<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICASDOCTOR.COM, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7374 52-2059555
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
------------------------------
AMERICASDOCTOR.COM, INC.
11403 CRONRIDGE DRIVE
SUITE 200
OWINGS MILLS, MARYLAND 21117
(410) 581-1189
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
SCOTT M. RIFKIN, M.D.
CHIEF EXECUTIVE OFFICER
AMERICASDOCTOR.COM, INC.
11403 CRONRIDGE DRIVE
SUITE 200
OWINGS MILLS, MARYLAND 21117
(410) 581-1189
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL D. NATHAN, ESQ. WILLIAM J. GRANT, JR., ESQ.
SIMPSON THACHER & BARTLETT WILLKIE FARR & GALLAGHER
425 LEXINGTON AVENUE 787 SEVENTH AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10019
(212) 455-2000 (212) 728-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If the delivery of the prospectus is expected to be made pursuant to Rule
434 under the Securities Act, check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO AGGREGATE OFFERING REGISTRATION
BE REGISTERED PRICE(1) FEE
<S> <C> <C>
Common Stock, par value $ per share......................................... $ 60,000,000 $ 16,680
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
The information contained in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
PRELIMINARY PROSPECTUS DATED , 1999
- --------------------------------------------------------------------------------
,000,000 SHARES
AMERICASDOCTOR.COM
COMMON STOCK
- ----------------------------------------------------------------------
AmericasDoctor.com is offering ,000,000 shares of common stock with this
prospectus.
Prior to this offering, there has been no public market for our common stock. We
expect that the price to the public in the offering will be between $ and
$ per share. The market price of the shares after the offering may be higher
or lower than the offering price. In connection with this offering, the common
stock will be listed on the NASDAQ National Market under the symbol "AMDR."
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Price to the Public $ $
- -------------------------------------------------------------------------------------------
Underwriting Discount
- -------------------------------------------------------------------------------------------
Proceeds to AmericasDoctor.com
- -------------------------------------------------------------------------------------------
</TABLE>
AmericasDoctor.com has granted an over-allotment option to the underwriters.
Under this option, the underwriters may elect to purchase a maximum of
additional shares from AmericasDoctor.com within 30 days following the date of
this prospectus to cover over-allotments.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WARBURG DILLON READ LLC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 7
Use of Proceeds.......................... 29
Dividend Policy.......................... 29
Capitalization........................... 30
Dilution................................. 31
Selected Financial Data.................. 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 33
Business................................. 41
Regulation and Other Legal
Considerations......................... 59
Management............................... 65
Certain Transactions..................... 74
Principal Stockholders................... 80
Description of Capital Stock............. 82
Shares Eligible for Future Sale.......... 85
Underwriting............................. 88
Legal Matters............................ 90
Experts.................................. 90
Where You Can Find More Information...... 90
Index to Consolidated Financial
Statements............................. F-1
</TABLE>
Unless otherwise stated, all information contained in this prospectus
assumes no exercise of the over-allotment option granted to the underwriters.
The underwriters are offering the shares subject to various conditions and
may reject all or part of any order. The shares should be ready for delivery on
or about , 1999.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" as defined in Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements may include statements about
our business strategy, plans and timing for the introduction or enhancement of
our services, plans for entering into sponsorships or strategic alliances,
expected sources of funds to finance our operations following this offering, and
other expectations, intentions and plans contained in this prospectus that are
not historical facts.
When used in this prospectus, the words "expects," "anticipates," "intends,"
"plans," "may," "believes," "seeks," "estimates," "strategy" and similar
expressions are generally intended to identify forward-looking statements.
Because such statements involve risks and uncertainties, our actual results of
operations could differ materially from those expressed or implied by such
statements for a number of reasons, including those discussed under "Risk
Factors" and elsewhere in this prospectus. We assume no obligation to update any
forward-looking statements contained in this prospectus.
CONVENTIONS WHICH APPLY TO THIS PROSPECTUS
Unless otherwise indicated in this prospectus, the information contained in
this prospectus:
- reflects the conversion of all outstanding shares of our preferred stock
into 237,216 shares of common stock upon the completion of this offering,
- reflects a for 1 split of our common stock upon the completion of this
offering, and
- assumes that the representatives of the underwriters do not exercise their
over-allotment option and that no other person exercises any other
outstanding option or warrants.
"AmericasDoctor.com," "America's Doctor," the AmericasDoctor logo and "AD
chatware" are some of our trademarks and service marks. This prospectus contains
trade names, trademarks and service marks of other companies, all of which are
the property of their respective owners.
This prospectus includes statistical data regarding the Internet industry
and the healthcare market. This data was obtained from industry publications and
reports which we believe to be reliable sources; however, we cannot guarantee
the accuracy and completeness of such information. We have neither independently
verified such data nor sought the consent of any organization to refer to their
respective reports herein. We have not commissioned any of such reports.
Unless the context requires otherwise, references to the "company,"
"AmericasDoctor.com," "we," "us" and "our" in this prospectus refer to
AmericasDoctor.com, Inc., a Delaware corporation, and AmericasDoctor.com Medical
Mall, Inc., its subsidiary.
You should not consider information available through our Web site to be a
part of this prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS, INCLUDING "RISK FACTORS,"
AND THE FINANCIAL STATEMENTS AND NOTES CONTAINED ELSEWHERE IN THIS PROSPECTUS
BEFORE BUYING SHARES OF OUR COMMON STOCK.
AMERICASDOCTOR.COM
AmericasDoctor.com operates an interactive Internet healthcare information
destination for consumers. We offer consumers free, real-time interaction with
healthcare professionals and easy access to relevant and reliable healthcare
information. Our destination features our free 24-hour doctor chat service that
enables consumers to have live on-line, one-on-one chats with doctors and other
healthcare professionals, a variety of interactive healthcare content such as
lectures and live educational programs, a growing library of information on
acute ailments, chronic illnesses, nutrition, pharmacology and other topics, as
well as health and medical publications and news. We have designed our doctor
chat service to enable our users, through the assistance, expertise and insight
of doctors and other healthcare professionals, to successfully find relevant and
reliable healthcare information on-line in response to their health questions.
We are also expanding our site to integrate community Web pages that focus on
the needs of people sharing specific health conditions and interests. We offer
hospitals the opportunity to be an exclusive sponsor of our Internet services
within a market defined by zip code, and also provide sponsors with
opportunities to feature their healthcare professionals on our site. Our goal is
to establish AmericasDoctor.com as a premier Internet site that consumers trust
for accurate, real-time answers to their health questions and rely on as a
preferred destination for healthcare content, communities and services. We
launched our service in September 1998, initially accessible only to America
Online, Inc. ("AOL") subscribers. In February 1999, we launched our service on
the Internet, at our domain address, WWW.AMERICASDOCTOR.COM, and during April
1999 we had approximately 400,000 user sessions and approximately 4,000,000 page
views. In general, a user session is a period of on-line activity by a user,
identified by a "cookie", separated by a period of at least 30-minutes of
inactivity on our site by that user.
We are developing our site to generate revenue opportunities from multiple
sources, including hospital sponsorship, e-commerce, sales of advertising,
commercial sponsorship of educational programming and fees for assisting in the
recruitment of volunteers for clinical hospital sponsorship studies. As of June
1, 1999 we had 34 contracts with hospital sponsors, 23 of which were launched on
the Internet. In addition, in May 1999 we launched our medical mall through
which we intend to offer a broad range of healthcare products to our customers.
We have established several key strategic relationships, and we intend to
pursue additional strategic relationships in the future. In particular, we are
an anchor tenant on AOL's subscriber Health Page that provides AOL's subscribers
easy access to our content, communities and services. In addition to our
relationships with AOL and our hospital sponsors, we have entered into
agreements with Smith & Nephew PLC, a distributor and manufacturer of home
health products and devices, to develop an e-commerce presence, Premier Research
Worldwide, Ltd., a clinical research company, to help develop and market our
ability to recruit volunteers for clinical studies and with Lycos Corporation, a
leading Internet portal, to provide us with over 400 keywords, phrases and
advertising that enable consumers to easily locate our Web site and communities
and assist us in building our brand image and driving more traffic to our site.
The Internet has emerged as one of the fastest growing media in history and
has rapidly become a significant global medium enabling an increasing number of
users to quickly retrieve information, share their experiences in on-line
communities and purchase a variety of products and services. According to the
U.S. Department of Commerce, the number of U.S. Internet users will grow from
approximately
3
<PAGE>
62 million in 1998 to about 136 million by the year 2002. In addition, changes
in the healthcare industry, including the development of managed care and the
emergence of new medical and pharmaceutical treatments, are placing increasing
pressure on consumers to inform themselves of their healthcare options.
According to Cyber Dialogue, the number of adults searching for on-line
healthcare information will grow from approximately 17 million users in 1998 to
approximately 30 million by the year 2000.
As consumers become more involved in managing their personal health, and
that of their relatives or other people close to them, they are searching for
clear answers to their health questions and more reliable information about
medical conditions, treatments and outcomes. Many of the traditional and new
on-line sources of healthcare information are diffuse, unclear, voluminous and
difficult for many consumers to evaluate. We believe many consumers continue to
lack the tools necessary to navigate successfully through the abundance of
healthcare information services and products available to them.
Our solution enables consumers to obtain accurate real-time answers to their
healthcare questions and quickly find clearly presented, objective and
up-to-date healthcare information by utilizing the expertise and insight of
doctors through our free 24-hour doctor chat service. We are designing our site
to offer an engaging and interactive destination where consumers also will find
interactive expert lectures, educational programming, healthcare articles,
current healthcare news, on-line communities focused on specific health
conditions, e-commerce as well as access to hospitals and other healthcare
companies.
We believe our healthcare content, communities and service, featuring our
free 24-hour doctor chat service, will enable us to attract a loyal consumer
audience that will be highly attractive to hospitals and other healthcare
providers, pharmaceutical companies and other healthcare suppliers, advertisers
and research organizations. Key elements of our business strategy include:
- establish AmericasDoctor.com as a leading and trusted brand for on-line
healthcare information, and products and services;
- differentiate our healthcare content, communities and services by
featuring our free 24-hour doctor chat service and interactive expert
lectures and designing additional easy-to-use interactive features;
- pursue and expand relationships with local hospital sponsors;
- expand our strategic relationships with companies that have the ability
among other things, to promote the AmericasDoctor.com brand, drive
additional consumers to our site and enhance the quality of our healthcare
content, communities and services; and
- integrate and expand our health condition-specific on-line communities to
become premier healthcare destinations integrating targeted information
and community chat services with the full range of our healthcare content,
products and services.
We were incorporated in Delaware in August 1997 and commenced operations in
September 1998.
------------------------
Our corporate headquarters currently are located at 11403 Cronridge Drive,
Suite 200, Owings Mills, Maryland 21117. Our telephone number is (410) 581-1189.
4
<PAGE>
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by us to purchase additional shares in the offering. Immediately
following completion of this offering, AmericasDoctor.com also will have (i)
272,222 shares of common stock issuable upon the exercise of outstanding options
granted under our 1999 Long-Term Incentive Plan and (ii) 23,220 shares of common
stock issuable upon exercise of outstanding warrants. See "Underwriting,"
"Management-- Stock Plans" and note 9 to the financial statements and the other
notes thereto.
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<S> <C>
Common stock offered by AmericasDoctor.com.............. shares
Common stock to be outstanding after this offering...... shares
Use of proceeds......................................... AmericasDoctor.com intends to use
the proceeds from this offering to
fund operating losses and for
general corporate purposes,
including expansion of our
operations and building additional
chat centers, advertising and
brand promotion, operate and
maintain our Web site, content
development and working capital.
We may also use a portion of the
proceeds for strategic alliances
and acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.................. AMDR
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
We have calculated pro forma net loss per share assuming the conversion of
133,333 shares of preferred stock issued on February 1, 1999 into common stock
as of the date of issuance. For purposes of the balance sheet data, we have
given pro forma effect to the issuance of 9,958 shares of common stock and
103,883 of convertible redeemable preferred stock on June 1, 1999, as if such
issuances had occurred on March 31, 1999. The "as adjusted" column reflects the
receipt by AmericasDoctor.com of the estimated net proceeds of this offering at
an assumed initial public offering price of $ per share, after deducting the
estimated underwriting discounts and commissions and estimated offering expenses
payable by us, and the application of the estimated net proceeds from this
offering. See "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 8, 1997
(INCEPTION) THROUGH YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
------------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATION DATA:
Revenues................................................... $ -- $ 62 $ -- $ 216
Operating loss........................................... (12) (4,604) (164) (2,821)
Net loss................................................. $ (42) (5,242) (223) (2,854)
------ ------------ --------- ---------
------ ------------ --------- ---------
Basic and diluted loss per share......................... $ (0.34) $ (22.36) $ (1.80) $ (6.30)
------ ------------ --------- ---------
------ ------------ --------- ---------
Shares used in computing basic and diluted loss per
share.................................................... 124 234 124 453
------ ------------ --------- ---------
------ ------------ --------- ---------
Pro forma basic and diluted loss per share................. $ (0.34) $ (22.36) $ (1.80) $ (5.39)
------ ------------ --------- ---------
------ ------------ --------- ---------
Shares used in computing pro forma basic and diluted loss
per share................................................ 124 234 124 530
------ ------------ --------- ---------
------ ------------ --------- ---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------
<S> <C> <C> <C>
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 2,322 $ 9,356 $
Working capital................................................................ 2,812 9,846
Total assets................................................................... 4,257 11,291
Long-term obligations.......................................................... 5 5
Redeemable preferred stock..................................................... -- 6,375
Total stockholders' equity..................................................... 3,639 4,298
</TABLE>
6
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
BUYING SHARES OF OUR COMMON STOCK. OUR BUSINESS AND BUSINESS STRATEGY ARE NEW,
EVOLVING AND NOT PROVEN. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING AMERICASDOCTOR.COM. WE MAY FACE ADDITIONAL RISKS AND
UNCERTAINTIES THAT ARE CURRENTLY UNKNOWN TO US OR THAT WE CURRENTLY DEEM
IMMATERIAL. ALL OF THESE RISKS MAY IMPAIR OUR BUSINESS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. SUCH RISKS ALSO COULD CAUSE A SIGNIFICANT DECLINE IN THE
TRADING PRICE OF OUR COMMON STOCK AND YOU COULD LOSE PART OR ALL OF YOUR
INVESTMENT.
OUR EARLY STAGE OF DEVELOPMENT AND LIMITED OPERATING HISTORY MAKE FUTURE
FORECASTING DIFFICULT.
We were incorporated in August 1997 and are in the early stages of
development. We were formerly a development stage company and continue to have
uncertainties related to development stage enterprises. We launched our Internet
operations on America Online, Inc. ("AOL") in September 1998, our Web site in
February 1999 and our first on-line community in March 1999. Our e-commerce
operations commenced in May 1999. Accordingly, we have a very limited operating
history. We face the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets, such as the Internet market.
To address these risks and difficulties we must:
- attract larger audiences to our site;
- increase awareness and recognition of our brand;
- maintain our current strategic relationships (including distribution
relationships) and develop new ones;
- respond successfully to changes in our consumers' demands and actions
taken by our competitors;
- attract and retain healthcare sponsors, e-commerce partners and
advertisers;
- successfully manage the increasing use of our doctor chat service;
- design and market compelling content and well-regarded health-related
products and on-line services which will foster audience loyalty;
- manage and fund our expanding operations;
- continue to upgrade and effectively integrate current and new
technologies;
- attract, retain and motivate qualified personnel; and
- respond to changes in government regulations.
We believe our success depends on our ability to develop and execute a
business strategy to address these issues, many of which are beyond our control.
We cannot assure you that the public will accept our content, communities or
services, that our business strategy will be successful or that we will
successfully address the risks or difficulties associated with our business.
Failure to successfully implement our business strategy or to adequately address
any of these risks or difficulties could have a material adverse effect on our
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and related notes for detailed information on our very
limited operating history.
The Internet market, and, in particular, the healthcare sector of the
Internet market, is in the early stage of development and is rapidly evolving.
The Internet market is characterized by an increasing
7
<PAGE>
number of market entrants who are introducing competing products and services.
Demand and market acceptance for recently introduced products and services often
are subject to a high level of uncertainty and risk. We cannot predict with any
certainty that a market for our health-related services will develop or that
demand for our content, communities and services will emerge, grow or be
sustainable. If the market fails to develop, develops more slowly than we expect
or becomes saturated with competitors, our business, financial condition and
results of operations could be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
OUR BUSINESS STRATEGY IS NEW, EVOLVING AND UNPROVEN AND MAY NOT BE SUCCESSFUL.
Our business strategy is new, evolving and unproven. Due to the rapidly
changing nature of the Internet we are continuously modifying our business
strategy and expect to continue to modify our strategy in the future. Our
business objective is to become a premier Internet healthcare information
destination that customers trust for accurate, real time answers to their health
questions and rely on us as a preferred destination for healthcare content,
communities and services. Our current strategy includes among other things, the
following elements:
- establish AmericasDoctor.com as a leading brand;
- differentiate our consumer experience with our free 24-hour doctor chat
service and other interactive tools;
- pursue and expand relationships with local hospital sponsors;
- expand our strategic relationships;
- integrate our health condition-specific communities into our site; and
- generate multiple and recurring online revenue streams.
We cannot assure you that our current business strategy will be successful,
or if it is not successful, that we will be able to modify it in a timely and
successful manner. In addition, we cannot assure you that we will be able to
develop successful business strategies to capitalize on opportunities in new and
unproven areas. See "Business--Our Business."
Furthermore, much of our content and many of our communities and services
are currently in development and are being offered on a limited basis. We cannot
assure you that we will be able to effectively develop or expand the content,
communities and services we currently offer on a limited basis.
WE MAY FAIL TO ACCOMMODATE USER DEMAND FOR OUR FREE 24-HOUR DOCTOR CHAT SERVICE
AND WE WILL INCUR SIGNIFICANT EXPENSE TO OPERATE THIS SERVICE.
We believe our free 24-hour doctor chat service differentiates
AmericasDoctor.com from other Internet healthcare networks and Web sites.
Although we are designing our site to offer compelling content and other
interactive features in addition to our chat service, such other features may
not attract users to our site independent of our free doctor chat service. For
example, we are planning, as an alternative to our free 24-hour doctor chat
service, an interactive feature that allows our users to submit their questions
by e-mail to a research staff member who will search the resources available on
our site under the supervision of our medical personnel and e-mail a response.
However, we cannot assure you that such service will be satisfactory to our
users. The costs of operating our free 24-hour doctor chat service, and, in
particular, the costs of employing doctors, are significant. We anticipate the
need to add call centers and increase the number of doctors available on our
chat service to accommodate increases in the number of visitors seeking to use
our chat service. We expect such expansion to elevate our cost structure
significantly; however, due to the cost of adding doctors and call centers and
the availability of doctors, we do not intend to increase the number of doctors
8
<PAGE>
proportionately to the anticipated increase in the number of our users. In light
of these cost issues, as well as training, recruitment, technological and
operational issues, we cannot assure you that we will be able to add call
centers or employ additional doctors to the extent required to support the full
volume of users entering our site desiring to use our chat service. From time to
time, our users experience delays in accessing our doctor chat service, and as a
result of increasing traffic and costs, our users may experience increasing
delays or substantial difficulty in accessing our doctor chat service which
could lead to dissatisfaction with our service and our site as a whole. Such
user dissatisfaction could have a material adverse effect on our business,
financial condition and results of operations. In addition, we believe many of
our hospital sponsors have associated their image and reputation, in part, with
the quality of our site and services and, in particular, the satisfaction of our
users. If our hospital sponsors perceive that our users are becoming
dissatisfied with our doctor chat service, or any other features of our site, we
may lose the support of our hospital sponsors and face difficulty acquiring new
hospital sponsors or renewing existing hospital sponsorships. Such circumstances
could have a material adverse effect on our business, financial condition and
results of operations.
WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES AND NEGATIVE CASH FLOW FOR THE
FORESEEABLE FUTURE.
Since our inception, we have incurred significant losses and negative cash
flow, and, as of March 31, 1999, had an accumulated deficit of approximately
$8.1 million. We have not achieved profitability and expect to incur increasing
operating losses and negative cash flow for the foreseeable future as we fund
operating and capital expenditures in areas such as marketing and brand
promotion, expanding our free 24-hour doctor chat service, advertising and
sales, content and service development and operating infrastructure. Our
business strategy is not yet proven, and we cannot assure you that we will ever
achieve or sustain profitability. See "Use of Proceeds," "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
FUTURE REVENUES AND OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY.
Our revenues and our operating results may fluctuate significantly in the
future as a result of various factors, many of which are outside of our control.
These factors include:
- the level of Internet usage;
- the level of traffic on our site;
- our ability to enter into or renew key agreements, such as our agreement
with AOL;
- the cost, timing and impact of our sales and marketing initiatives;
- the demand, timing and volume of hospital and educational program
sponsorships of our site and our ability to renew sponsorships;
- seasonal or cyclical patterns in Internet advertising;
- the amount and timing of operating costs and capital expenditures relating
to expansion of our operations;
- our ability to charge access fees to our e-commerce partners;
- new or enhanced features and services introduced by us or our competitors;
- the degree of competition in our market;
- system failures or technical difficulties affecting the Internet generally
or the operation of our site;
- government regulations related to healthcare, such as those governing the
practice of medicine and anti-kickback laws, and to use of the Internet,
including those relating to sales and distribution of healthcare
information, products and services; and
9
<PAGE>
- economic conditions specific to the Internet, on-line commerce and the
healthcare industry.
We expect our revenues to come from hospital sponsorships, e-commerce
(including access fees charged to our e-commerce partners), advertising,
educational program sponsorships and fees for assisting in the recruitment of
volunteers for clinical trial studies. Our hospital sponsorships are generally
one-year arrangements. We cannot assure you that we will be able to attract
additional hospital sponsors, that our existing hospital sponsors will renew
their current agreements with us. We expect that our primary sources of revenues
for the foreseeable future will be sponsorship revenues and access fees. We
cannot forecast with any degree of certainty, the amount of sponsorship
revenues, advertising revenues or e-commerce revenues or other revenues we may
be able to generate. In addition, our operating expenses, including development
costs, general and administrative expenses, advertising, marketing and public
relations expenses, may be committed in advance and in anticipation of future
revenues.
Due to the foregoing and other factors, we believe quarterly comparisons of
our results of operations will not be good indicators of our performance. If our
operating results fall below the expectations of securities analysts and
investors in some future periods, our stock price may fall. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
WE MUST EXPEND SIGNIFICANT RESOURCES TO ESTABLISH, MAINTAIN AND STRENGTHEN OUR
BRAND.
We must expend significant resources to establish the AmericasDoctor.com
brand. Brand loyalty is essential to attract an increasing number of visitors to
our site and to the success of our business. The following factors may affect
our ability to successfully establish our brand:
- healthcare consumers must, among other things, perceive our healthcare
content as relevant and reliable;
- our sponsors must, among other things, consider our site to be
professional, reliable and well operated;
- pharmaceutical companies, medical device manufacturers and other
healthcare vendors must, among other things, view our healthcare site as
an effective marketing and sales channel for their products and services;
and
- clinical researchers seeking volunteers for trial studies must view our
healthcare site as an effective means of recruiting suitable volunteers.
There are a substantial number of competitors currently seeking to establish
their name as a dominant brand in the Internet healthcare market. Failure to
establish AmericasDoctor.com as a leading brand in our market could have a
material adverse effect on our business, financial condition and results of
operations.
We intend to use a significant portion of the proceeds from this offering to
pursue aggressive marketing campaigns on-line and in traditional media to
promote our brand. However, unlike our on-line advertising, which gives us
immediate feedback and allows us to promptly adjust our marketing messages, the
effectiveness of advertising in traditional print and broadcast media is more
difficult to determine. We believe traditional media advertisements take longer
and cost more to produce and, as a result, have longer run times. If our
promotional efforts are unsuccessful, we will face difficult and costly choices
in deciding whether and how to redirect our marketing dollars, which could have
a material adverse effect on our business, financial condition and results of
operations. See "Business-- Marketing, Advertising and Public Relations."
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WE DEPEND ON OUR RELATIONSHIP WITH AMERICA ONLINE, INC.
We have an agreement with AOL to position AmericasDoctor.com as an anchor
tenant on its subscriber Health Channel. Our agreement with AOL became effective
in April 1998 and runs through June 2001. For the months of April and May 1999,
AOL accounted for approximately 55% of the visitors to our site. The number of
visitors to our site may vary according to seasonal patterns in the usage of AOL
services by AOL subscribers. Our relationship with AOL provides significant
opportunities to increase the level of traffic on our site, increase the
awareness of the AmericasDoctor.com brand and attract greater numbers of
sponsors and advertisers to our site. The fee we pay to AOL in the third year of
the agreement is not currently fixed and must be negotiated. We cannot assure
you that such fee will remain at current levels or at commercially reasonable
levels, or that we will be able to continue our agreement for the third year
with AOL or renew the agreement thereafter. If AOL fails to support us as an
anchor tenant on its subscription service or our agreement with AOL is
terminated, we may not be able to replace these services on commercially
reasonable terms with an adequate Internet service provider or portal. A
termination of our agreement with AOL would result in the loss of a substantial
number of users and could cause us to lose sponsors and advertisers. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." See "Business--Strategic Relationships" and "--Marketing,
Advertising and Public Relations."
WE MAY FAIL TO ESTABLISH AND MAINTAIN ADDITIONAL STRATEGIC RELATIONSHIPS AND
SPONSORSHIPS.
In addition to our relationship with AOL, we must establish and maintain
additional strategic relationships with popular Internet service providers,
portals and Web sites to increase the number of visitors to our site and
establish our Internet presence. There is intense competition for relationships
with Internet service providers, portals and Web sites, and we may not be able
to enter into these relationships on commercially reasonable terms or at all.
Even if we enter into strategic relationships with such Internet service
providers, portals and Web sites, they may not be able to continue to attract a
significant number of users. As a result, our site may not receive the expected
additional users from these relationships. Moreover, we may have to pay
significant fees to establish these relationships which could be significantly
more than fees paid by our competitors for similar services. We also may enter
into agreements with hospital and other healthcare sponsors, content providers
or other Internet service providers, portals and Web sites that require us to
feature their services exclusively in areas of our site and may prevent us from
entering into other sponsorships, advertising arrangements, content agreements
or other strategic relationships. Our business strategy depends, in part, on our
ability to attract and maintain hospital sponsorships. We cannot assure you that
we will be able to attract such hospital sponsors or that our existing hospital
sponsors will renew current agreements with us. Many companies we may pursue for
such strategic relationships also offer services that compete with our services.
As a result, these companies may be reluctant to enter into strategic
relationships with us. Our inability to enter into additional strategic
relationships and maintain and expand our existing relationships could have a
material adverse effect on our business, financial condition and results of
operations. See "Business--Strategic Relationships."
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS.
Numerous Internet companies compete for users, sponsors, advertisers,
e-commerce transactions and other sources of on-line revenue. The number of Web
sites offering users healthcare information and related products and services is
increasing rapidly. In addition, traditional media and healthcare providers
compete for consumers' attention both through traditional marketing channels as
well as through their own new Internet initiatives. We believe competition for
healthcare consumers will continue to increase as the Internet healthcare market
evolves.
