UNITED STATES
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
April 5, 2001
---------------
(Date of Report)
Claimsnet.com inc.
------------------
(Exact name of registrant as specified in its charter)
Delaware 001-14665 75-2649230
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
12801 N. Central Expressway, Suite 1515, Dallas, Texas 75243
------------------------------------------------------------
(Address of principal executive offices)
(972) 458-1701
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name or former address, if changed since last report.)
Item 5. Miscellaneous
On April 18, 2000, Claimsnet.com, through its newly formed,
wholly-owned subsidiary, HealthExchange.com, Inc., a Delaware corporation
("HECOM"), executed an asset purchase agreement (the "Asset Purchase Agreement")
with VHx Company, a Nevada corporation ("VHx"), whereby HECOM acquired selected
properties and assets of VHx, including the HealthExchange.com name and
HealthExchange.com trademarks, related to all efforts of VHx to develop products
and services designed to use Internet technology to facilitate and improve
interaction between physicians, health plans, employers and their members in
exchange for (i) 1,200,000 shares of common stock, par value $.001 per share
(ii) the assumption of certain liabilities, and (iii) the cancellation of a $2
million advance owed by VHx to the Company. In addition, the Company issued
additional consideration comprised of 13,767 shares of Series A 8% Convertible
Redeemable Preferred Stock , stated value of $725.60 per share, and 13,767
shares of Series B 8% Convertible Redeemable Preferred Stock, stated value of
$725.60 per share, (the Preferred Stock).
The Preferred Stock was contingent upon the completion of
specified milestones, described below, by March 31, 2001. The Preferred Stock
was either to be (i) cancelled in the event that the milestones were not
satisfied or (ii) convertible into common stock in the event that the milestones
were satisfied.
The performance milestone for the Series A Preferred Stock was the
existence of 1,000,000 lives covered by the business operation attributable to
assets acquired. The performance milestone for the Series B Preferred Stock was
the recognition of revenue from 6,000,000 member-months attributable to assets
acquired. Claimsnet.com does not believe that either performance milestone was
satisfied by March 31, 2001. Therefore, both series of Preferred Stock are to be
cancelled.
One of the significant assets acquired, an agreement with John
Deere Health ("JDH") for development of an Enterprise Care Management System,
required the parties to negotiate mutually agreeable business terms for delivery
of the system after acceptance of beta testing. The Company and JDH were unable
to reach such an agreement. Additionally, the asset purchase agreement contained
provisions related to the satisfaction of pre-existing financial obligations due
to JDH by VHx within 180 days of the acquisition and also contained certain
provisions in the event that such obligations were not satisfied by VHx. VHx was
unable to satisfy the JDH obligations within the 180 days. As a result, the
Company exercised its rights pursuant to the asset purchase agreement and took
possession of 888,000 of the 1.2 million shares of common stock and placed them
into its treasury. The fair market value of the common shares returned to the
Company was $1,415,000 as of the date of the agreement.
Contemporaneously, the Company, HECOM, and JDH reached an
agreement in December 2000 (which was subsequently modified by letter agreement
dated March 2001) by which the parties agreed to cancel all pre-existing
agreements and JDH agreed to forgive all unpaid obligations in exchange for
244,000 shares of Claimsnet common stock, which was valued at $389,000 at the
date of the agreement.
The Company retained an independent valuation firm to evaluate the
HECOM asset purchase and recommend the allocation of purchase price to the
various assets acquired. The appraisals utilized standard appraisal
methodologies, projecting cash flows over the estimated useful lives of the
assets, net of additional investment needs, and considering the stage of
completion of software development projects. A blended state and federal
effective tax rate of 40% was applied to the cash flows. These cash flows were
discounted to their present value using discount rates between 60 and 70
percent, reflective of development products at similar risk. The initial results
of the valuation valued the intangible assets at $3,700,000 after charges to
in-process technology of $6,154,000, recorded in the quarter ended June 30,
2000.
In November 2000, as a result of revised expectations, the Company
reevaluated the HECOM asset purchase using the same valuation methodologies and
determined that there had been an impairment of the assets acquired. The revised
valuation valued the intangible assets acquired at $400,000.
In December 2000, in anticipation of slowing growth in potential
customer acquisiton as a result of, among other things, the slowing U.S.
economy, and future cash requirements to continue product development, the
Company decided to postpone further development of the HECOM products and
terminate the Atlanta facility. The residual value of intangible assets was
written off.
As a result of the revised valuation of intangible assets acquired
and the revised agreement and return of escrowed shares described above, the
Company recognized charges of $3,288,000 for impairment of assets, $14,000 for
write off of fixed assets, and a reduction to purchased research and development
expense of $1,026,000. Amortization of $412,000 related to the acquisition has
been recognized during the twelve months ended December 31, 2000.
The Company and JDH also entered into a separate business
agreement whereby the Company will continue to provide limited services to JDH
and its clients at fair market value for a period not to exceed eighteen months.
Item 7. Financial Statements and Exhibits
(a) Exhibits
10.1 Mutual Release Agreement, dated as of December 28, 2000, by
and among Claimsnet.com, Inc., a Delaware corporation, its
wholly-owned subsidiary, HealthExchange.com, Inc., a Delaware
corporation; and John Deere Health Care, Inc., a Delaware
corporation.
10.2 Letter Agreement modifying the Mutual Release Agreement, dated
March 6, 2001 by and between Claimsnet.com, Inc. and John
Deere Health Care, Inc.
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.
Dated: April 5, 2001
CLAIMSNET.COM, INC.
By: /s/ Paul W. Miller
--------------------------------------------
Name: Paul W. Miller
Title: Chief Financial Officer