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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 9, 1999
(Date of earliest event reported)
OnHealth Network Company
(Exact name of registrant as specified in its charter)
Commission file number: 0-22212
Washington 41-1686038
(State of incorporation or organization) (IRS Employer Identification No.)
808 Howell Street, Suite 400 Seattle, Washington 98101
(Address of principal executive offices)
(206) 583-0100
(Registrant's telephone number, including area code)
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 9, 1999, pursuant to an Agreement and Plan of Reorganization, dated
as of September 9, 1999 (the "Reorganization Agreement"), OnHealth Network
Company, a Washington corporation ("OnHealth"), acquired by merger, through its
wholly owned subsidiary BB Acquisition, Inc., a Delaware corporation ("Sub"),
BabyData.com Inc., a Delaware corporation ("BabyData"). The acquisition was
effectuated by a merger of Sub with and into BabyData. BabyData's Web site,
babydata.com, provides information for pregnant couples and those trying to
conceive.
Pursuant to the Merger Agreement, at the Closing, all of the outstanding shares
of BabyData were converted into 681,534 shares of OnHealth common stock having a
value of approximately $4.7 million. The acquisition of BabyData was accounted
for using the purchase method of accounting.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
<TABLE>
<CAPTION>
Page
----
<S> <C>
BabyData.com (a development stage company)
Audited Financial Statements:
Report of Ernst & Young LLP, Independent Auditors........................ 3
Balance Sheets as of December 31, 1998 and December 31, 1997.............. 4
Statements of Operations for the year ended December 31, 1998, for
the period from July 1, 1997 (inception) to December 31, 1997 and
for the cumulative period from July 1, 1997 (inception) to
December 31, 1998....................................................... 5
Statements of Proprietorship Equity for period from July 1, 1997
(inception) to December 31, 1998 ...................................... 6
Statements of Cash Flows for the year ended December 31, 1998,
for the period from July 1, 1997 (inception) to December 31, 1997
and for the cumulative period from July 1, 1997 (inception) to
December 31, 1998...................................................... 7
Notes to Financial Statements............................................. 8
BabyData.com (a development stage company)
Unaudited Financial Statements:
Condensed Balance Sheets as of and June 30, 1999 and
December 31, 1998.......................................................10
Condensed Statements of Operations for the six month periods ended
June 30, 1999 and 1998 and for the cumulative period from
July 1, 1997 (inception) to June 30, 1999...............................11
Condensed Statements of Cash Flows for the six month periods
ended June 30, 1999 and 1998 and for the cumulative period
from July 1, 1997 (inception) to June 30, 1999..........................12
Notes to Condensed Financial Statements....................................13
(b) Unaudited Pro Forma Financial Information
Pro Forma Condensed Balance Sheet as of June 30, 1999......................15
Pro Forma Condensed Statement of Operations for the six month
period ended June 30, 1999..............................................16
Pro Forma Condensed Statement of Operations for the year ended
December 31,1998........................................................17
Notes to Pro Forma Condensed Financial Statements..........................18
</TABLE>
2
<PAGE>
Report of Independent Auditors
The Sole Proprietor
BabyData.com
We have audited the accompanying balance sheets of BabyData.com (a development
stage company) as of December 31, 1998 and 1997, and the related statements of
operations, proprietorship equity, and cash flows for the year ended December
31, 1998, for the period from July 1, 1997 (inception) to December 31, 1997 and
for the period from July 1, 1997 (inception) to December 31, 1998. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BabyData.com at December 31,
1998 and 1997, and the results of its operations and its cash flows for the year
ended December 31, 1998 for the period from July 1, 1997 (inception) to December
31 1997 and for the period from July 1, 1997 (inception) to December 31, 1998 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Seattle, Washington
October 1, 1999
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BABYDATA.COM
(a development stage company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
ASSETS
Web site $ 37,345 $ 10,844
Web site development in process 4,825 -
Accumulated amortization (6,224) -
---------------- ---------------
35,946 10,844
Total assets $ 35,946 $ 10,844
================ ===============
LIABILITIES AND PROPRIETORSHIP EQUITY
Current liabilities:
Accrued expenses $ $
758 -
---------------- ---------------
Total current liabilities 758 -
Proprietorship equity:
Proprietorship capital 44,318 10,844
Deficit accumulated during development stage (9,130) -
---------------- ---------------
Total proprietorship equity 35,188 10,844
================ ===============
Total liabilities and proprietorship equity $ 35,946 $ 10,844
================ ===============
</TABLE>
See notes to financial statements.