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We compete directly for users, sponsors, advertisers, e-commerce suppliers
and other affiliates with numerous Internet companies, including:
- healthcare Web sites such as (by domain name) accesshealth.com, ahn.com,
betterhealth.com, drkoop.com, drweil.com, healthcentral.com,
healthgate.com, intelihealth.com, mayohealth.org, mediconsult.com,
onhealth.com, thriveonline.com and webmd.com;
- Web search engines and Internet portals, such as aol.com, Microsoft
Network, Yahoo! Inc., Excite, Inc., Lycos Corporation and Infoseek
Corporation;
- HMOs, managed care organizations, insurance companies, hospitals and other
healthcare payors and providers such as Columbia/HCA Healthcare
Corporation, Kaiser Permanente and VHA Inc. which offer healthcare
information on-line;
- Web communities, such as the American Association of Retired Persons,
SeniorNet and ThirdAge Media, Inc., which offer healthcare-related
information and programming to special demographic groups; and
- e-commerce suppliers and conventional retailers such as CVS,
Drugstore.com, Express Scripts, Inc., Merck-Medco Managed Care, L.L.C.,
PlanetRx, Rite Aid Corporation, Walgreens and other companies that sell
healthcare products and services through the Internet that may be
competitive to those available through our site.
Many of our existing competitors and potential new competitors are likely to
enjoy substantial competitive advantages compared to our company, including:
- the ability to offer a wider array of on-line products and services;
- more comprehensive health-related content and information;
- larger production and technical staffs;
- greater name recognition and larger marketing budgets and resources;
- larger customer and user bases; and
- substantially greater financial, technical and other resources.
In addition, such competitors may have longer operating histories on the
Internet, lower cost structures and higher amounts of user traffic. Such
competitors also may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies, make more attractive offers to potential
employees, distribution partners, advertisers and content providers and may be
able to respond more quickly to new or emerging technologies and changes in Web
user requirements. We cannot assure you that our competitors will not develop
better services than ours or achieve greater market acceptance.
To be competitive, we must respond promptly and effectively to the
challenges of rapid technological change, evolving consumer demands, evolving
Internet standards and our competitors' innovations by continuing to enhance our
services, as well as our sales and marketing channels. Competition is likely to
increase as new companies enter the market and current competitors expand their
services. We expect that competitive factors will create a continuing need for
us to improve and add to our healthcare content. Accordingly, we intend to seek
additional sources of healthcare information and expand the scope of our content
offerings. Increased competition and our failure to successfully respond to our
competitors could result in greater competition for sponsorships, reductions in
advertising rates, lower margins, greater operating losses or loss of market
share, any of which would have a material adverse effect on our business,
financial condition and results of operations. See "Business--Competition."
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WE DEPEND ON THIRD PARTIES FOR ESSENTIAL BUSINESS OPERATIONS.
GENERAL. We depend on third parties for important aspects of our business,
including Internet access, chat center operations, the provision of content,
products and services, the development of software for new Web site features and
telecommunications. We also depend on unrelated Web site operators that provide
advertising links to AmericasDoctor.com. We have limited control over these
third parties, and we may not be their only client. As a result, we may not be
able to maintain satisfactory relationships with any of them on acceptable
commercial terms or renew or replace these agreements on the same terms or on
other commercially acceptable terms. Further, we cannot be certain that the
quality of the content, products and services provided by third parties will
remain at levels required by us to conduct our business successfully.
RELIANCE ON MEDICAL ADVISORY SYSTEMS, INC. We currently rely on an
agreement with Medical Advisory Systems, Inc. ("MAS") to manage our chat center
operations. Hall & AMDOC Associates, an affiliate of MAS, recruits and hires
doctors and other healthcare professionals to operate our free 24-hour doctor
chat service subject to our authorization. Pursuant to our arrangement with MAS,
we pay MAS a fee which includes the costs of the doctors and other healthcare
professionals and other expenses related to our chat center operations. MAS also
trains and supervises all chat center personnel in accordance with strict
guidelines instructing doctors not to practice medicine. However,
notwithstanding instructions to the contrary, there is a risk that some MAS
doctors may engage in conduct that could be considered the practice of medicine.
A determination by any state or federal regulatory agency that we are practicing
medicine in violation of applicable state or federal statutes, could subject us
to allegations of malpractice and could have a material adverse effect on our
business, financial condition and results of operations. Further, any
operational difficulties or other problems with our chat center operations,
availability of chat center personnel or our relationship with MAS could result
in consumer complaints, the loss of qualified doctors or legal proceedings,
which could have a material adverse effect on our business, financial condition
and results of operations. In addition, if MAS fails to deliver these services
or our arrangement with MAS is terminated, we would be required to obtain these
services from another operator or provide them internally which could interrupt
our services, involve significant costs and could have a material adverse effect
on our business, financial condition and results of operations. MAS has the
right to terminate the agreement for cause upon 90 days notice.
RELIANCE ON CONTENT. We rely on independent content providers for the
majority of healthcare information provided through AmericasDoctor.com. Our
success depends significantly on our ability to maintain our existing
arrangements with these content providers and to build new relationships with
other content providers. Our arrangements with content providers are typically
short-term and non-exclusive. However, termination of one or more significant
content provider agreements would decrease the availability of
healthcare-related news and information which we can offer consumers and could
have a material adverse effect on our business, financial condition and results
of operations. Due to the non-exclusivity of our agreements with content
providers, competitors offer, or could offer, content that is similar or the
same as ours. To the extent that content providers, including our current
providers, offer information to our competitors at a lower cost, our business,
financial condition and results of operations could be materially adversely
affected.
In addition, we depend on the ability of our content providers to deliver
high quality content from reliable sources and to continually upgrade their
content in response to subscriber and consumer demand and developments in the
healthcare industry. Any failure by these parties to develop and maintain high
quality, attractive content could result in subscriber and consumer
dissatisfaction and impair our ability to attract larger audiences. We could
also be subject to legal claims that could negatively affect the
AmericasDoctor.com brand name. Any of the foregoing circumstances could have a
material adverse effect on our business, financial condition and results of
operations. See "Business-- Strategic Relationships."
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ACQUISITIONS, INVESTMENTS OR OTHER VENTURES MAY IMPAIR OUR BUSINESS.
Although we have no current agreements to enter into any material investment
or acquisition transactions, we may acquire or make investments in complementary
businesses, technologies, services or products if appropriate opportunities
arise. From time to time, we have had discussions and negotiations with
companies regarding our acquiring, or investing in, such companies' businesses,
products, services or technologies. We cannot assure you that we will be able to
identify suitable acquisition or investment candidates in the future, or if we
do identify suitable candidates, that we will be able to make such acquisitions
or investments on commercially acceptable terms or at all. If we acquire or
invest in another company, we could have difficulty integrating that company's
personnel, operations, technology and software into our operations. In addition,
the key personnel of the acquired company may decide not to work for us. These
difficulties could occupy a substantial portion of the time and resources of our
management and employees, increase our expenses and materially adversely affect
our business, financial condition and results of operations.
Future acquisitions may require us to issue equity securities which could
dilute the holdings of existing shareholders and may involve the incurrence of
debt, the assumption of known and unknown liabilities, the write-off of software
development costs and the amortization of expenses related to goodwill and other
intangible assets, all of which could have a material adverse effect on our
business, financial condition and results of operations. In the future, we may
take charges in connection with acquisitions. We cannot guarantee that the costs
and expenses incurred will not exceed the estimates upon which such charges are
based.
WE DEPEND ON KEY PERSONNEL AND REQUIRE ADDITIONAL PERSONNEL.
Our future success depends, in part, on the performance of our senior
management team and other key employees, particularly Scott M. Rifkin, M.D., our
chief executive officer. The loss of the services of any key member of our
senior management team or other key employees or our failure to attract,
integrate, motivate and retain additional key employees could have a material
adverse effect on our business, financial condition and results of operations.
Although we intend to enter into employment agreements with our key executive
officers, we currently do not have employment agreements with all of our key
executive officers. We also believe that our future success depends on our
ability to attract, integrate, motivate and retain additional highly skilled
technical personnel, particularly well-trained and experienced professionals
capable of marketing Internet-based services to healthcare institutions. In
addition, in order for us to deliver our free 24-hour doctor chat service, we
must attract, train and retain qualified doctors and other healthcare
professionals. There is intense competition for employees, at all levels, that
possess knowledge of both the Internet industry and the healthcare market. Our
failure to retain our key employees or attract, integrate and retain other
highly qualified employees and doctors in the future could have a material
adverse effect on our business, financial condition and results of operations.
See "Management."
OUR INFRASTRUCTURE MAY FAIL TO ACCOMMODATE RAPID GROWTH IN OUR BUSINESS.
Presently, only a relatively limited number of consumers use our site.
However, in order to execute our business strategy we must generate a high
volume of traffic on our site. We also must continue to expand and adapt our
infrastructure and services, including our free 24-hour doctor chat service, to
accommodate additional traffic, new features and tools and changing consumer
requirements. We may fail to accurately project the rate or timing of increases,
if any, in the use of our site or to expand and upgrade our services, systems
and infrastructure to accommodate such increases. Our systems may not
accommodate increased use of our services, including our free 24-hour doctor
chat service, while maintaining acceptable overall performance. Operational
delays or other difficulties, including increased waiting time on our doctor
chat service, could cause our users to become dissatisfied with our services
which would have a material adverse effect on our business, financial condition
and results of
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operations. If our business grows we may experience strain on our management
systems and resources, and we will be required to implement new operational and
financial systems, procedures and controls. Our inability to accommodate growth
in our business or the use of our services to accomplish any of these goals
could have a material adverse effect on our business, financial condition and
results of operations. See "Business--Technology, Infrastructure and
Operations."
WE MAY FAIL TO ADAPT TO RAPID TECHNOLOGICAL CHANGE.
Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new service and product announcements. We must
adapt to our rapidly changing market by continuing to improve the performance,
features and reliability of our site and, in particular, its functionality with
new versions of Web browsers and other platforms. We also could incur
substantial costs if we need to modify our services or infrastructure in order
to adapt to these changes. We also could use new technologies ineffectively or
fail to adapt our site and infrastructure to consumer requirements or emerging
industry standards. If we fail to keep pace with the technological advancements,
our consumers may not use our site and instead may use our competitors'
services. Such response by our consumers could have a material adverse effect on
our business, financial condition and results of operations.
WE MUST PROVIDE TOOLS AND FEATURES WHICH MEET THE CHANGING DEMANDS OF OUR USERS.
We must have a large audience of consumers with attractive demographic
profiles to attract healthcare sponsors, e-commerce partners, educational
program sponsors, advertisers and clinical researchers to our site. As with many
forms of Internet-based, consumer-oriented media, we must provide informational
content, interactive tools, e-commerce and other features that consumers demand
in order to continue to attract and retain our consumer audiences. We must
allocate significant resources to continue to improve our site, and we must
properly anticipate, identify and respond to changes in consumer demands.
Competition for relevant content may increase the license fees charged by
high-quality content providers. If we fail to respond to changes in consumer
demand, expand the scope of our content and services, introduce new services
quickly and efficiently, or our content and services fail to achieve market
acceptance, our business, financial condition and results of operations could be
materially and adversely affected.
WE ARE SUBJECT TO SYSTEM FAILURES AND CAPACITY CONSTRAINTS.
We believe we must be able to operate our site 24 hours each day without
interruption. Almost all of our content and Web services are provided by
third-party providers and the operation of our interactive features is dependent
upon Internet service providers. To operate without interruption, our content
providers and Internet service providers must guard against:
- damage from fire, power loss and other natural disasters;
- system failures;
- software and hardware errors, failures or crashes;
- security breaches, computer viruses and similar disruptive problems; and
- other potential interruptions.
Our Internet service providers' infrastructure must accommodate high volumes
of traffic and deliver frequently updated information, components or features.
In the past our site has suffered outages and experienced slower response times
due to equipment or software downtime or other operational difficulties, some of
which have been related to our service providers. Our site may, in the future,
experience increased response times or system failures due to increased traffic
or for a variety
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of other reasons. Any significant interruptions in our services or an increase
in response time could result in a loss of potential or existing consumers,
sponsors, strategic partners or advertisers and, if sustained or repeated, could
reduce the attractiveness of our site to such parties. Although we maintain
business interruption insurance, it is unlikely that all potential situations or
claims will come within the scope of our insurance coverage, or that the amount
of our insurance will be adequate to compensate us for all losses that may occur
or to provide reimbursement for indirect costs associated with business
interruptions.
In addition, our consumers depend on their Internet service providers and
other Web site operators for access to our site. Many of them have experienced
significant outages in the past and could experience outages, delays and other
difficulties in the future due to system failures unrelated to our systems. Any
prolonged interruption in these services would have a material adverse effect on
our business, financial condition and results of operations.
WE DEPEND ON THE CONTINUED GROWTH IN THE USE OF THE INTERNET.
Our market is new and rapidly evolving. Our business would be adversely
affected if Web usage does not continue to grow. Internet usage may be inhibited
for a number of reasons, such as:
- inadequate infrastructure;
- inadequate security precautions;
- inconsistent quality of service;
- unavailability of cost-effective, high-speed service; and
- increased government regulations.
Further, if Internet usage grows, its infrastructure may not be able to
support the demands placed on it by this growth or its performance and
reliability may decline. In addition, Web sites have experienced interruptions
in their service as a result of outages and other delays occurring throughout
the Internet infrastructure. If these outages or delays frequently occur in the
future, Internet usage, as well as usage of our site, could be materially and
adversely affected. See "Business--Strategic Relationships."
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OUR BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND OTHER LEGAL
CONSIDERATIONS.
GENERAL.
Our business and industry are subject to extensive government regulation.
Federal and state laws, regulations and statutes have been or may be adopted
with respect to healthcare, the Internet, our industry or other on-line
services.
The delivery of healthcare services and products is heavily regulated under
federal and state law. For example, federal and state agencies regulate the
practice of medicine, establish licensing and reimbursement requirements and,
through fraud and abuse laws, prohibit payments for the referral of patients to
a person participating in, or for the order, purchase or recommendation of items
or services that are subject to reimbursement by, Medicare, Medicaid and other
federal or state healthcare programs or other third-party payors.
Notwithstanding our efforts to structure our business activities in a manner
that would not constitute the practice of medicine or involve prohibited
referrals, federal and/or state healthcare regulatory authorities could
determine that, in a particular case or generally, we are engaged in the
practice of medicine through the activities of our doctors or other healthcare
professionals on or through our Web site. There is also a risk that our
relationships with hospital and other sponsors, e-commerce vendors and other
companies may implicate or violate laws governing the sale of healthcare
products and laws prohibiting referral arrangements. We have not researched the
laws of each of the 50 states or obtained opinions or rulings from federal and
state agencies with authority to enforce such laws. A finding that our current
or future business activities violate any of these laws or statutes could cause
a material adverse effect on our business, financial condition and results of
operations.
There is also an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, on-line content regulation, user privacy, taxation and quality of
products and services. Moreover, it may take years to determine whether and how
existing laws addressing intellectual property, privacy, libel, copyright,
trademark, trade secret, obscenity, personal privacy, taxation and regulation of
the sale of products and services apply to the Internet and Internet
advertising. Any requirements imposed by any legislation or regulation may limit
the growth of the use of the Internet. Such limitations could decrease the
demand for our services, increase our cost of doing business or otherwise have a
material adverse effect on our business, financial condition and results of
operations.
REGULATION OF THE PRACTICE OF MEDICINE AND OTHER LICENSING LAWS.
The practice of medicine, generally defined by state law as engaging in,
with or without compensation, medical diagnosis, healing, treatment (including
the prescription of medications) or surgery, requires licensing under applicable
state law. The practice of medicine without a license can be a civil or criminal
violation depending on state law. We have endeavored to structure our site, and
in particular our free 24-hour doctor chat service, to avoid violation of state
licensing requirements. Our guidelines provide and we instruct that chat center
doctors and other healthcare professionals, shall not practice medicine.
However, chat center doctors and other healthcare professionals may fail to
follow our guidelines, or interaction between our doctors and consumers could
elicit responses which may be claimed or deemed to be a diagnosis or other
element of the practice of medicine. Furthermore, the application of this area
of the law to Internet services such as ours is novel and, accordingly, a state
regulatory authority may allege that one or more elements of our business
requires a license under existing or future laws or statutes. Any application of
the regulation of the practice of medicine to our business, and in particular
our free 24-hour doctor chat service, could result in a material adverse effect
on our business, financial condition or results of operation.
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We also contract with healthcare professionals who are not physicians. For
example, pharmacists and nutritionists communicate with users in our chat
sessions in the same manner as doctors. Pharmacists engaging in the practice of
pharmacology are regulated by state law, and nutritionist may also be licensed
under state law, depending on the jurisdiction. As is the case with doctors,
these healthcare professionals are instructed not to prescribe drugs, diagnose,
or treat consumers. While we take steps to ensure that our non-physicians do not
engage in professional practices that require them to be licensed, we cannot
guarantee that a local professional licensing board would not seek to impose its
state law requirements on the activities of our non-physician healthcare
professionals.
We plan to engage in the sale of certain home care products on-line. We have
entered into an agreement with Smith & Nephew to develop this e-commerce
business. Smith & Nephew has historically employed or contracted with healthcare
professionals, such as occupational therapists, who are available to answer
customer questions about product purchases. We plan to utilize Smith & Nephew's
call center for our users who wish to purchase products from us. If it were
determined that this Smith & Nephew service constituted the delivery of services
for which professional healthcare license is required, we could lose the ability
to provide this service, and we could be subject to penalties for making this
service available.
FEDERAL AND STATE HEALTHCARE REGULATION.
Provisions of the Social Security Act (the "Federal Anti-Kickback Law")
prohibit knowingly or willfully, directly or indirectly, paying or offering to
pay, or soliciting or receiving, any remuneration in exchange for the referral
of patients to a person participating in, or for the order, purchase or
recommendation of items or services that are subject to reimbursement by,
Medicare, Medicaid and similar other federal or state healthcare programs.
Violations may result in civil and criminal sanctions and penalties. Civil
penalties include exclusion from government health programs. Criminal sanctions
include imprisonment for up to five years, fines up to $25,000 or both, for each
violation. Recent federal legislation expanded the sanctions to include civil
monetary penalties up to $50,000 for each prohibited act and up to three times
the total amount of remuneration offered, paid, solicited or received, even in
circumstances where a portion of such remuneration is offered, paid, solicited
or received for a lawful purpose. There is increasing scrutiny by federal and
state law enforcement authorities with both civil and criminal jurisdiction,
over financial arrangements between healthcare providers and referral sources.
Certain courts reviewing the statute have taken a broad view of the Federal
Anti-Kickback Law and have ruled that it can be violated if only one purpose of
a payment arrangement is to induce referrals. Many states also have enacted
similar local anti-kickback laws.
We earn revenues by selling exclusive geographical sponsorships to
hospitals. Each time a user located in the zip code of our sponsor concludes a
chat with a doctor, a screen appears enabling the user to obtain further
information about the sponsor in his area if one exists, or to provide
information to a hospital regarding appointments or further information. While
we have taken steps to structure our sponsorship arrangements in a manner such
that they would not be deemed to violate the anti-kickback laws, there can be no
assurances that regulators would not reach a contrary conclusion. It is possible
that facilitation of contacts between hospitals or other sponsors and potential
patients could result in the allegation or finding that we or the physicians
arranged for or recommended the provision of reimbursable healthcare services by
our sponsors. In addition, we expect to earn revenues from e-commerce
activities, including the on-line sale of products which are subject to Medicare
and Medicaid reimbursement. Although we intend to structure our arrangements in
a manner which complies with applicable federal anti-kickback laws and/or
similar state laws, we cannot guarantee that regulators would not reach a
contrary conclusion and seek to enforce such laws against us and limit our
e-commerce opportunities. Furthermore structuring our arrangements to comply
with these laws may limit the revenues we can earn from e-commerce sales of
reimbursable items.
Limited "safe harbor" regulations promulgated by the Department of Health
and Human Services ("DHHS") define a narrow range of practices that are exempted
from federal prosecution or other
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enforcement under the Federal Anti-Kickback Law. These regulations fail to
exempt a wide range of activities in which healthcare providers and others
engage. Activities that fall outside the safe harbor regulations are not
necessarily illegal, though they could be the subject of increased scrutiny,
investigation or prosecution. Our existing and planned sponsorship and
e-commerce activities may not qualify for safe harbor protection. Given the
breadth of the Federal Anti-Kickback Law and the limited scope of the existing
safe harbors, the possibility of adverse regulatory positions cannot be
eliminated. The Office of Inspector General ("OIG") is authorized to issue
advisory opinions regarding the interpretation and applicability of the Federal
Anti-Kickback Law, including whether an activity or proposed activity
constitutes grounds for the imposition of civil or criminal sanctions. We have
not sought such an opinion and are aware of no opinion that has been issued with
respect to our sponsorships or existing or planned Internet sales activities.
If our activities were deemed to be inconsistent with the Federal
Anti-Kickback Law or similar laws which have been adopted by various states, we
could face civil and criminal penalties or be barred from such activities, any
of which could have a material adverse effect on our business, financial
condition or results of operations. Further, we could be required to restructure
our existing or planned sponsorship compensation arrangements and e-commerce
activities in a manner which could have a material adverse effect on our
business, financial condition and results of operations.
SELF-REFERRAL PROHIBITIONS.
The federal physician self-referral statute, sometimes identified as the
"Stark Law," generally forbids payments under Medicare or Medicaid based on a
physician referral for "designated health services" to any entity with which the
physician (or an immediate family member) has a financial relationship, which
can take the form of a direct or indirect ownership or investment interest or a
compensation relationship. A referral, under the Stark Law, can include
prescribing or requesting designated health services, and also, establishing a
plan of care for the designated health service. The Stark Law applies to
clinical laboratory services and certain other designated health services,
including outpatient prescription drugs and durable medical equipment. Penalties
for violating the Stark Law include denial of payment from Medicare and Medicaid
programs for any services referred to an entity in violation of the "Stark Law,"
civil monetary penalties of up to $15,000 for each offense and exclusions from
the Medicare and Medicaid programs. Many states have adopted referral laws which
may extend to governmental and third-party payors. If it were determined that
(a) doctors operating our chat service were engaged in the practice of medicine,
(b) such doctors were, in turn, deemed to have made referrals for designated
health services and (c) no exemption covered the manner in which such doctors
are compensated, we could be subject to action under the Stark Law, which could
have a material adverse effect on our business, financial condition and results
of operations and subject us to sanctions under these laws.
OPERATION AS A HEALTHCARE PROVIDER.
We intend to engage in e-commerce by delivering healthcare products to
members of the public, including participants in Medicare, Medicaid and other
governmental payment programs. These activities may include sales of
pharmaceuticals, durable medical equipment and other items. Accordingly, we may
be considered to be a healthcare supplier and may be required to obtain federal
and state licenses and permits, such as pharmaceutical licenses and permits, as
well as certifications to participate in the Medicare, Medicaid or other
programs. We cannot guarantee that we will be able to obtain and maintain such
licenses, permits and certifications. In addition, Medicare, Medicaid and other
third-party payment programs are under pressure to control healthcare costs and
the rates paid for products we may sell are subject to change. Federal and state
law enforcement authorities scrutinize closely the claims of healthcare
providers. The submission of false or fraudulent claims by any healthcare
providers or suppliers carries the risk of prosecution under applicable federal
and state criminal and civil statutes.
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MALPRACTICE.
Due to the nature of our business, we may become involved in litigation
regarding the information transmitted over the Internet by doctors or other
healthcare professionals operating our chat service or involving claims against
our hospital sponsors, with the risk of adverse publicity, significant defense
costs and substantial damage awards. If we or healthcare professionals with
which we contract or who provide information on or through our Web site or
suppliers are deemed to be engaged in the practice of medicine, including as a
result of a doctor or other healthcare professional failing to follow our
guidelines, we could subject us to claims and/or malpractice liability exposure
for which we may not be insured. In recent years, participants in the healthcare
industry, including doctors, nurses and other healthcare professionals, have
been subject to an increasing number of lawsuits alleging malpractice, product
liability and related legal theories, many of which involve large claims and
significant defense costs. We have adopted policies and procedures intended to
reduce the risk of claims, and to date, we have not been the subject of any
claim involving the operation of our site. However, there can be no assurance
that claims will not be brought against us. Even if such claims ultimately prove
to be without merit, defending against them can be time-consuming and expensive,
and any adverse publicity associated with such claims could have a material
adverse effect on our business, financial condition or results of operations.
While we maintain liability insurance, which provides limited coverage for
malpractice, claims may arise that would not come within the scope of or be
covered by our insurance or, if covered, may exceed the limits of our coverage.
In addition, we expect to seek increased coverage as the business grows. There
can be no assurance that we will be able to maintain existing coverage or expand
its scope to address evolving risks, or obtain increased amounts of coverage on
acceptable terms or at all.
USE OF MEDICAL INFORMATION AND DATA.
There are currently, and continue to be adopted, amended and implemented,
federal and state laws governing the storage and disclosure of medical
information and healthcare records. We may collect and use data about users
seeking information on our site. While this information is not intended to
constitute or be treated as medical records, users or regulatory agencies may
seek to characterize this information as medical records and impose requirements
and/or sanctions upon us related to the maintenance and handling of medical
records. Maintaining this information could expose us to claims if unauthorized
persons gain access to it notwithstanding our efforts to maintain its security
or if the consumer wishes to have us transmit or give access to others, and we
fail or are unable to do so.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996.
The recently enacted Health Insurance Portability and Accountability Act of
1996, mandates the use of standard transactions, standard identifiers, security
and other provisions by the year 2000 with regard to healthcare issues on the
Internet. It will be necessary for our platform and for the applications that we
provide to be in compliance with the proposed regulations. Congress is also
likely to consider legislation that would establish uniform, comprehensive
federal rules about an individual's right to access his own medical information.
This legislation would likely define what is to be considered "protected health
information" and outline steps to ensure the confidentiality of this
information.
RELATIONSHIPS WITH RESEARCH COMPANIES.
We expect to have relationships with companies that recruit volunteers for
clinical trial studies and to earn revenue from these relationships. Users on
our site will have the opportunity to volunteer to participate in research
studies through organizations with which we have a relationship. Certain ethical
rulings may limit or prohibit compensation to physicians for making referrals of
patients to research studies. We do not believe these issues apply to our
planned operations but we cannot guarantee that regulatory agencies or
associations asserting authority to regulate our activities (including our chat
service operations and healthcare professionals) would not seek to apply such
rulings to us.
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FDA REGULATION.
We do not believe that our current services are regulated by the Food and
Drug Administration ("FDA"); however, our services may become subject to FDA
regulation. Additionally, we may expand our business into areas that subject us
to FDA regulation. We have no experience in complying with FDA regulations. We
believe that complying with FDA regulations would be time consuming, burdensome
and expensive and could delay or prevent the introduction of new services.
PROTECTION OF PRIVACY.
The Federal Trade Commission (the "FTC") is considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals, particularly children, while accessing Web sites. Such
regulations may include requirements that companies operating Web sites
establish certain procedures that, among other things:
- give adequate notice to consumers regarding information collection and
disclosure practices;
- provide consumers with the ability to have personal identifying
information deleted from a company's database;
- provide consumers with access to their personal information and with the
ability to rectify inaccurate information;
- clearly identify affiliations or a lack thereof with third parties that
may collect information or sponsor activities on a company's Web site; and
- obtain express parental consent prior to collecting and using personal
identifying information on children under 13 years of age.
We cannot assure that our services will conform with regulations adopted by
the FTC. Even in the absence of such regulations, the FTC may investigate the
privacy practices of companies that collect information on the Internet. One
investigation resulted in a consent decree pursuant to which an Internet company
agreed to establish programs to implement the principles noted above. If we
become subject to such an investigation, the FTC's regulatory and enforcement
efforts may adversely effect our ability to collect personal information from
our users, which, in turn, could have an adverse effect on our ability to
provide effective opportunities for advertisers and e-commerce marketers. This
could have a material adverse effect on our business, financial condition and
results of operations.
