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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997
Commission file number: 0-29282
MEDICONSULT.COM, INC.
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(Name of small business issuer in its Charter)
Delaware 84-1341886
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
33 Reid Street, 4th Floor, Hamilton HM 12, Bermuda
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(Address of principal executive offices, including zip code)
(441) 296-0736
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(Issuer's telephone number)
Securities Registered Pursuant to Section 12(b) of the Act: None.
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Issuer's revenues for its most recent fiscal year were $256,374.
As of April 9, 1998, 17,307,400 shares of the Registrant's common stock were
outstanding, and the aggregate market value of the shares held by non-
affiliates was approximately $18,400.00.
DOCUMENTS INCORPORATED BY REFERENCE: None.
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BACKGROUND
The Company is a consumer marketing company featuring a site on the
World Wide Web which provides patient oriented medical information and
moderated support to patients, families and health care professionals. This
website provides information and services for over 50 medical topics.
According to records maintained by the Company, the Company's website received
approximately three million visitors during 1997, viewing almost 14 million
pages of information.
The Company's sources of revenues include: (1) advertising and
sponsorship fees charged to pharmaceutical and medical supply companies; (2)
licensing fees charged to health care companies; (3) on-line sales of books
and medical supplies; (4) user fees derived from the Company's proprietary
MediXperts service; and (5) strategic Internet related consulting services.
HISTORY OF THE COMPANY
Mediconsult.com, Inc. (the "Company") was formed under the laws of the
State of Colorado in October 1989, for the purpose of creating a corporate
vehicle to seek and acquire a business opportunity. The Company was
incorporated under the name Waterford Capital, Inc., and conducted no business
until the acquisition of Mediconsult.com Limited, a Bermuda corporation, in
April 1996.
On April 23, 1996, the Company acquired all of the outstanding stock of
Mediconsult.com, Limited ("MCL"), a Bermuda corporation, in exchange for
11,000,000 shares of the Company's authorized but unissued Common Stock. Such
shares were issued to the former shareholders of MCL and represented
approximately 80% of the Company's Common Stock outstanding. As a result of
this transaction, there was a change in control of the Company, and new
officers and directors selected by MCL were elected. MCL was formed for the
purpose of creating a consumer marketing company using a site on the World
Wide Web.
During May 1996, the Company conducted a small offering pursuant to Rule
504 under Regulation D in which it raised $25,985 by selling 1,039,400 shares.
On August 12, 1996, the Company effected a 20 for 1 forward stock split
of the Company's Common Stock and on October 23, 1996, the Company effected a
10 for 1 forward stock split of the Company's Common Stock. All financial
information and share data in this Report gives retroactive effect to these
two stock splits.
All references to the "Company" herein refers to the Company and MCL,
the Company's wholly-owned subsidiary, unless the context otherwise requires.
The Company generally conducts business through its wholly-owned subsidiary
with the parent company acting as a holding company.
On December 4, 1996, the Company merged with a newly-formed, wholly-
owned subsidiary having the same name for the purpose of changing the
Company's domicile from Colorado to Delaware.
HISTORY OF MCL
MCL was incorporated under the laws of Bermuda on April 11, 1996. Mr.
Robert Jennings and Dr. Michel Bazinet, the founders of MCL, developed MCL's
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business plan and the website was launched on July 1, 1996, with 10 medical
topics. Currently, more than 55 medical topics are covered on the website.
During mid-1996, a management team headed by Ian Sutcliffe was hired,
and additional staff was hired to fill out various site development, content
acquisition, research, promotion and marketing positions.
The development and construction of the website, HYPERLINK
http://www.mediconsult.com was largely completed by early 1997. Immediately
thereafter, senior management began to pursue revenue generating activities
through attracting advertising sponsorships and licensing of Mediconsult.com's
content to other health-care companies. Other sources of revenue were
achieved through the provision of strategic marketing consulting and on-line
electronic commerce.
Advertising Sponsorships - Sponsor marketing began during November 1996,
with a marketing newsletter and telephone campaign. The Company started
aggressively pursuing pharmaceutical companies to advertise on the Company's
web site in early 1997 and has continued this activity to date. In the third
and fourth quarters of 1997, Novartis contracted with the Company for a number
of sponsorships which management expects will generate approximately $500,000
in revenues during 1998. In early 1998, two other companies, Bristol-Myers
Squibb and Pfizer also agreed to sponsorships. These will generate modest
income for 1998, but will establish the relationship and may lead to more
significant revenues in the future.
"HealthMEDIC" - The Company formally launched its private label content
licensing product in January 1998. As of March 1998, one customer had agreed
to license Mediconsult.com's content.
Strategic Consulting - The Company earns consulting revenues in
conjunction with implementing advertising sponsorships and licensing content.
This consulting activity has generated modest revenues, and is expected to
continue to do so, but is integral to the process of developing client
relationships and establishing the Company's credibility and skill set.
"MediStore" - Launched in April 1997, MediStore provides an opportunity
for visitors to purchase medical products on-line. The Company anticipates
that significant revenues will not be generated through e-commerce for several
years. The MediStore, however, provides the Company with a beachhead in e-
commerce until then.
In December 1996, the Company commenced a service offering people the
opportunity to submit questions to medical experts for a fee. The formal
launch of the "MediXperts" consulting service was completed in November 1997.
As of March 31, 1998 more than 55 world-renowned medical specialists were
members of the MediXperts panel.
In January 1997, the Company started advertising on Yahoo!, WebCrawler,
America On Line, Lycos and several other search engines on the Internet.
Subsequently, this advertising has been limited primarily to Yahoo!, although
the Company continually follows up on all advertising opportunities. In
addition, the Company posts messages to news groups to promote the site to
users on the Internet.
During March 1997, the Company entered into an agreement with CompuServe
Incorporated ("CompuServe")(now owned by AOL) whereby CompuServe has
established
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on its Internet site links to the Company's site and the Company has created a
referral area on its website to refer users to CompuServe's site.
During April 1997, the Company entered into an agreement with IBM Canada
Ltd. which basically has two components. First, the Company is working with
IBM Canada to build a website for the Company's online medical products store
using IBM's Net.commerce software. Secondly, the Company's staff has been
working in a consulting capacity to assist IBM Canada in the development and
marketing of its Net.commerce software for small and medium sized companies.
The IBM Net.commerce software is a proprietary electronic commerce
software product sold by IBM Canada to companies wishing to establish an on-
line retail environment. The Company has completed most of its services under
this agreement with IBM Canada, and these services included assessing the
competition, identifying bugs in the software, reviewing the installation
process, reviewing the IBM website tools that support the product, reviewing
marketing plans, creating proposal templates for selling the product and
conducting presentations to IBM Canada marketing staff.
The Company charged IBM Canada based on the actual time spent at the
Company's standard daily rates for consulting services.
