<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______ TO ______.
COMMISSION FILE NO. 0-22913
RNETHEALTH.COM, INC. (FORMERLY RECOVERY NETWORK, INC.)
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Colorado 39-1731029
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
506 Santa Monica Blvd, Suite 400, Santa Monica, California, 90401
(Address of Principal Executive Offices)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 393-3979
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities 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 whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 24,820,382 shares as of
February 2, 2000.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
Yes [ ] No [X]
<PAGE> 2
RNETHEALTH.COM, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31,
1999 (unaudited) and June 30, 1999.................................... 3
Condensed Consolidated Statements of Operations
(unaudited) for the three-month and six-month periods
ended December 31, 1999 and 1998...................................... 4
Condensed Consolidated Statements of Cash Flows
(unaudited) for the six-month periods ended December 31,
1999 and 1998......................................................... 5
Notes to Condensed Consolidated Financial Statements (unaudited)...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and results of Operations................................................. 10
PART II - OTHER INFORMATION
Item 1. Legal proceedings................................................ 13
Item 6. Exhibits and Reports on Form 8-K ................................ 13
Signature Page............................................................ 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RNETHEALTH.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1999
(UNAUDITED) JUNE 30, 1999
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 134,585 $ 136,058
Accounts receivable, net of allowance for doubtful
accounts of $32,000 for both December 31, 1999 and
June 30, 1999 128,498 256,499
Current portion of capitalized programming costs, net 85,000 98,000
Inventory 55,843 55,593
Prepaid expenses 48,903 70,345
------------ ------------
Total current assets 452,829 616,495
Capitalized programming costs, net 209,181 421,648
Furniture and equipment, net 149,186 177,550
Other 52,185 52,686
------------ ------------
$ 863,381 $ 1,268,379
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Short-term notes payable, net of unamortized debt
discount of $0 and $181,318 $ 75,000 $ 481,015
Accounts payable 530,038 442,085
Accrued payroll and benefits 206,982 139,086
Other accrued liabilities 193,821 295,256
Accrued royalty expense 309,723 503,137
Current portion of capital lease obligations 10,497 19,817
------------ ------------
Total current liabilities 1,326,061 1,880,396
------------ ------------
Commitments
Shareholders' deficit:
Common stock, $0.01 par value; 25,000,000 shares authorized;
24,568,982 and 15,494,507 shares issued and outstanding at
December 31, 1999 and June 30, 1999, respectively 245,689 154,945
Additional paid-in capital 27,593,936 21,813,509
Common stock subscription receivable -- (50,000)
Prepaid consulting -- (230,331)
Accumulated deficit (28,302,305) (22,300,140)
------------ ------------
Total shareholders' deficit (462,680) (612,017)
------------ ------------
$ 863,381 $ 1,268,379
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 4
RNETHEALTH.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED SIX-MONTH PERIODS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Domestic sales $ 295,002 $ 272,639 $ 721,671 $ 678,963
------------ ------------ ------------ ------------
Operating expenses:
Salaries and consulting expenses 1,389,525 1,175,951 2,780,605 2,287,234
General and administrative expenses 206,126 595,612 599,145 1,370,339
Programming expenses 97,181 937,495 438,423 1,328,073
Cost of video and publication sales 109,396 64,661 252,095 218,064
Marketing expenses (4,328) 24,074 18,984 163,105
------------ ------------ ------------ ------------
Total operating expenses 1,797,900 2,797,793 4,089,252 5,366,815
------------ ------------ ------------ ------------
Loss from operations (1,502,898) (2,525,154) (3,367,581) (4,687,852)
Interest expense (1,152,371) (9,762) (1,913,895) (13,880)
Interest income 821 9,299 1,291 60,686
------------ ------------ ------------ ------------
Loss before provision for state income taxes (2,654,448) (2,525,617) (5,280,185) (4,641,046)
Provision for state income taxes -- 800 -- 974
------------ ------------ ------------ ------------
Net loss $ (2,654,448) $ (2,526,417) $ (5,280,185) $ (4,642,020)
============ ============ ============ ============
Loss per share information - basic and
diluted loss per share $ (0.12) $ (0.34) $ (0.27) $ (0.70)
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 21,927,646 7,472,400 19,489,853 6,643,258
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 5
RNETHEALTH.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH PERIODS ENDED
DECEMBER 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,280,185) $(4,642,020)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of prepaid consulting 230,331 --
Value of shares issued for interest expense,