It is also possible that "cookies" (files stored on a user's hard drive,
possibly without the user's knowledge, to identify a specific server, file
pathway or directory location) employed to track user information and trigger
profiled sponsorships and advertising may become subject to laws limiting or
prohibiting their use. Certain Internet browsers allow users to remove cookies
or prevent cookies from being stored on their hard drives. In addition, a number
of Internet commentators, advocates and governmental bodies in the United States
and other countries have urged the passage of laws limiting or abolishing the
use of cookies. We currently use cookies to identify the zip code of users of
our site in order to trigger the display of information about the appropriate
hospital sponsor on the user's screen. Limitations on or elimination of our use
of cookies could limit the effectiveness of our sponsorship and advertising
opportunities, which could have a material adverse effect on our business,
financial condition and results of operations.
The European Union (the "EU") has adopted a directive that imposes
restrictions on the use of personal data in the EU. Under the directive, EU
citizens are guaranteed certain rights, including the right of access to their
data, the right to know where the data originated, the right to have inaccurate
data rectified, the right to recourse in the event of unlawful processing and
the right to withhold permission to use their data for direct marketing. The
directive could, among other things, affect U.S. companies that collect
information over the Internet from individuals in EU member countries, and may
impose restrictions that are more stringent than current Internet privacy
standards in the United States. In particular, companies with offices located in
EU countries will not be allowed to send personal information to countries that
do not maintain adequate standards of privacy. The directive
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does not, however, define what standards of privacy are adequate. As a result,
there can be no assurance that the directive will not adversely effect the
activities of entities such as our company that engage in data collection from
users in EU member countries.
Planned features of our site include the retention of personal information
about our users which we would obtain with their consent. We plan to have a
stringent privacy policy covering this information. However, if third persons
were able to penetrate our site security and gain access to, or otherwise
misappropriate, our users' personal information, we could be subject to
liability. Such liability could include claims for the misuse of personal
information, such as for unauthorized marketing purposes or unauthorized use of
credit cards. These claims could result in litigation, our involvement in which,
regardless of the outcome, could require us to expend significant resources.
Moreover, to the extent any of the data constitute or are deemed to constitute
patient health records, a breach of privacy could violate federal or state law.
PRESENCE IN MULTIPLE JURISDICTIONS.
Due to the global reach of the Internet, it is possible that, although our
Internet transmissions originate primarily in the State of New Jersey, the
governments of other states and foreign countries may attempt to regulate our
activity or take action against us for violations of their laws. There can be no
assurance that state or foreign governments will not allege that we are
violating such laws or that such laws will not be modified, or new laws enacted,
in the future. Any of the foregoing could have a material adverse effect on our
business, financial condition and results of operations.
WE DEPEND ON THE PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS.
We rely on a combination of copyright, trademark and trade secret laws and
contractual provisions to establish and protect our proprietary rights. There
can be no assurance that the steps we have taken to protect our proprietary
rights will be adequate, that we will be able to secure trademark or service
mark registrations for our marks in the United States or in foreign countries or
that third parties will not infringe upon or misappropriate our copyrights,
trademarks, service marks, domain names and similar proprietary rights. In
addition, effective copyright and trademark protection may be unenforceable or
limited in certain foreign countries where the global nature of the Internet
makes it impossible to control the ultimate destination of our services. It is
possible that our competitors or others will adopt product or service names
similar to ours, thereby impeding our ability to build brand identity and
possibly leading to customer confusion. Our inability to protect our marks
adequately could have a material adverse effect on the acceptance of our brand
and on our business, financial condition and results of operations. Further, we
may have to litigate to enforce and protect our intellectual property rights.
Litigation would divert management resources, be expensive and may not
effectively protect our intellectual property.
In addition, we may be subject to litigation for claims of infringement of
the rights of others or to determine the scope and validity of the intellectual
property rights of others. If other parties file applications for marks used or
registered by us, we may have to oppose those applications and participate in
administrative proceedings to determine priority of rights to the mark, which
could result in substantial costs to us due to the diversion of management's
attention and the expense of such litigation, even if the eventual outcome is
favorable to us. Adverse determinations in such litigation could result in the
loss of certain of our proprietary rights, subject us to significant
liabilities, require us to seek licenses from third parties or prevent us from
selling our services. Any of these results could have a material adverse effect
on the acceptance of the AmericasDoctor.com brand and on our business, financial
condition and results of operations. In addition, since we license a substantial
portion of our content from third parties, our exposure to copyright
infringement actions may increase because we must rely upon their
representations as to the origin and ownership of third-party intellectual
property.
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In addition to our intellectual property rights, we benefit from our domain
name. Domain names are Internet "addresses" which derive value because they are
currently the simplest way to access Web sites. The current system for
registering, allocating and managing domain names has been the subject of
litigation and proposed regulatory reform in the United States. There can be no
assurance that third parties will not bring claims for infringement against us
for the use of our domain name. In addition, our domain name may lose value if
reform measures or technological advances result in users ceasing to use domain
names to access Internet resources. We cannot assure that litigation or reform
efforts resulting in a restructuring of the current system of registering domain
names will not require us to obtain new domain names in addition to, or in lieu
of, our current domain names. Further, we cannot assure you that other companies
or individuals will not seek to obtain domain names similar to ours resulting in
confusion to, or loss of, our users and sponsors and advertisers. See
"Business--Intellectual Property."
WE COULD BE LIABLE FOR INFORMATION RETRIEVED FROM AND COMMUNICATIONS ON OUR
SITE.
In addition to the litigation risks described above, we may be subject to
third-party claims for defamation, negligence, copyright or trademark
infringement or other claims based on the nature and content of information
supplied on our site by us, our users or third parties, including our content,
product and service providers. These types of claims have been brought,
sometimes successfully, against Internet companies in the past. We could be
subject to liability with respect to content that may be accessible through our
site or other Web sites linked to our site. For example, claims could be made
against us if a consumer relies on healthcare information accessed through our
site to their detriment. Even if such claims do not result in liability to us,
our reputation could suffer and we could incur significant costs litigating such
claims and implementing measures to reduce our exposure to such liability.
Claims also could arise from inaccurate, offensive, harassing, or otherwise
inappropriate statements of participants in health condition-specific
communities or educational programs, over which we have no control. Similarly,
claims may arise from content or statements contained or made on Web sites
linked to our site. Our insurance may not cover potential claims of this type or
may not be adequate to cover all costs incurred in defense of such claims or to
indemnify us for all liability that may be imposed. To the extent we are
currently covered by insurance, the continued availability of such insurance
cannot be assured. Any liability not covered by insurance or in excess of
insurance coverage could have a material adverse effect on our business,
financial condition and results of operations.
WE COULD BE SUBJECT TO ADDITIONAL SALES OR OTHER TAXES.
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of legislative proposals have been made at the federal, state and local
level, and by certain foreign governments, that would impose additional taxes on
e-commerce; and certain states have taken measures to tax other Internet-related
activities. Although the U.S. Congress recently placed a three-year moratorium
on state and local taxes on Internet access and on discriminatory taxes on
e-commerce, existing state or local laws were expressly excepted from this
moratorium. A new commission, established by the Internet Tax Freedom Act, is
mandated to study the question of whether this exemption should remain in place.
During 2000, the commission is supposed to submit its report to Congress.
Further, when the moratorium expires, some type of federal and/or state taxes
may be imposed upon e-commerce. Such legislation or other attempts at regulating
e-commerce may impair the growth of e-commerce and, as a result, adversely
affect our opportunity to earn income from such activities. See "Regulation and
Other Legal Considerations."
WE FACE POSSIBLE YEAR 2000 RISKS.
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000.
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These problems are widely expected to increase in frequency and severity as the
year 2000 approaches and are commonly referred to as the "Year 2000 Problem."
OUR INTERNAL ASSESSMENT. The Year 2000 Problem could affect computers,
software and other equipment that we use internally. We are reviewing our
internal computer programs and systems to determine if they will be Year 2000
compliant. We presently believe that our computer systems will be Year 2000
compliant in a timely manner. We believe that we have identified substantially
all of the major computers, software applications and related equipment used in
connection with our internal operations that must be modified, upgraded or
replaced to minimize the possibility of a material disruption to our business,
but there can be no assurance of this. We have commenced the process of
modifying, upgrading and replacing systems that have been identified as
potentially being adversely affected and expect to complete this process before
the end of the third quarter of 1999. We do not expect the costs related to
these efforts to be material to our business, financial condition or results of
operations.
SERVICES PROVIDED TO CONSUMERS. We depend on third party suppliers for most
of the services provided through AmericasDoctor.com. We have been gathering
information from and have contacted our service and informational content
providers to identify and, to the extent possible, resolve issues involving the
Year 2000 Problem. However, we have limited or no control over the actions of
our content and service providers. Thus, while we expect that we will be able to
resolve any significant Year 2000 Problems with our systems, we cannot guarantee
that our content and service providers will resolve any or all Year 2000
Problems with their systems before the occurrence of a material disruption to
our business. Any failure of third parties to resolve Year 2000 Problems with
their systems in a timely manner could have a material adverse effect on our
business, financial condition or results of operations.
MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS. Although we expect to
identify and resolve all Year 2000 Problems that could materially adversely
affect our business, financial condition or results of operations, we cannot
anticipate all Year 2000 Problems that may affect our company. In addition, we
cannot accurately predict the nature, severity, duration or financial
consequences of Year 2000 Problems that may occur. As a result, we expect that
we could possibly suffer the following consequences:
- operational distortions to our service and content providers and our
consumers that may divert our time, attention and financial resources away
from our ordinary business activities; and
- serious system failures that may require significant efforts by us, our
service and informational content providers or our consumers to avoid a
material disruptions of our business.
THERE IS NO ESTABLISHED MARKET FOR HEALTHCARE E-COMMERCE TRANSACTIONS.
We plan to develop relationships with retailers, manufacturers, suppliers
and other providers to conduct e-commerce transactions involving healthcare
products and services through our site. Our strategy, and such relationships,
involve numerous risks and uncertainties. There is no established business model
for the sale of healthcare products over the Internet. We have no significant
experience in the sale of healthcare products on-line or in the development of
relationships with retailers, manufacturers or other providers of such
healthcare products. In addition, we cannot predict the rate at which consumers
will elect to engage in e-commerce or the compensation that we will receive for
enabling these transactions.
We could be involved in litigation if any product or service sold through
our site is defective, fails to perform properly or injures a consumer, even if
such product or service is provided by an unaffiliated third party. We intend to
negotiate with retailers for contractual provisions intended to limit our
exposure to liability claims. However, such contractual provisions may not
prevent, and we may not be able to negotiate for protection against all
potential claims, and our insurance may not
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adequately protect us from these types of claims. Liability claims could require
us to spend significant time and money in litigation or pay significant damages.
As a result, any such claims, whether or not successful, could seriously damage
our reputation and our business, financial condition and results of operations.
See "Business--Our Industry."
WE DEPEND ON THE SECURITY OF ON-LINE TRANSACTIONS.
A significant barrier to e-commerce and communications over the Internet has
been the need for secure transmission of confidential information such as credit
card and other personal information. Any well-publicized compromise of security
could limit the growth of Web usage. We may incur significant costs to protect
against the threat of security breaches or to alleviate problems caused by such
breaches. If an unauthorized person were able to enter into our systems and
misappropriate personal information or credit card information of our consumers,
we could face legal claims, litigation or other potential liabilities that could
have a material adverse effect on our business, financial condition and results
of operations.
We retain confidential customer information in our database. Therefore, it
is critical that our facilities and infrastructure remain secure and are
perceived by consumers to be secure. Despite the implementation of security
measures, our infrastructure may be vulnerable to physical break-ins, computer
viruses, programming errors or similar disruptive problems. A material security
breach could damage our reputation or result in liability to us.
ADOPTION OF THE INTERNET AS AN ADVERTISING MEDIUM IS UNCERTAIN.
We expect to derive a portion of our revenues from banner advertising on our
Web site. However, we have not earned any banner advertising revenue to date,
and we cannot guarantee that we will be able to generate any significant
advertising revenues in the future. No standards have been widely accepted to
measure the effectiveness of Internet advertising. If such standards do not
develop, existing advertisers may not continue their current level of Internet
advertising, and advertisers that have traditionally relied upon other
advertising media may be reluctant to advertise on the Internet. Advertisers
that already have invested substantial resources in other advertising methods
may be reluctant to adopt a new strategy. Our business would be adversely
affected if the market for Internet advertising fails to develop or develops
more slowly than expected.
Different pricing models are used to sell advertising on the Web. It is
difficult to predict which, if any, will emerge as the industry standard. This
makes it difficult to project our future advertising rates and revenues. Our
advertising revenues could be adversely affected if we are unable to adapt to
new forms of Internet advertising. Moreover, "filter" software programs that
limit or prevent advertising from being delivered to a Web user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
Advertisers will want accurate measures of the demographics of our consumer
base and the delivery of advertisements on our Web site. We will have to perform
these measured services ourselves or obtain them from providers. If we do not
develop these systems successfully, we may not be able to accurately evaluate
the demographic characteristics of our consumers. Companies may not advertise on
our site or may pay less for advertising if they do not perceive such
measurements to be reliable. See "Business--Our Revenue Opportunities."
WE HAVE RECEIVED RECENT AND CONTINUING PUBLICITY.
We have received, and may continue to receive, a high degree of media
coverage, including coverage that includes rumors, speculations and other
inaccurate or incomplete information and forward-looking statements that involve
numerous risks and uncertainties. We assume no responsibility for the accuracy
of any unauthorized statements or other information appearing in the media,
including statements made by our affiliates or those who purport to be our
affiliates, for purposes of this
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offering. Prospective investors should not rely on any information other than
the information set forth in this prospectus in making a decision to purchase
the common stock we are offering by this prospectus.
PRIOR TO THIS OFFERING THERE HAS BEEN NO PRIOR TRADING MARKET FOR OUR STOCK AND
OUR STOCK PRICE MAY BE VOLATILE.
Prior to this offering, there has been no public market for our common
stock. We cannot predict the extent to which investor interest in
AmericasDoctor.com will lead to the development of a trading market or how
liquid that trading market might become. The initial public offering price for
our shares will be determined by negotiation between us and the representatives
of the underwriters based upon several factors and may not be indicative of
future market prices. See "Underwriting" for factors to be considered in
determining the initial public offering price.
The trading price of our common stock could be subject to fluctuations in
response to factors, some of which are beyond our control, including, without
limitation, the following:
- actual or anticipated variations in our quarterly operating results;
- announcements of technological innovations or new products or services by
us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the Internet and/or on-line commerce industries;
- changes in the economic performance and/or market valuations of other
Internet, on-line commerce or healthcare companies;
- announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
- additions or departures of key personnel;
- release of lock-up or other transfer restrictions on our outstanding
shares of common stock or sales of additional shares of common stock; and
- potential litigation.
In addition, the stock market has experienced significant volatility, which
recently, in part, may be due to the expansion of trading on the Internet, that
has particularly affected the market prices of equity securities of companies
within certain industry groups, such as technology companies generally and
Internet-related companies in particular. This volatility has included rapid and
significant increases in the trading prices of certain Internet companies
following initial public offerings to levels that do not bear any reasonable
relationship to the operating performance of such companies and large interday
swings in the trading prices of such securities. These fluctuations may
materially adversely affect the trading price of our common stock.
Investors in our stock may not be able to resell their shares of common
stock at or above the initial public offering price due to possible volatility
in our stock price after this offering. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has been instituted against such a company. The institution of
such litigation against us could result in substantial costs and diversion of
our management's attention and resources.
WE ARE CONTROLLED BY OUR EXISTING STOCKHOLDERS.
Upon completion of this offering, our present directors and executive
officers, holders of more than 5% of our outstanding common stock and their
respective affiliates will beneficially own approximately % of the
outstanding common stock (approximately % of the outstanding common stock
assuming full exercise of the underwriters' over-allotment option). As a result,
these
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stockholders, if they act as a group, will be able to control all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Such control may have the effect of
delaying or preventing a change in control. See "Management," "Principal
Stockholders" and "Description of Capital Stock."
OUR MANAGEMENT WILL HAVE BROAD DISCRETION OVER THE USE OF PROCEEDS.
Our Board of Directors and management team will have significant flexibility
in applying the net proceeds of this offering. We currently intend to use the
net proceeds from this offering for the following:
- to fund operating losses;
- expansion of our operations, including building additional chat centers;
- advertising and brand promotion;
- operate and maintain our Web site;
- content development; and
- working capital and other general corporate purposes.
The failure of our management team to apply such funds effectively could have a
material adverse effect on our business, financial condition and results of
operations. See "Use of Proceeds" and "Management."
THERE WILL BE A SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE.
The market price of our common stock could decline as a result of sales of a
large number of shares of common stock in the market after this offering, or the
perception that such sales could occur. Such sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. After this offering, we will have
outstanding shares of common stock, and shares issuable under currently
exercisable outstanding options and warrants. Subject to compliance with the
lock-up agreements described in "Underwriting," shares eligible for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------
<S> <C>
After the date of this prospectus: ............................................................
Upon the filing of a registration statement to register for resale shares of common stock
issuable upon the exercise of options granted under our 1999 Long-Term Incentive Plan: ......
At various times after 90 days from the date of this prospectus: ..............................
At various times after 180 days from the date of this prospectus: .............................
</TABLE>
In addition, we have entered into a registration rights agreement with
certain shareholders holding an aggregate of 466,852 shares (including shares
issuable upon exercise of currently exercisable outstanding options and
warrants). Pursuant to the registration rights agreement, such shareholders may
require AmericasDoctor.com to register for sale to the public some or all of
their shares. See "Certain Transactions--Amended and Restated Registration
Rights Agreement."
NEW INVESTORS WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors participating in the initial public offering will incur an
immediate, substantial dilution of $ in the net tangible book value per
share of the common stock from the assumed initial public offering price of
$ per share. The expense of our outstanding options and warrants will result
in further dilution of new investors in the offering. Furthermore, to the extent
that we issue additional shares of our common stock pursuant to acquisitions or
our strategic relationships, or outstanding
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options or warrants to purchase our common stock are exercised, there will be
further dilution. For more information, see "Dilution."
WE MAY NEED ADDITIONAL FINANCING.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus. However, we may need to raise additional
funds to respond to business contingencies which may include the need to:
- fund more rapid expansion;
- fund additional marketing expenditures;
- develop new or enhance existing content, features or services;
- enhance our operating infrastructure;
- respond to competitive pressures; or
- acquire complementary businesses or technologies.
If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced,
and such securities may have rights, preferences or privileges senior to those
of our stockholders. We cannot guarantee that additional financing will be
available on terms favorable to us, or at all. If adequate funds are not
available on acceptable terms, or at all, our ability to fund our operations,
take advantage of unanticipated opportunities, develop and enhance our content,
features and services, or otherwise respond to competitive pressures would be
limited. Our business, financial condition and results of operations could be
materially adversely affected by any limitations in raising additional required
financing. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT BE REALIZED.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those anticipated in
these forward-looking statements as a result of the risks faced by us described
above and elsewhere in this prospectus. We undertake no obligation after the
date of this prospectus to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future and could have a material adverse effect on our business, financial
condition and results of operations.
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USE OF PROCEEDS
We estimate that the proceeds from the sale by us of the shares of
common stock offered hereby at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and estimated
offering expenses, will be approximately $ million (and an additional
$ million if the underwriters' over-allotment option is exercised in full).
We currently intend to use the net proceeds from this offering for the
following:
- fund operating losses;
- expansion of our operations, including building additional chat centers;
- advertising and brand promotion;
- operate and maintain our Web site;
- content development; and
- working capital and other general corporate purposes.
We also may use a portion of the proceeds from this offering for possible
acquisitions, strategic investments or the introduction of products or
technologies that expand, complement or are otherwise related to our current or
planned content, communities and services. We have no current plans, agreements
or commitments with respect to any such acquisition or investment transaction,
and we are not currently engaged in any negotiations with respect to any such
transaction.
We have not yet determined the amount of net proceeds to be used
specifically for each of the foregoing purposes. Accordingly, management will
have significant flexibility in applying the net proceeds of this offering.
Pending the foregoing uses, the net proceeds of this offering will be invested
in short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock. We intend
to retain all of our future earnings, if any, for use in our business, and
therefore we do not expect to pay any cash dividends on our common stock in the
foreseeable future. Investors should not purchase our common stock with the
expectation of receiving cash dividends.
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CAPITALIZATION
The following table sets forth the capitalization of AmericasDoctor.com
derived from our unaudited financial statements as of March 31, 1999 on an
actual, pro forma and as adjusted basis. The "actual" column reflects our
capitalization as of March 31, 1999 on a historical basis, without any
adjustments to reflect subsequent events or anticipated events. The "pro forma"
column reflects our capitalization as of March 31, 1999 with adjustments for the
following:
- the issuance by us on June 2, 1999 of 103,883 shares of our Series B
redeemable convertible preferred stock and warrants for an aggregate
purchase price of approximately $6.9 million, and the exercise by a
shareholder of preemptive rights with respect to 9,958 shares at a price
of $66.18 per share.
The "as adjusted" column reflects our capitalization as of March 31, 1999
with the preceding "pro forma" adjustments plus:
- the automatic conversion of all shares of outstanding preferred stock into
shares of common stock upon the closing of this offering,
- a for 1 split of our common stock to take place upon the closing of
this offering, and
- the sale by us of shares of our common stock pursuant to this
offering at an assumed public offering price of $ net of estimated
underwriting discounts and offering expenses.
The capitalization information set forth in the table below should be read
in conjunction with the financial statements and notes thereto included
elsewhere in this prospectus. You should review note 9 to the notes to our
financial statements included elsewhere in this prospectus for a description of
our Series A convertible preferred stock and Series B redeemable convertible
preferred stock.
<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents..................................... $ 2,322 $ 9,356
--------- -----------
--------- -----------
Notes payable and current portion of capital lease
obligations................................................. $ 43 $ 43
--------- -----------
--------- -----------
Capital lease obligations, net of current portion............. $ 5 $ 5
Series B redeemable convertible preferred stock, $0.01 par
value; 151,103 shares authorized, no shares issued and
outstanding, actual, 103,883 shares issued and outstanding,
pro forma; shares issued and outstanding, as
adjusted.................................................... -- 6,375
Stockholders' equity:
Series A convertible preferred stock, $0.01 par value; 133,333
shares authorized, 133,333 shares issued and outstanding,
actual and pro forma; shares issued and outstanding, as
adjusted.................................................... 1 1
Common stock, $0.01 par value; 2,500,000 shares authorized,
593,992 shares issued and outstanding, 20,751 shares
subscribed, actual; 603,950 shares issued and outstanding,
20,751 shares subscribed; pro forma; shares issued and
outstanding, shares subscribed, as adjusted............ 6 6
Warrants...................................................... 300 300
Additional paid-in capital.................................... 11,957 12,616
Stock subscriptions receivable................................ (325) (325)
Deferred compensation......................................... (163) (163)
Accumulated deficit........................................... (8,137) (8,137)
--------- -----------
Total stockholders' equity.................................... 3,639 4,298
--------- -----------
Total capitalization.......................................... $ 3,644 $ 10,678
--------- -----------
--------- -----------
</TABLE>
Immediately following completion of this offering, AmericasDoctor.com will
also have (i) 272,222 shares of common stock issuable upon the exercise of
outstanding options granted under our 1999 Long-Term Incentive Plan at a
weighted average exercise price of $50.24 per share and (ii) 23,220 shares of
common stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.01 per share.
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<PAGE>
DILUTION
The pro forma net tangible book value of AmericasDoctor.com as of March 31,
1999 was $ million or $ per share of common stock. Pro forma net tangible
book value per share is equal to AmericasDoctor.com's total tangible assets less
its total liabilities, divided by the number of shares of common stock
outstanding on a pro forma basis after giving effect to (i) the conversion of
outstanding preferred stock into 237,216 shares of common stock upon the closing
of this offering, (ii) a for 1 stock split of our common stock to be effected
upon the closing of this offering and (iii) receipt of all outstanding stock
subscriptions receivable. After giving effect to the sale of shares of common
stock offered hereby at an assumed initial public offering price of $ per
share and the receipt by AmericasDoctor.com of the estimated net proceeds
therefrom, after deducting estimated underwriting discounts and offering
expenses, the pro forma net tangible book value of AmericasDoctor.com at March
31, 1999 would have been $ million, or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to new
investors.
The following table illustrates our per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share..................... $
Pro forma net tangible book value per share as of March 31, 1999.... $
Increase per share attributable to new investors.................... $
Pro forma net tangible book value per share after this offering..... $
Dilution per share to new investors................................. $
---------
---------
</TABLE>
The following table summarizes, as of March 31, 1999, the number of shares
of common stock purchased from AmericasDoctor.com, the total consideration paid
to AmericasDoctor.com on a pro forma basis, and the average price per share paid
by existing stockholders and by the investors purchasing shares of common stock
in this offering, before deducting estimated underwriting discounts and
estimated offering expenses at an assumed public offering price of $ per
share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------ ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... % 12,515,420 % $ 0.56
New investors....................................... % % $
------------ --- ------------ --- -----
Total........................................... 100% 100% $
------------ --- ------------ --- -----
</TABLE>
Immediately following completion of this offering, AmericasDoctor.com will
also have (i) 272,222 shares of common stock issuable upon the exercise of
outstanding options granted under our 1999 Long-Term Incentive Plan at a
weighted average exercise price of $50.24 per share and (ii) 23,220 shares of
common stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $0.01 per share. The exercise of these options will
result in further dilution of new investors in this offering.
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<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data should be read in conjunction with the
financial statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" appearing elsewhere in this
prospectus. The statement of operations data for the period from August 8, 1997
("inception") to December 31, 1997 and the year ended December 31, 1998 and the
balance sheet data as of December 31, 1997 and 1998 are derived from the
financial statements of AmericasDoctor.com which have been audited by Arthur
Andersen LLP, independent public accountants, and are included elsewhere in this
prospectus. The statement of operations data for the three months ended March
31, 1998 and 1999 and the balance sheet data as of March 31, 1999 are derived
from unaudited financial statements, which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the financial statements. The results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the results for a full year. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." We have calculated
pro forma basic and diluted net loss per share assuming the conversion of the
outstanding preferred stock into common stock on the date of issuance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 8, 1997 YEAR
(INCEPTION) TO ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
--------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenues....................................................... $ -- $ 62 $ -- $ 216
------ ------------ --------- ---------
Operating expenses:
Content and production....................................... -- 2,473 17 2,036
Product development.......................................... -- 974 110 206
Marketing.................................................... -- 587 23 283
General and administrative................................... 12 596 14 467
Depreciation and amortization................................ -- 36 -- 45
------ ------------ --------- ---------
Total operating expenses................................. 12 4,666 164 3,037
------ ------------ --------- ---------
Operating loss........................................... (12) (4,604) (164) (2,821)
Other expense, net........................................... (30) (638) (59) (33)
------ ------------ --------- ---------
Net loss..................................................... $ (42) $ (5,242) $ (223) $ (2,854)
------ ------------ --------- ---------
------ ------------ --------- ---------
Basic and diluted loss per share............................... $ (0.34) $ (22.36) $ (1.80) $ (6.30)
------ ------------ --------- ---------
------ ------------ --------- ---------
Shares used in computing basic and diluted loss per share...... 124 234 124 453
------ ------------ --------- ---------
------ ------------ --------- ---------
Pro forma basic and diluted loss per share..................... $ (0.34) $ (22.36) $ (1.80) $ (5.39)
------ ------------ --------- ---------
------ ------------ --------- ---------
Shares used in computing pro forma basic and diluted loss per
share........................................................ 124 234 124 530
------ ------------ --------- ---------
------ ------------ --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1997 1998 1999
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ 67 $ 271 $ 2,322
Working capital.................................................................... 83 286 2,812
Total assets....................................................................... 141 1,843 4,257
Long-term obligations.............................................................. -- 6 5
Stockholders' equity............................................................... 92 771 3,639
</TABLE>
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE FOLLOWING DISCUSSION OF OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND THE
RELATED NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE CAUTIONARY STATEMENTS SET FORTH IN THIS SECTION, IN "RISK
FACTORS," "REGULATIONS AND OTHER LEGAL CONSIDERATIONS" AND ELSEWHERE IN THIS
PROSPECTUS IDENTIFY IMPORTANT FACTORS RELATING TO SUCH FORWARD-LOOKING
STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE OUR
ACTUAL RESULTS OF OPERATIONS TO DIFFER FROM THOSE EXPRESSED OR IMPLIED IN SUCH
FORWARD-LOOKING STATEMENTS.