4
<PAGE>
BABYDATA.COM
(a development stage company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from Period from
Year July 1, 1997 July 1, 1997
Ended (inception) to (inception) to
December 31, December 31, December 31,
1998 1997 1998
---------------- ------------------- ----------------
<S> <C> <C> <C>
Operating expenses:
General and administrative $ 9,130 $ - $ 9,130
---------------- ------------------- ----------------
Total operating expenses 9,130 - 9,130
---------------- ------------------- ----------------
Loss from operations (9,130) - (9,130)
---------------- ------------------- ----------------
Net loss $ (9,130) $ - $ (9,130)
================ =================== ================
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
BABYDATA.COM
(a development stage company)
STATEMENTS OF PROPRIETORSHIP EQUITY
PERIOD FROM JULY 1, 1997 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Proprietorship During the Proprietorship
Capital Development Stage Equity
----------------- ------------------ -----------------
<S> <C> <C> <C>
Contributions from owner $ 10,844 $ - $ 10,844
----------------- ------------------ -----------------
Balance at December 31, 1997 10,844 - 10,844
Contributions from owner 33,474 33,474
Net loss - (9,130) (9,130)
================= ================== =================
Balance at December 31, 1998 $ 44,318 $ (9,130) $ 35,188
================= ================== =================
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
BABYDATA.COM
(a development stage company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
July 1, 1997 July 1, 1997
Year Ended (inception) (inception)
December 31, to December 31, to December 31,
1998 1997 1998
--------------- --------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (9,130) $ - $ (9,130)
Adjustments to reconcile net loss to cash used
in operating activities:
Amortization 6,224 - 6,224
Changes in assets and liabilities:
Increase in accrued expenses 758 - 758
--------------- --------------- ----------------
Net cash used in operating activities (2,148) - (2,148)
INVESTING ACTIVITIES:
Payments for Web site development (31,326) (10,844) (42,170)
--------------- --------------- ----------------
Net cash used in investing activities (31,326) (10,844) (42,170)
FINANCING ACTIVITIES:
Capital contributions from owner 33,474 10,844 44,318
--------------- --------------- ----------------
Net cash provided by financing activities 33,474 10,844 44,318
--------------- --------------- ----------------
Net increase in cash and cash equivalents - - -
Cash and cash equivalents at beginning of period - - -
=============== =============== ================
Cash and cash equivalents at end of period $ - $ - $ -
=============== =============== ================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
BABYDATA.COM INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
BabyData.com (the Company) was founded by Dr. Amos Grunebaum, M.D. in July of
1997 (inception). On July 4, 1998, the Company launched a web site devoted to
the publishing of conception and pregnancy information on the Internet.
Operating activities relate primarily to the design and development of the
Company's web site and therefore the Company is classified as a development
stage company.
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 at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
WEB SITE
Web site consists of payments made to third parties for web site programming and
design work and is carried at cost. Amortization is provided on a straight-line
basis over the estimated useful life of three years.
INCOME TAXES
The Company is a sole proprietorship for federal income tax purposes. As a sole
proprietorship, the Company is not subject to federal income tax, rather the
Company's loss is included in the tax return of the sole proprietor.
Accordingly, no provision for federal income tax is reflected in the
accompanying financial statements.
CONTRIBUTED SERVICES
The Company's sole owner has contributed various services to the Company since
its inception. No amounts have been recorded in the accompanying financial
statements related to these contributed services, as their fair value is not
objectively determinable or measurable.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants issued SOP
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 requires that entities capitalize certain
costs related to internal use software once certain criteria have been met. The
Company is required to implement SOP 98-1 for the year ending December 31, 1999.