compensation and other services 931,296 --
Imputed interest on beneficial conversion of debt 448,944 --
Value of options and warrants granted 2,226,879 --
Amortization of notes payable discount 181,318 --
Accrued interest on notes converted to stock 51,493 --
Amortization of capitalized programming costs 280,806 639,758
Loss on sale of fixed assets -- 300
Depreciation and other amortization 38,371 88,910
Interest income from escrow account -- (29,421)
Loss on investment in joint venture -- 65,852
Changes in operating assets and liabilities:
Accounts receivable 128,001 65,108
Inventory (250) (6,980)
Prepaid expenses (20,897) (170,182)
Other assets 501 (34,389)
Capitalized programming costs (13,000) (374,399)
Accounts payable, accrued payroll and benefits, and
other accrued liabilities 54,414 977,951
Accrued royalty expense (193,414) 5,042
Due to joint venture -- (149,500)
----------- -----------
Net cash used in operating activities (935,392) (3,563,970)
----------- -----------
Cash flows from investing activities:
Purchases of furniture and equipment (10,007) (88,172)
Investment in joint venture -- (77,050)
----------- -----------
Net cash used in investing activities (10,007) (165,222)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings from shareholders 230,000 667,157
Payments on borrowings -- (3,813)
Payments on capital lease obligation (9,320) (829)
Net proceeds from the issuance of common stock share
commitments and collection of subscription receivable 723,246 1,161,204
----------- -----------
Net cash provided by financing activities 943,926 1,823,719
----------- -----------
Net decrease in cash (1,473) (1,905,473)
Cash, beginning of period 136,058 2,219,145
----------- -----------
Cash, end of period $ 134,585 $ 313,672
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 6
RNETHEALTH.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
RnetHealth.com, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial statements and
the instructions to Form 10-QSB related to interim period financial statements.
Accordingly, these condensed consolidated financial statements do not include
certain information and footnotes required by generally accepted accounting
principles for complete financial statements. However, the accompanying
unaudited condensed consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary in order to present the financial statements fairly.
The results of operations for interim periods are not necessarily indicative of
the results to be expected for the full year. These condensed consolidated
financial statements should be read in conjunction with the Company's audited
financial statements, and notes thereto, which are included in the Company's
Registration Statement on Form SB-2/A (File No. 333-90481 dated November 12,
1999), and the Company's Annual Report on Form 10-KSB for the year ended June
30, 1999.
NOTE 2 - ISSUANCE OF COMMON STOCK
In July, 1999, the Company issued 931,687 shares of stock to employees and
consultants for services rendered in the Company's fiscal year ended June 30,
1999. The value of such shares was recorded previously as shares subscribed;
therefore, the issuance of these shares had no impact on operations or equity.
In addition, the Company received $50,000 from the June 1999 private placement
and the related shares were issued out of escrow.
From July to December 1999, the Company issued 605,538 shares of stock to
employees and consultants for employment and other consulting services,
recognizing expenses of $257,232. In that same period, the Company issued
1,064,445 shares to various related-party lenders who provided short-term
financing for the Company. The value of such shares (totaling $384,331) has been
recorded as additional interest expense in the accompanying consolidated
statement of operations for 1999 since the related short-term notes were
immediately convertible at the option of the note holder. In addition, the
Company has committed to issue an additional 210,715 shares at December 31, 1999
to employees and consultants, the estimated value of which ($289,733) has been
recognized as of December 31, 1999.
From July to December 1999, option and warrant holders exercised their rights to
acquire 897,500 shares of common stock, resulting in proceeds of $116,975 to the
Company.
On September 28, 1999, the Company entered into a Restructuring Agreement with
various investors. Pursuant to the Restructuring Agreement, the Company agreed
to the following: (i) issue 500,000 shares to various investors in lieu of any
further reset rights under June 1998 private placement agreement; (ii) issue
400,000 shares as an initial reset of the purchase price of common stock under
the June 1999 subscription agreement, with all further resets based on a
purchase price of $0.50 with a subsequent issuance of 1,200,000 shares as a
further reset; (iii) fix the conversion price on the $100,000 convertible note
(see below) at $0.50; and (iv) reprice 500,000 warrants issued in May 1999 from
$0.01 to $0.25 per share (see Note 3), 250,000 of which were exercised during
the period ended December 31, 1999 (see above) with the other 250,000 shares
committed to be exercised (see Note 8).