OVERVIEW
We operate an interactive Internet healthcare information destination for
consumers. We offer consumers free, real-time interaction with doctors and other
healthcare professionals and easy access to relevant and reliable healthcare
information. AmericasDoctor.com was founded by Scott M. Rifkin, M.D. in August
1997 under the name Ask-A-Doctor, Inc. As a practicing physician, Dr. Rifkin
recognized that many patients value easy and quick access to medical
information. To address this need, Dr. Rifkin developed the innovative idea of a
24-hour doctor chat service that would allow Internet users to get real-time
answers to their health questions from doctors for free. As our operations have
expanded, we have recognized significant opportunity to leverage the
functionality of our 24-hour doctor chat service to attract larger audiences and
respond to their specific health interests through the development of an
interactive Internet site focused on personal health for consumers. Our site
features our free 24-hour doctor chat service that enables consumers to have
live on-line, one-on-one chats with doctors and other healthcare professionals
and a growing library of health and medical information for consumers. We are
expanding our site to integrate community Web sites that focus on the interests
and needs of people sharing specific health conditions. Our objective is to
establish AmericasDoctor.com as a premier Internet healthcare information
destination that consumers trust for accurate, real-time answers to health
questions and prefer for healthcare content, communities and services.
We launched our service in September 1998, initially accessible only by AOL
subscribers. We launched our service in February 1999 on the Internet at our
domain address, WWW.AMERICASDOCTOR.COM. Since the launch of our service we have
focused on broadening its functionality, incorporating additional interactive
tools and features and increasing awareness of the AmericasDoctor.com brand.
Our business strategy is to derive revenue from hospital sponsors (including
healthcare systems), e-commerce (including access fees charged to our e-commerce
partners), sales of advertising and commercial sponsorship of educational
programming and fees for recruiting volunteers for clinical studies. We began
recognizing revenue in November 1998, and through the end of 1998 our revenues
were derived exclusively from revenues from hospital sponsorships and
educational program sponsorships. We launched our e-commerce operations in May
1999. We intend to further develop our e-commerce operations during 1999,
initially focusing on our strategic relationship with Smith & Nephew.
We generate hospital sponsorship revenue from the sale of promotional
opportunities that go beyond banner advertising. We enter into sponsorship
arrangements that typically provide for a term of one year and make the hospital
the exclusive sponsor of our Internet services within a market defined by zip
code. We also provide the sponsors with opportunities for on-line program
sponsorships featuring each sponsor's personnel, integrated Web pages on our
site and links to the hospital's Web site. Revenues from hospital sponsorships
are recognized during the contractual period of the sponsorship, which commences
when the hospital sponsor goes on-line. Sponsorship fees vary depending on the
nature of the promotional activities involved, the size of the sponsor's market
and
33
<PAGE>
the extent of regional exclusivity. As of June 1, 1999, we had 34 contracts with
hospital sponsors of which 23 have been launched on the Internet.
We intend to generate e-commerce revenues through alliances with certain
retailers of medical devices and other health-related products. We do not intend
to maintain any significant inventories of the goods we may offer and we
generally intend to enter into arrangements where our e-commerce partners will
fulfill our inventory needs in connection with the sale of a product. We may
receive revenue from direct sales of products we buy for resale, access fees to
our site paid by product suppliers, fees based on percentages of sales made
through our site (other than sales of reimbursable products) and fixed fees for
contacts or transactions made by an e-commerce partner through our site. We will
recognize revenue from sales as made, access fees generally over the term of the
related contract and transaction fees payable by our e-commerce partners upon
notification from the e-commerce partner of sales attributable to users of our
site. We have had no revenue to date from e-commerce other than limited access
fees paid in connection with our launch activities.
We may generate advertising revenues primarily through the sale of banner
advertisements and commercial sponsorship educational program. We currently
intend to enter into advertising contracts under which we may guarantee a
minimum number of user "impressions" (times that an advertisement is displayed
on the screen of our users) to be delivered over a specified period for a fixed
fee. Advertising rates, if measured on a cost per thousand impressions basis,
would be dependent on whether the impressions are for general rotation
throughout our site or targeted at specific audiences or users on our site. We
have had limited revenues from commercial sponsorship of educational programs
and have not had any advertising revenue to date.
We may generate contract research services revenue primarily through fees
for assisting in the recruitment of volunteer participants for clinical trials
through our site. These revenues may consist of annual fees paid by
organizations to recruit on our site, and fees based on the number of volunteers
recruited from our site who meet the general criteria for a trial and who are
accepted into a study. We currently intend to enter into contracts with a
limited number of healthcare companies seeking volunteers for clinical trials,
such as pharmaceutical companies, contract research organizations ("CROs") that
offer comprehensive clinical research services and site management organizations
("SMOs") that offer some similar services including data collection, but do not
perform research. We have not had any revenue from clinical trial recruitment to
date.
We incurred net losses of approximately $42,000 for the year ended December
31, 1997, approximately $5.2 million for the year ended December 31, 1998 and
approximately $2.9 million for the three-month period ended March 31, 1999. At
March 31, 1999, we had an accumulated deficit of $8.1 million. The net losses
and accumulated deficit resulted primarily from the costs associated with the
start-up of our business, developing and operating our site, obtaining
healthcare information, attracting users to our site and establishing the
AmericasDoctor.com brand. Since we plan to invest heavily in marketing,
advertising, brand promotion, content development, hiring additional employees
and continuing to develop our site and operating infrastructure, we expect to
incur significant net losses for the foreseeable future.
The costs of operating our free 24-hour doctor chat service, and, in
particular, the costs of providing doctors, are significant. Our agreement with
MAS provides for payments of cost plus 20% plus additional costs such as rent.
We anticipate the need to add call centers and increase the number of doctors
available on our chat service to accommodate increases in the number of visitors
seeking to use our chat service. We expect such expansion to elevate our cost
structure significantly; however, due to the cost of adding doctors and call
centers, we do not intend to increase the number of doctors proportionately to
the anticipated increase in the number of users to our site.
The Internet market, and, in particular, the healthcare sector of the
Internet market, is in an early stage of development, rapidly evolving and
characterized by an increasing number of market entrants
34
<PAGE>
who are introducing competing products and services. Demand and market
acceptance for recently introduced products and services often are subject to a
high level of uncertainty and risk. We cannot predict with any certainty that
demand for our content, communities and services will emerge, grow or be
sustainable.
We have a very limited operating history with which to evaluate our business
and prospects. We were formerly a development stage company and continue to have
uncertainties related to development stage enterprises. Our business strategy is
new, evolving and unproven. Due to the rapidly changing nature of the Internet
we are continuously modifying our business strategy and expect to continue to
modify our strategy in the future. Our prospects must be considered in light of
the risks, difficulties, uncertainties and expenses often encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets such as the Internet market. Our ability to earn
revenues may be limited by the application of healthcare regulations and laws to
our business, as well as the application of existing and future laws to the
Internet, including e-commerce activities. The requirement that we comply with
any existing or new legislation or regulation may decrease the demand for our
services, increase our cost of doing business or otherwise have a material
adverse effect on our business, financial condition and results of operations.
Although we have experienced some revenue growth in recent periods, this growth
may not be sustainable. We may never achieve significant revenues or
profitability, or if we achieve significant revenues they may not be sustained
in future periods.
Because of these and other factors, we believe quarterly comparisons of our
results of operations are not good indicators of our future performance. If our
operating results fall below the expectations of securities analysts and
investors in some future periods, our stock price may fall.
RESULTS OF OPERATIONS
For purposes of the discussion set forth below, the period from August 8,
1997 (inception) through December 31, 1997 is referred to as 1997 and the year
ended December 31, 1998 is referred to as 1998. Quarterly or semi-annual periods
referred to below are defined accordingly.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS
ENDED MARCH 31, 1998.
REVENUE. Revenue for the three months ended March 31, 1999 was $216,000 and
was comprised exclusively of sponsorship fees from hospitals and commercial
sponsors of educational programs and access fees charged to our e-commerce
partners. No revenue was recognized for the same period in 1998. Hospital
sponsorship revenue accounted for $176,000 or 81% of our revenues for the three
months ended March 31, 1999. E-commerce access and site development fees were
$40,000 or 19% of our revenues for the three months ended March 31, 1999
relating to pre-launch activities for our e-commerce which commenced activities
in March 1999 and was launched in May 1999, all of which was earned from Smith &
Nephew.
CONTENT AND PRODUCTION EXPENSE. Content and production expense consists
primarily of AOL carriage fees, reimbursement for physician salaries, other call
center costs and consulting fees related to the development of our clinical
trial business. Content and production expense increased to approximately $2.0
million for the three months ended March 31, 1999 compared to $17,000 for the
same period in 1998. This increase was due to the development of our online
operations, and the payment to PRWW of $575,000 for consulting services. We
believe that our level of expenditures in this area will continue to increase as
we further develop the content available on our site, increase the capacity of
our call center in connection with our planned advertising and promotion
campaign and further develop our e-commerce strategies.
PRODUCT DEVELOPMENT EXPENSE. Product development expense consists primarily
of costs incurred to maintain our Web site and further refine our chat tools as
well as costs incurred in connection with
35
<PAGE>
the development of software to support our e-commerce strategies. Product
development expense increased to $206,000 for the three months ended March 31,
1999 from $110,000 for the same period in 1998. The increase is primarily
attributable to the early stage of development of our site in 1998 and costs
incurred in 1999 related to our e-commerce strategy. We expect that additional
significant investments in technology will be required for us to remain
competitive and to complement the expansion of our business into additional
business areas, including the development of new e-commerce opportunities. We
therefore, expect that product development expense will continue to increase in
absolute dollars for the foreseeable future.
SALES AND MARKETING EXPENSE. Sales and marketing expense consists primarily
of salaries, travel costs and public relations costs. Sales and marketing
expense increased to $283,000 for the three months ended March 31, 1999 compared
to $23,000 for the same period in 1998. The increase is primarily attributable
to the hiring of additional sales personnel and increases in public relations
expenditures. We plan to spend a large portion of the proceeds from this
offering on an expanded marketing campaign including the use of traditional
media as well as on-line advertising. We expect these expenses to continue to
increase for the foreseeable future.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
consists primarily of salaries and other costs for our general corporate
functions including executive and finance, facilities costs, professional fees
and travel costs. General and administrative expense increased to $467,000 for
the three months ended March 31, 1999 compared to $14,000 for the same period in
1998. The increase in general and administrative expenses was attributable to
the hiring of additional executive and administrative personnel and increases in
facility costs to support the growth of our operations. We expect to incur
additional general and administrative expense as we hire additional personnel
and incur incremental costs related to the growth of our business and compliance
with public company obligations and, therefore, expect this expense to continue
to increase in absolute dollar terms. We also expect to record a charge of
approximately $5.6 million in June 1999 in connection with the vesting of
options granted to our chief executive officer in July 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $44,000
for the three months ended March 31, 1999. There was no depreciation and
amortization recorded for the same period in 1998. We had no property and
equipment as of March 31, 1998.
OTHER EXPENSE. Other expense consists primarily of interest on convertible
debt, notes payable and capital leases. Other expense decreased to $33,000 for
the three months ended March 31, 1999 from $59,000 for the same period in 1998.
This decrease was due to the amortization of interest recorded in connection
with the conversion provision on the Company's promissory notes which were
converted in July 1998.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO THE PERIOD FROM AUGUST 8,
1997 (INCEPTION) THROUGH DECEMBER 31, 1997.
REVENUE. Revenue for 1998 was comprised exclusively of sponsorship fees
paid by hospitals and educational program sponsors. We launched our site on AOL
in September 1998. We recorded revenue of $62,000 for 1998. No revenue was
recognized in 1997.
CONTENT AND PRODUCTION EXPENSE. Content and production expense consisted
primarily of AOL carriage fees, reimbursement for physician salaries and other
call center costs. Content and production expense was $2.5 million in 1998.
There was no content and production expense in 1997.
PRODUCT DEVELOPMENT EXPENSE. Product development expense consists of costs
incurred to support the development of our web site and related tools. Product
development expense was $974,000 in 1998. No product development expense was
incurred in 1997 as we had not yet begun to develop our site.
36
<PAGE>
SALES AND MARKETING EXPENSE. Sales and marketing expense consists primarily
of salaries and related costs, commissions, advertising, promotion and other
related costs. We incurred $587,000 of sales and marketing expense in 1998 as we
commenced our sales activities and began to build the infrastructure for our
marketing campaign and commencement of sales activities. There was no sales and
marketing expense in 1997.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
consists primarily of salaries and other costs for our general corporate
functions including executive and finance, facilities costs, professional fees
and travel costs. General and administrative expense increased to $596,000 in
1998 from $12,000 in 1997 as a result of the initial growth and build-up of our
operations.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $36,000 in
1998. There was no depreciation and amortization recorded for the same period in
1997. Depreciation and amortization increased due to the purchase of property
and equipment as we have expanded our operations.
OTHER EXPENSE. Other expense consists primarily of interest expense on
convertible debt, notes payable and capital leases. Other expense was $638,000
in 1998 compared to $30,000 in 1997. Other expense increased as a result of
increased borrowings in 1998 and the amortization of interest recorded in
connection with the beneficial conversion feature on the Company's promissory
notes which were converted in July 1998.
INCOME TAXES. At December 31, 1998, we had total net operating loss
carryforwards for federal and state income tax purposes of $4.6 million which
expire in 2012 and 2013. For financial reporting purposes, we have recorded a
valuation allowance to reduce our net deferred tax assets to zero as a result of
uncertainties related to our ability to generate enough taxable income prior to
expiration of the carryforwards in order to realize the deferred tax assets that
we have recorded.
SEASONALITY
We believe that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. If similar seasonal and cyclical patterns emerge in Internet advertising,
our revenues and operating results also may vary based upon these patterns.
Given the early stage of development of the Internet and our company, however,
we cannot predict to what extent, if at all, our operations will prove to be
seasonal. In addition, although we cannot predict the effects of seasonality
with respect to our e-commerce sales, we expect that similar trends may develop
in our e-commerce business to those experienced in the healthcare product and
medical device industries of our e-commerce partners.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through the sale of equity and
debt securities as we have generated negative cash flow from operations since
our inception. To date, we have received approximately $18.2 million in net
proceeds from the sale of common stock, convertible preferred stock and
unsecured convertible promissory notes. At March 31, 1999, we had approximately
$2.3 million in cash and cash equivalents and a $325,000 receivable from the
sale of common stock. Our principal commitments consist of obligations under our
capital and operating leases.
On June 30, 1998 we borrowed $900,000 from Mercantile Safe Deposit and Trust
Co. This loan was repaid in February 1999.
On August 14, 1998 we sold 63,643 shares of common stock for an aggregate
amount of $997,000 to a group of individual investors.
On November 1, 1998 we sold 25,000 shares of common stock for an aggregate
amount of $500,000 to a group of individual investors.
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<PAGE>
From November 1998 through January 1999, we sold 140,000 shares of common
stock for an aggregate amount of $3.5 million to a group of individual
investors.
On February 1, 1999 we sold 133,333 shares of Series A convertible preferred
stock for an aggregate amount of approximately $4 million to Tullis-Dickerson
Capital Focus II, L.P., TD Origen Capital Fund, L.P. and Javelin Capital Fund,
L.P.
On March 4, 1999 we sold 27,778 shares of common stock for an aggregate
amount of $1 million to a group of individual investors.
On June 1, 1999 we sold 9,958 shares of common stock to MAS for an aggregate
amount of $659,020.
On June 1, 1999 we sold 103,883 shares of Series B redeemable convertible
preferred stock to GE Capital Equity Investments, Inc. and Tullis-Dickerson
Capital Focus II for an aggregate amount of approximately $6.9 million.
Net cash used in operating activities was $3.0 million for the three months
ended March 31, 1999, $5.1 million in 1998 and $56,000 in 1997. The principal
use of cash for all periods was to fund our losses from operations.
Cash used in investing activities has consisted of capital expenditures for
computers, office furniture and equipment.
Net cash provided by financing activities was $5.3 million for the three
months ended March 31, 1999, $5.7 million in 1998 and $123,000 in 1997. Cash
provided by financing activities has consisted of sales of our common stock and
preferred stock and proceeds from notes payable and convertible debt, net of
principal repayments of capital lease obligations and notes payable.
We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future and that our
operating expenses will be a material use of our cash resources. We believe that
our existing working capital and cash flows from operations combined with the
net proceeds from this offering will be sufficient to meet our anticipated cash
needs for working capital and capital expenditures for at least 12 months after
the date of this prospectus. We expect these requirements to include the funding
of operating losses, working capital requirements and other general corporate
purposes, including advertising, brand promotion, content development and access
and other distribution fees. We may also elect to pursue one or more strategic
alliances or acquisition transactions; although, as of the date of this
prospectus, we have no agreement to enter into any material investment or
acquisition transaction. Such alliance or acquisition could involve the issuance
of additional equity or debt securities, or the payment of cash or a combination
of both.
We may need to raise additional funds, however, to respond to business
contingencies which may include the need to:
- fund more rapid expansion;
- fund additional marketing expenditures;
- pay for access to additional portals and other distribution channels;
- development of editorial content, features or services;
- enhance our operating infrastructure;
- respond to competitive pressures; or
- acquire complementary businesses or technologies.
If cash generated from operations is insufficient to satisfy our cash needs,
we may be required to raise additional funds. If we raise additional funds
through the issuance of equity securities or issue
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additional equity securities in connection with acquisitions or alliances, our
existing shareholders may experience significant dilution. Furthermore,
additional financing may not be available when needed or, if available,
financing may not be on terms favorable to us or our stockholders. If financing
is not available when required or is not available on acceptable terms, we may
be unable to develop or enhance our site or our products or services. In
addition, we may be unable to take advantage of business opportunities or
respond to competitive pressures. Any of these events could have a material
adverse effect on our business, financial condition and results of operations.
YEAR 2000 COMPLIANCE
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the year
2000 approaches and are commonly referred to as the "Year 2000 Problem."
ASSESSMENT. The Year 2000 Problem could affect computers, software and
other equipment that we use. Accordingly, we are reviewing our internal computer
programs and systems to determine if they will be Year 2000 compliant. We
believe that our computer systems will be Year 2000 compliant in a timely
manner. However, while we do not expect the cost of these efforts to be material
to our financial position or any year's operating results, there can be no
assurance to this effect. We believe that we have identified substantially all
of the major computers, software applications and related equipment used in
connection with our internal operations that must be modified, upgraded or
replaced to minimize the possibility of a material disruption to our business.
We have commenced the process of modifying, upgrading and replacing systems that
have been identified as potentially being adversely affected and expect to
complete this process before the end of the third quarter of 1999. We do not
expect the cost related to these efforts to be material to our business,
financial condition or results of operations.
SERVICES PROVIDED TO CONSUMERS. We depend on third party suppliers for most
of the services provided through AmericasDoctor.com. If these parties are
affected by the Year 2000 Problem, our ability to provide services to our
consumers may be materially adversely affected. We have been gathering
information from and have initiated communications with our service and content
providers to identify and, to the extent possible, resolve issues involving the
Year 2000 Problem. However, we have limited or no control over the actions of
our service and content providers. Thus, while we expect that we will be able to
resolve any significant Year 2000 Problems with our systems, we cannot guarantee
that our service and content providers will resolve any or all Year 2000
Problems with their systems before the occurrence of a material disruption to
our business. Any failure by third parties to resolve Year 2000 Problems with
their systems in a timely manner could have a material adverse effect on our
business, financial condition or results of operations.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers
and related systems, the operation of our office and facilities equipment, such
as fax machines, photocopiers, telephone switches, security systems and other
common devices may be affected by the Year 2000 Problem. We are currently
assessing the potential effect of, and costs of remediating, the Year 2000
Problem on this equipment. We estimate that our total cost of completing any
required modifications, upgrades or replacements of these internal systems will
not have a material effect on our business, financial condition or results of
operations.
MOST LIKELY CONSEQUENCES TO OUR BUSINESS OF YEAR 2000 PROBLEMS. Although we
expect to identify and resolve all Year 2000 Problems that could materially
adversely affect our business, financial condition or results of operations, we
cannot anticipate all Year 2000 Problems that may affect our company. In
addition, we cannot accurately predict the nature, severity, duration or
financial
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consequences of Year 2000 Problems that may occur. As a result, we expect that
we could possibly suffer the following consequences:
- operational distortions to our service and content providers and our
consumers that may divert our time, attention and financial resources away
from our ordinary business activities and
- serious system failures that may require significant efforts by us, our
service and informational content providers or our consumers to avoid a
material disruption of our business.
CONTINGENCY PLANS. We currently are developing contingency plans to be
implemented as part of our efforts to identify and correct Year 2000 Problems
affecting our internal systems. We expect to complete our contingency plans by
the end of the third quarter of 1999. Depending on the systems affected, these
plans could include (a) accelerated replacement of affected equipment or
software; (b) short to medium-term use of backup equipment and software; (c)
increased work hours for our personnel or use of contract personnel to correct
on an accelerated schedule any Year 2000 Problems which arise or to provide
manual workarounds for information systems; and (d) other similar approaches. If
we are required to implement any of these contingency plans, such plans could
have a material adverse effect on our business, financial condition or results
of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No 131 ("SFAS No. 131") "Disclosure
About Segments of an Enterprise and Related Information," which is effective for
fiscal years beginning after December 15, 1997. SFAS No. 131 requires that
public companies report certain information about operating segments in their
annual financial statements and in subsequent condensed financial statements of
interim periods issued to shareholders. This statement also requires that public
companies report certain information about their products and services, the
geographic areas in which they operate and their major customers. Reportable
operating segments are determined in accordance with the management approach, as
defined in SFAS No. 131. The management approach is based on the way that the
chief operating decision-maker organizes the segments within an enterprise for
making operating decisions and assessing performance. We have adopted SFAS No.
131 effective January 1, 1998. We only had one material reportable segment for
the year ended December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 ("SOP 98-1") "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
entities capitalize certain costs related to internal use software once certain
criteria have been met. We are required to adopt SOP 98-1 effective January 1,
1999. Adoption of SOP 98-1 did not have a material impact on our capitalization
policy, cash flows, financial condition or results of operations.
In April 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5")
"Reporting on the Costs of Start-up Activities." SOP 98-5, which is effective
for fiscal years beginning after December 15, 1998, provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as incurred. As we
have historically expensed these costs, the adoption of SOP 98-5 is not expected
to have a significant impact on our cash flows, financial conditions or results
of operations.
The FASB is currently addressing significant current practices relating to
accounting for stock-based compensation awards under APB 25. The FASB is also
addressing the accounting for the repricing of stock options. Tentatively, the
FASB has decided that awards to non-employee directors would be charged to
operations based upon the fair value of the award.
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BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING THOSE ARISING FROM THE FACT THAT OUR BUSINESS IS NEW
AND EVOLVING AND OUR BUSINESS STRATEGY IS UNPROVEN. OUR ACTUAL RESULTS OF
OPERATIONS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS OF OPERATIONS DISCUSSED IN
THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
OUR BUSINESS
AmericasDoctor.com operates an interactive Internet healthcare information
destination for consumers. We offer consumers free, real-time interaction with
healthcare professionals and easy access to relevant and reliable healthcare
information. Our destination features our free 24-hour doctor chat service that
enables consumers to have live on-line, one-on-one chats with doctors and other
healthcare professionals, a variety of interactive healthcare content such as
lectures and live educational programs and a growing library of information on
acute ailments, chronic illnesses, nutrition, pharmacology and other topics, as
well as health and medical publications and news. We have designed our doctor
chat service to enable our users, through the assistance, expertise and insight
of doctors and other healthcare professionals, to successfully find relevant and
reliable healthcare information on-line in response to their health questions.
We are also expanding our site to integrate community Web pages that focus on
the needs of people sharing specific health conditions and interests. We offer
hospitals the opportunity to be an exclusive sponsor of our Internet services
within a market defined by zip code, and also provide sponsors with
opportunities to feature their healthcare professionals on our site. Our goal is
to establish AmericasDoctor.com as a premier Internet site that consumers trust
for accurate, real-time answers to their health questions and rely on as a
preferred destination for healthcare content, communities and services.
We launched our service in September 1998, initially accessible only to AOL
subscribers. In February 1999, we launched our service on the Internet at our
domain address, WWW.AMERICASDOCTOR.COM, and during April 1999 we had
approximately 400,000 user sessions and approximately 4,000,000 page views. In
general, a user session is a period of on-line activity by a user, identified by
a "cookie," separated by a period of at least 30-minutes of inactivity on our
site by that user. In addition, we launched our first health condition-specific
community Web site in April 1999. We plan for each of our free, health
condition-specific communities to offer the full range of our healthcare
content, products and services, including our free 24-hour doctor chat service.
Our communities are intended to foster an interactive experience among people
who share similar health conditions and interests.
Our site currently enables us to generate revenues from hospital and
commercial sponsorship of educational programs and access fees charged to our
e-commerce partners. As of June 1, 1999 we had 34 contracts with hospital
sponsors, 23 of which were launched on the Internet. Each of our hospital
sponsors may provide healthcare content and programming on our site featuring
their doctors. We are designing our site to generate revenue opportunities from
additional sources, including e-commerce, sales of advertising and fees for
recruiting volunteers for clinical studies.
We have established several key strategic relationships, and we intend to
pursue additional strategic relationships in the future. We believe our
relationship with AOL provides significant growth opportunities for our site. In
particular, we are an anchor tenant on AOL's subscriber Health Page that
provides AOL's subscribers easy access to our content, communities and services.
Through our strategic relationships, we believe AmericasDoctor.com will
experience increased traffic and brand recognition.
In addition to our relationships with AOL and our hospital sponsors, we have
entered into agreements with Lycos Corporation, a leading Internet portal, to
increase traffic to our site, Premier Research Worldwide, Ltd. ("PRWW"), a
clinical research company, to help develop and market our
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ability to recruit volunteers for clinical studies and Smith & Nephew, a
distributor and manufacturer of home health products and devices, to develop
e-commerce opportunities.
OUR INDUSTRY
The Internet is one of the fastest growing media in history and has rapidly
become a significant global medium for information, communications, news and
commerce. The Internet enables users to quickly retrieve and transfer
information, share their experiences in on-line communities and purchase a
variety of products and services. The United States Department of Commerce
anticipates that the number of U.S. Internet users will grow from approximately
62 million in 1998 to about 136 million by 2002. The Internet is distinct from
other media because it permits the dissemination of content without geographic
limits, print costs or broadcast capacity constraints. The Internet also permits
information to be targeted to specific demographic groups on both a national and
local basis.