Since November 1996, the Company has signed content and marketing
agreements with approximately eighteen non-profit patient support
organizations. The agreements provide for sharing of medical information,
sales of videotapes, books and other products, online donation and membership
registration for conferences and association services; all via the Company's
proposed secure transactions area. Generally, these agreements provide that
the Company will be paid a referral fee based on a percentage of the purchase
price of items sold through the Company's store or other payments made to the
organization plus credit card processing charges. Organization members will
also be able to participate in the Company's online services including
moderated discussion groups to obtain timely information and emotional
support.
The organizations that have agreements with the Company are:
-- The Brain Tumor Society
-- Chronic Fatigue Syndrome & Immunological Disorders Association
of America
-- MidLife Woman (Menopause)
-- US TOO! (Prostate Cancer)
-- National Stroke Association
-- American Liver Foundation
-- Testicular Cancer Resource Center
-- National Depression/Manic-Depression Association
-- American Sleep Apnea Association
-- Leukemia Society of America
-- Alliance for Lung Cancer, Advocacy, Support and Education
-- The Arthritis Foundation
-- Glaucoma Research Foundation
-- Hospice Foundation of America
-- International Council on Infertility Information Dissemination
-- National Mental Health Association
-- National Family Caregivers Association
-- National Health Council
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During April 1997, the Company verbally agreed with CenterWatch, Inc., a
leading clinical trial organization, pursuant to which the Company will
present educational and other material on clinical trials and provide leads to
CenterWatch for a flat monthly fee.
During April 1997, the Company signed an agreement with the Canadian
syndicated television show, "Doctor on Call", to co-brand the show and the
site and co-market both companies to advertisers.
BUSINESS - INTRODUCTION
The Company is a consumer marketing company featuring a "site" on the
World Wide Web. The Company's objective is to create a high quality content
destination on the Internet, attract visitors who will find the information
valuable and generate revenue from visitors and advertisers. The Company also
intends to reach non-Internet users through newsletters, CD-Roms, television
and other vehicles.
While the initial focus of the business is catering to the needs of
patients, there are many natural extensions to pursue in the future, including
physicians, plastic surgeons, pharmacies and other health care segments. The
content is presented in English and can be translated into other languages to
expand the market opportunity.
The Company's objectives are to generate revenue from website
advertising, sponsorships, licensing content, product and service sales, and
consulting services. Access to the site will be free, however special
services will be available for a fee.
The Company's marketing strategy has two components. First, the Company
is executing a consumer public relations and advertising campaign to attract
visitors to the site and raise awareness of the site. This campaign includes
online and off-line activities. Second, the Company is conducting a sponsor
public relations and advertising campaign to attract advertising agencies,
pharmaceutical firms, health management organizations, pharmacy chains,
medical device manufacturers, clinical trial companies, biotechnology firms
and other health care providers as advertisers and sponsors.
THE INTERNET SITE
The Company's Internet site is designed from the ground up with the
consumer in mind. The objective is to develop an empowered patient who
achieves improved health. The site strives to provide "one-stop shopping" for
customer medical information. The vast majority of services are provided free
to the visitor.
All information and services are organized into 50 different medical
condition topics. Some of the topics included are: attention deficit
disorder, AIDS, allergies, alzheimer's disease, arthritis, asthma, breast
cancer, bronchitis, colorectal cancer, depression, diabetes, erectile
dysfunction, headache/migraines, heart disease, infertility, lung cancer,
melatonin, menopause/osteoporosis, obesity, hypertension, pregnancy, prostrate
cancer, sleep disorder, spinal cord injury, sexually transmitted diseases,
stress and strokes. Additional sites will be added in the future.
Services: For each listed medical topic the site offers a combination
of the following services:
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*Journal Club: The Journal Club provides summaries of
articles from leading, peer-reviewed medical journals (e.g., New England
Journal of Medicine) that would be of interest to patients, friends and
families. The summaries of the articles are prepared by qualified medical
journalists who are hired as independent contractors/consultants by the
Company.
*Support Group: Users can post messages, ideas or responses
to an e-mail bulletin board that is moderated by a health care professional.
*Conference Highlights: Selected papers presented to major
medical conferences are summarized by qualified medical journalists and
presented in the same manner as the Journal Club within days of the medical
conference ending.
*Educational Material: This section includes basic primer
information on each topic as well as specific material provided by
organizations such as the National Institute of Health, pharmaceutical
companies, major associations for each condition, leading hospitals and
prominent support groups.
*Drug Information: This database provides detailed
information on drugs used to treat specific medical conditions. The
information is from the US Pharmacopoeia database and is supplemented by
information from pharmaceutical firms and other health organizations. The
database includes 30 areas of information on each drug, including side
effects, missed dosage, pregnancy implications and interactions with other
medications.
*Outside Sources: This service contains a list of links to
selected Internet sites covering the medical topic of interest. A brief
description of the linked site is included to assist the user in selecting the
best site.
*MediXpert: This service currently provides a visitor to the
site with tailored information based on the specific information submitted by
the visitor, from one of approximately 50 physician specialists covering over
30 different medical conditions. Visitors can select the individual
specialist most appropriate to their needs based on the specific credentials
and experience of each physician. The Company intends to add specialists in
other fields in the future. A visitor who desires to use this service is
asked to complete a questionnaire with complete background information and the
specific hypothetical questions he would like answered. The request and
response are both processed in such a manner that they are private and not
accessible to other users of the site. The specialists who respond to these
requests provide only general information and they do not provide medical
advice or diagnoses, and they do not make any patient-specific
recommendations. The user is instructed that the specialist is not the user's
personal physician, and that the specialist will not know the identity of the
user, but will be asked the question in a hypothetical format.
The physician specialists execute consulting agreements with the Company
in which they agree to act as independent contractors and to be compensated
based on a set fee for each report they prepare.
*Medical Supplies: This section was opened in April 1997.
Users are able to purchase hard to find medical products, devices and services
which are shipped for home delivery. The Company in essence has a medical
supply store. The Company has agreed to use IBM's Net.Commerce software for
its on-line store.
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*Patient Associations: This service provides links to
patient associations involved with the medical conditions covered in the
topic. A detailed introduction to the association is provided. Through these
links, a user has access to membership information, additional material on the
medical topic, and products and services offered by the association. As of
April 14, 1998, eighteen associations are represented on the Company's
website; and active discussions are underway with a number of others.
*Bookstore: This service provides a list of recommended
reading materials with a review prepared by the Company. The books can be
purchased on-line through the link to the Amazon.com on-line bookstore.
Stepping outside of the Internet, there are thousands of patients
wanting the same quality of information organized into specific topics -- who
do not have access to the Internet. The Company has thousands of pages of
documents, and it is only reaching a small percentage of the people who are
sick. To service this demand, the Company intends to publish off-line
newsletters in the future. The Company believes that it has enough content to
publish a monthly issue on most topics which are included on the website.
CONSULTING
The Company has developed a comprehensive Internet Marketing
Methodology[TM] and the Company believes that it can utilize this marketing
methodology as a basis for providing consulting services to other companies
that are interested in developing a strategy for marketing on the Internet.
These consulting services are to be distinguished from the services described
above under "History of MCL" which the Company performed for IBM Canada in
connection with its Net.commerce software.
