Pro Forma Combined Financial Information
On June 30, 2000, Healthaxis, Inc's ("HAI") subsidiary, Xxxxxxxxxx.xxx,
Inc. ("Healthaxis") and Digital Insurance, Inc. ("Digital") entered into an
asset purchase agreement that set forth the terms and conditions under which
HealthAxis sold to Digital substantially all assets related to its retail
website, including intellectual property of the retail web site user interface,
certain tangible assets, and the existing in-force insurance business. On
September 29, 2000, HealthAxis and Digital entered into an Amendment to the
Asset Purchase Agreement, which amends among other things, the payment terms in
the original agreement. The consideration received by the Company in return for
these assets consisted of: $500,000 in cash at closing, a $500,000 note at
closing, ongoing license fees, a technology services contract, and an 11% equity
interest in Digital. The transaction was completed on October 13, 2000. HAI has
accounted for the disposal of the retail website in the Form 10-Q as filed for
the six months ended June 30, 2000 as a discontinued operation as of June 30,
2000.
The unaudited pro forma consolidated financial information should be
read in conjunction with the notes hereto and the following:
o HAI's historical consolidated financial statements and notes
thereto included in HAI's quarterly report on Form 10-Q for
the six months ended June 30, 2000 which is incorporated by
reference in this document;
o HAI's historical consolidated financial statements and notes
xxxxxxx included herein for the year ended December 31, 1999.
1
HEALTHAXIS INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(Dollars in the thousands, except share and per share data)
Six Months Ended June 30, 2000
As Disposition
Reported (3)(4) Adjustments Pro Forma
--------------- ----------- ---------
Net Revenues................................ $ 21,738 $ -- $ 21,738
--------- --------- --------
Expenses:
Cost of Revenues.......................... 14,247 -- 14,247
Operating................................. 8,815 -- 8,815
Sales and marketing....................... 716 -- 716
General and administrative................ 6,246 -- 6,246
Amortization of value of customers........ 2,151 -- 2,151
Amortization of developed software........ 503 -- 503
Amortization of goodwill.................. 69,532 (69,532)(4) --
Interest expense.......................... 177 -- 177
Merger related costs...................... 4,678 -- 4,678
--------- --------- --------
Total expenses............................ 107,065 (69,532) 37,533
--------- --------- --------
Income (loss) from operations............. (85,327) 69,532 (15,795)
Provisions (benefit) for income taxes..... -- -- --
--------- --------- --------
Income (loss) before minority interest.... (85,327) 69,532 (15,795)
Minority interest......................... 51,943 (33,182)(4) 18,761
--------- --------- --------
Income (loss) from continuing operations.. $ (33,384) $ 36,350 $ 2,966
========= ========= ========
(Loss)/gain per common share from continuing
operations
Basic................................. $ (2.55) $ 0.23
Diluted............................... $ 0.21
Weighted average common shares outstanding
Basic................................. 13,072,000 13,072,000
Diluted............................... 14,222,491
2
HEALTHAXIS INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in the thousands)
As of June 30, 2000
As Disposition
Reported (3)(4) Adjustments Pro Forma
--------------- ------------ ---------
Assets
Cash and cash equivalents............... $ 31,530 $ -- $ 31,530
Accounts and notes receivable........... 7,887 -- 7,887
Prepaid interactive marketing expense... 619 -- 619
Other assets............................ 297 -- 297
---------- ------ ----------
Total current assets.................... 40,333 -- 40,333
Property, equipment and software, net... 13,085 -- 13,085
Capitalized software costs.............. 3,876 -- 3,876
Other intangibles....................... 15,054 -- 15,054
Goodwill, net........................... -- -- --
Other assets............................ 1,341 -- 1,341
---------- ------ ----------
Total Assets............................ $ 73,689 $ -- $ 73,689
========== ====== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable........................ $ 619 $ -- $ 619
Accrued commissions and expenses........ 8,609 -- 8,609
Current maturities...................... 413 -- 413
Deferred revenues....................... 639 -- 639
---------- ------ ----------
Total current liabilities............... 10,280 -- 10,280
Convertible debentures.................. 26,045 -- 26,045
Other long-term liabilities............. 7,692 -- 7,692
---------- ------ ----------
Total liabilities....................... 44,017 -- 44,017
Minority Interest....................... 46,925 -- 46,925
Stockholders' Equity (Deficit):
Preferred stock......................... -- -- --
Common stock............................ 1,310 -- 1,310
Additional paid in capital.............. 324,963 -- 324,963
Unearned compensation................... (7,528) -- (7,528)
Accumulated deficit .................... (335,998) -- (335,998)
---------- ------ ----------
Total Stockholders' Equity (Deficit).... (17,253) -- (17,253)
---------- ------ ----------
Total Liabilities and Stockholders' Equity $ 73,689 $ -- $ 73,689
========== ====== ==========
3
HEALTHAXIS INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(Dollars in the thousands, except share and per share data)
Year Ended December 31, 1999
Non Merging Insurdata
Insurdata Incorporated
As Insurdata Incorporated Merger Disposition Pro
Reported Incorporated Subsidiaries Adjustments Subtotal Adjustments Forma