THE HEALTHCARE INDUSTRY
According to the Health Insurance Association of America, the healthcare
industry is the largest segment of the U.S. economy, representing approximately
$1 trillion or 14% of U.S. gross domestic product, annually. We believe changes
in the healthcare industry, including the development of managed care and the
emergence of new medical and pharmaceutical treatments, are placing increasing
pressure on consumers to inform themselves of their healthcare options. As
consumers become more involved in managing their personal health, and that of
their relatives or other people close to them, they are searching for clear
answers to their health questions and reliable information about medical
conditions, treatments and outcomes. According to Cyber Dialogue, the number of
adults searching for on-line healthcare information will grow from approximately
17 million in 1998 to about 30 million by the year 2000.
In addition, the healthcare industry is experiencing consolidation and
increased competition, pressuring hospitals and other healthcare organizations
to find new ways to attract patients and deliver services more efficiently. We
believe successful hospitals and other healthcare organizations must facilitate
consumer access to accurate information about their organizations and
disseminate reliable healthcare information to consumers. The healthcare
industry also continues to research and market new drugs and treatments
requiring volunteers for clinical trials. However, we believe traditional
methods of recruiting volunteers are often time-consuming and costly, relative
to the potential of on-line methods, and may slow the development of new drugs
and treatments.
THE EMERGING INTERNET HEALTHCARE MARKET
We believe participants in the healthcare industry can benefit from the
Internet's open, low-cost, flexible technology for exchanging information and
executing commercial transactions. The Internet has the potential to help
healthcare consumers quickly access relevant healthcare information, identify
and communicate with hospitals, doctors, other patients and healthcare
organizations and make better informed evaluations of treatment alternatives and
healthcare products. We believe the Internet is empowering consumers to educate
themselves on health conditions and treatments, share experiences with other
patients, and better manage their health. Healthcare information is already one
of the fastest growing areas of interest on the Internet with over 15,000 Web
sites providing healthcare information. Traditional sources of healthcare
information, as well as many new on-line sources, are diffuse, unclear,
voluminous and difficult for many consumers to evaluate. Although we believe
useful healthcare information currently is available through traditional media
and on the Internet, a significant proportion of such information is unorganized
and difficult for consumers to find, access and evaluate. We believe a
successful Internet solution must clearly present healthcare information to
consumers through trusted and organized channels.
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INTERNET HEALTHCARE MARKET OPPORTUNITIES
The Internet is distinct from other media in that it can offer instant
access to interactive content targeted to specific demographic groups on both a
national and local basis. We believe this enables hospitals and other healthcare
organizations to promote their services directly to consumers in targeted
markets and geographic areas. In addition to providing healthcare information,
we believe the Internet can be used effectively to attract and communicate with
large audiences of people who may have particular interest in clinical research
issues and in volunteering for clinical trials. We believe Web sites and on-line
communities may enable pharmaceutical companies to disseminate information about
new drugs and treatments to consumers with specific health conditions, possibly
leading to improved consumer understanding and compliance with drug treatment
protocols and better medical outcomes. The Internet also may enable advertisers
and e-commerce suppliers to target consumer audiences sharing specific interests
and preferences. In particular, we believe the Internet's interactive nature
makes the Internet an attractive vehicle for direct-to-consumer advertising of
health-related products and services. The Internet can also provide
opportunities to capture both business-to-consumer and business-to-business
on-line commerce and can provide consumers with greater selection and lower
prices than conventional retail channels. Forrester Research estimates that
healthcare e-commerce will grow from approximately $213 million in 1998 to about
$6.3 billion by 2003. We believe the Internet will capture an increasing portion
of sales in the healthcare market as companies begin to capitalize on e-commerce
for the sale of their products and services.
THE AMERICASDOCTOR.COM SOLUTION
We believe healthcare consumers seek accurate, real-time answers to their
health questions and clearly presented, objective and up-to-date healthcare
information. We believe a significant opportunity exists for AmericasDoctor.com
to offer the expertise and insight of doctors and other healthcare professionals
on a 24-hour, real-time basis to help users quickly find and understand reliable
healthcare information. We also believe we have an opportunity to create an
engaging and interactive destination where consumers will find access to
hospitals, educational programming, current healthcare news, on-line communities
focused on specific health conditions, e-commerce as well as information on
other healthcare companies.
THE AMERICASDOCTOR.COM STRATEGY
Our objective is to become a premier interactive Internet healthcare
information destination that consumers trust for accurate, real-time answers to
their health questions and rely on as a preferred on-line destination for
healthcare information and health-related products and services. We believe our
healthcare content, communities and services, featuring our free 24-hour doctor
chat service, will enable us to attract loyal consumer audiences that are highly
attractive to hospitals and other healthcare providers, pharmaceutical companies
and other healthcare suppliers, advertisers and research organizations.
Key elements of our business strategy include:
- ESTABLISH AMERICASDOCTOR.COM AS A LEADING BRAND.
We intend to establish AmericasDoctor.com as a leading and trusted brand for
on-line healthcare information, products and services. We must build brand
recognition to attract, retain and increase the number of our consumers,
partners and sponsors. We intend to market AmericasDoctor.com through
promotional campaigns in traditional and on-line media and the unique
presentation of our health content, communities and services. We intend to
pursue distribution partnerships with other Internet and media companies to
create additional exposure for the AmericasDoctor.com brand.
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- DIFFERENTIATE OUR CONSUMER EXPERIENCE WITH OUR FREE 24-HOUR DOCTOR CHAT
SERVICE AND OTHER INTERACTIVE FEATURES.
We intend to differentiate our health content, communities and services by
featuring our free 24-hour doctor chat service and design additional easy-to-use
interactive features. We intend to promote our free 24-hour doctor chat service
as a premier Internet tool that offers consumers the expertise and insight of
doctors to help them navigate and understand healthcare information to get
accurate, real-time answers to their health questions.
- PURSUE AND EXPAND RELATIONSHIPS WITH LOCAL HOSPITAL SPONSORS.
We intend to pursue and work with our hospital sponsors in their local
communities to establish a shared brand image that features our on-line health
content, communities and services, including our free doctor chat service, and
the doctors of our hospital sponsors. We offer hospitals the opportunity to be
an exclusive sponsor of our Internet services within a market defined by zip
code, and also provide sponsors with opportunities to feature their healthcare
professionals on our site.
- EXPAND OUR STRATEGIC RELATIONSHIPS.
We will pursue relationships with companies that have the ability, among
other things, to promote the AmericasDoctor.com brand, drive additional
consumers to our site and enhance the quality of our healthcare content,
communities and services. We have entered into an agreement with Lycos, a
leading Internet portal, to make AmericasDoctor.com. a preferred source of
information associated with approximately 400 keywords, phrases and advertising.
We have also partnered with Smith & Nephew, a distributor and manufacturer of
home health products and devices, to help develop our healthcare e-commerce
activities and PRWW, a clinical research company, to help develop and market our
ability to recruit volunteers for clinical studies.
- INTEGRATE AND EXPAND OUR HEALTH CONDITION-SPECIFIC COMMUNITIES INTO OUR
SITE.
We plan to develop our on-line communities, dedicated to specific health
conditions, to become destinations integrating targeted information and
community chat services with the full range of our healthcare content, products
and services. We are designing our communities to facilitate on-line interaction
among people sharing similar health conditions and interests. Our communities
will offer interactive features, including our free 24-hour doctor chat service
and community chat rooms. We also plan to provide other additional services
within each of our on-line communities, including opportunities to volunteer for
clinical trials focused on their specific health conditions and access to an
e-commerce medical mall that provides a range of healthcare products available
from our e-commerce partners. We believe our communities are an effective means
of attracting and maintaining loyal audiences on our site.
- GENERATE MULTIPLE ON-LINE REVENUE STREAMS.
We are designing our site to generate revenue from multiple sources
including hospital sponsorships, e-commerce (including access fees charged to
our e-commerce partners), sales of advertising, educational program sponsorships
and fees for clinical trial recruitment.
THE AMERICASDOCTOR.COM SITE
We have designed the AmericasDoctor.com main Web page as the primary entry
point into our free 24-hour doctor chat service, the full range of our personal
health information resources and our other interactive tools, including our
interactive expert lectures and our medical mall. Our main Web page will also
provide an entry point into our integrated, health condition-specific
communities. We are designing our communities to provide consumers with
resources and interactive tools, in each case, tailored to the relevant
community's focus including moderated community support group chats. We
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believe the effective presentation of our health content, communities and
services is essential to establishing our brand and consumer trust.
FREE 24-HOUR DOCTOR CHAT SERVICE
Our innovative free 24-hour doctor chat service allows our consumers to
question doctors or other healthcare professionals on a range of health issues.
Our chat service provides real-time, instant-messaging between a doctor and a
single user to answer healthcare questions, explain and interpret medical
information and point consumers to relevant on-line resources. When visitors
enter our site, they can begin a private chat with a doctor, or another type of
healthcare professional, depending on the topic, by simply clicking on the
"Ask-the-Doc" button. Visitors are then prompted to read and agree to the terms
of the service which inform users that doctors do not to prescribe medicine or
diagnose medical conditions on our site. In addition, users are instructed,
among other things, not to use our doctor chat service for emergency medical
services.
After accepting the terms of the service, visitors are asked to select a
topic in connection with which they would like information. Current topics
include the following:
- Children's Health
- Women's Health
- Dietary
- Pharmaceutical
- Medical
Doctors conducting chats may refer to comprehensive reference manuals, other
in-depth medical reference materials and on-line services to enhance the
resources available to our users. If a visitor requests an article from our
library, or the doctor engaged in the chat session desires to provide specific
information available through our library, such information will be transmitted
directly to the visitor's screen. When doctors exit chat sessions, the chat
session is terminated and visitors in zip codes where a hospital sponsor exists
are prompted to indicate whether they would like additional information on the
chat topic, whether they would like information about the hospital sponsor and
whether they would like to schedule an appointment with a hospital sponsor.
Visitors who request hospital sponsor information are required to provide
certain basic contact information that we forward to our hospital sponsors so
that our hospital sponsors may contact our visitors.
Depending on the number of visitors to our site, visitors may wait in a
queue until a doctor, or other selected healthcare professional, is available.
While waiting our users can minimize the doctor chat screen and browse other
resources on our site. We are designing an additional service that would permit
users to e-mail a question to a researcher staff member who will search the
resources available on our site under the supervision of our medical personnel
and e-mail a response.
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We have created guidelines for healthcare professionals operating our chat
service intended, in part, to help maintain consistent quality in our content
and services. Chat center doctors, and other healthcare professionals, are
trained to answer health and medical questions, but are instructed not to
practice medicine. Doctors and other healthcare professionals may explain
medical conditions and medications, provide relevant articles on-screen and
direct users to relevant health-related information, among other things, but are
not permitted to diagnose, prescribe, keep medical records or provide continuing
or follow-up care. The text of chat sessions engaged in by our users generally
are not recorded or otherwise stored by AmericasDoctor.com. We may archive
information forwarded to our hospital sponsors to assist our hospital sponsors.
Our staff may include a variety of other healthcare professionals, including
pharmacists and registered nutritionists. We require our doctors and other
healthcare professionals to have appropriate credentials and meet current
professional standards. Doctors and other healthcare professionals participating
in our chat sessions are recruited, hired and trained by MAS, or an affiliate of
MAS, in accordance with our guidelines through an exclusive arrangement to
operate our chat center. The chat center staff, including healthcare
professionals, is supervised and monitored by MAS to ensure compliance with our
guidelines.
HEALTH CONDITION-SPECIFIC COMMUNITIES
We established our first on-line health condition-specific communities in
April 1999. We currently have 21 on-line health condition-specific communities,
each of which will integrate interactive content and services tailored to the
community's health condition focus and feature our free 24-hour doctor chat
service. Currently, our 21 on-line communities are focused on health conditions
listed in the table below:
AMERICASDOCTOR.COM
HEALTH-CONDITION SPECIFIC COMMUNITIES
- ALLERGY
- ARTHRITIS
- ASTHMA
- ADD/ADHD
- BREAST CANCER
- CARDIOVASCULAR
- DEPRESSION
- DIABETES
- DIGESTIVE CONDITIONS
- EATING DISORDERS
- FIBROMYALGIA
- FITNESS
- LYME DISEASE
- MEN'S HEALTH
- MIGRAINE
- MULTIPLE SCLEROSIS
- NUTRITION
- SENIOR HEALTH
- SKIN CONDITIONS
- SLEEP DISORDERS
- WOMEN'S HEALTH
We are planning to introduce a number of additional on-line communities in
1999. We are designing our communities to bring together people sharing similar
health conditions and interests. We believe our communities will enable our
visitors to share and gain valuable insight, practical knowledge and support and
better manage their personal health.
Visitors will be able to access each of our communities through our site's
main Web page or independently at the particular address of the relevant
community. Although first time visitors are required to register by providing an
e-mail address and a username of their choice, there are no registration fees
for using our on-line communities. The front Web page of each community contains
an index of the interactive tools and features which will be available on our
site, including our doctor chat service, calendar of events, libraries and news,
hospital contacts and medical mall, each with point and click access. The front
Web page of each community also provides an interactive community chat room, a
community message board and a community reading room. Our community chat rooms
enable our members to participate in group chat sessions using instant-messaging
technology.
We plan for each of our communities to have a reading room containing a
variety of clearly-presented healthcare information and health and medical news.
We also plan to offer opportunities in
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our communities to volunteer for clinical trial studies and become involved in
current research on issues relating to health conditions focused on in our
communities. We also plan to offer educational program sponsors the opportunity
to educate our audiences on issues affecting each of our communities by
sponsoring programs intended to highlight new and alternative treatments, risks
and side effects of treatments, and other healthcare issues. Our interactive
educational programs will feature seminars on current healthcare topics and
on-line question and answer sessions.
HEALTH AND MEDICAL INFORMATION AND NEWS
We believe our site provides users with easy access to a variety of
healthcare information and news. Our site contains full-text health and medical
news headlines from Screaming Media, which provides feeds from UPI, the U.S.
Newswire, The New York Times Syndicate and the Associated Press. In addition,
our consumers can easily search our healthcare information resources which
include a library of more than 4,400 easy-to-read medical and health-related
articles written by healthcare professionals and editorials and other articles
written by our in-house healthcare staff. In addition, we intend to expand our
information resources to include textbook articles, commentaries and other
health-related publications as well as transcripts from the educational programs
broadcast in our communities. Our users can search our community libraries to
target information specifically relating to a community's health condition
focus. In addition, our hospital sponsors may provide healthcare content for our
site and, if they operate their own Web sites, allow our users to link to their
Web sites where additional information may be found. We intend to update our
content on a regular basis to ensure that our information is current and meets
our standards of quality.
INTERACTIVE TOOLS AND FEATURES
Our interactive tools and features are being developed to allow our users to
take advantage of the healthcare resources available on our site. Our
interactive tools and features may also assist us in better understanding and
responding to the interests of our users and provide more accurate feedback to
our sponsors and advertisers. Examples of our interactive tools and features
include:
AMERICASDOCTOR.COM MEDICAL MALL. In May 1999, we launched our medical mall
offering home health products supplied by Smith & Nephew. We intend to offer a
broad range of healthcare products to our consumers through our medical mall. We
are designing and integrating our medical mall into our health
condition-specific communities to provide healthcare products targeted to the
community's needs. We intend for our consumers to benefit from free 24-hour
on-line assistance from customer sales representatives with regard to certain
home health products. We also are designing automated on-line questionnaires to
assist our consumers in selecting and purchasing products.
AMERICASDOCTOR.COM ON-LINE LECTURES. We schedule on-line lectures on our
main Web page that are hosted by healthcare professionals. We promote our
lectures on our main Web page and in our communities. Our on-line lectures may
address issues of importance to one or more of our communities, but are not
limited to community topics. We offer our hospital sponsors the opportunity to
provide doctors for interactive lectures.
AMERICASDOCTOR.COM COMMUNITY CHAT AND MESSAGE BOARDS. Each of our health
condition-specific communities features an interactive 24-hour community chat
room that allows members of the community to engage in real-time conversations
with other members. Each community chat room hosts open support group chat
sessions. As of June 1999, four of our communities had regularly scheduled
moderated support group chat sessions moderated by non-professionals. We are
planning to schedule such support group chat sessions on a regular basis in
additional community chat rooms.
THE AMERICASDOCTOR.COM HEALTH QUESTIONNAIRES. We are designing health
questionnaires to provide our users with opportunities to participate in on-line
polls relating to a variety of health-related topics.
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We plan to use our users' anonymous responses to prepare presentations in our
health condition-specific communities to increase the awareness of current
health issues affecting each community.
THE AMERICASDOCTOR.COM SEARCH ENGINE. Our site provides an easy-to-use
search engine. This tool allows our users to search and retrieve healthcare
information available in the libraries on our site and within our health
condition-specific communities.
We believe our interactive tools and features, and, in particular, our free
24-hour doctor chat service, will enable us to attract loyal audiences to our
health condition-specific communities and improve our responsiveness to our
audiences and sponsors. We intend to invest in infrastructure, make
technological improvements and develop additional interactive community tools
and features in response to the needs and interests of our audiences.
STRATEGIC RELATIONSHIPS
DISTRIBUTION
We are pursuing high-quality, strategic relationships to increase the
traffic to our site and further establish the AmericasDoctor.com brand. We
believe relationships with Internet service providers, Internet portals, Web
sites, media companies starting Internet initiatives and healthcare companies,
and the quality of their content, membership and services will strengthen our
brand. In addition, we believe such distribution partners have the ability to
drive additional consumers to our site and promote the AmericasDoctor.com brand
and enhance our content, communities and services. We believe that these
relationships create a significant competitive advantage in our industry, and,
accordingly, we will pursue partners that are prepared to invest their resources
to realize mutual benefits.
AMERICA ONLINE, INC. We have entered into a three-year agreement (the "AOL
Agreement") with AOL to feature AmericasDoctor.com as one of four anchor tenants
on AOL's subscriber Health Channel and make our 24-hour doctor chat service
available to AOL's subscribers. AOL has agreed to provide our logo or banner on
the main screen and secondary screens of its Health Channel. AOL also has agreed
to provide us with keywords which link to the home Web page of our site, and to
include AmericasDoctor.com in AOL's "directory of services" and "find" features.
The AOL Agreement provides that we will be the only anchor tenant providing free
24-hour, real-time medical advisory service on AOL during the term of the
agreement. The third year of the AOL agreement is subject to agreement on
pricing terms for that year.
LYCOS. We entered into a one-year agreement, effective June 1, 1999, with
Lycos (the "Lycos Agreement") pursuant to which we have purchased over 400
keywords, phrases and advertising. The purchase of keywords and phrases will
result in the association of AmericasDoctor.com, including our on-line
communities, as a designated source of information relating to such keywords and
phrases. Searches conducted by Lycos users using one or more of the keywords or
phrases covered by the Lycos Agreement will generally return search results that
highlight AmericasDoctor.com in a prominent position in the listing of the
search results.
CLINICAL TRIAL RECRUITMENT
PREMIER RESEARCH WORLDWIDE, LTD. In March 1999, we entered into a two-year
marketing service agreement (the "PRWW Marketing Agreement") with PRWW. Under
the agreement, PRWW has agreed to provide marketing services in connection with
the development of our clinical research services business and consultation
regarding the recruitment, quantification and qualification of volunteers for
clinical trial studies. Specifically, PRWW will provide services which include:
- education and training for our officers, representatives and staff about
volunteer and patient recruitment and related marketing techniques;
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- expertise as to the workings of CROs and pharmaceutical companies with
regard to the recruitment, quantification and qualification of volunteers
for clinical/medical studies;
- consulting our representatives on marketing and sales presentations;
- introducing us to CROs and pharmaceutical companies; and
- assisting us in determining pricing levels for our services.
We have agreed to pay PRWW approximately $4.8 million in connection with the
PRWW Agreement. The PRWW Agreement expires on December 31, 2000.
The PRWW Marketing Agreement supplemented an earlier agreement (the "PRWW
Initial Agreement") entered into with PRWW which, among other things, provides
PRWW the right to recruit volunteers for clinical trials from our site and
provides that we shall promote the service of PRWW on our site. PRWW's right to
recruit volunteers from our site is not limited in duration. Further, the PRWW
Initial Agreement required that we recruit clinical trial volunteers for PRWW
studies on an exclusive basis and that we not permit other CROs to recruit
volunteers for a study on the same disease as a PRWW study. The PRWW Marketing
Agreement removed the exclusivity provision.
CHAT CENTER OPERATIONS
MEDICAL ADVISORY SYSTEMS, INC. In July 1998, we entered into an exclusive
call center service agreement (the "MAS Agreement") with MAS to operate the chat
centers for our 24-hour doctor chat service. MAS, or an MAS affiliate, hires,
trains, monitors and supervises all healthcare professionals and staff for our
chat service. We require all healthcare professionals, operating our chat
service, including pharmacists and registered nutritionists, to meet
professional qualifications. We own or license the principal hardware and
software utilized by MAS to operate our 24-hour chat centers. The MAS Agreement
entitles MAS to operate additional 24-hour chat centers opened by
AmericasDoctor.com.
MAS is a 24-hour medical services company that provides medical assistance,
telemedicine, medical equipment/pharmaceutical distribution, training and
occupational health services. We have agreed to provide promotional space on our
site for MAS to use for MAS business purposes.
OUR REVENUE OPPORTUNITIES
HOSPITAL SPONSORSHIP REVENUE
Our site provides hospital sponsors (including hospital systems) with
exclusive access to an audience of potential consumers located in the geographic
area (defined by zip code) served by the hospital. We provide each hospital
sponsor with its own Web page on our site which may feature an image of the
hospital, a description of its services and facilities, directions to the
hospital and a link to its Web site, if one exists, or other promotional content
provided by the sponsor. Through the interactive features on our site, we offer
our hospital sponsors opportunities to provide consumers free medical
information and exposure to the sponsors' own doctors. When visitors enter our
site for the first time they are requested to provide their state and zip code
information. Each time thereafter that the user visits our site, our site will
automatically identify the applicable sponsor hospital, delivering such
sponsor's marketing message directly to the user's screen. After the conclusion
of every doctor chat session, a user located in a geographic area (defined by
zip-code) where one of our sponsors is located is provided a screen that enables
the visitor to contact that hospital. Visitors who request hospital sponsor
information are required to provide basic contact information, including an
e-mail address, that we forward to our hospital sponsors so that our hospitals
may contact our visitors.
We believe that our geographically exclusive sponsorship arrangements result
in significant marketing benefits to our hospital sponsors because the
hospital's message is delivered directly to
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consumers in their communities who are seeking health information. In addition,
we believe that our site offers the following benefits to our hospital sponsors:
- enhances the sponsor's image by providing their community a comprehensive,
personal health information resource;
- offers the sponsor national exposure to our audiences of healthcare
consumers which enhances their Internet presence; and
- enables the sponsor to promote their services by hosting on-line events
and promoting health education programs featuring their doctors.
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As of June 1, 1999 we had 34 sponsorship contracts with the following
hospitals:
AMERICASDOCTOR.COM
HOSPITAL SPONSORS
<TABLE>
<S> <C>
- - St Francis Hospital (Delaware)
- - University of Miami/Jackson Memorial Medical Center(1) (Florida)
- - Memorial Health System (Georgia)
- - Central DuPage Health System(1) (Illinois)
- - Evanston Northwestern Healthcare (Illinois)
- - Ingalls Health System (Illinois)
- - McNeal Memorial Hospital Association (Illinois)
- - St. Francis Hospital and Health Center(1) (Indiana)
- - St. Joseph's Hospital (Indiana)
- - St. Margaret's Mercy Healthcare Centers(1) (Indiana)
- - Christus Schumpert Health System(1) (Louisiana)
- - St. Mary's Regional Medical Center (Maine)
- - Laurel Regional Hospital (Maryland)
- - Lifebridge Health System (Maryland)
Sinai Hospital of Baltimore,
Northwest Hospital Center,
Levindale Geriatric Center
- - Henry Ford Hospital System (Michigan)
- - Lake Regional Hospital (Minnesota)
- - Duke University Health System (North
Carolina)
- - St. Alexius Medical Center (North Dakota)
- - New York Presbyterian Hospital-The University Hospital of (New York)
Columbia & Cornell(1),
The Allen Pavilion, Babies and Children's Hospital of New York,
Columbia Presbyterian Center,
New York Weill Cornell Center Westchester Division
- - University Hospital at Syracuse (New York)
- - The Community Hospital (Ohio)
- - Guthrie Healthcare(1) (Pennsylvania)
- - Jefferson Health System(1) (Pennsylvania)
- - PennCARE (Pennsylvania)
Lehigh Valley Hospital,
Doylestown Hospital
- - PennState Geisinger Health System(1) (Pennsylvania)
- - St. Joseph's Regional Health Network(1) (Pennsylvania)
St. Joseph Hospital,
St. Joseph Medical Center
- - University of Pittsburgh Medical Center Health System (Pennsylvania)
- - UT Medical Group, Inc.(2) (Tennessee)
- - Vanderbilt Medical Center(1) (Tennessee)
- - Good Shepherd Medical Center (Texas)
- - St. Luke's Episcopal Health System (Texas)
- - Trinity Mother Francis Hospital Regional Health System (Texas)
- - Bon Secours Richmond Health System (Virginia)
Bon Secours Memorial Regional Medical Center,
Bon Secours Richmond Community Hospital,
Bon Secours Stuart Circle Hospital,
Bon Secours St. Mary's Hospital
- - Froedert Memorial Lutheran Hospital (Wisconsin)
- --------------------------
(1) This sponsor is not on-line as of June 9, 1999.
(2) UT Medical Group, Inc. is a physician practice group.
</TABLE>
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We typically enter into one-year sponsorship agreements with hospitals that
make the hospital the exclusive sponsor of our Internet services within a market
region defined by zip code. Our hospital sponsors currently pay a flat fee based
upon the number of consumers in their market, the scope of geographic
exclusivity (the number of zip codes purchased) and the competitiveness of the
hospital's market. Hospital sponsorship fees are not based, in whole or in part,
and do not vary with, the volume or value of consumers who contact a hospital
sponsor. We prepare reports for our hospital sponsors that include detailed
information about our audiences' interests, the topics researched by our
visitors and the number of visitors using different areas of our site.
E-COMMERCE REVENUE
We plan to develop our e-commerce operations during the remainder of 1999 to
address the increasing number of consumers who we believe are interested in
buying health-related products over the Internet. Our medical mall was launched
in May 1999 and initially focused on Smith & Nephew supplies. We are designing
our on-line medical mall to present consumers with e-commerce options including
the availability of home health products, pharmaceuticals, over-the-counter
drugs, vitamins, responsible natural products, durable medical equipment and
health-related books. We also intend to help consumers make informed purchases
by using our free 24-hour chat technology to provide real-time access to
knowledgeable sales representatives. We believe that our health
condition-specific communities will allow us to serve the special e-commerce
needs of consumers with specific healthcare conditions and interests.
Part of our e-commerce strategy is to develop relationships with companies
that we believe have established, recognizable and trusted names and national
product fulfillment capabilities. We do not intend to maintain any significant
inventory or establish our own warehousing, shipping or fulfillment operations.
We intend to enter into arrangements where our e-commerce partners will fulfill
our inventory needs in connection with the sale of a product. In addition to our
relationship with Smith & Nephew, we have entered into arrangements with Tempur
Pedic, Inc., and Kimberly Clark, Inc. to sell certain home healthcare products.
Our relationship with Smith & Nephew includes the promotion of the
AmericasDoctor.com brand, site and health condition-specific communities in
Smith & Nephew print catalogs and the provision of warehouse space and inventory
management by Smith & Nephew for all products purchased by us (including
products we purchase from other e-commerce suppliers). The Smith & Nephew
product catalogue also will be available on-line through our medical mall. We
intend to resell Smith & Nephew products to our consumers through our medical
mall and introduce other business customers to Smith & Nephew through our site.
EDUCATIONAL PROGRAM SPONSORSHIP REVENUE.