Adoption of SOP 98-1 is not expected to have a material impact on the Company's
financial condition or results of operations.
In April 1998, the Accounting Standards Executive Committee issued SOP 98-5,
"Reporting on the Costs of Start-up Activities" (SOP 98-5). Start-up activities
are defined broadly as those one-time activities related to the opening of a new
facility, introducing a new product or service, conducting business in a new
territory, conducting business with a new class of customer, commencing some new
operation, or organizing a new entity. SOP 98-5 requires that the cost of
8
<PAGE>
start-up activities be expensed as incurred. SOP 98-5 is effective for the
Company beginning in fiscal 1999. All start-up costs prior to December 31, 1998
were expensed as incurred.
2. PROPRIETORSHIP EQUITY
Since inception, the Company has been owned as a sole proprietorship by Dr. Amos
Grunebaum, M.D. In 1998 and 1997, the sole proprietor has contributed $44,318
and $10,844, respectively, to the Company as capital contributions in the form
of payments of expenditures on behalf of the Company.
3. SUBSEQUENT EVENTS
On March 15, 1999, the Company's sole owner entered into a Letter of Agreement
(the Agreement) with a third party, Alterity Partners LLC (Alterity). Based on
the terms of the Agreement, the two parties agreed to form a new corporate
entity whereby the founder contributed all of the assets of the sole
proprietorship (principally the web site) in exchange for 60% of the common
stock, and Alterity agreed to provide certain management services (primarily
technical enhancements to the web site) in exchange for 40% of the common stock.
The Company was incorporated as BabyData.com Inc. in the State of Delaware on
August 27, 1999. The Company is authorized to issue 10,000 shares of common
stock, $0.01 par value.
On September 9, 1999, the Company entered into an Agreement and Plan of
Reorganization (the Reorganization Agreement) with OnHealth Network Company
(acquiring company). Under the terms of the Reorganization Agreement, the
acquiring company will acquire all of the outstanding shares of the Company's
stock in exchange for approximately 682,000 shares of the acquiring company's
common stock valued at approximately $5 million.
9
<PAGE>
BABYDATA.COM
(a development stage company)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Web site $ 50,255 $ 37,345
Web site development in process 2,035 4,825
Accumulated amortization (13,524) (6,224)
---------------- ---------------
38,766 35,946
Total assets $ 38,766 $ 35,946
================ ===============
LIABILITIES AND PROPRIETORSHIP EQUITY
Current liabilities:
Accrued expenses $ 1,200 $ 758
Advances 2,035 -
---------------- ---------------
Total current liabilities 758
3,235
Proprietorship equity:
Proprietorship capital 58,435 44,318
Deficit accumulated during development stage (22,904) (9,130)
---------------- ---------------
Total proprietorship equity 35,531 35,188
================ ===============
Total liabilities and proprietorship equity $ 38,766 $ 35,946
================ ===============
</TABLE>
See Notes to Condensed Financial Statements.
10
<PAGE>
BABYDATA.COM
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Period from
Six Months Ended June 30, July 1, 1997
------------------------------------ (inception) to
1999 1998 June 30, 1999
--------------- ---------------- ----------------
<S> <C> <C> <C>
Operating expenses:
General and administrative $ 13,774 $ - $ 22,904
--------------- ---------------- ----------------
Total operating expenses 13,774 - 22,904
--------------- ---------------- ----------------
Loss from operations (13,774) - (22,904)
--------------- ---------------- ----------------
Net loss $ (13,774) $ - $ (22,904)
=============== ================ ================
</TABLE>
See Notes to Condensed Financial Statements.
