SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 17, 2001
MEDICALOGIC/MEDSCAPE, INC.
(Exact name of registrant as specified in its charter)
| Oregon | 000-28285 | 93-0890696 |
| (State or other jurisdiction incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
20500 NW Evergreen Parkway
Hillsboro, Oregon 97124
(Address of principal executive offices)
(503) 531-7000
(Registrant's telephone number, including area code)
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 17, 2001, MedicaLogic/Medscape, Inc., d.b.a. Medscape (together with its subsidiaries "Medscape" or the "Company"), completed the sale of its transcription services segment to TEM Holdings, LLC, a newly formed limited liability company funded by Parthenon Capital, LLC ("Parthenon"), a Boston based private equity firm, for approximately $6.0 million in cash. The transaction was structured as a sale by Medscape Enterprises, Inc., a wholly owned subsidiary of MedicaLogic/Medscape, Inc., of all of the outstanding shares of Total eMed, Inc. pursuant to a stock purchase agreement dated as of July 31, 2001 and amended as of August 16, 2001 (the "Stock Purchase Agreement"). The sale also included the three subsidiaries of Total eMed, Inc., consisting of Total eMed of Tennessee, Inc., Total eMed Finance Co., Inc. and Total eMed Leasing Co., LLC. Medscape received initial purchase price proceeds of $5.0 million from Parthenon on August 17, 2001. The remaining purchase price of $1.0 million will be held in an escrow account for up to one year pursuant to the terms of an Escrow Agreement dated August 17, 2001 (the "Escrow Agreement"). These descriptions of the terms of the Stock Purchase Agreement, as amended, and the Escrow Agreement are not complete and are qualified by reference to the Stock Purchase Agreement and the Escrow Agreement that are attached as Exhibits 2.1, 2.2 and 99.1 and incorporated by reference herein.
The Company expects to use the proceeds from the sale primarily to fund operations of Medscape's digital health record and Internet healthcare portal businesses. During the three months ended June 30, 2001, the Company recorded an estimated net loss on sale of discontinued operations of approximately $252.4 million, including a provision of $7.8 million for estimated losses during the phase out period and related estimated selling and professional services expenses.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Information
INTRODUCTION
On August 17, 2001, MedicaLogic/Medscape, Inc., d.b.a. Medscape (together with its subsidiaries "Medscape" or the "Company"), completed the sale of its transcription services segment to TEM Holdings, LLC ("Purchaser"), a newly formed limited liability company funded by Parthenon Capital, LLC ("Parthenon"), a Boston based private equity firm, for approximately $6.0 million in cash. The transaction was structured as a sale by Medscape Enterprises, Inc., a wholly owned subsidiary of the Company, of all of the outstanding shares of Total eMed, Inc., including its three subsidiaries Total eMed of Tennessee, Inc., Total eMed Finance Co., Inc. and Total eMed Leasing Co., LLC (collectively, "Total eMed"), pursuant to a stock purchase agreement dated as of July 31, 2001 and amended as of August 16, 2001 (the "Stock Purchase Agreement").
The unaudited pro forma condensed consolidated balance sheet of MedicaLogic/Medscape, Inc. at June 30, 2001 reflects the financial position of the Company after giving effect to the sale of Total eMed as if the sale had occurred at June 30, 2001. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2001 and 2000 and the year ended December 31, 2000 give retroactive effect to the sale of Total eMed as if the sale had occurred at the beginning of the periods presented. The statements of operations for the years ended December 31, 1999 and 1998 are not presented herein because there are no pro forma adjustments for these periods. The results of operations of Total eMed have been included in the Company's results of operations only since May 11, 2000, the date of acquisition of Total eMed by Medscape.
These unaudited pro forma condensed consolidated financial statements may not be indicative of Medscape's financial position at any future date. The unaudited pro forma condensed consolidated financial statements set forth below should be read in conjunction with Medscape's audited consolidated financial statements and notes thereto for the year ended December 31, 2000 filed on Form 10-K/A with the Securities and Exchange Commission on May 29, 2001 and the Company's Form 10-Q for the period ended June 30, 2001.
MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
(IN THOUSANDS, EXCEPT SHARE DATA)
| | As Reported | Pro Forma Adjustments | Pro Forma As Adjusted | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | |||||||||||||
| Current assets: | |||||||||||||
| Cash and cash equivalents | $ | 10,308 | $ | 5,000 | (a) | $ | 15,308 | ||||||
| Short-term investments | 7,982 | — | 7,982 | ||||||||||
| Accounts receivable, net | 10,018 | — | 10,018 | ||||||||||
| Prepaid expenses and other current assets | 14,040 | 1,000 | (a) | 15,040 | |||||||||
| Total current assets | 42,348 | 6,000 | 48,348 | ||||||||||
| Property and equipment, net | 21,878 | — | 21,878 | ||||||||||
| Goodwill and intangibles, net | 386,673 | — | 386,673 | ||||||||||
| Prepaid advertising and other assets, net | 62,696 | — | 62,696 | ||||||||||
| Total assets | $ | 513,595 | $ | 6,000 | $ | 519,595 | |||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||
| Current liabilities: | |||||||||||||
| Accounts payable | $ | 2,743 | $ | — | $ | 2,743 | |||||||
| Accrued and other liabilities | 12,876 | 1,325 | (b) | 14,201 | |||||||||
| Net liabilities of discontinued operation | 2,050 | (2,050 | )(c) | — | |||||||||
| Deferred revenue | 11,518 | — | 11,518 | ||||||||||
| Long term liabilities, current portion | 2,861 | — | 2,861 | ||||||||||
| Total current liabilities | 32,048 | (725 | ) | 31,323 | |||||||||
| Long term liabilities, net of current portion | 1,699 | — | 1,699 | ||||||||||
| Long term deferred revenue, net of current portion | 814 | — | 814 | ||||||||||
| Total liabilities | 34,561 | (725 | ) | 33,836 | |||||||||
| Series 1 convertible redeemable preferred stock, 50,000,000 authorized, no par value, 5,933,332 and no shares issued and outstanding at June 30, 2001 and December 31, 2000, respectively | 8,819 | — | 8,819 | ||||||||||
| Shareholders' equity: | |||||||||||||
| Common stock, no par value; authorized 100,000,000 shares; issued and outstanding 56,428,054 and 55,657,348 shares at June 30, 2001 and December 31, 2000, respectively | 1,254,633 | — | 1,254,633 | ||||||||||
| Common stock notes receivable, net | (6,215 | ) | — | (6,215 | ) | ||||||||
| Warrants | 52,722 | — | 52,722 | ||||||||||
| Deferred stock compensation | (412 | ) | — | (412 | ) | ||||||||
| Accumulated deficit | (830,513 | ) | 6,725 | (d) | (823,788 | ) | |||||||
| Total shareholders' equity | 470,215 | 6,725 | 476,940 | ||||||||||
| Total liabilities and shareholders' equity | $ | 513,595 | $ | 6,000 | $ | 519,595 | |||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| | As Reported | Pro Forma Adjustments | Pro Forma As Adjusted | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||||||
| Application license | $ | 2,481 | $ | — | $ | 2,481 | ||||||
| Subscription and support services | 6,743 | — | 6,743 | |||||||||
| Sponsorship and advertising | 12,452 | — | 12,452 | |||||||||
| Total revenues | 21,676 | — | 21,676 | |||||||||
| Non-cash sales discounts | (208 | ) | (208 | ) | ||||||||
| Net revenues | 21,468 | — | 21,468 | |||||||||
| Operating expenses: | ||||||||||||
| Cost of revenues: | ||||||||||||
| Application license | 312 | — | 312 | |||||||||
| Subscription and support services | 6,574 | — | 6,574 | |||||||||
| Sponsorship and advertising | 5,131 | — | 5,131 | |||||||||
| Marketing and sales | 23,191 | — | 23,191 | |||||||||
| Research and development | 9,244 | — | 9,244 | |||||||||
| General and administrative | 5,987 | — | 5,987 | |||||||||
| Depreciation and amortization | 126,689 | — | 126,689 | |||||||||
| Restructuring charges | — | — | — | |||||||||
| Non-recurring gain | (8,500 | ) | — | (8,500 | ) | |||||||
| Total operating expenses | 168,628 | — | 168,628 | |||||||||
| Operating loss | (147,160 | ) | (147,160 | ) | ||||||||
| Other income, net | 673 | — | 673 | |||||||||
| Loss from continuing operations | (146,487 | ) | — | (146,487 | ) | |||||||
| Discontinued operations: | ||||||||||||
| Loss from operations of discontinued operations | (46,614 | ) | 46,614 | (A) | — | |||||||
| Loss on disposal of discontinued operations, including provision of $7,750 for operating losses during phase-out period | (252,415 | ) | 252,415 | (A) | — | |||||||
| Net loss | $ | (445,516 | ) | $ | 299,029 | $ | (146,487 | ) | ||||
| Basic and diluted net loss per share: | ||||||||||||
| Loss from continuing operations | $ | (2.63 | ) | $ | (2.63 | ) | ||||||
| Loss from discontinued operations | (5.36 | ) | — | |||||||||