The Company charges its consulting clients based on the actual amount of
time spent at the Company's standard daily rates for consulting services.
MARKET AND MARKETING STRATEGY
Thus far, the Company's website has been visited by patients (76%),
their families and friends (18%) and some health professionals. The Company
received in excess of three million visits to its website during 1997. Each
visitor downloaded an average of approximately four documents per visit
(14,000,000 documents for the year).
The Company's mission is to help patients make better health care
decisions, communicate more effectively with health care providers and promote
compliance with appropriate therapies.
The business strategy is to attract high quality visitors to the site
and provide them with information, services and products pertinent to their
medical condition.
The Internet site is attracting visitors who are more focused than the
average Internet user. The following statistics indicate that the visitors
represent a very targeted audience:
Visitors average age: 45 year old (Internet average 33 years old)
Visitors gender: 67% female (Internet average 48%)
86% of visitors are either a patient or an influencer of a patient:
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76% Patient 18% Influencer 4% Doctor 2% Other
70% of visitors have been diagnosed with a medical condition.
80% discuss the information with their doctor-creating value for
sponsors.
The Company intends to build relationships with strategic organizations
in the healthcare and information technology sectors. These organizations
would include healthcare providers -- like pharmaceutical firms, medical
service companies, specialized hospital departments, non-profit support
groups, and physician organizations -- as well as charitable research
foundations and publishers, HMOs, PBMs, pharmacies, clinical trial
organizations, allied health-care groups, and consumer media. These
relationships are expected to result in long-term partnerships. The Company
has agreed with eighteen non-profit patient associations to provide their
information on the Company's site. During April 1997, the Company established
a "secure server" transaction area to allow the non-profit associations a
place to accept donations, and sell products and services to users online. In
return for promoting and processing the sales the Company will charge the
association a fee of approximately 10% of the transaction amount.
COMPETITION
Management believes that there are over 20,000 medical and health
information sites on the Internet, and approximately 100 to 200 of these sites
are regularly managed and updated. Included among these Internet sites are
Intelihealth, a site developed jointly by Aetna U.S. Healthcare and Johns
Hopkins University; Medscape, operated by Medscape, Inc.; PharmInfoNet,
operated by VirSci Corporation; HealthAnswers, operated by Orbis Broadcast
Group; and sites operated by Mayo Clinic, Avicenna, Sapient Health Network,
Global Medic and HealthGate. Many of these competitors have significantly
greater financial, technical and marketing resources than the Company and some
have greater name recognition and client/patient bases.
The Company attempts to compete by focusing on the needs of a patient
who has a particular illness or medical condition. Information on the
Company's site is organized into 50+ medical types so that a patient with a
particular illness or question can go immediately to the health problem he/she
is interested in. Most websites of competitors, on the other hand, are
designed to provide information for physicians or physicians and patients.
The Company attempts to provide the latest available information on the topics
it covers and new information is added daily. There can be no assurance that
the Company will be able to compete successfully against current and future
competitors.
GOVERNMENT REGULATION
The only portion of the Company's business which may become regulated is
the "MediXpert" service on the website. If the specialist were to be deemed
to be practicing medicine, he may be required to be licensed as a physician in
the jurisdiction where the user resides. The Company has attempted to
carefully design this portion of its business to avoid the claim that it or
its specialists are practicing medicine. The specialists only provide general
information in response to hypothetical questions. No medical opinions or
diagnoses are provided and no patient-specific recommendations are made. The
specialist always recommends that a user consult with his/her physician.
Based on the foregoing, the Company believes that the services provided by its
specialists do not constitute practicing medicine. In the event that some
state or other regulatory
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agency determines that the Company or its specialists are practicing medicine
without a license, the Company will be required to revise or terminate this
portion of its business. The Company does not believe that this would have a
material adverse impact on its business because this is not expected to be a
significant source of revenue or profits for the Company.
EMPLOYEES AND CONSULTANTS
As of April 1, 1998, the Company had approximately 45 employees and
consultants of which 30 work full-time for the Company. The Company's
employees are not represented by any labor union. Management believes that
its relationship with its employees is favorable.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company leases office space at 21 Eric Street, Cambridge,
Massachusetts at a monthly rate of $2,000. Most of the Company's employees
and consultants work out of their homes or contractor's offices. The
employees and consultants make extensive use of Email, telephone and fax
communications.
ITEM 3. LEGAL PROCEEDINGS.
There are no pending legal proceedings in which the Company is a party,
and the Company is not aware of any threatened legal proceedings involving the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1997.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a)MARKET INFORMATION. The Company's Common Stock trades in the
over-the-counter market, under the symbol "MCNS". The following table sets
forth the high and low bid prices for the Company's Common Stock for the
periods indicated as reported by the OTC Bulletin Board. The Common Stock has
been quoted on the Bulletin Board since September 30, 1996. These prices are
believed to be inter-dealer quotations and do not include retail mark-ups,
mark-downs, or other fees or commissions, and may not necessarily represent
actual transactions.
QUARTER ENDED HIGH BID LOW BID
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December 31, 1996 $2.37 $0.625
March 31, 1997 $2.25 $1.52
June 30, 1997 $2.4375 $1.31
September 30, 1997 $3.3125 $1.39
December 31, 1997 $1.69 $1.01
(b)HOLDERS. As of March 28, 1998, the Company had approximately 101
shareholders of record. This does not include shareholders who hold stock in
their accounts at broker/dealers.
(c)DIVIDENDS. The Company has never paid a cash dividend on its
common stock and does not expect to pay a cash dividend in the foreseeable
future.
(d)RECENT SALES OF UNREGISTERED SECURITIES. None.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
The Company's revenues during the year ended December 31, 1997 were
$256,374 as compared to no revenues during the period ended December 31, 1996.
The 1997 revenues were derived from advertising on the Company's website,
related consulting services and some e-commerce sales.
The Company's total expenses for the year ended December 31, 1997 were
$2,861,420 as compared to $839,431 for the period ended December 31, 1996.
The increase was primarily due to the fact that the Company's activities
during 1996 were limited to launching the website and attracting visitors to
the site. In addition the 1996 year commenced on April 23, 1996, the date of
inception of the Company's wholly owned subsidiary, Mediconsult.com Limited.
Contributing to the increase in expenses was the $431,565 spent on
advertising and promotion in 1997 compared to no such expenditures in 1996. In
January 1997 the Company started advertising on Yahoo! and several other
search engines on the Internet. Salaries more than doubled from $548,424 in
1996 to $1,185,130 in 1997 due to the 12 months of business in 1997 compared
to approximately 8 months in 1996 and the increase in the number of employees
and consultants. There was $179,598 spent on medical content in 1997 compared
to no such expenditures in 1996. Medical content costs of $161,600,
consisting of technical translations of medical publications were deferred as
of December 31, 1996 because the Company had not commenced operations. These
were then amortized during 1997. Other costs and expenses increased due to
the overall increased level of business activity as the Company's business
increased.