11
<PAGE>
BABYDATA.COM
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Period from
Six Months Ended June 30, July 1, 1997
---------------------------------- (inception) to
1999 1998 June 30, 1999
-------------- --------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (13,774) $ - $ (22,904)
Adjustments to reconcile net loss to cash used
in operating activities:
Amortization 7,300 - 13,524
Changes in assets and liabilities:
Increase in accrued expenses 442 - 1,200
Increase in advances 2,035 - 2,035
-------------- --------------- ---------------
Net cash used in operating activities (3,997) - (6,145)
INVESTING ACTIVITIES:
Payments for Web site development (10,120) (10,844) (52,290)
-------------- --------------- ---------------
Net cash used in investing activities (10,120) (10,844) (52,290)
FINANCING ACTIVITIES:
Capital contributions from owner 14,117 10,844 58,435
-------------- --------------- ---------------
Net cash provided by financing activities 14,117 10,844 58,435
-------------- --------------- ---------------
Net increase in cash and cash equivalents - - -
Cash and cash equivalents at beginning of period - - -
============== =============== ===============
Cash and cash equivalents at end of period $ - $ - $ -
============== =============== ===============
</TABLE>
See Notes to Condensed Financial Statements.
12
<PAGE>
BABYDATA.COM
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the financial statements for the year ended December 31, 1998, for the period
from July 1, 1997, (inception) to December 31, 1997, and for the period from
July 1, 1997 (inception) to December 31, 1998, and notes thereto included
herein.
2. LETTER OF AGREEMENT
On March 15, 1999, the Company's sole owner entered into a Letter of Agreement
(the Agreement) with a third party, Alterity Partners LLC (Alterity). Based on
the terms of the Agreement, the two parties agreed to form a new corporate
entity whereby the founder contributed all of the assets of the sole
proprietorship (principally the web site) in exchange for 60% of the common
stock, and alternatively agreed to provide certain management services
(primarily technical enhancements to the web site) in exchange for 40% of the
common stock. The new corporate entity, BabyData.com Inc., was incorporated in
the State of Delaware on August 27, 1999.
Based on the terms of the Agreement, Alterity provided management services at no
cost to the Company in the form of certain web site enhancements. No amounts
have been recorded in the accompanying financial statements related to these
contributed services, because their fair value is not objectively determinable
or measurable.
3. ADVANCES
Advances consist of payments made by Alterity to a third party for programming
to enhance the web site. Such costs have been capitalized. Subsequent to June
30, 1999, the advances were recorded as capital contributions from Alterity upon
incorporation of BabyData.com Inc. (see Note 2).
4. SUBSEQUENT EVENTS
On September 9, 1999, the Company entered into an Agreement and Plan of
Reorganization (the Reorganization Agreement) with OnHealth Network Company
(acquiring company). Under the terms of the Reorganization Agreement, the
acquiring company will acquire all of the outstanding shares of the Company's
stock in exchange for approximately 682,000 shares of the acquiring company's
common stock valued at approximately $5 million.
13
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(b) Unaudited pro forma financial information
The following unaudited pro forma combined condensed financial
statements give effect to the BabyData acquisition, which occurred on
September 9, 1999, using the purchase method of accounting. Under the
purchase method of accounting, the purchase price is allocated to the
assets acquired and liabilities assumed based on their estimated fair
values. The estimated fair values of the assets and liabilities of
BabyData have been combined with the recorded values of the assets and
liabilities of OnHealth in the unaudited pro forma combined condensed
financial statements. The unaudited pro forma combined condensed
balance sheet gives effect to the merger as if it had occurred on June
30, 1999. The unaudited pro forma combined condensed statement of
operations for the year ended December 31, 1998 and the six months
ended June 30, 1999 give effect to the BabyData acquistion as if it had
occurred on January 1, 1998.
The unaudited pro forma combined condensed financial statements are for
illustrative purposes only and do not purport to represent what
OnHealth's financial position or results of operations would have been
if the acquisition had occurred on such dates or to project OnHealth's
financial position or results of operations as of any future date or
for any future period. The unaudited pro forma combined condensed
financial statements, including the notes thereto, are qualified in
their entirety by reference to, and should be read in conjunction with,
the historical financial statements of OnHealth included in its: (a)
Annual Report on Form 10-K, as amended, for the year ended December 31,
1998 and (b) Quarterly Report on Form 10-Q for the quarter ended June
30, 1999, as well as the historical financial statements and the
related notes thereto of BabyData included in this report.