<PAGE> 7
RNETHEALTH.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
DECEMBER 31, 1999
NOTE 2 - ISSUANCE OF COMMON STOCK, CONTINUED
Debt Restructuring
On October 12, 1999, the Company entered into Debt Restructuring Agreements with
certain note holders. Pursuant to these agreements, the note holders agreed to
accept shares of the Company's common stock at the rate of $0.25 per share as
payment for the principal and interest owed. The total debt and accrued interest
balance converted was $760,826 for 3,043,305 shares. The Company recorded
interest expense of $191,728 related to this conversion. In addition, the note
holders were given the right to acquire an additional 3,043,305 shares at $0.25
per share for at least a minimum of 45 days which expired January 15, 2000. The
value of these warrants was $760,826, which was recorded as interest expense for
the quarter ended December 31, 1999. Subsequent to December 31, the Company
received commitments to exercise certain of these warrants (see Note 8).
On November 18, 1999, additional notes and accrued interest totaling $108,000
were converted for 432,000 shares at a beneficial price of $0.25 per share
resulting in additional imputed interest expense of $27,216.
NOTE 3 - STOCK OPTIONS AND WARRANT ACTIVITY
In connection with employee services and consulting arrangements, the Company
has granted options and warrants to acquire a total of 9,188,717 shares of
common stock to various employees, consultants and Board of Director members for
the six-month period ended December 31, 1999. These options have exercise prices
between $0.15 and $1.00 per share and vest immediately through two years. The
estimated fair value of the non-employee options and warrants granted (under
SFAS No. 123) or amended during the six month period ended December 31, 1999
(see Note 2) or the intrinsic value of employee options and warrants granted
below market value (under APB Opinion 25), at the time of grant, totaled
approximately $2,226,879 and has been included in equity.
In addition, approximately 492,613 options expired during the period.
NOTE 4 - DEBT
Debt consists of the following at December 31, 1999:
<TABLE>
<S> <C>
Unsecured note payable to Group W Network Services, interest
at 10%, principal and interest due March 31, 2000 $75,000
=======
</TABLE>
The debt discount amortization totaled $181,318 during the period ended December
31, 1999.
In connection with the $230,000 of promissory notes (which were converted to
common stock - see Note 2), the note holders received 1,064,445 shares of stock
(valued at $384,331) that have been recorded as additional interest expense for
the period ended December 31, 1999. Also, the promissory note holders were given
a conversion option equivalent to 50% of the share price on the date of
conversion. This beneficial conversion was recorded as additional interest
expense of $230,000 during the quarter ended September 30, 1999 as the notes
were immediately convertible.
<PAGE> 8
RNETHEALTH.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
DECEMBER 31, 1999
NOTE 5 - LOSS PER SHARE
Net loss per share is based on the weighted average number of common shares
outstanding and dilutive common stock equivalents during the periods presented.
Options and warrants to purchase 14,802,580 shares of common stock (at prices
ranging from $.01 to $9.075 per share) and 5,450,835 shares of common stock (at
prices ranging from $0.01 to $9.075 per share) were outstanding as of December
31, 1999 and 1998, respectively, and were excluded from the computation of loss
per share assuming dilution as they would have been anti-dilutive.
NOTE 6 - GOING CONCERN
The accompanying condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has
significant recurring losses from operations, limited operating revenues, a
working capital deficit of $873,232 and a shareholders' deficit of $462,680.
These factors (among others) raise substantial doubt about the Company's ability
to continue as a going concern. The ability of the Company to operate as a going
concern is dependent upon its ability to obtain sufficient additional debt
and/or equity capital. The Company plans to raise additional working capital
through strategic alliances and private and public offerings. The successful
outcome of future activities cannot be determined at this time and there are no
assurances that if achieved, the Company will have sufficient funds to execute
its intended business plan or generate positive operating results.
The financial statements do not include any adjustments related to the
recoverability and classification of assets carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has a consulting agreement with an unrelated company. In connection
with the agreement, the Company is obligated to reserve for issuance 200,000
shares, which will be paid to the consultant over a twenty-four month period at
8,333 shares per month. If the agreement is terminated prior to the conclusion
of the twenty-four month period, the consultant has no right to receive any
additional shares that have not yet been granted. Through December 31, 1999,
57,331 shares have been granted under this agreement
<PAGE> 9
RNETHEALTH.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(UNAUDITED)
DECEMBER 31, 1999
NOTE 8 - SUBSEQUENT EVENTS
Stock Activity
From January 1, 2000 through February 2, 2000, the Company accepted commitments
to acquire shares of common stock as follows: (1) 2,400,000 shares to existing
investors at $0.25 per share (at December 31, 1999, $556,271 was already
received for 2,225,080 shares and has been included in additional paid-in
capital); (2) 200,000 shares to board members for the exercise of options at
$0.25 per share; (3) 1,966,366 shares to former note holders pursuant to
warrants at $0.25 per share (see Note 2); and (4) 332,000 shares to an outside
investor at $0.6024 share. In addition to the $556,271 already received by the
Company through December 31, 1999 under these commitments, the Company will
receive an additional $785,000 from the above commitments, of which
approximately $742,000 has been received through February 2, 2000. Also, the
Company received approximately $65,000 from the exercise of options and warrants
totaling 280,500 shares (including the 250,000 shares at $0.25 per share - see
Note 2).