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The Company's loss for the year ended December 31, 1997 was $2,625,046
compared to a loss of $862,098 for the year ended December 31, 1996. The loss
was due to the increased level of expenses in 1997 which was offset by only
$256,354 in revenues.
The Company has reviewed the effect that the Year 2000 will have on its
essential computer systems, especially those related to its ongoing opeations
and its internal control systems, including the preparation of financial
information. The Company has plans underway to ensure that there will be no
significant adverse effect on its operations or accounting records related to
the Year 2000.
CAPITAL RESOURCES AND LIQUIDITY
The Company's working capital was $332,287 at December 31, 1997 as
compared to a negative $58,811 at December 31, 1996. The increase in working
capital was primarily due to the issuance of preferred stock for $2,500,000
during 1997 and the conversion of $500,000 of notes payable for 1,000,000
common shares. This investment was offset by the loss from 1997 operations of
$2,625,046.
During the year ended December 31, 1997, cash used in operating
activities was $2,467,554 as compared to $961,998 of cash used in operating
activities for the year ended December 31, 1996. The principal contributing
factor to this increase in cash used was the loss for the year ended December
31, 1997 of $2,625,046.
During the year ended December 31, 1997, net cash used in investing
activities was $120,474 as compared to $205,298 in the prior year. The cash
used was spent on capital asset purchases of computer hardware and computer
programming.
During the year ended December 31, 1997 the net cash provided by
financing activities was $2,595,847 as compared to $1,560,426 in the prior
year. In 1997 the Company received $2,500,000 from the sale of preferred
stock and $91,997 in advances from a shareholder. The company has prepared
the financial statements on a going concern basis with the assumption that the
company will secure additional financing from principal shareholders for cash
fow deficiencies and become profitable.
The Company has no material commitments for capital expenditures at the
time of the filing of this Report.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are set forth on pages F-1 through F-10 hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No response required.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The directors and executive officers of the Company and its wholly-owned
subsidiary, their ages and positions held in the Company are as follows:
NAME AGE POSITIONS HELD AND TENURE
---- --- -------------------------
Robert E. Jennings 40 President, CEO and Director of the Company
Ian Sutcliffe 45 Chief Operating Officer of the Company and
President of Subsidiary
Michel Bazinet 41 Medical Director of Subsidiary
Debora A. Falk 39 Vice President-Sales of Subsidiary
There is no family relationship between any Director or Executive
Officer of the Company.
The Company has no nominating, compensation or audit committees.
Set forth below are the names of all Directors, Nominees for Director
and Executive Officers of the Company and its wholly-owned subsidiary, all
positions and offices with the Company held by each such person, the period
during which he has served as such, and the principal occupations and
employment of such persons during at least the last five years:
ROBERT E. JENNINGS - PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR
OF THE COMPANY. Mr. Jennings has served as President, CEO and a Director of
the Company since April 1996, and as CEO and a Director of Mediconsult.com
Limited since its inception in April 1996. Mr. Jennings received a Bachelors
Degree in Economics from the University of Western Ontario in 1979 and he
received his degree as a chartered accountant in Canada in 1981. He was
employed by Coopers & Lybrand in Canada and England from May 1979 until
September 1988, where he spent the last four years as a senior audit manager.
From September 1988 until the present, Mr. Jennings has advised companies and
underwriters on mergers and acquisitions, international business, and other
general business matters. He also serves as a director of MIT Ventures, Inc.,
a mining company which is publicly-traded on the Vancouver Stock Exchange.
IAN SUTCLIFFE - CHIEF OPERATING OFFICER OF THE COMPANY AND PRESIDENT OF
SUBSIDIARY. Mr. Sutcliffe has served as Chief Operating Officer of the
Company and as President of Mediconsult.com Limited since July 1996. He has
17 years experience as a management consultant, primarily in the high-tech
sector. Most recently he spent three years from July 1993 to June 1996, re-
engineering key marketing and sales processes worldwide for IBM. Mr.
Sutcliffe received a Bachelor of Commerce Degree from the University of
British Columbia in 1980 and he received his Chartered Accountant Designation
in 1982. He was employed by Coopers & Lybrand in Canada and Europe from 1979
until 1985. He owned and operated his own firm, Sutcliffe & Associates, from
1985 until 1989 when he merged his firm with BDO Dunwoody. He left BDO
Dunwoody in June 1993 to begin his consulting work with IBM.
MICHEL BAZINET - MEDICAL DIRECTOR OF SUBSIDIARY. Dr. Bazinet has served
as the Medical Director of Mediconsult.com Limited since April 1996. He is a
urologist specializing in uro-oncology. He completed his medical and
specialty training at Sherbrooke (1979) and McGill (1984) universities in
Canada, followed
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by a three-year fellowship in uro-oncology at the Memorial Sloan Kettering
Cancer Center in New York. Dr. Bazinet has been practicing medicine at McGill
University in Montreal since 1987. His responsibilities with the Company's
subsidiary include the direction of the overall medical content of the
Company's website and he moderates many of the Company's on-line support
groups.
DEBORA FALK - VICE PRESIDENT-SALES OF SUBSIDIARY. Ms. Falk has served
as Vice President-Sales of Mediconsult.com Limited since September 1996.
During July and August 1996, she was a consultant to the Company. From 1985
until June 1996, she was employed by IBM Canada in a number of technical and
marketing positions with the most recent one being Canadian Market Management
Process Manager. She received a Bachelor of Arts degree in Computer Science
and Business from the University of Guelph in 1985.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain written representations, no persons who were either a
Director, Officer or beneficial owner of more than 10% of the Company's Common
Stock, failed to file on a timely basis reports required by Section 16(a) of
the Exchange Act during the most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information regarding the executive
compensation for the Company's President and each other executive officer
whose total annual salary and bonus exceeded $100,000 for the years ended
December 31, 1996 and December 31, 1997:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
- -----------------------------------
ANNUAL COMPENSATION AWARDS
PAYOUTS
----------------------- ---------------------------
- -------
SECURI-
TIES
UNDERLY-
OTHER RE- ING
ALL
ANNUAL STRICTED OPTIONS/
OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP
COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) PAYOUTS
SATION
- ------------------ ---- ------- ----- ------ -------- -------- -------
- ------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Robert Jennings, 1997 $-0- -0- -0- -0- -0- -0-
-0-
President 1996 $ 55,000 -0- -0- -0- 790,000 -0-
-0-
Michel Bazinet, 1997 $ 70,000 -0- -0- -0- -0- -0-
-0-
Medical Director 1996 $150,000 -0- -0- -0- 250,000 -0-
-0-
of Subsidiary
Ian Sutcliffe, 1997 $240,000 -0- -0- -0- -0- -0-
-0-
President of 1996 $120,000 -0- -0- -0- 250,000 -0-
-0-
Subsidiary
</TABLE>
13
<PAGE>
AGGREGATED OPTION EXERCISES IN YEAR ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1997 OPTION VALUES
SECURITIES UNDER- VALUE OF UNEXER-
SHARES LYING UNEXERCISED CISED IN-THE
ACQUIRED OPTIONS MONEY OPTIONS
ON AT 12/31/97 AT 12/31/97
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (NUMBER) REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- --------------- ----------------
Robert Jennings -0- -0- 790,000/0 $809,750/0
Michel Bazinet -0- -0- 0/0 $ 0/0
Ian Sutcliffe -0- -0- 0/0 $ 0/0
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE
---- ------------ ------------ ----------- ----------
Robert Jennings 0 N/A N/A N/A
Michel Bazinet 0 N/A N/A N/A
Ian Sutcliffe 0 N/A N/A N/A
The Company has no employment agreements with any of its executive
officers.
