SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 2010
(Exact name of registrant as specified in its charter)
100 North First Street, Suite 104, Burbank, California 91502
(Address of principal executive offices and Zip Code)
(Registrants telephone number, including area code)
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:
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements (as such term is defined in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) and information relating to the Company that are based on the current beliefs of the Companys management as well as assumptions made by and information currently available to management, including statements related to the markets for the Companys products, general trends and trends in the Companys operations or financial results, plans, expectations, estimates and beliefs. When used in this report, the words anticipate, believe, estimate, expect, intend, plan, predict, opinion, will and similar expressions and their variants, as they relate to the Company or the Companys management, may identify forward-looking statements. Such statements reflect the Companys judgment as of the date of this report with respect to future events, the outcome of which is subject to certain risks, including the risk factors described herein, which may have a significant impact on the Companys business, operating results or financial condition. You are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein.
Upon the closing of the Agreement and Plan of Reorganization as described more fully below, AMHN, Inc., a Utah corporation (AMHN), became the parent company of Spectrum Health Network, Inc., a Delaware corporation (Spectrum). Unless otherwise provided in this current report on Form 8K (the Report), all references in this Report to we, us, our Company, our, AMHN, the Company, or the Registrant refers to the combined AMHN, Inc. entity, together with its wholly owned subsidiaries, Americas Minority Health Network, Inc., a Delaware corporation (Americas Minority Health Network) and Spectrum. Unless otherwise indicated in this Report, all references in this Report to the Companys Board of Directors shall refer to the Board of Directors of AMHN, which was not reconstituted upon the closing of the Agreement and Plan of Reorganization. The business operations of AMHN following the Agreement and Plan of Reorganization consist of those of its subsidiaries, Americas Minority Health Network and Spectrum. This Report contains summaries of the material terms of various agreements executed in connection with the Agreement and Plan of Reorganization and subsequent transactions.
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On June 1, 2010, AMHN, Inc., a Utah corporation (AMHN), entered into an Agreement and Plan of Reorganization (the Acquisition Agreement) with Spectrum Acquisition Corp., a newly formed Delaware corporation and wholly owned subsidiary of AMHN (Merger Sub), Spectrum Health Network, Inc., a Delaware corporation (Spectrum) and the sole shareholder of Spectrum (the Sole Shareholder). The terms of the Acquisition Agreement provide for (i) the transfer of 100% of the issued and outstanding shares of common stock of Spectrum to AMHN in exchange for the issuance to the shareholder of Spectrum of an aggregate of 500,000 shares of common stock of AMHN (the AMHN Common Stock) at a conversion ratio where one share of Spectrum is converted into 500 shares of AMHN; (ii) AMHNs assumption of all the assets and liabilities of Spectrum; (iii) the officers and directors of Spectrum to retain their respective positions in the Merger Sub; and (iv) Spectrum to become a wholly owned subsidiary of AMHN. A full description of the terms of the Acquisition Agreement (the Transaction) is set forth in our discussion of the Transaction in Item 2.01 below, and as outlined in the Acquisition Agreement filed herewith as Exhibit 10.01 to this Report on Form 8-K, which is incorporated herein by reference.
Agreement and Plan of Reorganization with Spectrum Health Network, Inc.
On June 11, 2010, the Closing Date of the Transaction pursuant to the terms and conditions of the Acquisition Agreement, AMHN acquired 100% of the issued and outstanding shares of Spectrum in exchange for the issuance of an aggregate of 500,000 shares of AMHN Common Stock. In accordance with the provisions of this triangulated merger, Merger Sub shall be merged with and into Spectrum as of the Effective Date of the Acquisition Agreement, as that term is defined therein. Upon consummation of the Agreement and all transactions contemplated therein, the separate existence of Merger Sub shall cease and Spectrum becomes a wholly owned subsidiary of AMHN. In conjunction with the Acquisition Agreement, AMHN assumed the assets and liabilities of Spectrum totaling approximately $270,264 and $453,299 respectively.
