Document


 
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
Date of Report (Date of earliest event reported)
February 3, 2020
NantHealth, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
001-37792
 
27-3019889
(State or other jurisdiction of
incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)

9920 Jefferson Boulevard
Culver City, California 90232
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (310) 883-1300

Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
NH
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §(§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §(§240.12b-2).

Emerging growth company x

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  x
 





Item 2.01
Completion of Acquisition or Disposition of Assets.

As previously reported, on January 13, 2020, NantHealth, Inc., a Delaware corporation (the “Company”), entered into an asset purchase agreement (the “Purchase Agreement”) with Masimo Corporation (“Masimo”), VCCB Holdings, Inc., a wholly owned subsidiary of Masimo (collectively with Masimo, the “Purchaser”), and, solely with respect to certain provisions of the Purchase Agreement, NantWorks, LLC ("NantWorks"), an affiliate of the Company. Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchaser certain of its assets related to its “Connected Care” business, including the products known as DCX (formerly DeviceConX), VCX (formerlyVitalsConX), HBox and Shuttle Cable (collectively, the “Connected Care Business”).

On February 3, 2020, the Company completed the sale of the Connected Care Business (the "Disposition") for $47.25 million of cash consideration in exchange for assets primarily related to the Connected Care Business (as defined under the terms of the Purchase Agreement). The cash consideration is subject to adjustment based upon the final amount of working capital as of the closing date.

The foregoing description of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety, by the full text of the Purchase Agreement, a copy of which the Company intends to file as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and the terms of which are incorporated herein by reference. Certain terms of the Purchase Agreement will be redacted for confidentiality reasons. The Purchase Agreement is not intended to provide any other factual information about the Company, NantWorks or the Purchaser. In particular, the representations and warranties contained in the Purchase Agreement were made only for the purposes of the Purchase Agreement as of specific dates and were qualified by disclosures between the parties and a contractual standard of materiality that is different from those generally applicable to stockholders, among other limitations. The representations and warranties were made for the purposes of allocating contractual risk between the parties to the Purchase Agreement and should not be relied upon as a disclosure of factual information relating to the Company, NantWorks or the Purchaser.

Item 9.01
Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2019, the Unaudited Pro Forma Consolidated Statements of Operations for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017, and the notes to the Unaudited Pro Forma Financial Information of the Company are included as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by reference.

(d) Exhibits

Exhibit No.
Description
99.1
Unaudited Pro Forma Financial Information of NantHealth, 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.

 
 
 
 
NantHealth, Inc.
 
 
 
 
Date:
February 6, 2020
By:
 
/s/ Bob Petrou
 
 
 
 
Bob Petrou
 
 
 
 
Chief Financial Officer





EXHIBIT INDEX
Exhibit No.
Description


Exhibit


Exhibit 99.1
NantHealth, Inc.
Summary of Unaudited Pro Forma Financial Information
(Dollars in thousands, except per share amounts)
Overview
On January 13, 2020, NantHealth, Inc., a Delaware corporation (the “Company”), entered into an asset purchase agreement (the “Purchase Agreement”) with Masimo Corporation (“Masimo”), VCCB Holdings, Inc., a wholly owned subsidiary of Masimo (collectively with Masimo, the “Purchaser”), and, solely with respect to certain provisions of the Purchase Agreement, NantWorks, LLC, an affiliate of the Company. Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchaser certain of its assets related to its “Connected Care” business, including the products known as DCX (formerly DeviceConX), VCX (formerly VitalsConX), HBox and Shuttle Cable (collectively, the “Connected Care Business”).

On February 3, 2020, the Company completed the sale of the Connected Care Business (the "Disposition") for $47.25 million of cash consideration in exchange for assets primarily related to the Connected Care Business (as defined under the terms of the Purchase Agreement). The cash consideration is subject to adjustment based upon the final amount of working capital as of the closing date.
Basis of Presentation
The following unaudited pro forma consolidated balance sheet as of September 30, 2019 has been prepared to give effect to the Disposition as if it had occurred on September 30, 2019, and the following unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2019 and the years ended December 31, 2018 and 2017 have been prepared to give effect to the elimination of revenues and costs from continuing operations as a result of the Disposition as if it had occurred on January 1, 2017.
The unaudited pro forma consolidated financial statements for the Company were derived from, and should be read in conjunction with, the Company's unaudited interim Consolidated Financial Statements included in its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) on November 8, 2019 and from the audited Consolidated Financial Statements for the years ended December 31, 2018 and 2017 included in the Company's Annual Report on Form 10-K filed with the SEC on April 1, 2019.
The unaudited pro forma consolidated financial statements were prepared in accordance with Article 11 of Regulation S-X. The historical financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the Disposition, (ii) factually supportable, and (iii) with respect to the unaudited pro forma consolidated statements of operations, expected to have a continuing impact on the combined results.
The pro forma adjustments are described in the notes to the unaudited pro forma financial information and are based upon available information and assumptions that the Company believes are reasonable.
The unaudited pro forma financial information included herein is for informational purposes only and is not necessarily indicative of what the Company's financial performance and financial position would have been had the Disposition been completed on the dates assumed, nor is such unaudited pro forma financial information necessarily indicative of the results to be expected in any future period. Actual results may differ significantly from those reflected here in the unaudited pro forma consolidated financial statements for various reasons, including but not limited to, the differences between the assumptions used to prepare the unaudited pro forma consolidated financial statements and actual results.
# # #