DIRECTOR COMPENSATION
Directors of the Company do not receive any fees for their services in
such capacity. However, each Director is reimbursed for all reasonable and
necessary costs and expenses incurred as a result of being a Director of the
Company.
STOCK OPTION PLAN
In April 1996, the Company's Board of Directors adopted the Company's
1996 Stock Option Plan (the "1996 Plan"). The 1996 Plan was approved by the
Company's shareholders during May 1996. The 1996 Plan allows the Board to
grant stock options from time to time to employees, officers and directors of
the Company and consultants to the Company. The Board has the power to
determine at the time the option is granted whether the option will be an
Incentive Stock Option (an option which qualifies under Section 422 of the
Internal Revenue Code of 1986) or an option which is not an Incentive Stock
Option. However, Incentive Stock Options will only be granted to persons who
are employees of the Company. Vesting provisions are determined by the Board
at the time options are granted. As originally adopted, the total number of
shares of Common Stock subject to options under the 1996 Plan was not to
exceed 1,500,000, subject to adjustment in the event of certain recapitali-
zations, reorganizations and similar transactions. On December 31, 1997, the
Board voted to increase the plan to 2,000,000 shares, subject to shareholder
approval by December 31, 1998.
The Board of Directors may amend the 1996 Plan at any time, provided
that the Board may not amend the 1996 Plan to materially increase the number
of shares available under the 1996 Plan, materially increase the benefits
accruing to Participants under the 1996 Plan, or materially change the
eligible class of employees without shareholder approval.
14
<PAGE>
There have been a total of 1,732,000 options granted under the 1996
Plan, of which 598,000 have been exercised as of March 28, 1998. There were
1,134,000 options outstanding as of March 28, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 28, 1998, the stock
ownership of each person known by the Company to be the beneficial owner of
five percent or more of the Company's Common Stock, each officer and director
individually, and all officers and directors as a group. Each person has sole
voting and investment power over the shares except as noted.
AMOUNT AND
NAME AND ADDRESS NATURE OF BENE- PERCENT
OF BENEFICIAL OWNERS FICIAL OWNERSHIP OF CLASS
- ------------------------- ---------------- --------
Robert Jennings 10,240,000(1) 56.6%
33 Reid Street, 4th Floor
Hamilton HM 12
Bermuda
Michel Bazinet 1,000,000(2) 5.8%
343 Brookfield Street
Mount-Royal
Montreal, Quebec
Canada H3P 2A7
The Mediconsult Trust(3) 9,450,000 54.6%
51 Pitts Bay Road
Pembroke HM 12
Bermuda
Ian Sutcliffe 250,000(4) 1.4%
16 Stonehedge Hollow
Unionville, Ontario
Canada L3R 3Y9
All Executive Officers and 11,490,000(5) 63.5%
Directors as a Group
(5 Persons)
_________________
(1) Includes 9,450,000 shares owned beneficially by Mr. Jennings by virtue of
his interest in the shares held by The Mediconsult Trust, and 790,000 shares
subject to immediately exercisable options granted under the 1996 Stock Option
Plan.
(2) Represents 1,000,000 shares directly owned by Mr. Bazinet. Does not
include a contingent indirect beneficial interest in The Mediconsult Trust
because the Mediconsult Trust is subject to the total discretion of Robert
Jennings, the trustee of The Mediconsult Trust.
(3) The trustee of The Mediconsult Trust is Robert Jennings, and as trustee
Mr. Jennings has full control of the voting rights of the Trust. Mr. Jennings
created the trust and originally contributed all assets to the trust. He has
total discretion in the management and operation of the trust including the
sale of trust assets and the allocation of the proceeds among beneficiaries.
He also has absolute power to change beneficiaries. This Trust is a personal
tax and estate planning trust and it has an indefinite term.
15
<PAGE>
(4) Represents 250,000 shares owned directly by Mr. Sutcliffe. Does not
include a contingent indirect beneficial interest in The Mediconsult Trust
because The Mediconsult Trust is subject to the total discretion of Robert
Jennings, the trustee of The Mediconsult Trust.
(5) Includes presently exercisable options held by Mr. Jennings.
The Company knows of no arrangement or understanding, the operation of
which may at a subsequent date result in a change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
ACQUISITION OF MEDICONSULT.COM LIMITED
On April 23, 1996, the Company issued 11,000,000 shares of its Common
Stock to the holders of 100% of the outstanding common stock of
Mediconsult.com Limited, a Bermuda corporation ("MCL"), in an exchange
transaction in which MCL became a wholly-owned subsidiary of the Company.
The stock issuances were made pursuant to an Agreement Concerning the
Exchange of Common Stock ("Agreement") between the Company and MCL. The terms
of the Agreement were the result of negotiations between the managements of
the Company and MCL. However, the Company's Board of Directors did not obtain
any independent "fairness" opinion or other evaluation regarding the terms of
the Agreement, due to the cost of obtaining such opinions or evaluations.
The persons receiving stock in this exchange were the following:
NAME NUMBER OF SHARES
---- ----------------
The Mediconsult Trust 10,250,000
Michel Bazinet 750,000
----------
Total 11,000,000
TRANSACTIONS INVOLVING THE COMPANY
During October 1996, the Company issued debentures in the aggregate
principal amount of $500,000 to four non-affiliated persons who had previously
loaned $500,000 to the Company's subsidiary. The debentures were convertible
into the Company's Common Stock at a conversion rate of $.50 per share. All
four of the debentures were converted into an aggregate of 1,000,000 shares of
the Company's Common Stock on June 30, 1997. One of the debentures ($300,000)
was held by Kevin Winter who acquired 600,000 shares on the conversion of his
debenture.
Since April 1996, Robert Jennings has advanced funds to the Company on
an interest-free basis. The outstanding balance of these advances was $51,841
on December 31, 1996 and $143,838 on December 31, 1997.
On June 30, 1997, the Company issued 190,000 shares of its $10 Non-
Cumulative Preferred Stock to Robert Jennings in exchange for $1,000,000 in
cash and $900,000 of debt conversion. On December 31, 1997, the Company
issued an additional 60,000 shares of its $10 Non-Cumulative Preferred Stock
to Robert Jennings for $600,000 in cash.
During December 1996, the Company sold 970,000 shares of its Common
Stock to Kevin Winter at $1.00 per share for a total consideration of
$970,000.