Business Overview of Spectrum
Spectrum Health Network, Inc. was founded in October 2009. Spectrum is a digital signage waiting room network built for the multispecialty group practice and independent physician associations (IPA)1. Spectrum was developed to be an extension of the medical practice, enabling the group practice to relay custom produced health-specific educational based content to patients while they waited to see their physician. Spectrum provides its clients with a powerful tool for practice enhancement, patient communications and as a viable method to deliver educational initiatives.
Spectrum uses HD 32 LCD flat panel commercial monitors, a digital signage media player, and an EnQii remote transfer platform to manage the playlist content for each site. The right side of the viewing screen is dedicated to the medical group/IPA. As of the Closing of the Transaction, Spectrum maintained 126 live sites installed across seventy-two (72) independent buildings servicing eight (8) different UPAs in
the California and New York markets and one location operating as a test site in Atlanta, Georgia. Of these locations, fifty-eight (58) are located in Northern California, ten (10) in Southern California, and two (2) in New York. Spectrum has an additional 29 sites under contract but which have not yet been installed.
Spectrum was originally founded as an ad supported network; however, the decision was recently made to shift from ad supported to a subscription based service. Spectrum now sells its network to the IPA market as a subscription service for a one-time fee of $3,500 per location for each system, plus an ongoing monthly service fee ranging from $102 to $250 per month per location. To date, Spectrum has not converted any of its existing client base to a subscription service. The IPA has a well-maintained network which they can choose to be free of advertising. The IPA can use their network to:
If Spectrum is able to convert its existing client base to a subscription service, then at the lowest price threshold, Spectrum expects to net $13,260 per month in network maintenance revenue.
Spectrum has developed a primary target list of prospective IPAs which, if subscribed, would represent a minimum of 640 potential locations, with each location supporting its own system. There are approximately 3,500 IPAs operating in the United States. Of this total, an estimated 2,000 fall under the category of the Staff Model where staff are fulltime employees directed under a corporate management structure; another 1,500 are considered a Staff/Hybrid Model where the IPA is created to facilitate a Primary Care Group and still enable specialized physicians to maintain their own practices, but also the benefits of achieving economies of scale from the formation of an association to operate and help manage their practice.
According to The IPA Association of America, the average UPA has approximately 450 independent physicians. While the exact number of waiting rooms is unknown, the single most important aspect of the IPA market is its sheer size and number of offices each IPA may grow to manage.
Aggregate Beneficial Ownership of AMHNs Common Stock after the Transaction
On the Closing Date, and after giving effect to the issuance of the 500,000 shares of AMHN Common Stock to the shareholders of Spectrum, there are 16,290,209 shares of Common Stock of AMHN issued and outstanding. The aggregated beneficial ownership of the Companys shares of outstanding Common Stock on a fully diluted basis is as follows:
A discussion of beneficial ownership of our directors, officers and principal shareholders is set forth herein in Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners and Management
The following alphabetical table sets forth the ownership of our Common Stock, after giving effect to the Closing of the Transaction, by each person known by us to be the beneficial owner of more than 5% of our outstanding Common Stock, each of our directors and executive officers, and all of our directors and executive officers as a group. The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. This table is based upon information derived from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares indicated as beneficially owned. Except as set forth below, applicable percentages are based upon 16,290,209 shares of Common Stock outstanding as of June 11, 2010 and takes into account the shares issued upon the Closing of the Transaction. Except as otherwise listed below, the address of each person is c/o AMHN at 100 North First Street, Suite 104, Burbank, CA 91502.
As previously mentioned herein, pursuant to and in conjunction with the Closing of the Acquisition Agreement, the Company issued 500,000 shares of its Common Stock to the shareholders of Spectrum. The 500,000 shares were issued with a restrictive legend that the shares had not been registered under the Securities Act of 1933. The exchange of the securities pursuant to the Transaction was conducted pursuant to the exemption from registration provided by Regulation D of the Securities Act and Section 4(2) of the Securities Act.
See Financial Statements of Spectrum Health Network, Inc. for the period from inception (October 21, 2009) through December 31, 2010 attached hereto at Exhibit 99.1.
See Financial Statements of Spectrum Health Network, Inc. for the quarter ended March 31, 2010 attached hereto at Exhibit 99.2.
See Unaudited Proforma Consolidated Financial Statements attached hereto at Exhibit 99.3.
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.