FINANCIAL TABLES FOLLOW





NantHealth, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 2019
(Dollars in thousands, except per share amounts)
 
As Reported (A)
 
 Pro Forma Adjustments
 
Pro Forma
Assets
 
 
 
 
 
Current assets
 
 
 
 
 
Cash and cash equivalents
$
9,326

 
$
47,250

(C)
$
56,576

Accounts receivable, net
10,948

 
(3,926
)
(D)
7,022

Inventories
202

 
(202
)
(D)

Related party receivables, net
1,047

 

 
1,047

Prepaid expenses and other current assets
23,670

 
(525
)
(D)
23,145

Total current assets
45,193

 
42,597

 
87,790

Property, plant, and equipment, net
16,351

 
(711
)
(D)
15,640

Goodwill
115,930

 
(18,623
)
(E)
97,307

Intangible assets, net
54,045

 

 
54,045

Investment in related party
33,612

 

 
33,612

Related party receivable, net of current
1,029

 

 
1,029

Operating lease right-of-use assets
10,353

 
(1,675
)
(D)
8,678

Other assets
1,903

 

 
1,903

Total assets
$
278,416

 
$
21,588

 
$
300,004

 
 
 
 
 
 
Liabilities and Stockholders' Deficit
 
 
 
 
 
Current liabilities
 
 
 
 
 
Accounts payable
$
2,912

 
$
(237
)
(D)
$
2,675

Accrued and other current liabilities
35,044

 
810

(D)(F)
35,854

Deferred revenue
17,792

 
(10,742
)
(D)
7,050

Related party payables, net
3,771

 

 
3,771

Notes payable
946

 

 
946

Total current liabilities
60,465

 
(10,169
)
 
50,296

Deferred revenue, net of current
2,764

 
(539
)
(D)
2,225

Related party liabilities
22,583

 

 
22,583

Related party promissory note
112,666

 

 
112,666

Related party convertible note, net
8,736

 

 
8,736

Convertible notes, net
83,281

 

 
83,281

Deferred income taxes, net
1,892

 

 
1,892

Operating lease liabilities
11,418

 
(1,659
)
(D)
9,759

Other liabilities
21,188

 

 
21,188

Total liabilities
324,993

 
(12,367
)
 
312,626

 
 
 
 
 
 
Stockholders' deficit
 
 
 
 
 
Common stock, $0.0001 par value per share, 750,000,000 shares authorized; 110,619,906 shares issued and outstanding at September 30, 2019
11

 

 
11

Additional paid-in capital
888,994

 
(65
)
(G)
888,929

Accumulated deficit
(935,135
)
 
34,020

(H)
(901,115
)
Accumulated other comprehensive loss
(447
)
 

 
(447
)
Total stockholders' deficit
(46,577
)
 
33,955

 
(12,622
)
Total liabilities and stockholders' deficit
$
278,416

 
$
21,588

 
$
300,004


This unaudited pro forma financial information should be read in conjunction with the accompanying footnotes.





NantHealth, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For the Nine Months Ended September 30, 2019
(Dollars in thousands, except per share amounts)
 
As Reported (A)
 
 Pro Forma Adjustments
 
Pro Forma
Revenue:
 
 
 
 
 
Software-as-a-service related
$
54,421

 
$

 
$
54,421

Software and hardware related
5,135

 
(5,135
)
(I)

Maintenance
7,771

 
(7,771
)
(I)

Total software-related revenue
67,327

 
(12,906
)
 
54,421

Sequencing and molecular analysis
1,581

 

 
1,581

Home health care services
2,863

 

 
2,863

Total net revenue
71,771

 
(12,906
)
 
58,865

 
 
 
 
 
 
Cost of Revenue:
 
 
 
 
 
Software-as-a-service related
17,155

 
(213
)
(I)
16,942

Software and hardware related
2,203

 
(2,203
)
(I)