16
<PAGE>
TRANSACTIONS INVOLVING MEDICONSULT.COM LIMITED
Mediconsult.com Limited was incorporated under the laws of Bermuda on
April 11, 1996.
On April 11, 1996, the corporation issued 12,000 shares to the
Mediconsult Trust for total consideration of $12,000.
The Board of Directors was of the opinion that the terms of the above
transactions were at least as favorable as those which could be obtained from
independent third parties.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 3. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
3.1 Articles of Incorporation Incorporated by reference to
Exhibit 3.1 to the Registrant's
Form 10-SB Registration State-
ment filed on December 16, 1996
3.2 Bylaws Incorporated by reference to
Exhibit 3.2 to the Registrant's
Form 10-SB Registration State-
ment filed on December 16, 1996
9.1 Declaration of Trust -- The Incorporated by reference to
Mediconsult Trust Exhibit 9.1 to the Registrant's
Form 10-SB Registration State-
ment filed on June 27, 1997
10.1 1996 Stock Option Plan Incorporated by reference to
Exhibit 10.1 to the Registrant's
Form 10-SB Registration State-
ment filed on December 16, 1996
10.2 Agreement Concerning the Exchange Incorporated by reference to
of Common Stock Between the Com- Exhibit 10.2 to the Registrant's
pany and Mediconsult.com Ltd. Form 10-SB Registration State-
ment filed on December 16, 1996
10.3 Articles of Merger with Incorporated by reference to
Delaware Subsidiary Exhibit 10.3 to the Registrant's
Form 10-SB Registration State-
ment filed on December 16, 1996
10.4 Worldwide Web Server Agreement Incorporated by reference to
with TeleVisions, Inc., and Exhibit 10.4 to the Registrant's
Amendment Form 10-SB Registration State-
ment filed on December 16, 1996
17
<PAGE>
10.5 Marketing Partnership Proposal Incorporated by reference to
with Electric Entertainment re Exhibit 10.5 to the Registrant's
Doctor on Call Form 10-SB Registration State-
ment filed on June 6, 1997
10.6 Form of Consulting Agreement Incorporated by reference to
with Physician Specialist Exhibit 10.6 to the Registrant's
Form 10-SB Registration State-
ment filed on June 6, 1997
10.7 Agreement with IBM Canada Incorporated by reference to
Exhibit 10.7 to the Registrant's
Form 10-SB Registration State-
ment filed on June 6, 1997
21 Subsidiaries of the Small Incorporated by reference to
Business Issuer Exhibit 21 to the Registrant's
Form 10-SB Registration State-
ment filed on December 16, 1996
23 Consent of Coopers & Lybrand Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
(b) REPORTS ON FORM 8-K. No Reports on Form 8-K were filed during the
fourth quarter of the Company's fiscal year ended December 31, 1997.
18
<PAGE>
Coopers
& Lybrand
chartered accountants
Dorchester House
7 Church Street West
Hamilton, Bermuda HM 1
P.O. Box HM 1171
Hamilton, Bermuda, HM EX
telephone (441) 295-2000
fax (441) 295-1242 (groups 1/2/3)
March 19, 1998
Independent Auditors' Report To The Shareholders Of
Mediconsult.com Inc.
We have audited the accompanying consolidated balance sheets of
Mediconsult.com Inc. on page F-2 as of December 31, 1997 and 1996 and the
related consolidated statements of loss and deficit and cash flows on pages
F-3 and F-4 for the year ended December 31, 1997 and the period from April 23,
1996 to December 31. 1996. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Mediconsult.com
Inc as of December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the year ended December 31, 1997 and the
period from April 23, 1996 to December 31, 1996 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Coopers & Lybrand
Coopers & Lybrand
Chartered Accountants
Coopers & Lybrand is member of Coopers & Lybrand International, a limited
liability association incorporated in Switzerland
David E.W. Lines OBE, FCA, JP Raymond C. Medeiros George H. Holmes
Peter C.B. Mitchell Thomas E.C. Miller Darren Q. Johnston E.
Kirkland Cooper OBE, FCA, JP (Consultant)
F-1
<PAGE>
Mediconsult.com Inc.
Consolidated Balance Sheets
As Of December 31, 1997 And 1996
(Expressed in U.S. Dollars)
1997 1996
$ $
Current Assets
Cash 400,949 393,130
Accounts receivable 157,810 0
Deferred medical content costs (note 3) 0 161,600
---------- ---------
Total Current Assets 558,759 554,730
Capital Assets (note 4) 193,004 205,298
---------- ---------
Total Assets 751,763 760,028
---------- ---------
Current Liabilities
Accounts payable and accrued liabilities 82,634 39,033
Interest payable (note 5) 0 22,667
Advances from shareholder (note 6) 143,838 51,841
Notes payable (note 5) 0 500,000
---------- ---------
Total Current Liabilities 226,472 613,541
---------- ---------
Shareholders' Equity
Capital Stock (notes 7 and 8) 4,012,435 1,008,585
Deficit (3,487,144) (862,098)
---------- ---------
Total Shareholders' Equity 525,291 146,487
---------- ---------
Total Liabilities And Shareholders' Equity 751,763 760,028
---------- ---------
Signed on Behalf of the Board
______________________________ _________________________________
Director Director
The accompanying notes on patges F-5 to F-10 are an integral part of these
consolidated financial statements.
F-2
<PAGE>
Mediconsult.com Inc.
Consolidated Statements Of
Loss And Deficit
For The Year Ended December
31, 1997 And
The Period From April 23, 1996
To December 31, 1996
(Expressed in U.S. Dollars)
1997 1996
$ $
---------- --------
Revenues
Advertising 253,954 0
Sales - net 2,420 0
---------- --------
256,374 0
---------- --------
Expenses
Salaries (notes 8 and 9) 1,185,130 548,424
Advertising and promotion 431,565 0
Office 307,869 170,491
Amortization and depreciation 294,368 0
Travel 236,770 69,896
Medical content 179,598 0
Computer maintenance 87,104 0
Insurance 67,573 0
Accounting and legal 55,963 50,620
Bank charges 15,480 0
---------- --------
2,861,420 839,431
---------- --------
Operating Loss For The Year (2,605,046) (839,431)
---------- --------
Interest expense (20,000) (22,667)
---------- --------
Loss For The Year (2,625,046) (862,098)
Deficit - Beginning Of Year (862,098) 0
---------- --------
Deficit - End Of Year (3,487,144) (862,098)
========== ========
Per share loss applicable to
common stock (note 12):
Net Loss (0.16) (0.06)
========== ========
The accompanying notes on pages F-5 to F-10 are an integral part of these
consolidated financial statements.
F-3
<PAGE>
Mediconsult.com Inc.