The unaudited pro forma adjustments have been applied to the financial
information derived from the financial statements of OnHealth and
BabyData to account for the acquisition as a purchase and, accordingly,
the assets acquired and liabilities assumed are reflected at their
estimated fair values.
The unaudited pro forma financial information has been prepared based
on the assumptions described in the notes thereto and includes
assumptions relating to the allocation of the consideration paid for
the assets of BabyData based on the estimates of their fair value. In
the opinion of OnHealth, all adjustments necessary to present fairly
such unaudited pro forma financial information have been made based on
the terms and structure of the acquisition.
14
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
OnHealth BabyData Adjustments Balances
------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,854 $ - $ - $ 8,854
Accounts receivable 488 - - 488
Other current assets 1,791 - - 1,791
------------- ------------ --------------- -------------
Total current assets 11,133 - - 11,133
Furniture and equipment, net 1,120 - - 1,120
Web development assets, net - 39 4 c 43
Goodwill, net - - 3,300 c 3,300
Other non-current assets 44 - - 44
------------- ------------- --------------- -------------
Total assets $ 12,297 $ 39 $ 3,304 $ 15,640
============= ============ =============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,735 $ - $ - $ 3,735
Other accrued expenses 1,259 3 60 a 1,322
------------- ------------ --------------- -------------
Total current liabilities 4,994 3 60 5,057
Other non-current liabilities 34 - - 34
Shareholders' equity:
Proprietorship capital - 58 (58) b -
Preferred stock, $0.01 par value - - - -
Common stock, $0.01 par value 162 - 7 a 169
Additional paid-in-capital 107,765 - 4,679 a 112,444
Accumulated deficit (100,658) (22) 22 b (100,658)
Deferred compensation - - (1,406) c (1,406)
------------- ------------ --------------- -------------
Total shareholders' equity 7,269 36 3,244 10,549
------------- ------------ --------------- -------------
Total liabilities and shareholders' equity $ 12,297 $ 39 $ 3,304 $ 15,640
============= ============ =============== =============
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements.
15
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
OnHealth BabyData Adjustments Combined
------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Net revenue $ 781 $ - $ - $ 781
Cost of revenue 99 - - 99
------------- ------------ --------------- ---------------
Gross margin 682 - - 682
Operating expenses:
Product development, editorial and design 3,048 - - 3,048
Sales and marketing 7,011 - - 7,011
General and administrative 1,997 14 - 2,011
Acquisition related costs, including amortization
of goodwill and purchased intangibles - - 557 c 557
------------- ------------ --------------- ---------------
Total operating expenses 12,056 14 557 12,627
Loss from operations (11,374) (14) (557) (11,945)
Interest income 229 - - 229
Other income 2 - - 2
------------- ------------ --------------- ---------------
Total interest and other income 231 - - 231
------------- ------------ --------------- ---------------
Net loss (11,143) (14) (557) (11,714)
Net loss applicable to common shareholders $ (11,143) $ (14) $ (557) $ (11,714)
============= ============ =============== ===============
Net loss per common share-
Basic and diluted $ (0.72) $ (0.72)
============= ===============
Weighted average number of common shares
outstanding 15,544 682 16,226
============= =============== ===============
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements.