Maintenance
1,065

 
(1,035
)
(I)
30

Amortization of developed technologies
3,519

 

 
3,519

Total software-related cost of revenue
23,942

 
(3,451
)
 
20,491

Sequencing and molecular analysis
4,065

 

 
4,065

Home health care services
1,471

 

 
1,471

Total cost of revenue
29,478

 
(3,451
)
 
26,027

 
 
 
 
 
 
Gross profit
42,293

 
(9,455
)
 
32,838

 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
Selling, general and administrative
47,101

 
(4,330
)
(J)
42,771

Research and development
14,232

 
(3,990
)
(J)
10,242

Amortization of acquisition-related assets
3,163

 

 
3,163

Impairment of intangible assets
3,977

 

 
3,977

Total operating expenses
68,473

 
(8,320
)
 
60,153

Loss from operations
(26,180
)
 
(1,135
)
 
(27,315
)
Interest expense, net
(13,443
)
 

 
(13,443
)
Other expense, net
(5,039
)
 

 
(5,039
)
Loss from related party equity method investment
(6,401
)
 

 
(6,401
)
Loss from continuing operations before income taxes
(51,063
)
 
(1,135
)
 
(52,198
)
Benefit from income taxes
(168
)
 

 
(168
)
Net loss from continuing operations
$
(50,895
)
 
$
(1,135
)
 
$
(52,030
)
 
 
 
 
 
 
Basic and diluted net loss per share:
 
 
 
 
 
Continuing operations - common stock
$
(0.46
)
 
 
 
$
(0.47
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic and diluted - common stock
110,261,279

 
 
 
110,261,279


This unaudited pro forma financial information should be read in conjunction with the accompanying footnotes.






NantHealth, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 2018
(Dollars in thousands, except per share amounts)
 
As Reported (B)
 
 Pro Forma Adjustments
 
Pro Forma
Revenue:
 
 
 
 
 
Software-as-a-service related
65,646

 

 
65,646

Software and hardware related
4,534

 
(4,534
)
(I)

Maintenance
9,834

 
(9,834
)
(I)

Total software-related revenue
80,014

 
(14,368
)
 
65,646

Sequencing and molecular analysis
3,129

 

 
3,129

Home health care services
6,321

 

 
6,321

Total net revenue
89,464

 
(14,368
)
 
75,096

 
 
 
 
 
 
Cost of Revenue:
 
 
 
 
 
Software-as-a-service related
23,691

 
(201
)
(I)
23,490

Software and hardware related
3,335

 
(3,225
)
(I)
110

Maintenance
924

 
(924
)
(I)

Amortization of developed technologies
4,933

 

 
4,933

Total software-related cost of revenue
32,883

 
(4,350
)
 
28,533

Sequencing and molecular analysis
8,055

 

 
8,055

Home health care services
3,331

 

 
3,331

Total cost of revenue
44,269

 
(4,350
)
 
39,919

 
 
 
 
 
 
Gross profit
45,195

 
(10,018
)
 
35,177

 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
Selling, general and administrative
70,763

 
(6,158
)
(J)
64,605

Research and development
20,916

 
(5,184
)
(J)
15,732

Amortization of acquisition-related assets
4,217

 

 
4,217

Total operating expenses
95,896

 
(11,342
)
 
84,554

Loss from operations
(50,701
)
 
1,324

 
(49,377
)
Interest expense, net
(17,120
)
 

 
(17,120
)
Other expense, net
(17,876
)
 

 
(17,876
)
Loss from related party equity method investment
(108,409
)
 

 
(108,409
)
Loss from continuing operations before income taxes
(194,106
)
 
1,324

 
(192,782
)
Benefit from income taxes
(3,673
)
 

 
(3,673
)
Net loss from continuing operations
$
(190,433
)
 
$
1,324

 
$
(189,109
)
 
 
 
 
 
 
Basic and diluted net loss per share:
 
 
 
 
 
Continuing operations - common stock
$
(1.74
)
 
 
 
$
(1.73
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic and diluted - common stock
109,168,798

 
 
 
109,168,798


This unaudited pro forma financial information should be read in conjunction with the accompanying footnotes.