The Company also is committed to issuing 210,715 shares to employees and
consultants that were accrued for at December 31, 1999 at a value of $289,733.
Authorized Shares
The number of common shares issued by the Company is approaching the amount
authorized.
On January 18, 2000, the Company filed a proxy to increase common stock
authorized to 50,000,000 from the current 25,000,000. Management anticipates
that this increase will be approved by the shareholders at their meeting to be
held on February 24, 2000.
NOTE 9 - SEGMENT REPORTING
The Company is currently operating under one business segment and developing two
other segments. Thus, no additional segment reporting is required.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
SIX-MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998:
Net sales of $721,671 for the six-month period ended December 31, 1999 were 6%
higher than the net sales of $678,963 for the six-month period ended December
31, 1998, due to normal sales growth.
Operating expenses of $4,089,252 for the six-month period ended December 31,
1999 were 34% lower than the operating expenses of $5,366,815 for the six-month
period ended December 31, 1998. The decrease is primarily attributed to
significant reduction in workforce and significant corporate cost cutting,
resulting in a decrease of cash operating expenses of approximately $3,100,000.
The decrease is offset by additional non-cash charges for the six-month period
ended December 31, 1999 related to the issuance of stock, stock options and
warrants and amortization of prepaid consulting and debt discounts totaling
approximately $1,800,000.
Interest expense of $1,913,895 for the six-month period ended December 31, 1999
was $1,900,015 higher than the interest expense of $13,880 for the six-month
period ended December 31, 1998. The increase is primarily attributed to non-cash
interest charges incurred in connection with the issuance of convertible notes
during the six-month period ended December 31, 1999 (approximately $1,719,000)
and the non-cash amortization of debt discount on existing notes (approximately
$181,000).
As a result of the above factors, the net loss for the six-month period ended
December 31, 1999 was $5,280,185 or $0.27 per share as compared to a net loss of
$4,642,020 or $0.70 per share for the six-month period ended December 31, 1998.
THREE-MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998:
Net sales of $295,002 for the three-month period ended December 31, 1999 were 8%
higher than the net sales of $272,639 for the three-month period ended December
31, 1998, due to normal sales growth.
Operating expenses of $1,797,900 for the three-month period ended December 31,
1999 were 36% lower than the operating expenses of $2,797,793 for the
three-month period ended December 31, 1998. The decrease is primarily attributed
to significant reduction in workforce and significant corporate cost cutting.
Interest expense of $1,152,371 for the three-month period ended December 31,
1999 was $1,142,609 higher than the interest expense of $9,762 for the
three-month period ended December 31, 1998. The increase is primarily attributed
to non-cash interest charges incurred in connection with the issuance of
convertible notes during the three-month period ended December 31, 1999.
As a result of the above factors, the Company reduced its loss from operations
41% to $1,502,898 for the three month period ending December 31, 1999. However,
the net loss for the three-month period ended December 31, 1999 was $2,654,448
or $0.12 per share as compared to a net loss of $2,526,417 or $0.34 per share
for the three-month period ended December 31, 1998.
FINANCIAL POSITION:
Total assets decreased from $1,268,379 at June 30, 1999 to $863,381 at December
31, 1999. The decrease is primarily attributed to amortization of capitalized
programming costs of approximately $277,000 and a reduction in accounts
receivable of approximately $128,000.
<PAGE> 11
Total liabilities decreased from $1,880,396 at June 30, 1999 to $1,326,061 at
December 31, 1999. The decrease in primarily attributed to a debt conversion of
approximately $406,000 and reductions in accounts payable and accrued expenses
of approximately $148,000.
Shareholders' deficit decreased from $(612,197) at June 30, 1999 to $(462,680)
at December 31, 1999. The decrease is primarily attributed to operating losses
for the six-month period ended December 31, 1999, offset by the value of new
issuances of stock, warrants, and options to investors, employees and
consultants.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary capital requirements in the next twelve months will be to
fund the costs of developing its internet operations and to fund its affiliate
marketing efforts, Satellite transponder costs, costs for uplink, master control
and transmission services, and other working capital expenses. The Company's
capital requirements have been and will continue to be significant, and its cash
requirements continue to exceed its cash flow from operations. At December 31,
1999, the Company had a working capital deficit of $873,232. Due to (among other
things) the lack of meaningful revenue and costs associated with program
development and affiliated marketing efforts, the Company has been substantially
dependent upon various debt and equity private placements and its initial public
offering to fund its operations.