We plan to feature educational programs sponsored by healthcare companies
and hosted by healthcare professionals. We believe our educational programs will
offer sponsors an opportunity to reach our audiences to heighten awareness of
issues of interest to the healthcare community. We believe that raising general
awareness of healthcare issues, such as treatment alternatives, risks and side
effects and health outcomes associated with certain treatment options, empowers
consumers to make informed healthcare decisions and better manage their personal
health. For example, Glaxo Wellcome PLC has sponsored three educational programs
on our site.
ADVERTISING REVENUE OPPORTUNITY
Open access to the Internet and the rapidly increasing number of Web users
have resulted in the emergence of the Web as a potential new medium for
advertising. We believe the effectiveness of Internet advertising is not proven
and the success of business models relying principally on advertising
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revenue is uncertain. However, to the extent that Internet advertising and
related business models prove successful, we believe our site is being designed
to generate advertising revenue opportunities because of its interactivity,
flexibility, targetability and measurability. In particular, we believe our site
is designed to enable advertisers to reach large consumer audiences and target
advertisements to specific regional populations, specific consumer audiences or
selected individuals. Our site is designed to display "banner" advertisements
that allow consumers to link directly to the advertiser's Web site. We plan to
market such banner advertising on our site, including in our health
condition-specific communities, to traditional advertisers, such as
pharmaceutical companies, medical device manufacturers and other healthcare
companies. We expect to base our advertising fees, in part, on the size of the
consumer audience that views an advertisement.
CLINICAL TRIAL RECRUITMENT REVENUE OPPORTUNITY
We believe that a business opportunity exists in the recruitment of
volunteers to participate in clinical trials. The speed with which clinical
trials can be completed is significantly affected by the rate at which
participants are enrolled. We believe the inability to recruit a sufficient
number of patients in a timely manner is a recurring problem and one of the most
frequent causes of clinical trial delays, as well as a major cost for clinical
research sponsors. We believe that our site and health condition-specific
communities should provide us with the ability to help recruit participants for
clinical trials. Our interactive, on-line registration process for clinical
trial volunteers will allow us to collect preliminary information from our
volunteers and prepare comprehensive reports for research companies from which
they can select potential participants. Volunteers also will have the
opportunity to register for specific clinical trials of interest to them. We
intend to advertise for volunteers for clinical trials to our audiences and
record responses from potential participants. We believe that our health
condition-specific communities may provide an advantage in recruiting clinical
volunteers by enabling us to target an audience of volunteers meeting the basic
criteria of a study.
MARKETING, ADVERTISING AND PUBLIC RELATIONS
We market the AmericasDoctor.com brand, our site and our health
condition-specific communities through an integrated marketing model which
employs a variety of communications media. Our marketing program is managed by
our three person in-house staff. Our goals are to increase AmericasDoctor.com
brand recognition, attract and maintain visitors, additional hospital sponsors,
nonprofit healthcare sponsors and educational program sponsors. We pursue these
goals through an aggressive public relations program, direct advertising,
marketing on our own site and other on-line opportunities as well as
co-marketing opportunities with our strategic partners.
HOSPITAL SPONSORSHIP MARKETING
Marketing of our hospital sponsorship program is carried out by our
five-member in-house sales team and our marketing representatives. Our hospital
marketing staff contacts hospital executives or program directors through direct
advertising and mailings. A representative of our sales team contacts each
interested hospital to arrange for a complete marketing presentation. Our sales
staff works closely with potential hospital sponsors to determine how best to
satisfy its particular needs. We intend to allocate additional resources to
marketing our content, communities and services to strengthen hospital awareness
of the AmericasDoctor.com brand.
CO-MARKETING ARRANGEMENTS
We have entered into, and intend to continue to enter into, strategic
arrangements with parties having established audiences or customer bases and an
anticipated need for the content, communities and services provided by
AmericasDoctor.com. We have established a number of significant co-marketing
arrangements to increase the exposure of the AmericasDoctor.com brand. These
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arrangements involve leading Internet and healthcare companies and other
companies including the following:
AOL. As part of the AOL Agreement, we provide our free 24-hour
doctor chat service as an anchor tenant to AOL's subscribers. AOL also
has agreed to display our logo on the main screen of its Health Channel,
to provide us with the keywords to include our site in its "directory of
services" and "find" features and provide our content on its Health
Channel.
SMITH & NEPHEW. Our agreement with Smith & Nephew provides for the
inclusion of our domain name, WWW.AMERICASDOCTOR.COM, on the printed
version of all of Smith & Nephew's consumer product catalogs and
promotion and marketing of AmericasDoctor.com as a site for healthcare
products.
AMERICAN EXPRESS. Our agreement with American Express Company
provides for the marketing of the AmericasDoctor.com, brand to American
Express Cardmembers nationwide, as well as access to local and regional
marketing programs. American Express will also provide introductory
market funds for both traditional and on-line media promotions.
PUBLIC RELATIONS PROGRAM
Our public relations program is carried out by our two-member in-house
staff. We pursue public relations opportunities to build awareness of the
AmericasDoctor.com brand, content, communities and services, and in particular
our free 24-hour doctor chat service. We have gained significant recognition
within the industry by participating in tradeshows and through our public
relations efforts. We also have received extensive national media attention
since our launch on AOL in September 1998. We have been featured on GOOD MORNING
AMERICA, which did a live telecast from our doctor chat center, and on CNN. We
have been the subject of articles in TIME MAGAZINE, USA TODAY and other national
and local publications. In October 1998, our free 24-hour doctor chat service
was featured in a live demonstration for the FIRST INTERNET HEALTH DAY sponsored
by Intel Corporation.
We intend to engage in a significant branding and marketing campaign to
increase awareness of the AmericasDoctor.com brand. We will employ a combination
of marketing efforts aimed at establishing AmericasDoctor.com as a trusted
Internet brand for healthcare consumers, increasing traffic on our site and
developing revenue opportunities. We also intend to promote our content,
community and services through traditional print media, including trade
journals, newspapers and magazines targeted at healthcare consumers, and
participate in tradeshows, conferences and other engagements as part of our
ongoing public relations program. We plan to allocate significant resources to
building brand awareness of AmericasDoctor.com.
TECHNOLOGY, INFRASTRUCTURE AND OPERATIONS
TECHNOLOGY.
The various features of our site are implemented using a combination of
commercially available and proprietary software components. We favor licensing
and integrating "best of breed" commercially available technology from industry
leaders. We reserve internal development of software for those components that
are either unavailable on the market or that have strategic advantages when
developed internally. We believe that this component style approach is more
manageable, reliable and scalable than single-source solutions. In addition, the
emphasis on commercial components speeds development time, which is an advantage
when competing in a rapidly evolving market. Consistent with our preference for
off-the-shelf software components, we rely primarily on industry-standard
Microsoft operating systems, development and infrastructure components.
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Our innovative 24-hour doctor chat service uses proprietary software ("AD
Chatware") licensed to us by Jaspin Interactive, Inc. ("Jaspin"). AD Chatware
provides a user interface for real-time, text dialogue on-line. Jaspin has
granted us a worldwide, perpetual, irrevocable, royalty-free and exclusive
license to use AD Chatware in connection with any medical or health-related
purpose. Jaspin has represented to us that the AD Chatware software is year 2000
compliant.
We are in the process of developing new chat technology with Qwest Internet
Solutions, Inc. ("Qwest") that we believe will be more scalable than our
existing technology. We intend to spend significant resources to develop our new
chat technology.
INFRASTRUCTURE.
Our site's operating infrastructure has been designed and implemented to
support significant user traffic and to accommodate additional traffic. Web
pages are dynamically generated and delivered in response to individual user
requests. We believe our infrastructure is a distributed, scalable solution that
provides reliable and secure performance and service availability.
OPERATIONS.
Our site architecture currently operates on two Pentium servers (one
Webserver/Application Server and one Database server) with one spare server that
supports Web applications and database functions as a temporary emergency
backup. Our Web server runs Microsoft Windows NT 4.0 and utilizes Microsoft SQL
Version 6.5. We maintain our production servers at the New Jersey Data Center of
Qwest. Each of the servers is dedicated to our business. Our operations are
dependent upon Qwest's ability to protect its systems against damage from fire,
hurricanes, power loss, telecommunications failure, break-ins and other
destructive events. Qwest provides comprehensive facilities management services
including human and technical monitoring of all production servers 24 hours per
day, seven days per week. Qwest provides the means of connectivity for our
servers to our users via the Internet through multiple connections. The facility
is powered by multiple power supplies.
Our production data is copied to DAT tape nightly and is stored off-site on
a weekly basis. Copies of our production data are maintained on servers residing
with our current developers. We are in the process of developing a disaster
recovery plan to respond to system failures. We keep all of our production
servers behind firewalls for security purposes. Access to the production servers
is restricted to appropriate individuals and is subject to strict username and
password protocols.
CHAT CENTER OPERATIONS.
MAS operates our Owings chat center with 15 computers and our Owings Mills
chat center with seven computers, in each case using the Microsoft Windows 98
operating system. Each of our chat centers has a separate T-1 Internet
connection and back-up power generators.
COMPETITION
The market for Internet information and commercial products and services is
intensely competitive and rapidly changing. Over 15,000 Web sites already
provide healthcare information and related products and services. In addition,
traditional media and healthcare organizations are competing actively for
consumers' time and attention through traditional means as well as through
Internet initiatives. We believe competition for healthcare consumers will
continue to increase as the Internet and the healthcare market evolve.
We also compete for consumers' time and attention, sponsors, advertisers,
e-commerce merchants and other affiliates with a multitude of informational Web
sites operated by governmental agencies, educational institutions, businesses
and other organizations and individuals. We expect competition to
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intensify and the number of our competitors to increase significantly in the
future. In addition, as we expand the scope of our informational content,
products and services, we will compete with a greater number of Internet
companies. Since the operations and strategic plans of many Internet companies
are undergoing rapid change, it is difficult to anticipate which companies are
likely to offer competitive services in the future.
In particular, our competitors may include:
- healthcare Web sites such as (by domain name) accesshealth.com, ahn.com,
betterhealth.com, drkoop.com, drweil.com, healthcentral.com,
healthgate.com, intelihealth.com, mayohealth.org, mediconsult.com,
onhealth.com, thriveonline.com and webmd.com;
- Web search engines and Internet portals, such as aol.com, Excite, Inc.,
Infoseek Corporation, Lycos Corporation, Microsoft Network, and Yahoo!
Inc;
- HMOs, managed care organizations, insurance companies, hospitals and other
healthcare providers and payors such as Columbia/HCA Healthcare
Corporation, Kaiser Permanente and VHA Inc. which offer healthcare
information on-line;
- Web communities, such as the American Association of Retired Persons,
SeniorNet and ThirdAge Media, Inc., which offer healthcare-related
information and programming to special demographic groups; and
- e-commerce suppliers and conventional retailers such as CVS,
Drugstore.com, Express Scripts, Inc., Merck-Medco Managed Care, L.L.C.,
Planet Rx, Rite Aid Corporation, Walgreens and other companies that sell
healthcare products and services through the Internet that may be
competitive to those that may become available through our site.
We also may compete less directly with traditional information media, such
as print, radio and television, for our audience, sponsorships, commerce and
advertising dollars. We believe we must develop a loyal consumer audience that
is attractive to our sponsors, e-commerce suppliers and advertisers. We believe
key competitive factors in attracting a loyal consumer audience include the
quality and usefulness of services and the comprehensiveness and relevance of
our content.
Many of our existing competitors and potential new competitors are likely to
enjoy substantial competitive advantages compared to our company, including the
ability to offer a wider array of on-line content, products and services, larger
production and technical staffs, greater name recognition and larger marketing
budgets and resources, larger customer and user bases and substantially greater
financial, technical and other resources. In addition, such competitors may have
longer operating histories on the Internet, lower cost structures and higher
amounts of user traffic. Such competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies, make more
attractive offers to potential employees, distribution partners, advertisers and
content providers and may be able to respond more quickly to new or emerging
technologies and changes in Web user requirements.
To be competitive, we must respond promptly and effectively to the
challenges of rapid technological change, evolving consumer demands, evolving
Internet standards and our competitors' innovations by continuing to enhance our
products and services as well as our sales and marketing channels. Competition
is likely to increase as new companies enter the market and current competitors
expand their services. We expect that competitive factors will create a
continuing need for us to improve and add to our healthcare content.
Accordingly, we intend to seek additional sources of healthcare information and
expand the breadth of our content offerings. Increased competition or our
failure to successfully respond to our competitors could result in greater
competition for sponsorships, reductions in advertising rates, lower margins,
greater operating losses or loss of market share, any of which would materially
adversely affect our business, financial condition and results of operations.
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INTELLECTUAL PROPERTY
We rely primarily on a combination of copyrights, trademarks, trade secret
laws, our user policy and restrictions on disclosure to protect our intellectual
property and our content, trademarks, trade names and trade secrets. We have
filed trademark applications for "AmericasDoctor.com," "America's Doctor,"
"America's Doctor On-line," "AD Family Protect," "AD Chatware," the "AD" logo
and other derivative trade names. We may pursue foreign registrations of our
trademarks if international use of our site expands. We enter into
confidentiality agreements with our employees and consultants, and seek to
control access to and distribution of our other proprietary information. If our
competitors prepare and file applications in the United States that claim
trademarks used or registered by us, we may oppose those applications and be
required to participate in proceedings before the United States Patent and
Trademark Office to determine the entitlement and priority of rights to the
trademark. Such proceedings could cause us to incur substantial costs. We cannot
assure you the measures we have taken will adequately protect our intellectual
property rights or that our competitors will not develop proprietary technology
that is equivalent or superior to ours.
We license information, technology, data and other content from third
parties. Licensing such material from third parties increases our exposure to
infringement actions by requiring us to rely on third-party representations as
to the origin and ownership of such licensed material. We customarily negotiate
for indemnifications to cover any breach of such representations giving rise to
any claim by a third party that the licensed material infringes such person's
proprietary rights. We may seek to license additional material in order to
enhance our site and community features or introduce new interactive services.
The inability to obtain or maintain requisite licenses could impair our site and
communities and result in delays in the introduction of new interactive services
until the requisite material is identified, licensed and integrated into our
site.
In addition, we may be subject to litigation for claims of infringement of
the rights of others or to determine the scope and validity of the intellectual
property rights of others. If other parties file applications for marks used or
registered by us, we may have to oppose those applications and participate in
administrative proceedings to determine priority of rights to the mark, which
could result in substantial costs to us due to the diversion of management's
attention and the expense of such litigation, even if the eventual outcome is
favorable to us. Adverse determinations in such litigation could result in the
loss of certain of our proprietary rights, subject us to significant
liabilities, require us to seek licenses from third parties or prevent us from
selling our services. Any of these results could have a material adverse effect
on the acceptance of the AmericasDoctor.com brand and on our business, financial
condition and results of operations. In addition, since we license a substantial
portion of our content from third parties, our exposure to copyright
infringement actions may increase because we must rely upon their
representations as to the origin and ownership of third-party intellectual
property.
In addition to the litigation risks described above, we may be subject to
third-party claims for defamation, negligence, copyright or trademark
infringement or other claims based on the nature and content of information
supplied on our site by us, our users or third parties, including our content,
product and service providers. These types of claims have been brought,
sometimes successfully, against Internet companies in the past. We could be
subject to liability with respect to content that may be accessible through our
site or other Web sites linked to our site. For example, claims could be made
against us if a consumer relies on healthcare information accessed through our
site to their detriment. Even if such claims do not result in liability to us,
our reputation could suffer and we could incur significant costs litigating such
claims and implementing measures to reduce our exposure to such liability.
Claims also could arise from inaccurate, offensive, harassing, or otherwise
inappropriate statements of participants in public health condition-specific
communities or special programs, over which we have no control. Similarly,
claims may arise from content or statements contained or made on Web sites
linked to our site. Our insurance may not cover potential claims of this type or
may not be
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adequate to cover all costs incurred in defense of such claims or to indemnify
us for all liability that may be imposed. To the extent we are currently covered
by insurance, the continued availability of such insurance cannot be assured.
Any liability not covered by insurance or in excess of insurance coverage could
have a material adverse effect on our business, financial condition and results
of operations.
Domain names are the user's Internet "address" and derive value because they
are currently the simplest way to access Web sites. The current system for
registering, allocating and managing domain names has been the subject of
litigation and of proposed regulatory reform in the United States. There can be
no assurance that third parties will not bring claims for infringement against
us for the use of our domain name. Further, since the value of domain names
derives from users' ability to remember such names, there can be no assurance
that our domain names will not lose value if, for example, users stop using
domain names to access Internet resources. There can be no assurance that
litigation or reform efforts resulting in a restructuring of the current system
of registering domain names will not require us to obtain new domain names in
addition to, or in lieu of, our current domain names.
EMPLOYEES
We currently have 41 full-time employees, none of which is represented by a
labor union or covered by a collective bargaining arrangement. We believe that
our employee relations are good.
FACILITIES
Our corporate headquarters currently occupy approximately 7,850 square feet
of office space in Owings Mills, Maryland. The sublease expires on September 29,
2000, with an option to renew the sublease term for five years. In addition, we
lease approximately 1,500 square feet of space for our call center in Owings,
Maryland under a lease expiring at the end of our MAS call center service
agreement.
We have entered into a new sublease expiring May 2001 for 31,302 square feet
of office space in Owings Mills, Maryland and intend to relocate our corporate
headquarters. We intend to build an additional call center at our new office. We
believe additional leased space can be obtained, if needed, on acceptable terms.
LEGAL PROCEEDINGS
From time to time, we may be involved in regulatory proceedings or
litigation relating to claims arising out of our operations. We believe that
there are no claims or proceedings pending or threatened against us, the
ultimate disposition of which would have a materially adverse effect on our
business. See "Risk Factors--Our Business is Subject to Extensive Government
Regulation and Other Legal Considerations."
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REGULATION AND OTHER LEGAL CONSIDERATIONS
GENERAL.
Our business and industry are subject to extensive government regulation.
Federal and state laws, regulations and statutes have been or may be adopted
with respect to healthcare, the Internet, our industry or other on-line
services.
The delivery of healthcare services and products is heavily regulated under
federal and state law. For example, federal and state agencies regulate the
practice of medicine, establish licensing and reimbursement requirements and,
through fraud and abuse laws, prohibit payments for the referral of patients to
a person participating in, or for the order, purchase or recommendation of items
or services that are subject to reimbursement by, Medicare, Medicaid and other
federal or state healthcare programs or third-party payors. Notwithstanding our
efforts to structure our business activities in a manner that would not
constitute the practice of medicine or involve prohibited referrals, federal
and/or state healthcare regulatory authorities could determine that, in a
particular case or generally, we are engaged in the practice of medicine through
the activities of our doctors or other healthcare professionals on or through
our Web site. There is also a risk that our relationships with hospital and
other sponsors, e-commerce vendors and other companies may implicate or violate
laws governing the sale of healthcare products and laws prohibiting referral
arrangements. We have not researched the laws of each of the 50 states or
obtained opinions or rulings from federal and state agencies with authority to
enforce such laws. A finding that our current or future business activities
violate any of these laws or statutes, could cause a material adverse effect on
our business, financial condition and results of operations.
There is also an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, on-line content regulation, user privacy, taxation and quality of
products and services. Moreover, it may take years to determine whether and how
existing laws addressing intellectual property, privacy, libel, copyright,
trademark, trade secret, obscenity, personal privacy, taxation and regulation of
the sale of products and services apply to the Internet and Internet
advertising. Any requirements imposed by any legislation or regulation may limit
the growth of the use of the Internet. Such limitations could decrease the
demand for our services, increase our cost of doing business or otherwise have a
material adverse effect on our business, financial condition and results of
operations.
REGULATION OF THE PRACTICE OF MEDICINE AND OTHER LICENSING LAWS.
The practice of medicine, generally defined by state law as engaging in,
with or without compensation, medical diagnosis, healing, treatment (including
the prescription of medications) or surgery, requires licensing under applicable
state law. The practice of medicine without a license can be a civil or criminal
violation depending on state law. We have endeavored to structure our site, and
in particular our free 24-hour doctor chat service, to avoid violation of state
licensing requirements. Our guidelines provide and we instruct that chat center
doctors and other healthcare professionals, shall not practice medicine.
However, chat center doctors and other healthcare professionals may fail to
follow our guidelines, or interaction between our doctors and consumers could
elicit responses which may be claimed or deemed to be a diagnosis or other
element of the practice of medicine. Furthermore, the application of this area
of the law to Internet services such as ours is novel and, accordingly, a state
regulatory authority may allege that one or more elements of our business
requires a license under existing or future laws or statutes. Any application of
the regulation of the practice of medicine to our
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business, and in particular our free 24-hour doctor chat service, could result
in a material adverse effect on our business, financial condition or results of
operation.
We also contract with healthcare professionals who are not physicians. For
example, pharmacists and nutritionists communicate with users in our chat
sessions in the same manner as doctors. Pharmacists engaging in the practice of
pharmacology are regulated by state law, and nutritionist may also be licensed
under state law, depending on the jurisdiction. As is the case with doctors,
these healthcare professionals are instructed not to prescribe drugs, diagnose,
or treat consumers. While we take steps to ensure that our non-physicians do not
engage in professional practices that require them to be licensed, we cannot
guarantee that a local professional licensing board would not seek to impose its
state law requirements on the activities of our non-physician healthcare
professionals.
We plan to engage in the sale of certain home care products on-line. We have
entered into an agreement with Smith & Nephew to develop this e-commerce
business. Smith & Nephew has historically employed or contracted with healthcare
professionals, such as occupational therapists, who are available to answer
customer questions about product purchases. We plan to utilize Smith & Nephew's
call center for our users who wish to purchase products from us. If it were
determined that this Smith & Nephew service constituted the delivery of services
for which professional healthcare license is required, we could lose the ability
to provide this service, and we could be subject to penalties for making this
service available.
FEDERAL AND STATE HEALTHCARE REGULATION.
Provisions of the Social Security Act (the "Federal Anti-Kickback Law")
prohibit knowingly or willfully, directly or indirectly, paying or offering to
pay, or soliciting or receiving, any remuneration in exchange for the referral
of patients to a person participating in, or for the order, purchase or
recommendation of items or services that are subject to reimbursement by,
Medicare, Medicaid and similar other federal or state healthcare programs.
Violations may result in civil and criminal sanctions and penalties. Civil
penalties include exclusion from government health programs. Criminal sanctions
include imprisonment for up to five years, fines up to $25,000 or both, for each
violation. Recent federal legislation expanded the sanctions to include civil
monetary penalties up to $50,000 for each prohibited act and up to three times
the total amount of remuneration offered, paid, solicited or received, even in
circumstances where a portion of such remuneration is offered, paid, solicited
or received for a lawful purpose. There is increasing scrutiny by federal and
state law enforcement authorities with both civil and criminal jurisdiction,
over financial arrangements between healthcare providers and referral sources.
Certain courts reviewing the statute have taken a broad view of the Federal
Anti-Kickback Law and have ruled that it can be violated if only one purpose of
a payment arrangement is to induce referrals. Many states also have enacted
similar local anti-kickback laws.
We earn revenues by selling exclusive geographical sponsorships to
hospitals. Each time a user located in the zip code of our sponsor concludes a
chat with a doctor, a screen appears enabling the user to obtain further
information about the sponsor in his area if one exists, or to provide
information to a hospital regarding appointments or further information. While
we have taken steps to structure our sponsorship arrangements in a manner such
that they would not be deemed to violate the anti-kickback laws, there can be no
assurances that regulators would not reach a contrary conclusion. It is possible
that facilitation of contacts between hospitals or other sponsors and potential
patients could result in the allegation or finding that we or the physicians
arranged for or recommended the provision of reimbursable healthcare services by
our sponsors. In addition, we expect to earn revenues from e-commerce
activities, including the on-line sale of products which are subject to Medicare
and Medicaid reimbursement. Although we intend to structure our arrangements in
a manner which complies with applicable federal anti-kickback laws and/or
similar state laws, we cannot guarantee that regulators would not reach a
contrary conclusion and seek to enforce such laws against us and limit our
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e-commerce opportunities. Furthermore structuring our arrangements to comply
with these laws may limit the revenues we can earn from e-commerce sales of
reimbursable items.
Limited "safe harbor" regulations promulgated by the Department of Health
and Human Services ("DHHS") define a narrow range of practices that are exempted
from federal prosecution or other enforcement under the Federal Anti-Kickback
Law. These regulations fail to exempt a wide range of activities in which
healthcare providers and others engage. Activities that fall outside the safe
harbor regulations are not necessarily illegal, though they could be the subject
of increased scrutiny, investigation or prosecution. Our existing and planned
sponsorship and e-commerce activities may not qualify for safe harbor
protection. Given the breadth of the Federal Anti-Kickback Law and the limited
scope of the existing safe harbors, the possibility of adverse regulatory
positions cannot be eliminated. The Office of Inspector General ("OIG") is
authorized to issue advisory opinions regarding the interpretation and
applicability of the Federal Anti-Kickback Law, including whether an activity or
proposed activity constitutes grounds for the imposition of civil or criminal
sanctions. We have not sought such an opinion and are aware of no opinion that
has been issued with respect to our sponsorships or existing or planned Internet
sales activities.
If our activities were deemed to be inconsistent with the Federal
Anti-Kickback Law or similar laws which have been adopted by various states, we
could face civil and criminal penalties or be barred from such activities, any
of which could have a material adverse effect on our business, financial
condition or results of operations. Further, we could be required to restructure
our existing or planned sponsorship compensation arrangements and e-commerce
activities in a manner which could have a material adverse effect on our
business, financial condition and results of operations.
SELF-REFERRAL PROHIBITIONS.
The federal physician self-referral statute, sometimes identified as the
"Stark Law," generally forbids payments under Medicare or Medicaid based on a
physician referral for "designated health services" to any entity with which the
physician (or an immediate family member) has a financial relationship, which
can take the form of a direct or indirect ownership or investment interest or a
compensation relationship. A referral, under the Stark Law, can include
prescribing or requesting designated health services, and also, establishing a
plan of care for the designated health service. The Stark Law applies to
clinical laboratory services and certain other designated health services,
including outpatient prescription drugs and durable medical equipment. Penalties
for violating the Stark Law include denial of payment from Medicare and Medicaid
programs for any services referred to an entity in violation of the "Stark Law,"
civil monetary penalties of up to $15,000 for each offense and exclusions from
the Medicare and Medicaid programs. Many states have adopted referral laws which
may extend to governmental and third-party payors. If it were determined that
(a) doctors operating our chat service were engaged in the practice of medicine,
(b) such doctors were, in turn, deemed to have made referrals for designated
health services and (c) no exemption covered the manner in which such doctors
are compensated, we could be subject to action under the Stark Law, which could
have a material adverse effect on our business, financial condition and results
of operations and subject us to sanctions under these laws.
OPERATION AS A HEALTHCARE PROVIDER.
We intend to engage in e-commerce by delivering healthcare products to
members of the public, including participants in Medicare, Medicaid and other
governmental payment programs. These activities may include sales of
pharmaceuticals, durable medical equipment and other items. Accordingly, we may
be considered to be a healthcare supplier and may be required to obtain federal
and state licenses and permits, such as pharmaceutical licenses and permits, as
well as certifications to participate in the Medicare, Medicaid or other
programs. We cannot guarantee that we will be able to obtain and maintain such
licenses, permits and certifications. In addition, Medicare, Medicaid and
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other third-party payment programs are under pressure to control healthcare
costs and the rates paid for products we may sell are subject to change. Federal
and state law enforcement authorities scrutinize closely the claims of
healthcare providers. The submission of false or fraudulent claims by any
healthcare providers or suppliers carries the risk of prosecution under
applicable federal and state criminal and civil statutes.