Consolidated Statements Of Cash Flows
For The Year Ended December 31, 1997 And
The Period Prom April 23, 1996 To December 31, 1996
(Expressed in U.S. Dollars)
1997 1996
$ $
---------- ----------
Cash Flows From Operating Activities:
Loss for the year (2,625,046) (862,098)
Adjustment to reconcile loss for
the year to net cash used in
operating activities:
Depreciation of capital assets 132,768 0
Change in assets and liabilities:
Accounts receivable (157,810) 0
Deferred medical content costs 161,600 (161,600)
Accounts payable and accrued
liabilities 43,601 39,033
Interest payable (22,667) 22,667
---------- ----------
Net cash used in operating activities (2,467,554) (961,998)
---------- ----------
Cash Flows From Investing Activity:
Capital asset purchases (120,474) (205,298)
---------- ----------
Cash Flows From Financing Activities:
Advances from shareholder 91,997 51,841
Issue of preferred stock 2,500,000 0
Issue of common stock 3,850 1,008,585
Notes payable 0 500,000
---------- ----------
Net cash provided by financing activities 2,595,847 1,560,426
---------- ----------
Increase In Cash 7,819 393,130
Cash - Beginning Of Year 393,130 0
---------- ----------
Cash - End Of Year 400,949 393,130
========== ==========
Non-Cash Financing Activities (notes 5 and 7)
The accompanying notes on pages F-5 to F-10 are an integral part of these
consolidated financial statements.
F-4
<PAGE>
Mediconsult.com Inc.
Notes To Consolidated Financial Statements
For The Year Ended December 31, 1997 And
The Period From April 23, 1996 To December 31, 1996
(Expressed in U.S. Dollars)
1. Operations
Mediconsult.com Inc. (the "company") was incorporated in the United States of
America on October 31, 1989 under the name Waterford Capital, Inc. The
company did not trade and was effectively dormant. On April 23, 1996 the
company changed its name to Mediconsult.com Inc. and purchased the entire
share capital of Mediconsult.com Limited (the "subsidiary"), a company
incorporated in Bermuda. On December 4, 1996 through a merger with a Delaware
Corporation with the same name, the company became a Delaware Corporation.
The subsidiary has an Internet web site located at http://www.mediconsult.com
which is designed to serve the consumer demand for comprehensive top-quality
information on specific medical topics. The subsidiary's target audience
consist of patients who are dealing with medium and long-term medical
conditions and are looking for detailed information about their illnesses, the
latest treatments, drug-related and other therapies, and the management of
side effects.
The company trades on the National Association of Security Dealers - Over The
Counter ("NASD-OTC") market as "MCNS".
2. Significant Accounting Policies
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The financial statements
have been prepared on a going-concern basis with the assumption that the
company will secure additional financing from principal shareholders for
cashflow deficiencies and become profitable. The following is a summary of the
accounting policies considered to be particularly significant:
(a)Basis of consolidation
These consolidated financial statements, include the results of the company
and its wholly-owned subsidiary. All intercompany balances and transactions
have been eliminated on consolidation.
(b)Revenue recognition and unearned income
Revenues from the web site operations are recorded on an accrual basis and are
recognized as income on a pro-rata basis over the contract period to provide
services from web site operations. Unearned income represents the portion of
the revenue which is applicable to the unexpired period of the contract.
(c)Depreciation
Depreciation of the company's capital assets has been computed on the
straight-line method over the estimated useful lives of the assets as
indicated below:
F-5
<PAGE>
Estimated
Property Useful Lives
-------------------- ------------
Computer Hardware 2 years
Computer Programming 2 years
Depreciation on capital assets was deferred until the commencing January 1,
1997 when the company's computer systems became fully operational and the
company began to derive economic benefit from them.
The company writes off fully depreciated assets from its books.
(d)Deferred medical content costs
Medical content costs deferred at December 31, 1996 were amortized over a
period of 12 months commencing January l, 1997 when the company began
operations. Also commencing January l, 1997 current medical content costs are
expensed as incurred.
(e)Employee stock option compensation
Stock options over common shares granted to employees are expensed over their
vesting period based on their fair value at the date of grant. The fair value
of stock options is estimated using an option-pricing model that takes into
account the exercise price, expected life of the options, current market price
of the common shares and their expected volatility, expected dividends on the
common stock, and the risk-free interest rate based on zero-coupon U.S.
government issues with a remaining term equal to the expected life of the
options.
3. Deferred Medical Content Costs
Medical content costs, consisting of technical translations of medical
publications which provide a benefit to the company estimated to be one year
in duration, were deferred as of December 31, 1996 because the company had not
commenced operations. During the year ended December 31, 1997, the deferred
medical content costs of $161,600 were amortized.
4. Capital Assets
Capital assets comprise:
1997 1996
Accumulated Net Book Net Book
Cost Depreciation Value Value
$ $ $ $
------- ------------ -------- --------
Computer Hardware 102,401 (44,397) 58,O04 75,186
Computer Programming 223,371 (88,371) 135,000 130,112
------- ------------ -------- --------
325,772 (132,768) 193,004 205,298
======= ======= ======= =======
5. Notes Payable
During the period ended December 31, 1996, the company was advanced notes
payable in the aggregate of $500,000. These notes were repayable on December
31, 1997 and accrued interest at a rate of 8% per annum.
F-6
<PAGE>
On October 25, 1996 the company offered, at the option of the holder, the
right to convert the principal amount of the notes payable into common shares
at a conversion price of $0.50 per share, at any time prior to the repayment
date. On June 30, 1997 the option was fully exercised for 1,000,000 common
shares.
6.Advances From Shareholder
Advances from shareholder are interest free and repayable on demand.
7.Capital Stock
(a)Authorized capital stock
On October 31, 1989, the date of incorporation, the company had an authorized
share capital of 700 million common shares of no par value and 10 million
shares of $.001 par value Preferred Stock.
During the year ended December 31, 1997 250,000 shares of $.001 par value
Preferred Stock were designated as a new series called $10.00 Non-Cumulative
Preferred Stock.
As of December 31, 1997 and 1996 authorized capital stock comprises:
1997 1996
Number of Number of
Shares $ Shares $
----------- ---------- ----------- ------
Preferred Stock
$.001 par value
Preferred Stock 9,750,000 9,750 10,000,000 10,000
$10.00 Non-Cumulative
Preferred Stock 250,000 2,500,000 0 0
----------- ---------- ----------- ------
10,000,000 2,509,750 10,000,000 10,000
----------- ---------- ----------- ------
Common Stock at
no par value 700,000,000 0 700,000,000 0
=========== ========== =========== ======
(b) Share rights
(i) $.001 par value Preferred Stock
The Preferred Stock may be issued from time to time in series as determined by
the Board of Directors. The Board of Directors is authorized to fix and
determine the variations in the relative rights and preferences as between
series the Preferred Stock as may have limited, contingent or no voting
powers, may have such designations, preferences, dividends, and relative,
participating, optional or other special rights and be subject to such
qualifications, limitations and restrictions as the Board of Directors shall
determine. The Preferred Stock may be subject to redemption by the company or
at the options of the holders thereof and may be convertible into Common Stock
or exchangeable for other securities of the company. So long as no shares of
any class or series established by resolution of the Board of Directors have
been issued, the voting rights, designations, preferences and relative,
optional, participating or other rights of these shares may be amended by
resolution of the Board of Directors.
