SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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Date of Report (date of earliest event reported): December 24, 1996
SYNETIC, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-17822 22-2975182
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
669 River Drive, River Drive Center II,
Elmwood Park, New Jersey 07407
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 703-3400
Exhibit Index Appears on Page 5
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Item 2. Acquisition or Disposition of Assets.
On December 24, 1996, Synetic, Inc., a Delaware corporation
(the "Company"), acquired Avicenna Systems Corp., a Massachusetts corporation
("Avicenna"), for a purchase price of approximately $30,500,000 (subject to
post-closing adjustments), through the merger (the "Merger") of Synternet
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the
Company ("Synternet"), with and into Avicenna. As a result of the Merger,
Avicenna has become a wholly owned subsidiary of the Company.
The Merger was effected pursuant to the Agreement and Plan of
Merger, dated as of December 23, 1996, among the Company, Avicenna, Synternet
and the individual and entities listed on the signature page thereto (the
"Merger Agreement"). The Merger Agreement is incorporated herein by reference to
Exhibit 10.2 of the Registration Statement on Form S-3 (No. 333-18771) filed by
the Company with the Securities and Exchange Commission (the "SEC") on December
24, 1996, as amended through the date hereof. A copy of the Company's press
release announcing the completion of the Merger is filed as an exhibit hereto
and incorporated by reference herein.
The Company anticipates that a substantial portion of the
purchase price for Avicenna will be attributed to purchased research and
development costs. Under generally accepted accounting principles, the Company
will charge to expense the portion of the purchase price attributable to
purchased research and development costs. The amount of this charge cannot be
determined until the Company's independent valuation consultants perform an
appraisal of Avicenna, which the Company anticipates will be completed prior to
February 15, 1997. The Company expects, however, based on recent acquisitions of
software development companies by others, that this nonrecurring charge will
range between $18,000,000 and $29,000,000. As a result of this nonrecurring
charge, which the Company anticipates will be recognized during the quarter
ending December 31, 1996, the Company will have a consolidated net loss of up to
$26,800,000 for such quarter. In addition, the Company will have a consolidated
net loss for the fiscal year ending June 30, 1997 as a result of this
nonrecurring charge.
The Company is in the initial development phase of offering
services to provide inter-enterprise connectivity to payors and providers in the
healthcare industry. Avicenna, the Company's first acquisition in this new
business area, has operated at a loss since its inception two years ago, a
substantial portion of which was attributable to research and development
expenses, and as of November 30, 1996 had an unaudited accumulated deficit of
approximately $3,100,000. The current rate of these
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expenses approximates $1,500,000 per fiscal quarter. The Company expects to
continue to incur significant research and development expenses and to incur
additional operating losses in connection with this new area of business until
Avicenna successfully develops and markets its products and services. There can
be no assurance that such products and services will be successfully developed
or marketed. Research and development expenses relating to Avicenna may be
materially greater in the future than current amounts until Avicenna
successfully develops and markets its products and services. The Company
anticipates, however, that such research and development expenses will not
exceed $2,250,000 per fiscal quarter for the third and fourth quarters of the
current fiscal year ending June 30, 1997 and will not result in net losses for
the Company on a consolidated basis for the fiscal quarter ending December 31,
1996 or for the current fiscal year (excluding the anticipated charge for
purchased research and development costs relating to the acquisition of
Avicenna), or for either of the fiscal quarters ending March 31, 1997 or June
30, 1997. Further, the Company expects to acquire additional businesses to
supplement its own internal efforts and those of Avicenna. There is no specific
time frame for the first commercial introduction of these new services, and the
Company anticipates that it will incur significant development expenses until
these services are successfully developed and marketed. No assurances can be
given that the Company's effort in establishing such services will be successful
or that it will succeed in consummating such acquisitions or that such
acquisitions will ultimately provide the Company with the ability to offer these
services.
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(c) Exhibits.
Exhibit
Number Description
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2 Agreement and Plan of Merger, dated as of December 23,
1996, among the Company, Avicenna, Synternet and the
individual and entities listed on the signature page thereto
(incorporated herein by reference to Exhibit 10.2 of the
Registration Statement on Form S-3 (No. 333-18771)) filed by
the Company with the SEC on December 24, 1996, as amended
through the date hereof.
99.1 Press release of the Company, dated December 24, 1996
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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.
SYNETIC, INC.