MALPRACTICE.
Due to the nature of our business, we may become involved in litigation
regarding the information transmitted over the Internet by doctors or other
healthcare professionals operating our chat service or involving claims against
our hospital sponsors, with the risk of adverse publicity, significant defense
costs and substantial damage awards. If we or healthcare professionals with
which we contract or who provide information on or through our Web site or
suppliers are deemed to be engaged in the practice of medicine, including as a
result of a doctor or other healthcare professional failing to follow our
guidelines, we could be subject to claims and/or malpractice liability exposure
for which we may not be insured. In recent years, participants in the healthcare
industry, including doctors, nurses and other healthcare professionals, have
been subject to an increasing number of lawsuits alleging malpractice, product
liability and related legal theories, many of which involve large claims and
significant defense costs. We have adopted policies and procedures intended to
reduce the risk of claims, and to date, we have not been the subject of any
claim involving the operation of our site. However, there can be no assurance
that claims will not be brought against us. Even if such claims ultimately prove
to be without merit, defending against them can be time-consuming and expensive,
and any adverse publicity associated with such claims could have a material
adverse effect on our business, financial condition or results of operations.
While we maintain liability insurance, which provides limited coverage for
malpractice, claims may arise that would not come within the scope of or be
covered by our insurance or, if covered, may exceed the limits of our coverage.
In addition, we expect to seek increased coverage as the business grows. There
can be no assurance that we will be able to maintain existing coverage or expand
its scope to address evolving risks, or obtain increased amounts of coverage on
acceptable terms or at all.
USE OF MEDICAL INFORMATION AND DATA.
There are currently, and continue to be adopted, amended and implemented,
federal and state laws governing the storage and disclosure of medical
information and healthcare records. We may collect and use data about users
seeking information on our site. While this information is not intended to
constitute or be treated as medical records, users or regulatory agencies may
seek to characterize this information as medical records and impose requirements
and/or sanctions upon us related to the maintenance and handling of medical
records. Maintaining this information could expose us to claims if unauthorized
persons gain access to it notwithstanding our efforts to maintain its security
or if the consumer wishes to have us transmit or give access to others, and we
fail or are unable to do so.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996.
The recently enacted Health Insurance Portability and Accountability Act of
1996, mandates the use of standard transactions, standard identifiers, security
and other provisions by the year 2000 with regard to healthcare issues on the
Internet. It will be necessary for our platform and for the applications that we
provide to be in compliance with the proposed regulations. Congress is also
likely to consider legislation that would establish uniform, comprehensive
federal rules about an individual's right to access his own medical information.
This legislation would likely define what is to be considered "protected health
information" and outline steps to ensure the confidentiality of this
information.
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RELATIONSHIPS WITH RESEARCH COMPANIES.
We expect to have relationships with companies that recruit volunteers for
clinical trial studies and to earn revenue from these relationships. Users on
our site will have the opportunity to volunteer to participate in research
studies through organizations with which we have a relationship. Certain ethical
rulings may limit or prohibit compensation to physicians for making referrals of
patients to research studies. We do not believe these issues apply to our
planned operations but we cannot guarantee that regulatory agencies or
associations asserting authority to regulate our activities (including our chat
service operations and healthcare professionals) would not seek to apply such
rulings to us.
FDA REGULATION.
We do not believe that our current services are regulated by the Food and
Drug Administration ("FDA"); however, our services may become subject to FDA
regulation. Additionally, we may expand our business into areas that subject us
to FDA regulation. We have no experience in complying with FDA regulations. We
believe that complying with FDA regulations would be time consuming, burdensome
and expensive and could delay or prevent the introduction of new services.
PROTECTION OF PRIVACY.
The Federal Trade Commission (the "FTC") is considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals, particularly children, while accessing Web sites. Such
regulations may include requirements that companies operating Web sites
establish certain procedures that, among other things:
- give adequate notice to consumers regarding information collection and
disclosure practices;
- provide consumers with the ability to have personal identifying
information deleted from a company's database;
- provide consumers with access to their personal information and with the
ability to rectify inaccurate information;
- clearly identify affiliations or a lack thereof with third parties that
may collect information or sponsor activities on a company's Web site; and
- obtain express parental consent prior to collecting and using personal
identifying information on children under 13 years of age.
We cannot assure that our services will conform with regulations adopted by
the FTC. Even in the absence of such regulations, the FTC may investigate the
privacy practices of companies that collect information on the Internet. One
investigation resulted in a consent decree pursuant to which an Internet company
agreed to establish programs to implement the principles noted above. If we
become subject to such an investigation, the FTC's regulatory and enforcement
efforts may adversely effect our ability to collect personal information from
our users, which, in turn, could have an adverse effect on our ability to
provide effective opportunities for advertisers and e-commerce marketers. This
could have a material adverse effect on our business, financial condition and
results of operations.
It is also possible that "cookies" (files stored on a user's hard drive,
possibly without the user's knowledge, to identify a specific server, file
pathway or directory location) employed to track user information and trigger
profiled sponsorships and advertising may become subject to laws limiting or
prohibiting their use. Certain Internet browsers allow users to remove cookies
or prevent cookies from being stored on their hard drives. In addition, a number
of Internet commentators, advocates and governmental bodies in the United States
and other countries have urged the passage of laws limiting or abolishing the
use of cookies. We currently use cookies to identify the zip code of users of
our site in order to trigger the display of information about the appropriate
hospital sponsor on the user's screen. Limitations on or elimination of our use
of cookies could limit the effectiveness of our
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sponsorship and advertising opportunities, which could have a material adverse
effect on our business, financial condition and results of operations.
The European Union (the "EU") has adopted a directive that imposes
restrictions on the use of personal data in the EU. Under the directive, EU
citizens are guaranteed certain rights, including the right of access to their
data, the right to know where the data originated, the right to have inaccurate
data rectified, the right to recourse in the event of unlawful processing and
the right to withhold permission to use their data for direct marketing. The
directive could, among other things, affect U.S. companies that collect
information over the Internet from individuals in EU member countries, and may
impose restrictions that are more stringent than current Internet privacy
standards in the United States. In particular, companies with offices located in
EU countries will not be allowed to send personal information to countries that
do not maintain adequate standards of privacy. The directive does not, however,
define what standards of privacy are adequate. As a result, there can be no
assurance that the directive will not adversely effect the activities of
entities such as our company that engage in data collection from users in EU
member countries.
Planned features of our site include the retention of personal information
about our users which we would obtain with their consent. We plan to have a
stringent privacy policy covering this information. However, if third persons
were able to penetrate our site security and gain access to, or otherwise
misappropriate, our users' personal information, we could be subject to
liability. Such liability could include claims for the misuse of personal
information, such as for unauthorized marketing purposes or unauthorized use of
credit cards. These claims could result in litigation, our involvement in which,
regardless of the outcome, could require us to expend significant resources.
Moreover, to the extent any of the data constitute or are deemed to constitute
patient health records, a breach of privacy could violate federal or state law.
TAXATION OF E-COMMERCE.
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of legislative proposals have been made at the federal, state and local
level, and by certain foreign governments, that would impose additional taxes on
e-commerce and certain states have taken measures to tax other Internet-related
activities. Although the United States Congress recently placed a three-year
moratorium on state and local taxes on Internet access and on discriminatory
taxes on e-commerce, existing state or local laws were expressly excepted from
this moratorium. A new commission, established by the Internet Tax Freedom Act,
is mandated to study the question of whether this exemption should remain in
place. During 2000, the commission is supposed to submit its report to Congress.
Further, when the moratorium expires, some type of federal and/or state taxes
may be imposed upon e-commerce. Such legislation or other attempts at regulating
e-commerce may substantially impair the growth of e-commerce and, as a result,
adversely affect our opportunity to earn income from such activities.
PRESENCE IN MULTIPLE JURISDICTIONS.
Due to the global reach of the Internet, it is possible that, although our
Internet transmissions originate primarily in the State of New Jersey, the
governments of other states and foreign countries may attempt to regulate our
activity or take action against us for violations of their laws. There can be no
assurance that state or foreign governments will not allege that we are
violating such laws or that such laws will not be modified, or new laws enacted,
in the future. Any of the foregoing could have a material adverse effect on our
business, financial condition and results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of AmericasDoctor.com.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Scott M. Rifkin, M.D................... 39 Chief Executive Officer, President and Chairman of the Board of
Directors
Jeffrey J. Lefko....................... 53 Executive Vice-President of Sales and Marketing and Director
Laura Gill............................. 45 Chief Operating Officer
Alan L. Kimmel, M.D.................... 45 Chief Medical Information Officer
Jonathan R. Roth....................... 32 Chief Information Officer
Allan C. Sanders....................... 36 Chief Financial Officer, Secretary and Treasurer
Jonathan E. Missner.................... 30 Vice President of Business Development
Michael E. Cryor....................... 52 Vice President of Corporate Communications
Luther H. Ridenhour.................... 43 Vice President of E-Commerce Operations
Lewis S. Goodman....................... 41 Vice Chairman of the Board of Directors(1)(2)
Ronald W. Pickett...................... 51 Director
Thomas P. Dickerson.................... 49 Director(1)(2)
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
SCOTT M. RIFKIN, M.D., Chairman of the Board and Chief Executive Officer. In
February 1995, Dr. Rifkin founded Doctors Health, Inc. and served as Chairman of
the Board of Directors from February 1995 until he resigned from his
directorship in September 1998. He also served as Executive Vice President of
Doctors Health, Inc. from February 1995 until he resigned in May 1998. Since May
1998 Dr. Rifkin has been engaged as a consultant to Doctors Health, Inc. From
May 1992 to October 1998, Dr. Rifkin was President of the Baltimore Medical
Group, a Baltimore area multi-specialty group practice. Dr. Rifkin is also a
practicing physician. Dr. Rifkin received a Bachelors Degree in Biology from the
University of Maryland's Baltimore County Campus and graduated from the George
Washington University School of Medicine and is Board Certified in Internal
Medicine. See "Doctors Health, Inc." below for additional information regarding
Doctors Health, Inc.
JEFFREY J. LEFKO, Director and Executive Vice President of Sales and
Marketing. From 1994 to 1998, Mr. Lefko was Vice President, Planning and
Marketing for St. Joseph Medical Center, Towson, Maryland. From 1984 to 1985,
Mr. Lefko was President of the American Hospital Association's Society for
Healthcare Planning and Marketing. From 1985 to 1986, Mr. Lefko was Chairman of
American Hospital Association's Personal Membership Committee. Mr. Lefko has
been a member of the American College of Healthcare Executives since 1994. From
1986 to 1989, Mr. Lefko was on the Board of the Duke Endowment Memorial Library.
Mr. Lefko graduated from the University of Nebraska and received his Masters in
Hospital Administration from Washington University in St. Louis, Missouri.
LAURA GILL, Chief Operating Officer. From January 1991 to April 1998, Ms.
Gill operated her own health-care consulting firm. From April 1987 to December
1990, Ms. Gill was Director of Product Management/Product Implementation/Product
Design for Blue Cross/Blue Shield of Maryland and a member of a Research and
Development team for Blue Cross/Blue Shield Association. Ms. Gill graduated from
The City College of New York.
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ALAN L. KIMMEL, M.D., Chief Medical Information Officer. From February 1995
until he resigned in November 1998, Dr. Kimmel was Executive Vice President and
Chief Medical Officer for Medical Policy and Practice for Doctors Health, Inc.
From May 1992 to November 1998, Dr. Kimmel was Chairman of the Baltimore Medical
Group. Dr. Kimmel is also a practicing physician. Dr. Kimmel graduated from the
University of Maryland School of Medicine and is Board Certified in Internal
Medicine. See "Doctors Health, Inc." below for additional information regarding
Doctors Health, Inc.
JONATHAN R. ROTH, Chief Information Officer. From March 1996 to November
1998, Mr. Roth was the Vice President, Technical Operations of AssureNet, Ltd.
From December 1994 to March 1996, Mr. Roth was President of RothNet, Inc., a Web
presence provider. From April 1992 to December 1994, Mr. Roth worked as an
administrator in Columbia University's Department of English and Comparative
Literature. Mr. Roth graduated from Columbia University.
ALLAN C. SANDERS, Chief Financial Officer, Secretary and Treasurer. Mr.
Sanders is a certified public accountant and from July 1996 to March 1998, was a
Senior Manager at Grant Thornton, LLP. From February 1995 to July 1996, Mr.
Sanders was Vice President of Finance at Doctors Health, Inc. From December 1985
to February 1995, Mr. Sanders practiced public accounting primarily in the
healthcare industry, for Kananitz, Uhlfelder P.A. Since January 1996, Mr.
Sanders has served on the Board of Directors for the Baltimore chapter of the
Cystic Fibrosis Foundation. Since January 1997, Mr. Sanders has served as
President of Sports Boosters of Maryland. Mr. Sanders graduated from the
University of Baltimore. See "Doctors Health, Inc." below for additional
information regarding Doctors Health, Inc.
JONATHAN E. MISSNER, Vice President, Business Development-Sales. From
January 1998 to October 1998, Mr. Missner was Business Development Manager for
Ancillary Products for Kaiser Permanente. From September 1997 to January 1998,
Mr. Missner was Director of Marketing and New Product Development for Doctors
Health, Inc. From June 1991 to September 1997, Mr. Missner was Vice President of
Operations and Business Development at Applied Medical Research, Ltd. Mr.
Missner graduated from Johns Hopkins University and received his MBA from George
Washington University. See "Doctors Health, Inc." below for additional
information regarding Doctors Health, Inc.
MICHAEL E. CRYOR, Vice President of Corporate Communications. From January
1994 to November 1998, Mr. Cryor was the President and CEO of the Mellen
Corporation. From 1989 to 1994, Mr. Cryor was Executive Vice President of Susan
Davis International, a public affairs firm headquartered in Washington, D.C. and
from 1992 to 1998, Mr. Cryor was co-host of the CBS affiliate, WJZ TV public
affairs program, "On Time." From 1973 to 1980, Mr. Cryor, a psychologist, served
as an Associate Dean at Morgan State University and as a frequent lecturer in
its Department of Psychology after directing the Department of Consultation and
Education at the Albert Einstein College of Medicine in New York. Mr. Cryor's
other past affiliations include serving as Chairman of the Board of Associated
Black Charities of Maryland and as a Director of the Constellation Foundation,
the Downtown Partnership, Baltimore Advisors and the Afro-American Publishing
Company. Since 1993, Mr. Cryor has been a member of the Board of Visitors at the
University of Maryland Medical School and, since 1995, a member of the Board of
Sturdivant & Co., a financial investment company. Mr. Cryor graduated from
Morgan State University and holds a master's degree from Montclair State
University.
LUTHER H. RIDENHOUR, Vice President, E-Commerce Operations. In 1996, Mr.
Ridenhour founded LifeLynx, Inc., a medical product engineering, marketing and
consulting company. During 1997 and 1998, Mr. Ridenhour served as a consultant
to Smith & Nephew on product development and marketing issues. From October 1993
to July 1996, Mr. Ridenhour was a financial consultant for Merrill Lynch, and
also served on a venture capital board for the Enterprise Corporation of Western
Pennsylvania. Mr. Ridenhour graduated from the U.S. Naval Academy in Annapolis,
Maryland, and served as a highly decorated Naval Officer and pilot in numerous
key leadership positions, culminating
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in a tour as Commanding Officer of Naval Reserve Center, San Juan, Puerto Rico,
and selection for tactical squadron command.
LEWIS S. GOODMAN, Director and Vice Chairman. In August 1997, Mr. Goodman
co-founded AmericasDoctor.com. From October 1996 to present, Mr. Goodman has
been Managing Director of The Wyndhurst Capital Group, LLC. From June 1992 to
September 1996, Mr. Goodman headed the Bankruptcy and Business Reorganization
Practice Group of the Washington, D.C.-based law firm Shaw, Pittman, Potts &
Trowbridge. Mr. Goodman is a graduate of the University of Maryland School of
Law.
RONALD W. PICKETT, Director. Mr. Pickett is the Founder, Chairman of the
Board of Directors and President of Medical Advisory Systems, Inc. Mr. Pickett
has been an officer and director of Medical Advisory Systems, Inc. since 1981.
Mr. Pickett graduated from Gordon College.
THOMAS P. DICKERSON, Director. Mr. Dickerson has served as President of
Tullis-Dickerson & Co., Inc., a venture capital management company, from 1990 to
1997, and as Chairman of Tullis-Dickerson & Co., Inc. since 1997. Mr. Dickerson
is a principal of the venture capital partnerships managed by the
Tullis-Dickerson & Co., Inc. Mr. Dickerson serves as a director of a number of
private companies in the Tullis-Dickerson portfolio. Mr. Dickerson graduated
from Harvard College, the Harvard Law School and Harvard Business School.
DOCTORS HEALTH, INC.
As described above, Dr. Rifkin, Dr. Kimmel and Mr. Sanders were officers and
directors with Doctors Health, Inc. Doctors Health, Inc. which was founded in
February 1995, operated as a medical care management company which conducted its
business through a network consisting of primary care physicians, specialists,
hospitals and other healthcare providers. Doctors Health, Inc. operated in the
Baltimore and Washington D.C. metropolitan area, Northern Virginia and
surrounding regions. On November 16, 1998, Doctors Health, Inc. filed a
voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Maryland, Baltimore Division.
BOARD COMMITTEES
Our Board of Directors established the Compensation Committee and the Audit
Committee in July 1998.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all our key executive officers and establishes
and reviews general policies relating to compensation and benefits of our
employees.
The Audit Committee has the responsibility to review the audited financial
statements and accounting practices of AmericasDoctor.com and to consider and
approve the employment of independent accountants for both the audit function
and for advisory and other consulting services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the date of this offering, our Board of Directors ratified all
decisions of the Compensation Committee. No interested director voted on
decisions with respect to his compensation. Upon completion of this offering,
the Compensation Committee will make all compensation decisions. No interlocking
relationship exists between our Board of Directors or Compensation Committee and
the board of directors or compensation committee of any other company, nor has
any such interlocking relationship existed in the past.
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DIRECTOR COMPENSATION
Directors are entitled to reimbursement of all reasonable out-of-pocket
expenses incurred in connection with their attendance at Board and Board
committee meetings.
Directors are entitled to reimbursement of all reasonable out-of-pocket
expenses incurred in connection with their attendance at Board and Board
committee meetings.
In January 1999, our Board of Directors adopted, subject to stockholder
approval, an omnibus stock incentive plan (the "1999 LTIP"). A total of 6,000
shares of common stock have been issued in the form of stock options to members
of our Board of Directors who are not our employees or employees of any
affiliated company (the "Outside Directors"). Option grants to the Outside
Directors are automatic and nondiscretionary. The exercise price of such options
is the fair market value of the common stock on the date of grant.
Each eligible Outside Director who joins the Board of Directors on or after
the effective date of the Registration Statement of which this prospectus forms
a part will be granted an option to purchase shares. The options have
year terms. They will generally terminate three months after the date the
director ceases to be a director of AmericasDoctor.com but will remain
outstanding one year after the date the Outside Director ceases to be a director
due to death or disability. All options granted to Outside Directors will vest
as to 1/3 of the shares on each anniversary of the option grant date.
Additionally, immediately prior to the dissolution or liquidation of
AmericasDoctor.com or a "change in control" (as such term is defined in the 1999
LTIP), the vesting of the options will accelerate.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding the
compensation awarded to, earned by, or paid for services rendered to
AmericasDoctor.com in all capacities during fiscal years 1997 and 1998, by our
Chief Executive Officer and our other four most highly compensated executive
officers, other than our Chief Executive Officer, who were serving as executive
officers at the end of fiscal 1998. No other executive officer of
AmericasDoctor.com met the definition of "most highly compensated officer" for
fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- ----------------------------------------------------- ----------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Scott M. Rifkin, M.D.................................
Chief Executive Officer 1998 $ 60,000 -- -- 100,000
Allan C. Sanders.....................................
Chief Financial Officer 1998 65,000 -- -- 5,000
Laura Gill...........................................
Chief Operating Officer 1998 65,000 -- -- 5,000
Jeffrey J. Lefko.....................................
Executive Vice President, Sales and Marketing 1998 55,000 -- -- 3,000
Alan L. Kimmel, M.D..................................
Chief Medical Information Officer 1998 10,000 -- -- 5,000
</TABLE>
- ------------------------
(1) Allan C. Sanders became Chief Financial Officer in April 1998.
(2) Laura Gill became Chief Operating Officer in April 1998.
(3) Jeffrey J. Lefko became a Director and Executive Vice President in July
1998.
(4) Alan L. Kimmel, M.D. became Chief Medical Information Officer in December
1998.
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OPTION GRANTS IN FISCAL YEAR
The following table sets forth certain information regarding stock options
granted during 1997 and 1998 to our Chief Executive Officer and our other four
most highly compensated executive officers, other than our Chief Executive
Officer, who were serving as executive officers at the end of 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERMS(3)
FISCAL OPTIONS EMPLOYEES IN PER --------------------
NAME YEAR GRANTED(1) FISCAL YEAR(%) SHARE(2) EXPIRATION DATE 0% 5%
- --------------------------- ----------- ----------- --------------- ----------- ------------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Scott M. Rifkin, M.D....... 1998 100,000(4) 83.6% $ 10.00 July 2008 -- --
Allan C. Sanders........... 1998 5,000 4.2% 10.00 April 2008
Laura Gill................. 1998 5,000 4.2% 10.00 April 2008
Jeffrey J. Lefko........... 1998 3,000 2.5% 10.00 July 2008
Alan L. Kimmel, M.D........ 1998 5,000 4.2% 10.00 December 2008
<CAPTION>
NAME 10%
- --------------------------- ---------
<S> <C>
Scott M. Rifkin, M.D....... --
Allan C. Sanders...........
Laura Gill.................
Jeffrey J. Lefko...........
Alan L. Kimmel, M.D........
</TABLE>
- ------------------------
(1) We granted options for an aggregate of 119,600 shares to our employees under
the 1999 Long-Term Incentive Plan during the year ended December 31, 1998.
(2) Options were granted at an exercise price less than the fair market value of
the common stock, as determined by the Board of Directors on the date of
grant.
(3) The potential realizable value is calculated assuming the exercise price on
the date of grant appreciates at the indicated rate for the entire term of
the option and that the option is exercised at the exercise price and sold
on the last day of its term at the appreciated price. All options listed
have a term of 10 years. Stock price appreciation of 5% and 10% is assumed
pursuant to the rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price will appreciate over the 10-year
option term at the assumed 5% and 10% levels or at any other defined level.
Unless the market price of the common stock appreciates over the option
term, no value will be realized from the option grants made to the named
executive officers.
(4) All of Dr. Rifkin's options vested in June 1999. Dr. Rifkin's options shall
expire upon the occurrence of the earlier of (x) a specified period of time
after certain terminations of employment and (y) ten years following the
date the option was granted. In addition, in the event that Mr. Rifkin's
employment is terminated without cause (as defined in Section 9.1 of Mr.
Rifkin's employment agreement), Mr. Rifkin may cause us to repurchase all or
any portion of his shares at a price equal to the fair market value (as
defined in the option grant agreement) of such stock.
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FISCAL YEAR-END OPTION VALUES
The following table sets forth for our Chief Executive Officer and our other
four most highly compensated executive officers, other than our Chief Executive
Officer, who were serving as executive officers at the end of 1998, the number
and year-end value of exercisable and unexercisable options for the year ended
December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
------------------------------ ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- --------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Scott M. Rifkin, M.D...................................... -- 100,000 -- --
Allan C. Sanders.......................................... -- 5,000 -- --
Laura Gill................................................ -- 5,000 -- --
Jeffrey J. Lefko.......................................... -- 3,000 -- --
Alan L. Kimmel, M.D....................................... -- 5,000 -- --
</TABLE>
No options were exercised during 1998 by the Chief Executive Officer or any
other executive officer of AmericasDoctor.com. No cash compensation intended to
serve as incentive for performance to occur over a period longer than one year
was paid pursuant to a long-term incentive plan during 1998 to the Chief
Executive Officer or any other executive officer of AmericasDoctor.com. We do
not have any defined benefit or actuarial plan under which benefits are
determined primarily by final compensation and years of service with the Chief
Executive Officer or any other executive officer of AmericasDoctor.com.
Our Board of Directors adopted the Amended and Restated AmericasDoctor.com,
Inc. 1999 Long-Term Incentive Plan on January 27, 1999, subject to approval by
our shareholders. Our Board of Directors believes that in order to advance the
interests of AmericasDoctor.com and its stockholders, we must provide a means to
attract, retain and reward directors, officers and other key employees more
directly for improvement in the common stock price. It is critical for us to
adopt a flexible stock incentive plan, which is both responsive to our growth
and competitive with other stock incentive plans in the industry. The 1999 LTIP
is designed to permit us to take a deduction under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") with respect to
performance-based awards. The 1999 LTIP is to be administered by the
compensation committee of our Board of Directors, members of which must consist
solely of at least two individuals who are "outside directors" for purposes of
Section 162(m) of the Code.
SUMMARY OF THE 1999 LONG-TERM INCENTIVE PLAN
PURPOSE. The 1999 LTIP is designed to encourage selected individuals to
acquire or increase proprietary interests in AmericasDoctor.com, thereby
promoting a closer identity of interest between such individuals and our
stockholders.
PARTICIPANTS. All employees and directors of, and consultants to,
AmericasDoctor.com and its affiliates of outstanding ability may be selected by
the compensation committee to become participants in the 1999 LTIP.
NUMBER OF SHARES. The 1999 LTIP provides that 290,000 of the outstanding
shares of the common stock (including treasury shares) are available for
issuance as awards under the 1999 LTIP and that the maximum number of shares
that may be granted in a calendar year to any participant shall be 100,000.
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In the event that an award of a stock option expires or is not exercised or
any other award is forfeited, the shares of common stock allocated to such award
are again available for grant under the 1999 LTIP.
The 1999 LTIP restricts the number of shares that can be awarded as
"performance-based awards" (as described below) to 100,000 shares in any
calendar year and restricts the maximum amount that can be awarded as
performance-based awards to at the then prevailing fair market value in any
calendar year.
TERM. No awards may be made after the tenth anniversary of the date the
Board of Directors approves the 1999 LTIP (January 27, 1999).
AWARDS. Unless otherwise determined by the compensation committee, an award
shall not be transferable or assignable by a participant otherwise than by will
or by the laws of descent and distribution. An award exercisable after the death
of a participant may be exercised by the legatees, personal representatives or
distributees of the participant. No award may be granted under the 1999 LTIP
after the tenth anniversary of the effective date of the 1999 LTIP.
In addition, the 1999 LTIP provides for individual maximum limits on the
number of shares available for issuance in the form of stock options and other
stock-based awards. These annual limits per participant are 100,000 shares. The
1999 LTIP also provides that the compensation committee may specify performance
targets in connection with awards. Such performance targets would be with
respect to the following criteria: (i) annual earnings before payment of taxes
and interest; (ii) annual earnings per share; (iii) book value per share; and
(iv) annual return on common equity. These performance targets further ensure
that the incentive goals are aligned with shareholder interests.
The forms of the awards that may be granted under the 1999 LTIP are:
STOCK OPTIONS. The compensation committee may award a stock option in
the form of an "incentive" stock option (as defined in Section 422 of the
Code) or a non-qualified stock option. Such awards expire no more than ten
years after the date they are granted. The exercise price per share of
common stock, which may be purchased pursuant to an option, is determined by
the compensation committee, but, with respect to incentive stock options,
shall not be less than 100% of the fair market value of a share of common
stock on the date the option is granted. The exercise price is payable, as a
participant may elect, in cash, by tendering shares of already owned common
stock (which shares have been held by the participant for no less than six
months, or any combination thereof, or by delivery of irrevocable
instruments to a broker to deliver to us.