--------- ------------ ------------- ----------- --------- ----------- --------
(4) (1) (2) (3)
Revenue:
Commission and fee revenue .. $ -- $46,463 $(3,566) $ -- $ 42,897 $ -- $42,897
Interest and other revenue .. 80 13 93 -- 93
------- ------- ------ --------- --------- -------- --------
Total revenue .............. -- 46,543 (3,553) 42,990 -- 42,990
------- ------- ------ --------- --------- -------- --------
Expenses:
Operating .................. 504 38,470 (3,069) 35,905 -- 35,905
Sales and marketing ....... 447 475 922 -- 922
General and administrative . 7,457 5,395 (77) 12,775 -- 12,775
Amortization of value of
customers ............... 4,301 4,301 -- 4,301
Amortization of developed
software ............... 954 954 -- 954
Amortization of goodwill ... 765 136,437 137,202 (137,202)(4) --
Interest expense ........... 925 925 -- 925
Asset Impairment ........... -- -- --
Merger related costs ....... 3,207 3,207 -- 3,207
------- ------- ------ --------- --------- -------- --------
Total expenses ............. 10,098 44,340 (3,146) 144,899 196,191 (137,202) 59,989
------- ------- ------ --------- --------- -------- --------
Income (loss) from
operations ............. (10,098) 2,203 (407) (144,899) (153,201) 137,202 (15,999)
Provisions (benefit)
for income taxes: ...... 832 (119) (713) -- -- --
------- ------- ------ --------- --------- -------- --------
Income (loss) before
minority interest ........ (10,098) 1,371 (288) (144,186) (153,201) 137,202 (15,999)
Minority interest .......... (1,008) (1,008) -- (1,008)
------- ------- ------ --------- --------- -------- --------
Income (loss) from
continuing operations .... $(9,090) $ 1,371 $ (288) $(144,186) $(152,193) $137,202 $(14,991)
======= ======= ====== ========= ========= ======== ========
Basic and diluted (loss) per
common share from continuing
operations ...................... $(0.73) $(1.21)
Basic and diluted weighted
averag ecommon shares
outstanding .................. 12,260,000 12,260,000
4
HEALTHAXIS INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands except per share data)
1. Historical consolidated financial statements of Insurdata Incorporated.
2. Adjustment relates to Insurdata Incorporated's sale of Insurdata
Marketing Services, LLC and Insurdata Administrators, a division of
Insurdata Incorporated at book value to UICI on October 1, 1999. The
adjustment to the 1999 Statement of Operations was made to eliminate
the activity of these two entities from January 1, 1999 to September
30, 1999 that is included in the historical consolidated financial
statements of Insurdata Incorporated. The operations listed above were
retained by UICI prior to the merger of Insurdata Incorporated and
HealthAxis.
3. On January 7, 2000, HealthAxis completed a merger with Insurdata
Incorporated in which HealthAxis exchanged 21,807,567 shares of its
common stock for 100% of the issued and outstanding shares of Insurdata
Incorporated. This merger has been accounted for as a purchase in the
historical financial statements for the six months ended June 30, 2000.
The fair value of the Insurdata assets and liabilities acquired through
the Insurdata merger were:
Cash and cash equivalents............................ $ 2,126
Accounts receivable, net............................. 5,834
Fixed assets......................................... 6,278
Developed software................................... 2,862
Unearned compensation................................ 10,691
Customer base........................................ 17,205
Goodwill............................................. 682,184
Other assets......................................... 1,768
Other liabilities.................................... (5,021)
--------
$723,927
========
Included in the Insurdata Merger Adjustments on the Pro forma
Consolidated Statement of Operations for the Year Ended December 31,
1999 is the amortization of intangibles resulting from the above
purchase price allocation. Amortization of these intangibles on an
annual basis has been calculated as follows:
Annual
Asset Life Amount Amortization
----- ---- ------ ------------
Customer Base 48 months $ 17,205 $ 4,301
Developed Software 36 months $ 2,862 $ 954
Goodwill 60 months $ 682,184 $ 136,437
Unearned compensation 40 months $ 10,691 $ 3,207
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4. On June 30, 2000, HealthAxis entered into an Asset Purchase Agreement
with Digital Insurance, Inc. ("Digital"), an internet based distributor
of health insurance. Under the terms of the agreement, HealthAxis
agreed to sell to Digital its retail website user interface and other
assets related to its retail website. HealthAxis has accounted for the
sale of these assets as a discontinued operation at June 30, 2000.
Included in the loss on the sale of discontinued operations at June 30,
2000 is a write off of goodwill due to impairment in the amount of
$619,767. Management determined that the goodwill was impaired based
upon an analysis of future net cash flows in accordance with Statement
of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. The loss on impairment is included in the loss on the sale
of discontinued operations as it directly relates to the change in the
Company's business focus away from the eDistribution group and towards
the application solutions group. The pro forma statements of operations
for the periods ended December 31, 1999 and June 30, 2000 reflect the
elimination of the amortization of goodwill totaling $137,202 and
$69,532, respectively.
The historical financial statements for the year ended December 31,
1999 have been restated to reflect the discontinued operations and are
included herein.
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