 17,065 (6,203)
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Net cash provided by (used in) operating activities 470,828 (25,682)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of notes payable to shareholder (11,043) (12,172)
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Net cash used in financing activities (11,043) (12,172)
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INCREASE (DECREASE) IN CASH 459,785 (37,854)
CASH - BEGINNING OF YEAR 33,253 71,107
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CASH - END OF YEAR $ 493,038 $ 33,253
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The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
CYBER-TECH, INC.
Notes to Financial Statements
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
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1. ORGANIZATION
Cyber-Tech, Inc. (the "Company") was formed as a corporation in Hoboken
New Jersey on July 27, 1988, for the purpose of computer consulting and
programming services. In 1996, the Company set up an internet site,
www.heartinfo.com, which was dedicated to education on cardiovascular
issues.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The
following is a summary of the Company's significant accounting policies:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
REVENUE RECOGNITION
The Company's revenues are primarily derived from educational grants,
sponsorship of internet content and commissioned special projects such
as the development and implementation of cardiovascular risk
assessment tools for pharmaceutical companies. Such revenues are
recognized over the period that the development work is performed.
PRODUCT AND CONTENT DEVELOPMENT COSTS
The cost of development and enhancement of the technology used in the
Company's Web site are expensed as incurred.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentration of credit risk consist primarily of cash,
cash equivalents, and accounts receivable. Substantially all of the
Company's cash, cash equivalents, are managed by one individual.
Accounts receivable are typically unsecured and are derived from
revenues earned from customers primarily located in the United States.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS 130, "REPORTING COMPREHENSIVE INCOME." SFAS 130 establishes
standards for reporting comprehensive income and its components in a
financial statement. Comprehensive income as defined includes all
changes in equity (net assets) during a period from non-owner sources.
The disclosure prescribed by SFAS 130 must be made for the Company's
year ended December 31, 1998. For the years presented, the Company's
comprehensive income was equal to net income.
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CYBER-TECH, INC.
Notes to Financial Statements
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
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SEGMENTS
Additionally in June 1997, the FASB issued SFAS 131, "DISCLOSURES
ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION." This
statement establishes standards for the way companies report
information about operating segments in annual financial statements.
It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The disclosures
prescribed by SFAS 131 will be effective for the year ending December
31, 1998 consolidated financial statements. The Company believes that
it does not operate in more than one segment.
FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS 107 "DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS",
requires disclosure about the fair value of certain financial
instruments. The Company's financial instruments, including cash,
accounts receivable, accounts payable and accrued liabilities and
contributed capital are carried at cost which approximates their fair
value because of the short-term maturity of these instruments.
INCOME TAXES
Effective July 27, 1988, the Company made an election under the
Internal Revenue Code to be treated as an S Corporation. As a
result, the Company is not subject to federal and certain state
income taxes at the corporate level. Accordingly, the Company's
federal taxable income is reportable by its shareholders on their
individual income tax returns. Income tax expense included in the
income statement represents a reduced level of state income taxes
paid by the Company. In addition, the Company is on a cash basis
of accounting for tax purposes, and any deferred tax liabilities
that would result from this method are immaterial.
3. LOANS FROM SHAREHOLDER
The Company had loans from a shareholder of $101,294 outstanding at the
December 31, 1997. During 1998, $90,251 of these loans were converted to
common stock and the remaining $11,043 was repaid in cash.
4. SUBSEQUENT EVENTS
On June 14, 1999, all of the capital stock of the Company was acquired by
Mediconsult.com, Inc. pursuant to a Merger Agreement and Plan of
Reorganization. The consideration for this transaction was $3,300,000 in
cash and 257,000 shares of Mediconsult.com, Inc. common stock. In addition,
in connection with this transaction, two of the Company's shareholders and
one key employee of the Company entered into employment, consulting and
non-competition agreements with Mediconsult.com (US) Ltd., a wholly-owned
subsidiary of Mediconsult.com, Inc.
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(b) PRO FORMA FINANCIAL INFORMATION
MEDICONSULT.COM
Unaudited Pro Forma Consolidated Balance Sheet
AS OF DECEMBER 31, 1998
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(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Mediconsult Acquisition Other Pro Forma
Historical CyberDiet Cyber-Tech Adjustments Adjustments Consolidated
(1) (3) (4)
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash 135 10 493 0 3,160 3,798
Accounts receivable 136 6 20 0 0 162
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Total current assets 271 16 513 0 3,160 3,960
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NON-CURRENT ASSETS
Tangible assets 53 0 8 0 0 61
Intangible assets 819 0 0 9,264 0 10,083
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Total non-current assets 872 0 8 9,264 0 10,144
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TOTAL ASSETS 1,142 16 521 9,264 3,160 14,103
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LIABILITIES
CURRENT LIABILITIES
Accounts payable and
accrued liabilities 243 5 17 0 0 265
Advances from stockholder 514 0 0 0 0 514
Unearned revenue 107 0 0 0 0 107
Other current liabilities 0 54 0 0 0 54
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Total current liabilities 864 59 17 0 0 940
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STOCKHOLDERS' EQUITY
Preferred stock 4,300 0 0 0 (4,300) 0
Common stock 19 0 0 0 4 26
Additional paid-in capital 5,243 71 122 9,533 8,622 23,591
Deferred compensation (884) 0 0 0 0 (884)
Retained earnings (deficit) (8,399) (113) 382 (269) (1,166) (9,565)
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Total shareholders' equity 278 (43) 504 9,264 3,160 13,163
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 1,142 16 521 9,264 3,160 14,103
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The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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MEDICONSULT.COM
Unaudited Pro Forma Consolidated Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 1998
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(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Mediconsult Acquisition Other Pro Forma
Historical CyberDiet Cyber-Tech Adjustments Adjustments Consolidated
(1) (2) (4)
<S> <C> <C> <C> <C> <C> <C>
REVENUES 1,031 39 990 0 0 2,060
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OPERATING EXPENSES
Product and content
development 1,316 65 50 0 0 1,381
Marketing, sales and client
services 1,812 1 0 0 0 1,863
General and administrative 1,013 14 504 0 0 1,531
Depreciation and amortization 170 0 0 1,853 0 2,023
Fair value of options and
warrants granted to employees 275 0 0 0 0 275
Fair value of options and
warrants granted to
consultants 1,354 0 0 0 1,094 2,448
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Total operating expenses 5,940 80 554 1,853 1,094 9,521
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INCOME (LOSS) FROM OPERATIONS (4,909) (41) 436 (1,853) (1,094) (7,461)
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Interest income (expense) 0 (4) 15 0 0 11
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Net income (loss) (4,909) (45) 451 (1,853) (1,094) (7,450)
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</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
1. Represents the preliminary allocation of the excess of the purchase price
over the assets and liabilities to be acquired and the related amortization
in connection with the probable acquisition of CyberDiet and Cyber-Tech.