The Company's cash flow used in operating activities decreased from $3,563,970
for the six-month period ended December 31, 1998 to $935,392 for the six-month
period ended December 31, 1999. This decrease is primarily due to the Company's
significant cutbacks in personnel, overhead and other corporate expenses and the
Company's ability to pay many expenses in stock rather than cash. Total net
non-cash charges for the six-month period ended December 31, 1999 were
$4,389,438 as compared to only $765,399 for the six-month period ended December
31, 1998.
During the six-month period ended December 31, 1999, the Company has obtained
liquidity from the proceeds received from debt issuances, common stock issuances
and commitments and collections of subscription receivable totaling $953,246.
In January 2000, the Company received approximately $807,000 in cash for
commitments to purchase stock and exercise stock options and warrants for a
total of approximately 5,400,000 shares.
The Company currently anticipates that the proceeds received in December and
January from the new stock activity and the exercise of stock options and
warrants, together with projected revenues from operations, will be sufficient
to fund the Company's operations and capital requirements until approximately
June 30, 2000. There can be no assurance, however, that such funds will be
sufficient to fund the Company's operations and capital requirements until June
30, 2000 or that such funds will not be expended prior thereto due to
unanticipated changes in economic conditions or other unforeseen circumstances.
The Company has no current arrangements with respect to any additional
financing, and it is not anticipated that existing shareholders will provide any
substantial portion of the Company's future financing requirements. However, the
Company is actively negotiating certain strategic alliances and private
placements. Consequently, there can be no assurance that any additional
financing will be available to the Company when needed, on commercially
reasonable terms, or al all. An inability to obtain additional financing when
needed would have material adverse effect on the Company, requiring it to
curtail and possibly cease its operations. In addition, any additional equity
financing may involve substantial dilution to the interests of the Company's
then existing shareholders. In addition, the Company's equity is currently below
the $4 million minimum required for re-listing of the Company's shares on the
NASDAQ Small Cap exchange. Unless the Company can demonstrate the ability to
raise the Company's equity to an amount in excess of $4 million, and present a
plan that will satisfy NASDAQ's other standards regarding profitability and
stock price stability maintaining minimum bid price over $4.00, the Company's
shares may not be registered on the NASDAQ Small Cap.
<PAGE> 12
DISCLOSURE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains certain forward-looking statements with respect to the
future performance of the Company that involve risks and uncertainties. Various
factors could cause actual results to differ materially from those projected in
such statements. These factors include, but are not limited to, the Company's
lack of meaningful revenues, its significant and continuing losses, its
significant capital requirements, the uncertainty of its ability to implement
its plan of operation and other factors discussed herein and in the Company's
other filings with the Securities and Exchange Commission.
<PAGE> 13
PART II
ITEM 1. LEGAL PROCEEDINGS
Refer to Company's 10QSB filed for Quarter ending September 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<S> <C>
27.1 Financial Data Schedule.
27.2 Exhibits relating to debt restructuring signed October 12, 1999.
Refer to Company's SB-2 filed November 5, 1999 exhibit 10.22
file #333-90481.
</TABLE>
(b) Reports on form 8-K
None.
<PAGE> 14
SIGNATURES
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, thereunto duly authorized.
RNETHEALTH.COM, INC.
Dated: February 14, 2000 By: /s/ Stacey Romm
----------------------------------
Stacey Romm
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 134,585
<SECURITIES> 0
<RECEIVABLES> 160,498
<ALLOWANCES> (32,000)
<INVENTORY> 55,843
<CURRENT-ASSETS> 452,829
<PP&E> 453,271
<DEPRECIATION> (304,085)
<TOTAL-ASSETS> 863,381
<CURRENT-LIABILITIES> 1,326,061
<BONDS> 75,000
245,689
0
<COMMON> 0
<OTHER-SE> (708,369)
<TOTAL-LIABILITY-AND-EQUITY> 863,381
<SALES> 721,671
<TOTAL-REVENUES> 721,671
<CGS> 252,095
<TOTAL-COSTS> 4,089,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,913,895
<INCOME-PRETAX> (5,280,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,280,185)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,280,185)
<EPS-BASIC> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