NantHealth, Inc.
Unaudited Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 2017
(Dollars in thousands, except per share amounts)
 
As Reported (B)
 
 Pro Forma Adjustments
 
Pro Forma
Revenue:
 
 
 
 
 
Software-as-a-service related
60,730

 

 
60,730

Software and hardware related
7,648

 
(7,648
)
(I)

Maintenance
10,421

 
(10,421
)
(I)

Total software-related revenue
78,799

 
(18,069
)
 
60,730

Sequencing and molecular analysis
2,554

 

 
2,554

Home health care services
5,323

 

 
5,323

Total net revenue
86,676

 
(18,069
)
 
68,607

 
 
 
 
 
 
Cost of Revenue:
 
 
 
 
 
Software-as-a-service related
21,939

 
(176
)
(I)
21,763

Software and hardware related
4,749

 
(3,852
)
(I)
897

Maintenance
749

 
(133
)
(I)
616

Amortization of developed technologies
5,172

 
(600
)
(I)
4,572

Total software-related cost of revenue
32,609

 
(4,761
)
 
27,848

Sequencing and molecular analysis
6,084

 

 
6,084

Home health care services
2,829

 

 
2,829

Total cost of revenue
41,522

 
(4,761
)
 
36,761

 
 
 
 
 
 
Gross profit
45,154

 
(13,308
)
 
31,846

 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
Selling, general and administrative
74,976

 
(6,469
)
(J)
68,507

Research and development
33,862

 
(5,417
)
(J)
28,445

Amortization of acquisition-related assets
4,216

 

 
4,216

Total operating expenses
113,054

 
(11,886
)
 
101,168

Loss from operations
(67,900
)
 
(1,422
)
 
(69,322
)
Interest expense, net
(16,168
)
 

 
(16,168
)
Other income, net
800

 

 
800

Loss from related party equity method investment
(50,334
)
 

 
(50,334
)
Loss from continuing operations before income taxes
(133,602
)
 
(1,422
)
 
(135,024
)
Benefit from income taxes
(2,203
)
 

 
(2,203
)
Net loss from continuing operations
$
(131,399
)
 
$
(1,422
)
 
$
(132,821
)
 
 
 
 
 
 
Basic and diluted net loss per share:
 
 
 
 
 
Continuing operations - common stock
$
(1.12
)
 
 
 
$
(1.14
)
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
Basic and diluted - common stock
116,737,860

 
 
 
116,737,860


This unaudited pro forma financial information should be read in conjunction with the accompanying footnotes.






NantHealth, Inc.
Notes to Unaudited Pro Forma Financial Information
(Dollars in thousands, except per share amounts)
The Company's unaudited pro forma financial information as of September 30, 2019, the nine months ended September 30, 2019, and the years ended December 31, 2018 and 2017 include the following adjustments:
(A)
As reported in the Quarterly Report on Form 10-Q filed by the Company with the SEC on November 8, 2019.
(B)
As reported in the Annual Report on Form 10-K filed by the Company with the SEC on April 1, 2019.
(C)
Pro forma adjustment includes cash consideration of $47,250 received in exchange for the Connected Care Business, subject to finalization of certain post-closing working capital adjustments. The Purchaser placed $238 of the cash consideration in an escrow fund which is classified as restricted cash.
(D)
Represents the pro forma effect to remove the assets and liabilities included in the Disposition as if it had occurred on September 30, 2019.
(E)
Represents the pro forma effect of removing the relative fair value of goodwill attributable to the Connected Care Business as if the Disposition had occurred on September 30, 2019. Goodwill allocated to the Connected Care Business was calculated based on the fair value of the Connected Care Business as a percentage of the total fair value of the Connected Care Business and the Company that remains after the Disposition.
(F)
Pro forma adjustment includes $1,162 of additional accrued transaction costs directly attributable to the Disposition, not recorded as of September 30, 2019.
(G)
Represents the forfeiture of share-based awards in conjunction with the Disposition for the employees who ceased being employed by the Company and have become employees of the Purchaser relative to the Disposition.
(H)
The pro forma adjustment to accumulated deficit includes the following:
Cash received as consideration for Disposition
$
47,250

(C)
Less: Net assets disposed
(12,133
)
 
Gain on Disposition (1)
35,117

 
Estimated transaction costs associated with the Disposition
(1,162
)
(F)
Effect of forfeiture of share-based awards on accumulated deficit (2)
65

(G)
Total pro forma adjustment to accumulated deficit
$
34,020

 
(1) Represents the estimated Gain on the Disposition as if it had occurred on September 30, 2019. This gain is not reflected in the accompanying unaudited pro forma consolidated statement of operations because it is a nonrecurring item.
(2) Represents the offsetting effect on accumulated deficit of decreasing additional paid-in capital related to share-based awards forfeited at time of the Disposition.
(I)
Represents the pro forma effect of the Disposition on revenue and cost of revenue as if it had occurred on January 1, 2017.
(J)
Represents the pro forma effect of the Disposition on operating and administrative expenses as if it had occurred on January 1, 2017. Not included in the pro forma results are anticipated savings due to costs that may be reduced or eliminated.