F-7
<PAGE>
(ii) $10.00 Non Cumulative Preferred Stock
Each issued and outstanding share of $10.00 Non-Cumulative Preferred Stock
entitles the holder of record to receive dividends in cash at the rate of 8%
per annum as and when declared by the Board of Directors. The right to
dividends are non-cumulative. Holders of preferred shares of $10.00
Non-Cumulative Preferred Stock will be entitled, on a voluntary or involuntary
liquidation, dissolution or winding up of the company, before any payment or
distribution shall be made on the common stock, an amount per share equal to
$10 per share. Each share of S10.00 Non-Cumulative Preferred Stock shall
entitle the holder to one vote and with respect to each such vote, a holder of
shares of $10.00 Non-Cumulative Preferred Stock shall have full voting rights
and powers equal to the voting rights and powers of a holder of shares of
Common Stock, share for share, and shall be entitled to vote with holders of
Common Stock together as a single class. Each share of $10.00 Non-Cumulative
Preferred Stock may be redeemed at the option of the company for $10 per
share, plus an amount equal to declared and unpaid dividends. During the year
ended December 31, 1997 no dividends were declared.
(c) Issued Capital Stock
On November 7, 1989, the company issued 13,500 common shares for a total
consideration of $100 in cash. On April 23, 1996, 55,000 common shares were
issued in exchange for the entire share capital of Mcdiconsult.com Limited,
the Bermuda corporation which had a fair value of $Nil at that date. An
additional 5.197 common shares were issued on May 24, 1996 for $25,985 in
total on August 12, 1996 a 20 for 1 share split took place, which resulted in
issued common stock of 1,473,940 shares. On October 25, 1996 a 10 for 1 share
split took place, which resulted in an issued common stock of 14,739,400
shares. On November 13, 1996 stock options over 500,000 common shares were
exercised for $12,500 in total On November 20, 1996, the company issued
970,000 common shares for $970,000 in total. On June 30, 1997 notes payable
of $500,000 were converted for 1,000,000 common shares. During the year ended
December 31, 1997 stock options over 82,000 common shares were exercised for
$3,850 in total.
Also during the year ended December 31, 1997 250,000 shares of the $10.00
Non-Cumulative Preferred Stock were issued for $2,500,000 cash.
As of December 3l, l997 and 1996 issued capital stock comprises:
1997 1996
Number of Number of
Shares $ Shares $
----------- ---------- ---------- --------
Preferred Stock
$.001 par value
Preferred Stock 0 0 0 0
$10.00 Non-Cumulative
Preferred Stock 250,000 2,500,000 0 0
----------- --------- ---------- ---------
Common stock at
no par value 17,291,400 1,512,435 16,209,400 1,008,585
----------- --------- ---------- ---------
Total capital stock 4,012,435 1,008,585
========= =========
F-8
<PAGE>
8. Stock Options
The company has a 1996 Stock Option Plan ("the Plan") to provide incentives to
employees who contribute materially to the success and profitability of the
company and to reward directors and consultants who render valuable
contributions to the company. The maximum term of options granted under the
Plan is ten years The Board of Directors has the exclusive power over the
granting of options and their vesting provisions. During the year ended
December 31, 1997 the number of common shares covered by the Plan was
increased from 1,500,000 to 2,000,000.
Stock options over common shares comprise:
1997 1996
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Shares Price Shares Price
$ $
---------- -------- --------- --------
Outstanding at beginning of year 980,000 0.03 0 0
Granted during year 252,000 1.03 1,480,000 0.03
Exercised during year (82,000) 0.05 (500,000) 0.03
---------- -------- --------- --------
Outstanding at end of year 1,150,000 0.25 980,000 0.03
---------- -------- --------- --------
1997 1996
Outstanding ------------------- ---------
The ranges of stock options exercise prices are:
Stock options over number of common shares 902,000 248,000 980,000
Weighted average exercise price $0.03 $1.05 $0.03
Weighted average remaining contractual life 0.5 years 2 years 1.5 years
Exercisable
The ranges of stock option exercise prices are:
Stock options over number of common shares 902,000 65,000 980,000
Weighted-average exercise price $0.03 $1.05 $0.03
During the year ended December 31, 1997 and the period ended December 31, 1996
the fair value of the options granted was $141,068 and $Nil respectively and
the amount of the fair value of options granted included in salaries expense
was $40,235 and $Nil respectively.
The fair value of the options was estimated using an option-pricing model
based on the weighted-average risk-free interest rate of 5.525%, an expected
life of the options of two years, an expected volatility of the common stock
of 95.905% and no expected dividends on the common stock.
9. Related Party Transactions
During the year ended December 31, 1997 and the period ended December 31, 1996
salaries were paid in the amounts of $Nil and $55,000 respectively to R.
Jennings; $7O,OOO and $150,000 respectively to M. Bazinet; and $240,000 and
$120,000 respectively to I.Sutcliffe who are shareholders in the company.
F-9
<PAGE>
10. Taxation
The company's operations are conducted by its Bermuda subsidiary. The
subsidiary has received an undertaking from the Bermuda Government exempting
it from all local income, profits and capital gains taxes until the year 2016.
At the present time, no such taxes are 1evied in Bermuda.
The company is a Delaware holding company and is currently not subject to
taxation in the United States.
11. Fair Value Of Financial Instruments
In addition to the disclosed estimated fair value of stock options as
disclosed in note 8 the estimated fair value of the company's other financial
instruments, including cash, accounts receivable, accounts payable and accrued
liabilities, interest payable, advances from shareholder and notes payable
approximate their carrying value.
12. Per Share Loss
Per share data is based on the average number of common shares outstanding.
The average number of common shares outstanding during the year ended December
31, 1997 and the period ended December 31, 1996 were 16,729,900 and
14,861,000, respectively.
F-10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: April 15, 1998 MEDICONSULT.COM INC.
By: /s/ Robert Jennings
Robert Jennings, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Robert E. Jennings President, Chief Executive April 15, 1998
Robert E. Jennings Officer, Chief Financial
Officer and Director
/s/ Ian Sutcliffe Chief Operating Officer April 15, 1998
Ian Sutcliffe
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of loss and deficit
found on pages F-1 through F-10 of the Company's Form 10-KSB for the fiscal
year ended December 31, 1997, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> $ 400,949
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 558,759
<PP&E> 193,004
<DEPRECIATION> 0
<TOTAL-ASSETS> 751,763
<CURRENT-LIABILITIES> 226,472
<BONDS> 0
0
0
<COMMON> 4,012,435
<OTHER-SE> (3,487,144)
<TOTAL-LIABILITY-AND-EQUITY> 751,763
<SALES> 2,420
<TOTAL-REVENUES> 256,374
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,861,420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,000
<INCOME-PRETAX> (2,625,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,625,046)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report dated March 19, 1998
appearing in the Annual Report on page F-1 of Form 10-KSB of Mediconsult.com
Inc. for the year ended December 31, 1997, in the Company's Registration
Statement on Form S-8, SEC File No. 33-32289.
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Hamilton, Bermuda
April 15, 1998