| Net loss per share | $ | (7.99 | ) | $ | (2.63 | ) | ||||||
| Weighted average shares: | ||||||||||||
| basic and diluted | 55,791 | 55,791 | ||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| | As Reported | Pro Forma Adjustments | Pro Forma As Adjusted | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||||||
| Application license | $ | 4,573 | $ | — | $ | 4,573 | ||||||
| Subscription and support services | 4,260 | — | 4,260 | |||||||||
| Sponsorship and advertising | 6,316 | — | 6,316 | |||||||||
| Transcription services | 1,348 | (1,348 | )(B) | — | ||||||||
| Total revenues | 16,497 | (1,348 | ) | 15,149 | ||||||||
| Operating expenses: | ||||||||||||
| Cost of revenues: | ||||||||||||
| Application license | 807 | — | 807 | |||||||||
| Subscription and support services | 8,063 | — | 8,063 | |||||||||
| Sponsorship and advertising | 2,733 | — | 2,733 | |||||||||
| Transcription services | 1,561 | (1,561 | )(B) | — | ||||||||
| Marketing and sales | 24,177 | — | 24,177 | |||||||||
| Research and development | 8,077 | — | 8,077 | |||||||||
| General and administrative | 9,262 | (1,855 | )(B) | 7,407 | ||||||||
| Depreciation and amortization | 45,285 | (10,625 | )(B) | 34,660 | ||||||||
| Restructuring charges | 13,906 | (348 | )(B) | 13,558 | ||||||||
| Total operating expenses | 113,871 | (14,389 | ) | 99,482 | ||||||||
| Operating loss | (97,374 | ) | 13,041 | (84,333 | ) | |||||||
| Other income, net | 3,778 | (58 | )(B) | 3,720 | ||||||||
| Net loss | $ | (93,596 | ) | $ | 12,983 | $ | (80,613 | ) | ||||
| Net loss per share: | ||||||||||||
| basic and diluted | $ | (2.53 | ) | $ | (2.18 | ) | ||||||
| Weighted average shares: | ||||||||||||
| basic and diluted | 37,059 | 37,059 | ||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| | As Reported | Pro Forma Adjustments | Pro Forma As Adjusted | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||||||
| Application license | $ | 10,494 | $ | — | $ | 10,494 | ||||||
| Subscription and support services | 10,610 | — | 10,610 | |||||||||
| Sponsorship and advertising | 20,483 | — | 20,483 | |||||||||
| Transcription services | 6,568 | (6,568 | )(B) | — | ||||||||
| Total revenues | 48,155 | (6,568 | ) | 41,587 | ||||||||
| Operating expenses: | ||||||||||||
| Cost of revenues: | ||||||||||||
| Application license | 1,219 | — | 1,219 | |||||||||
| Subscription and support services | 17,237 | — | 17,237 | |||||||||
| Sponsorship and advertising | 8,649 | — | 8,649 | |||||||||
| Transcription services | 10,030 | (10,030 | )(B) | — | ||||||||
| Marketing and sales | 53,268 | (290 | )(B) | 52,978 | ||||||||
| Research and development | 18,643 | — | 18,643 | |||||||||
| General and administrative | 20,082 | (3,656 | )(B) | 16,426 | ||||||||
| Depreciation and amortization | 220,528 | (53,350 | )(B) | 167,178 | ||||||||
| Restructuring and other charges | 25,815 | (1,154 | )(B) | 24,661 | ||||||||
| Total operating expenses | 375,471 | (68,480 | ) | 306,991 | ||||||||
| Operating loss | (327,316 | ) | 61,912 | (265,404 | ) | |||||||
| Other income, net | 5,845 | (160 | )(B) | 5,685 | ||||||||
| Net loss | $ | (321,471 | ) | $ | 61,752 | $ | (259,719 | ) | ||||
| Net loss per share: | ||||||||||||
| basic and diluted | (6.96 | ) | (5.62 | ) | ||||||||
| Weighted average shares: | ||||||||||||
| basic and diluted | 46,186 | 46,186 | ||||||||||
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial information.
MEDICALOGIC/MEDSCAPE, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(1) PRO FORMA BALANCE SHEET ADJUSTMENTS
(2) PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
| Exhibit No. | Description | |
|---|---|---|
2.1 | Stock Purchase Agreement, among MedicaLogic/Medscape, Inc., Medscape Enterprises, Inc. and TEM Holdings, LLC, dated as of July 31, 2001 | |
2.2 | Amendment No. 1 to Stock Purchase Agreement, among MedicaLogic/Medscape, Inc., Medscape Enterprises, Inc. and TEM Holdings, LLC, dated as of August 16, 2001 | |
99.1 | Escrow Agreement, among Medscape Enterprises, Inc., TEM Holdings, LLC and Boston Safe Deposit and Trust Company, dated as of August 17, 2001 | |
99.2 | List of omitted schedules to the Stock Purchase Agreement | |
99.3 | Press Release, dated August 20, 2001 announcing the completion of the sale of Total eMed, Inc. |
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.
| MEDICALOGIC/MEDSCAPE, INC. | ||||
Date: August 29, 2001 | By: | /s/ DONALD A. BLOODWORTH Donald A. Bloodworth Executive Vice President and Chief Financial Officer | ||