(Registrant)
Date: December [31], 1996 By /s/ Victor L. Marrero
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Name: Victor L. Marrero
Title: Vice President - Finance
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EXHIBIT INDEX
Exhibit No. Description Page
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2 Agreement and Plan of Merger, dated December 23, *
1996, among the Company, Avicenna, Synternet and
the individual and entities listed on the signature
page thereto (incorporated herein by reference to
Exhibit 10.2 of the Prospectus included in the
Registration Statement on Form S-3 (No. 333-
18771)) filed by the Company with the SEC on
December 24, 1996, as amended through the date
hereof.
99.1 Press release of the Company, Inc., dated December
24, 1996 6
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* incorporated by reference as indicated.
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EXHIBIT 99.1
[LETTERHEAD OF SYNETIC, INC.]
FOR IMMEDIATE RELEASE
Contact: Victor L. Marrero
Vice President - Finance
and Chief Financial Officer
(201) 703-3405
Elmwood Park, New Jersey, December 24, 1996--Synetic, Inc. (NASDAQ:
SNTC) announced today that it has signed a merger agreement providing for the
acquisition of Avicenna Systems Corporation, a privately held Cambridge,
Massachusetts based company that markets and builds Intranets for managed health
care plans, integrated healthcare delivery systems, and hospitals. The parties
expect the acquisition to close later today. Avicenna's controlled-access
Intranet systems are designed to allow managed care organizations and provider
groups to exchange transactional, procedural, patient outcome and educational
information. This acquisition represents an initial step by Synetic in its
previously announced effort to provide inter-enterprise connectivity for
healthcare communications and commerce using the distributive power of the
Internet. Synetic expects to acquire additional businesses to supplement its own
internal efforts and those of Avicenna.
Avicenna's development of Internet technology-based information systems
will provide Synetic with the necessary platform to promote widespread
acceptance of a new generation of inter-enterprise healthcare transaction
applications. Avicenna is working to bring integrated payor-specific content and
transactional data to the physician's desktop. This important capability will be
a cornerstone in Synetic's plan to build new channels of communication linking
managed care organizations, pharmacy benefit managers, clinical laboratories,
physicians and other providers of healthcare services.
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"The acquisition of Avicenna Systems Corporation represents the first
significant step towards our goal," said Martin J. Wygod, Chairman of Synetic.
"Avicenna provides us with an organization with a common vision for
confidential, secure Internet healthcare commerce, and a talented management
team with relevant experience," he continued.
"We believe that the emergence of the World Wide Web as a commercial
medium provides solutions to several complex issues facing the healthcare
industry as inter-enterprise communication becomes the key to a patient-centric
model of healthcare management," said I-J Gujral, founder of Avicenna. "By
leveraging the existing healthcare information systems infrastructure, we allow
payors and providers to quickly share mission critical information, while
preserving their investment in existing technologies."
Synetic will acquire all of Avicenna's outstanding equity and
indebtedness (including employee stock options) for a total purchase price of
$30.5mm, payable in shares of Synetic common stock. As additional consideration,
Synetic has agreed to issue to certain of the sellers nontransferable warrants
covering 250,000 shares of Synetic common stock, exercisable after December 23,
1998 at a price of $54.50 per share. Synetic has entered into arrangements with
Mr. Gujral and the other key members of Avicenna's management team with respect
to their equity holdings that are designed to assure their continuation with the
Company. Promptly following the closing, Synetic has agreed to file a
Registration Statement covering certain of the shares of the Synetic stock
issued as consideration for the acquisition.
Synetic anticipates that a substantial portion of the purchase price
for Avicenna will be attributed to purchased research and development costs.
Under generally accepted accounting principles, Synetic will charge to expense
the portion of the purchase price attributable to purchased research and
development costs. Synetic anticipates that this charge will be recognized
during the quarter ended December 31, 1996. During calendar 1996, Avicenna
incurred losses, a substantial portion of which related to research and
development expenses. The current rate of these expenses approximates $500,000
per month. Synetic expects to incur research and development expenses which may
be significantly in excess of such amount without the benefit of revenues until
these products and services are sold to users.
* * * * *
The statements contained in this release, other than the terms of the
acquisition of Avicenna, are forward looking statements that involve risks and
uncertainties, including, but not limited to, product demand and market
acceptance risks, the feasibility of developing commercially profitable Internet
healthcare services, the effect of economic conditions, user acceptance, the
impact of competitive products, services, and pricing, product development,
commercialization and technological difficulties, and other risks detailed in
the Company's Securities and Exchange Commission filings.
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