Mediconsult is in the process of completing its valuation of the assets
and liabilities of CyberDiet and Cyber-Tech, pending the completion of its
valuation. Mediconsult has assumed for purposes of pro forma information
that the fair values of assets and liabilites will approximate underlying
book values. The purchase price for CyberDiet was determined based on the
quoted market price of the 400,000 shares of common stock of
Mediconsult.com, on February 25, 1999 when substantial agreement was
reached on the terms of the acquisition. The purchase price for Cyber-Tech
was determined based on the average quoted market price of the beginning
of July for $3,750,000 worth of shares and $3,300,000 on June 13, 1999
when substantial agreement was reached on the terms of the acquisition.
Purchase price for CyberDiet and Cyber-Tech ($2,675,000 and $7,050,000,
respectively), in excess of the assumed fair value of net assets acquired
for CyberDiet and Cyber-Tech, respectively, ($(43,083) and $504,360) has
been allocated to intangible assets and amortized over five years. This
resulted in adjustments to record goodwill of $2,718,083 and $6,545,640
for CyberDiet and Cyber-Tech, respectively, and annual amortization of
$543,617 and $1,309,128 for CyberDiet and Cyber-Tech, respectively. The
final allocation of purchase price may differ materially from amounts
assumed in the accompanying pro forma information.
2. Represents the approximate fair value of the 200,000 warrants with an
exercise price of $1.22 per share deliverable to Arnhold and
S. Bleichroeder, Inc. upon the initial filing of the prospectus, which
were recorded as an expense in Mediconsult's statement of operations
for 1999.
3. Represents the (a) issuance and conversion of $3.2 million of senior
preferred stock into shares of common stock upon the consummation of
a public offering in April, 1999 (b) the conversion of $4.3 million of
junior preferred stock into shares of common stock upon the consummation
of a public offering in April, 1999 and (c) the conversion of cumulative
dividends payable on the junior preferred stock into 71,666 shares of
common stock.
4. Excludes (a) an aggregate of 2,000,000 shares of common stock issuable
upon the exercise of currently exercisable options with an exercise price
of $0.003 per share; (b) 200,000 shares of common stock issuable upon the
exercise of warrants, with, with an exercise price of $1.22 per share; (c)
224,000 shares of common stock issuable upon the exercise of warrants,
with an exercise price of $6.32 per share; (d) shares issuable in respect
of the 8% payable in kind dividend on the junior preferred stock accruing
from and after January 1, 1999; and (e) 862,950 shares of common stock
reserved for issuance under the 1996 Stock Option Plan as of December 31,
1998 of which options to purchase 716,000 shares were outstanding at the
date with a weighted average exercise price of $1.38 per share.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (CONTINUED)
(c) EXHIBITS.
99.1 Merger Agreement and Plan of Reorganization, dated
June 14, 1999, among Mediconsult.com, Inc.,
Cyber-Tech, Inc., Andre Pilevsky and Daniel Rader,
M.D.*
99.2 Escrow Agreement, dated June 14, 1999, among
Mediconsult.com, Inc., Cyber-Tech, Inc., Andre
Pilevsky, Daniel Rader, M.D. and SunTrust Bank.*
99.3 Employment Agreement, dated June 14, 1999, among
Mediconsult.com (US), Ltd. and Andre Pilevsky.*
99.4 Employment Agreement, dated June 14, 1999, among
Mediconsult.com (US), Ltd. and Sharon Weinberg.*
99.5 Consulting Agreement, dated June 14, 1999, among
Mediconsult.com (US), Ltd. and Daniel Rader, M.D.*
99.6 Noncompetition Agreement, dated June 14, 1999, among
Mediconsult.com (US), Ltd. and Andre Pilevsky.*
99.7 Noncompetition Agreement, dated June 14, 1999, among
Mediconsult.com (US), Ltd. and Sharon Weinberg.*
99.8 Noncompetition Agreement, dated June 14, 1999, among
Mediconsult.com (US), Ltd. and Daniel Rader, M.D.*
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* Previously filed.
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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.
MEDICONSULT.COM, INC.
By:/s/ E. Michael Ingram
---------------------------------
E. Michael Ingram
Chief Financial Officer
Dated: September 2, 1999