16
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
OnHealth BabyData Adjustments Combined
------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Net revenue $ 1,522 $ - $ - $ 1,522
Cost of revenue 767 - - 767
------------- ------------ --------------- ---------------
Gross margin 755 - - 755
Operating expenses:
Product development, editorial and design 3,744 - - 3,744
Sales and marketing 5,626 - - 5,626
General and administrative 2,404 9 - 2,413
Acquisition related costs, including amortization
of goodwill and purchased intangibles - - 1,113 c 1,113
Stock-based compensation - - 1,406 c 1,406
------------- ------------ --------------- ---------------
Total operating expenses 11,774 9 2,519 14,302
------------- ------------ --------------- ---------------
Loss from operations (11,019) (9) (2,519) (13,547)
Interest income 84 - - 84
Other income (4) - - (4)
------------- ------------ --------------- ---------------
Total interest and other income 80 - - 80
------------- ------------ --------------- ---------------
Net loss (10,939) (9) (2,519) (13,467)
Preferred stock dividends (103) - - (103)
Preferred stock accretion (702) - - (702)
Preferred stock deemed dividend (220) - - (220)
------------- ------------ --------------- ---------------
Net loss applicable to common shareholders $ (11,964) $ (9) $ (2,519) $ (14,492)
============= ============ =============== ===============
Net loss per common share-
Basic and diluted $ (1.12) $ (1.29)
============= ===============
Weighted average number of common shares
outstanding 10,680 531 11,211
============= =============== ===============
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements.
17
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The purchase price for BabyData.com was approximately $4.7 million and
was comprised of 681,534 shares of OnHealth common stock, par value
$0.01 per share ("OnHealth Common Stock"), including approximately
$60,000 of acquisition costs.
This purchase was accounted for under the purchase method of accounting
in accordance with APB No. 16, whereby the purchase price is allocated
to the assets acquired and liabilities assumed based on their estimated
fair values. Estimates of the fair values of the assets and liabilities
of BabyData have been combined with the OnHealth column in the
unaudited pro forma combined condensed financial statements. The $4.7
million purchase price was allocated to goodwill, $3.3 million;
deferred compensation; $1.4 million, and other purchased intangibles,
$39,000.
PRO FORMA ADJUSTMENTS FOR BABYDATA
(a) To reflect the issuance of OnHealth Common Stock having an
aggregate value of approximately $4.7 million, including
approximately $60,000 of transaction costs, to consummate the
BabyData acquisition.
(b) To eliminate the historical proprietorship equity of BabyData.
(c) To record the excess of the purchase price over the estimate fair
value of assets and liabilities acquired in connection with the
BabyData acquisition and the related amortization. The intangible
component of the consideration for this transaction, which
includes goodwill and purchased intangibles, will be amortized on
a straight-line basis over three years. The deferred compensation,
which was the result of restricted shares issued pursuant to the
employment agreement entered into by OnHealth and one key employee
of BabyData, will be amortized over one year.
PRO FORMA LOSS PER COMMON SHARE
Basic pro forma earnings per share is computed using the weighted
average number of OnHealth common shares outstanding during the period
plus shares of OnHealth Common Stock issued in connection with the
BabyData acquisition. Diluted pro forma earnings per share is computed
using the weighted average number of common and common equivalent
shares outstanding during the period plus shares of OnHealth Common
Stock issued in connection with the BabyData acquisition. Common
equivalent shares consist of the incremental common shares issuable
upon the exercise of stock options and warrants (using the treasury
stock method). Common equivalent shares are excluded from the
computation as their effect is antidilutive. Shares issued in
connection with the BabyData acquisition, with exception to the
restricted shares, are assumed outstanding at the beginning of the
periods presented. Basic and diluted pro forma earnings per share for
the year ended December 31, 1998 exclude 102,230 outstanding restricted
common shares.
CONFORMING AND RECLASSIFICATION ADJUSTMENTS
There were no adjustments required to conform the accounting policies
of BabyData. There have been no intercompany transactions.
18
<PAGE>
(c) Exhibits
The following exhibits are filed herewith:
2.1* Agreement and Plan of Reorganization among OnHealth Network
Company, BabyData.com Inc., BB Acquisition, Inc. and the
stockholders of BabyData.com Inc. dated as of
September 9, 1999.
99.1* Press release of the Registrant.
-------------
* Incorporated by reference to the Company's Report on Form 8-K, as
filed with the Securities and Exchange Commission on September 15,
1999.
19
<PAGE>
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.
OnHealth Network Company
Date: November 22, 1999 By: \S\ RON STEVENS
-----------------------
Ron Stevens
Chief Financial Officer
20