STOCK APPRECIATION RIGHTS. The compensation committee may award a stock
appreciation right, the amount of which shall equal the excess of the fair
market value of one share of common stock on the date of exercise of the
award (or, if the compensation committee shall so determine in the case of
any such right other than one related to an incentive stock option, the fair
market value of one share of common stock on the date of exercise), over the
grant price of the stock appreciation right, determined by the compensation
committee as of the date of grant, which shall not be less than the fair
market value of one share of common stock on the date of grant. The
compensation committee may, in its sole discretion, determine the manner of
exercise of a stock appreciation right, which may include a limited stock
appreciation right that may only be exercised upon the occurrence of a
"change in control," as defined in the 1999 LTIP. No stock appreciation
right shall have a term longer than ten years from the date of grant, or
such shorter period as may be applicable under Section 422 of the Code.
RESTRICTED STOCK. The compensation committee may award shares of common
stock that are subject to restrictions on transferability and other
restrictions, which restrictions may lapse separately or in combination at
such times, under such circumstances, in such installments, as the
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<PAGE>
compensation committee may determine. Upon the termination of employment or
service of the participant (as determined under criteria established by the
compensation committee), restricted stock shall be forfeited and reacquired
by AmericasDoctor.com. A holder of an award of restricted stock shall have
the same rights of any other holder of common stock, including the right to
vote and receive dividends thereon.
DEFERRED STOCK. The compensation committee may award to the participant
the right to receive, upon the expiration of a deferral period specified by
the compensation committee, an award of common stock. This deferred stock
may be subject to such restrictions as the compensation committee may
impose, including which restrictions may lapse upon expiration of the
deferral period or at earlier times, separately or in combination, in
installments, or otherwise. Upon the termination of employment or service of
the participant (as determined under criteria established by the
compensation committee), such deferred stock shall be forfeited and
reacquired by AmericasDoctor.com. The compensation committee may also permit
the participant to elect to defer receipt of any other common stock vested
in the participant, to be acquired by the participant under the 1999 LTIP or
otherwise. This deferred stock shall not be forfeited upon the participant's
termination of employment or service.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The compensation
committee may grant common stock as a bonus, or grant common stock or other
awards in lieu of AmericasDoctor.com obligations to pay cash under other
plans or compensatory arrangements, provided that such grant complies with
all applicable securities law. Such grants shall be subject to such terms as
the compensation committee shall determine.
DIVIDEND EQUIVALENTS. The compensation committee may grant the right to
receive cash, common stock, or other awards to the participant that is equal
in value to dividends paid with respect to a specified number of shares of
common stock, or other periodic payments. The compensation committee may
provide that the dividend equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional common
stock, awards or other investment vehicles as the compensation committee may
specify.
OTHER STOCK-BASED AWARDS. The compensation committee may grant other
types of awards of common stock, or awards based in whole or in part by
reference to the fair market value of common stock. Such other stock-based
awards shall be in such form, and dependent on such conditions, as the
compensation committee shall determine (including, without limitation, the
right to receive one or more shares of common stock (or the equivalent cash
value of such shares) upon the completion of a specified period of service,
the occurrence of an event and/or the attainment of performance objectives),
other stock-based awards may be granted alone or in addition to any other
awards granted under the plan. The compensation committee shall determine
whether other stock-based awards shall be settled in cash, common stock or
any combination thereof.
ACCELERATION UPON A CHANGE IN CONTROL. Unless otherwise provided by the
compensation committee in an award agreement, all conditions and/or
restrictions relating to the continued performance of services and or
achievement of performance objectives with respect to the exercisability or
full enjoyment of an award shall immediately lapse upon a change in control,
as such term is defined in the 1999 LTIP.
ADJUSTMENTS. In the event of any change in the outstanding shares by
reason of any share dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or exchange of shares or any
other corporate exchange, combination or transaction, or any distribution to
shareholders of shares other than regular cash dividends, the compensation
committee may make an equitable adjustment in (i) the number or kind of
shares or other
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<PAGE>
securities issued or reserved for issuance pursuant to the Plan or pursuant
to outstanding awards, (ii) the option exercise price and/or (iii) any other
affected terms of such awards.
In addition, except as otherwise provided in an award agreement, in the
event of a "change in control" (as defined in the 1999 LTIP attached
hereto), the compensation committee in its sole discretion and without
liability to any person may take such actions, if any, as it deems necessary
or desirable with respect to any award (including, without limitation, (i)
the acceleration of an award, (ii) the payment of an amount, made in cash or
stock, in exchange for the cancellation of an award, (iii) the termination
of an award after a participant has been afforded a certain period of time
to exercise such award following the change in control, and/or (iv) the
requiring of the issuance of substitute awards that will substantially
preserve the value, rights and benefits of any affected awards previously
granted hereunder) as of the date of the consummation of the change in
control.
AMENDMENT AND TERMINATION. Our Board of Directors may amend, alter or
discontinue the 1999 LTIP at any time, without shareholder approval, unless
such amendment would increase the total number of shares reserved for
issuance under the 1999 LTIP, change the maximum number of shares for which
awards may granted to any participant. In addition, our Board of Directors
may not amend the 1999 LTIP in such a manner that would impair the rights or
obligations under any award previously granted to any participant without
such participant's approval and may not amend, alter or discontinue the
adjustment provision of the 1999 LTIP pertaining to a change in control
after the occurrence of a change in control.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to AmericasDoctor.com or
its stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law ("DGCL")
regarding unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
The limitation of liability and indemnification provisions in our Amended
and Restated Certificate of Incorporation may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though such an action, if successful, might
otherwise benefit us and our stockholders. Furthermore, a stockholder's
investment may be adversely affected to the extent we pay the costs of
settlement and damage awards against directors and officers pursuant to these
indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees for which indemnification is sought, nor
are we aware of any threatened litigation that may result in claims for
indemnification.
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CERTAIN TRANSACTIONS
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK TRANSACTION
On June 1, 1999, we sold 103,883 shares of Series B redeemable convertible
preferred stock at a purchase price of $66.18 per share, which was paid in cash.
The purchasers of the Series B redeemable convertible preferred stock included
the following holders (including their affiliates) of more than 5% of the common
stock, assuming the conversion of outstanding preferred shares:
<TABLE>
<S> <C>
75,552
- - GE Capital Equity Investments, Inc......................... shares
28,331
- - Tullis-Dickerson Capital Focus II, L.P..................... shares
</TABLE>
Thomas P. Dickerson, is the Chairman of Tullis-Dickerson & Co., Inc. and a
principal of the venture capital partnerships managed by the Tullis-Dickerson &
Co., Inc. In addition, in connection with this transaction, certain affiliates
of Tullis-Dickerson Capital Focus II, L.P. agreed to purchase 9,444 shares of
our Series B preferred stock on the same terms and conditions, in no event later
than 60 days after June 1, 1999.
In connection with its purchase of 75,552 shares of Series B redeemable
convertible preferred stock in June 1999, GE Capital Equity Investments, Inc.
obtained the right to elect one member to our Board of Directors. In connection
with this transaction, we agreed to certain restrictive covenants and made
certian representations, upon the violation of certain of which (i) we must
either increase the number of directors constituting the board of directors by
two, and the holders of the preferred stock will have the right to elect one
such director, or (ii) holders of preferred stock may require us to repurchase
all, but not less than all, of such holders shares of preferred stock at a
redemption price equal to the liquidation value of each such share plus all
accrued and unpaid dividends thereon. If any material breach has occurred and is
continuing more than 180 days after such occurrence, notwithstanding our
election of the remedy described in clause (i) above, each holder will
thereafter have the option to exercise the rights prescribed in each of clauses
(i) and (ii) above.
SERIES A CONVERTIBLE PREFERRED STOCK TRANSACTION
On February 1, 1999, we sold 133,333 shares of Series A convertible
preferred stock at a purchase price of $30 per share, which was paid in cash.
The purchasers of the Series A convertible preferred stock included the
following holders (including their affiliates) of more than 5% of the common
stock, assuming the conversion of outstanding preferred shares:
<TABLE>
<S> <C>
99,999
- - Tullis-Dickerson Capital Focus II, L.P..................... shares
16,667
- - TD Origen Capital Fund, L.P................................ shares
16,667
- - TD Javelin Capital Fund, L.P............................... shares
</TABLE>
Thomas P. Dickerson, a director of AmericasDoctor.com, is the Chairman of
Tullis-Dickerson & Co., Inc. and a principal of the venture capital partnerships
managed by the Tullis-Dickerson & Co., Inc. which include TD Origen Capital
Fund, L.P., TD Javelin Capital Fund, L.P. and Tullis-Dickerson Capital Foucs II,
L.P. Mr. Dickerson was elected as a director as a condition to the investment by
the foregoing entities.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
On June 1, 1999, we entered into the Second Amended and Restated
Registration Rights Agreement with MAS, PRWW, Tullis-Dickerson Capital Focus II,
L.P., TD Origen Capital Fund, L.P., TD Javelin Capital Fund, L.P., Wyndhurst, GE
Capital Equity Investments, Inc. Pursuant to the registration rights agreement,
upon completion of this offering, the holders of 466,852 shares of our common
stock, or their transferees, will be entitled to certain rights with respect to
the registration of
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such shares under the Securities Act. After such registration, these shares
would become freely tradeable without restriction under the Securities Act. The
holders of certain shares of common stock and options to purchase shares of
common stock (the "registrable securities") are entitled to have their shares
registered by us under the Securities Act under the terms of agreements between
us and the holders of the registrable securities. Subject to limitations
specified in the agreement, these registration rights include the following:
- The holders of at least 40% of the then outstanding registrable securities
may require that we use our reasonable best efforts to register the
registrable securities for public resale.
- If we register any common stock, either for our own account or for the
account of other security holders, the holders of registrable securities
are entitled to include their shares of common stock in such registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering in view of market conditions
- Holders of the then outstanding registrable securities having an aggregate
fair market value of $2,500,000 may require us to register all or a
portion of their registrable securities on Form S-3 when use of such form
becomes available to us.
Under the registration rights agreements we also have agreed to indemnify
the holders of registration rights. We will bear all registration expenses other
than underwriting discounts and commissions. All registration rights terminate
on the date ten years following the closing of this offering, or, with respect
to each holder of registrable securities, at such time as the holder is entitled
to sell all of its shares in any three-month period under Rule 144 of the
Securities Act.
Registrations of any shares of common stock held by these shareholders would
result in these shares being freely tradable without restriction under the
Securities Act upon the effective date of the registration. Any sales of
registrable securities by these shareholders, after such shares have been
lawfully registered, could have a material adverse effect on the trading price
of our common stock.
COMMON STOCK WARRANT
On January 27, 1998, we issued to Scott Rifkin a warrant to purchase 700
shares of common stock at an exercise price of $0.01. The warrant may be
exercised at any time on or before December 31, 2009.
On January 27, 1998, we issued to Alan Kimmel a warrant to purchase 2,100
shares of common stock at an exercise price of $0.01. The warrant may be
exercised at any time on or before December 31, 2009.
On February 1, 1999, in connection with the sale of Series A convertible
preferred stock, we issued to TD Javelin Capital Fund, L.P. and TD Origen Fund,
L.P. warrants to purchase shares of common stock at an exercise price of $0.01.
The number of shares for which the warrants may be exercised will be fixed at
the closing of this offering or upon the occurence of certain material
transactions involving AmericasDoctor.com. We currently expect the number of
shares to be zero. The warrant may be exercised at any time on or before
December 31, 2009.
On May 26, 1999, we issued to the Wyndhurst Capital Group, LLC a warrant to
purchase 19,723 shares of common stock at an exercise price of $0.01. The
warrant may be exercised at any time on or before May 1, 2009.
On June 1, 1999, in connection with the sale of Series B redeemable
convertable preferred stock, we issued to each of GE Capital Equity Investments,
Inc. and Tullis-Dickerson Capital Focus II, L.P. a warrant to purchase common
stock at an exercise price of $0.01 per share. The number of shares for which
the warrants may be exercised will be fixed at the closing of this offering or
upon the occurence
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of certain material transactions involving AmericasDoctor.com. We currently
expect the number of shares to be zero.
PREFERRED STOCK WARRANT
On June 1, 1999, in connection with the sale of Series B redeemable
convertible preferred stock, we issued to GE Capital Equity Investments, Inc. a
warrant to purchase 25,183 shares of Series B redeemable convertible preferred
stock at an exercise price of $66.18 per share.
On June 1, 1999, we issued to Tullis-Dickerson Capital Focus II, L.P. a
warrant to purchase 9,444 shares of Series B redeemable convertible preferred
stock at an exercise price of $66.18 per share.
The Preferred Stock warrants commence on October 16, 1999 and will expire on
April 15, 2000. In addition, the warrants will terminate if, on or prior to
October 15, 1999, AmericasDoctor.com has (i) effected an initial public
offering, (ii) effected an additional equity financing at a price per share of
common stock in excess of $66.18 which has resulted in cash proceeds to
AmericasDoctor.com of at least $5,000,000 or (iii) entered into any contract for
the sale of goods and services, excluding sales of assets not in the ordinary
course of business, which has resulted in cash proceeds to AmericasDoctor.com of
at least $5,000,000.
EMPLOYMENT AGREEMENTS
SCOTT M. RIFKIN, M.D. We are a party to an employment agreement with Scott
M. Rifkin, M.D., dated February 1, 1999. The term of the agreement is five years
and will be extended automatically for successive one-year terms. Pursuant to
the agreement, we are obligated to pay Dr. Rifkin an initial annual salary of
$225,000 plus cost-of-living adjustments. This salary will be reviewed by our
Board of Directors during each year and may be adjusted at our Board's sole
discretion. Dr. Rifkin is eligible for an annual discretionary bonus.
In the event Dr. Rifkin ceases his employment, he has agreed not to compete
with us for a period of 12 months following the cessation of his employment. In
the event we undertake an initial public offering of our common stock at a
before-the-money market capitalization of not less than $75,000,000, Dr. Rifkin,
in his sole discretion, may require us to renegotiate the terms of his
employment agreement. In such event, Dr. Rifkin will be entitled to compensation
and other benefits consistent with the compensation and benefits of similarly
situated officers of similarly situated companies. In addition, in the event
that Dr. Rifkin's employment is terminated without cause, Dr. Rifkin may cause
us to repurchase all or any portion of his shares at a price equal to the fair
market value (as defined in the option grant agreement) of such stock.
JEFFREY J. LEFKO. We are a party to an employment agreement with Jeffrey J.
Lefko, dated February 1, 1999. The term of the agreement is five years and will
be extended automatically for successive one-year terms. Pursuant to the
agreement, we are obligated to pay Mr. Lefko an initial annual salary of
$120,000 plus cost-of-living adjustments. This salary will be reviewed by our
Board of Directors during each year and may be adjusted at our Board's sole
discretion. Mr. Lefko is eligible for an annual discretionary bonus. In the
event Mr. Lefko's employment is terminated without cause, he would receive a
severance payment in an amount equal to his salary for a period of nine months.
In the event Mr. Lefko ceases his employment, he has agreed not to compete with
us for a period of 12 months following the cessation of his employment.
In the event we undertake an initial public offering of our common stock at
a before-the-money market capitalization of not less than $75,000,000, Mr.
Lefko, in his sole discretion, may require us to renegotiate the terms of his
employment agreement. In such event, Mr. Lefko will be entitled to compensation
and other benefits consistent with the compensation and benefits of similarly
situated officers of similarly situated companies.
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ALLAN C. SANDERS. We are a party to an employment agreement with Allan C.
Sanders, dated February 1, 1999. The term of the agreement is five years and
will be extended automatically for successive one-year terms. Pursuant to the
agreement, we are obligated to pay Mr. Sanders an initial annual salary of
$120,000 plus cost-of-living adjustments. This salary will be reviewed by our
Board of Directors during each year and may be adjusted at our Board's sole
discretion. Mr. Sanders is eligible for an annual discretionary bonus. In the
event Mr. Sanders' employment is terminated without cause, he would receive a
severance payment in an amount equal to his salary for a period of nine months.
In the event Mr. Sanders ceases his employment, he has agreed not to compete
with us for a period of 12 months following the cessation of his employment. In
the event we undertake an initial public offering of our common stock at a
before-the-money market capitalization of not less than $75,000,000, Mr.
Sanders, in his sole discretion, may require us to renegotiate the terms of his
employment agreement. In such event, Mr. Sanders will be entitled to
compensation and other benefits consistent with the compensation and benefits of
similarly situated officers of similarly situated companies.
LAURA GILL. We are a party to an employment agreement with Laura Gill,
dated February 1, 1999. The term of the agreement is five years and will be
extended automatically for successive one-year terms. Pursuant to the agreement,
we are obligated to pay Ms. Gill an initial annual salary of $120,000 plus
cost-of-living adjustments. This salary will be reviewed by our Board of
Directors during each year and may be adjusted at our Board's sole discretion.
Ms. Gill is eligible for an annual discretionary bonus. In the event Ms. Gill's
employment is terminated without cause, she would receive a severance payment in
an amount equal to her salary for a period of nine months.
In the event Ms. Gill ceases her employment, she has agreed not to compete
with us for a period of 12 months following the cessation of her employment. In
the event we undertake an initial public offering of our common stock at a
before-the-money market capitalization of not less than $75,000,000, Ms. Gill,
in her sole discretion, may require us to renegotiate the terms of her
employment agreement. In such event, Ms. Gill will be entitled to compensation
and other benefits consistent with the compensation and benefits of similarly
situated officers of similarly situated companies.
CONSULTING AGREEMENT WITH THE WYNDHURST CAPITAL GROUP, LLC.
In January 1999, we entered into a consulting agreement with The Wyndhurst
Capital Group, LLC ("Wyndhurst"). Our Board of Directors and officers consult
Wyndhurst in several areas, including the negotiation of certain contracts,
financing, organization of our staff, developing our financial and accounting
policies and developing our technology and infrastructure. Lewis S. Goodman, a
director of AmericasDoctor.com, is the managing director of Wyndhurst. We are
obligated to pay Wyndhurst a fee of $10,000 per month. In addition, Wyndhurst
may receive additional incentive compensation related to their services. Our
agreement with Wyndhurst expires in November 1999 and may be terminated by
either party upon 30 days' written notice. Subject to certain limitations, the
agreement may be renewed for two successive six-month periods. On January 29,
1999, March 3, 1999, and May 26, 1999, we issued warrants to purchase an
aggregate of 59,131 shares of common stock to Wyndhurst exercisable at $0.01 per
share. Wyndhurst has exercised 23,398 of such warrants as of June 1, 1999.
COMMON STOCK TRANSACTION WITH MEDICAL ADVISORY SYSTEMS, INC. AND PREMIER
RESEARCH WORLDWIDE, LTD.
On July 2, 1998, we sold 50,000 shares of common stock to each of MAS and
PRWW at a purchase price of $20 per share. The purchasers of the shares of
common stock included the following
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holders of more than 5% of the common stock, assuming the conversion of
outstanding preferred shares:
<TABLE>
<S> <C>
50,000
- - Medical Advisory Systems, Inc.............................. shares
50,000
- - Premier Research WorldWide, Ltd............................ shares
</TABLE>
Ronald W. Pickett, a director of AmericasDoctor.com, is the Chairman of the
Board of Directors and President of MAS. Mr. Pickett was elected as a director
as a condition to the investment by MAS. Joel Morganroth, M.D. is a Director of
AmericasDoctor.com and the Chief Executive Officer of PRWW. Dr. Morganroth was
elected as a Director as a condition to the investment by PRWW.
MEDICAL ADVISORY SYSTEMS, INC. In connection with the sale of common stock
to MAS, we entered into an exclusive call center service agreement (as amended,
the "MAS Agreement") with MAS. Under the MAS Agreement, MAS has agreed to
operate the chat center for our 24-hour doctor chat service. The MAS Agreement
also entitles MAS to operate additional chat centers opened by
AmericasDoctor.com. MAS provides 24-hour medical services, medical assistance,
telemedicine, medical equipment/pharmaceutical distribution, training and
occupational health services. On January 18, 1999, we consummated the sale of
40,000 additional shares of common stock to MAS at a purchase price of $25 per
share. MAS also purchased 9,958 shares of common stock on June 1, 1999, at a
purchase price of $66.18 per share; MAS also received 13,833 additional shares
in October 1998 because we failed to meet certain milestones agreed to in
connection with their initial investment in AmericasDoctor.com. On March 3, 1999
we consummated the sale to MAS of 13,889 shares at a purchase price of $36 per
share. During 1998, we paid $822,918 to MAS as part of the MAS Agreement.
PREMIER RESEARCH WORLDWIDE, LTD. In connection with the sale of Common
Stock to PRWW, we entered into a Support and Service Agreement (the "Support and
Service Agreement") with PRWW which was amended as of March 18, 1999 by a
Marketing Service Agreement (the "PRWW Agreement"). Under the PRWW Agreement,
PRWW has agreed to provide marketing services in connection with the development
of our clinical research services business and consultation regarding the
recruitment, quantification and qualification of volunteers for clinical
studies. We have agreed to pay PRWW $4.8 million in connection with the PRWW
Agreement. The PRWW Agreement expires on December 31, 2000. Pursuant to the
Support and Service Agreement with PRWW, we will assist PRWW on an exclusive
basis in recruiting volunteers from our site for PRWW's clinical trials. The
PRWW Agreement removed the exclusivity provision from the Support and Service
Agreement. PRWW also received 13,833 shares in October 1998 because we failed to
meet certain milestones in connection with their initial investment in
AmericasDoctor.com.
STOCKHOLDERS' VOTING AGREEMENT
On June 30, 1998, Scott M. Rifkin, M.D., our Chief Executive Officer, and a
group of our other stockholders, holding approximately 35,000 shares in
aggregate, entered into a voting agreement. In consideration for the common
stock issued to the stockholders, the stockholders granted to Dr. Rifkin the
exclusive right to act in respect of, and to vote, the shares held by the
stockholders in any manner and for any purpose in Dr. Rifkin's sole discretion.
Dr. Rifkin's voting rights include, but are not limited to, voting on amendments
to our articles of incorporation and bylaws, increases or reductions of our
capital stock, agreements of consolidation, merger, share exchanges or the sale
of our assets, the liquidation, dissolution or winding up of our company and the
issuance of stock options or warrants for our common stock. Dr. Rifkin is not
entitled to compensation for his services in connection with this agreement,
unless authorized by a majority vote of the stockholders that are party to the
agreement. This agreement may be amended by a vote of two-thirds of the
stockholders that are party to the agreement.
OTHER TRANSACTIONS
In August 1997, we issued 9,642 shares of common stock at a purchase price
of $0.01 per share which was paid for in cash by Alan M. Rifkin, Dr. Rifkin's
brother. The law firm of Rifkin, Livingston,
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Levitan & Silver, LLC., of which Alan M. Rifkin is Managing Member, has
represented and continues to represent AmericasDoctor.com, Inc.
SHAREHOLDERS AGREEMENT
On June 1, 1999, we entered into a Second Amended and Restated Shareholders'
and Voting Agreement with MAS, PRWW, Tullis-Dickerson Capital Focus II, L.P., TD
Origen Capital Fund, L.P., TD Javelin Capital Fund, L.P., Wyndhurst, GE Capital
Equity Investments, Inc. and Dr. Rifkin. Pursuant to the shareholders'
agreement, the board will consist of:
- one director to be designated by MAS, so long as MAS holds 2.0% or more of
the common stock;
- one director to be designated by PRWW, so long as PRWW holds 2.0% or more
of the common stock;
- one director to be designated by TD Capital Focus II, L.P., TD Origen
Capital Fund, L.P. and TD Javelin Capital Fund, L.P., so long as they
collectively hold 2.0% or more of the common stock;
- one director to be designated by GE Capital Equity Investments, Inc., so
long as GE Capital Equity Investments, Inc. holds 2.0% or more of the
common stock;
- Dr. Rifkin as Chairman of the Board and four additional directors to be
designated by Dr. Rifkin which right expires on July 2, 2000 in certain
circumstances. After July 2, 2000, Dr. Rifkin will have the right to
designate one director, so long as Dr. Rifkin holds 2.0% or more of the
common stock.
If the employment of a management shareholder, other than Dr. Rifkin, is
terminated without cause and a "change of control" occurs within the first 12
months following the date of such termination, the purchasers of the management
shareholder's stock will be required to pay such management shareholder, in
addition to the purchase price for such terminated management shareholder's
stock, the value such management shareholder would have received for his stock
upon, and as a result of, the change in control of AmericasDoctor.com. For the
purpose of the shareholders' agreement, a "change of control" means (i) a
liquidating distribution to the shareholders, (ii) a contribution, consolidation
or merger where a majority of the members of the Board of Directors after such
event were not members of the Board of Directors prior to this event, and (iii)
any sale or exchange of all, or substantially all, of AmericasDoctors.com's
assets.
Pursuant to the shareholders agreement, each party to the agreement, other
than AmericasDoctor.com, is restricted from transferring its shares of stock
unless such stock is first offered for purchase to AmericasDoctor.com and then
to certain other shareholders.
If a shareholder or a group of shareholders proposes to transfer their
shares, other than pursuant to a registration statement under the Security Act,
and such stock exceeds 33 1/3% of the outstanding stock of AmericasDoctor.com,
the remaining shareholders will have the right to participate in such sale of
common stock on the same terms and conditions as the original shareholder or
group of shareholders proposing the sale or transfer of stock.
Upon any additional issuance of stock, each of Dr. Rifkin, MAS, the holders
of preferred stock, PRWW and Joel Morganroth, so long as he is PRWW's designee
to our Board of Directors, shall have the right and option to purchase a portion
of the newly issued shares in proportion to their respective ownership of
shares, at the purchase price and on the terms being provided to the proposed
buyers of the newly issued shares.
The shareholders' agreement terminates upon completion of an initial public
offering with a pre-money aggregate capitalization of not less than $75,000,000
at an aggregate offering price of not less than $15,000,000.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of June 1, 1999, as adjusted to
reflect the sale of the common stock offered hereby under this prospectus, by:
- our Chief Executive Officer and our four other highest compensated
executive officers;
- each director;
- all directors and executive officers as a group, and
- each stockholder known by us to own beneficially more than 5% of the
common stock.
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
BENEFICIALLY OWNED(1)
NUMBER OF SHARES --------------------------------
BENEFICIALLY AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED BEFORE OFFERING OFFERING(2)
- ------------------------------------------------------------ ----------------- --------------- ---------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Scott M. Rifkin, M.D(3)..................................... 188,639 19.4%
Allan C. Sanders(4)......................................... 5,031 *
Laura Gill(5)............................................... 1,667 *
Jeffrey J. Lefko(6)......................................... 4,631 *
Alan L. Kimmel, M.D(7)...................................... 10,710 1.2%
Lewis S. Goodman(8)......................................... 57,846 6.5%
Ronald W. Pickett(9)........................................ 127,680 14.6%
Thomas P. Dickerson(10)..................................... 161,664 18.5%
All executive officers and directors as a group (8
persons)(11).............................................. 557,868 55.8%
5% STOCKHOLDERS
Tullis-Dickerson Capital Focus II, L.P...................... 128,330 14.7%
One Greenwich Plaza
Greenwich, CT 06830
Joel Morganroth, M.D.(12)................................... 110,757 12.7%
Medical Advisory Systems, Inc............................... 127,680 14.6%
8050 Southern Maryland Boulevard
Owings Mills, MD 20736
GE Capital Equity Investments, Inc.......................... 75,552 8.6%
120 Long Ridge Road
Stamford, CT 06927
Premier Research Worldwide, Ltd............................. 63,833 7.3%
30 South 17(th) Street
Philadelphia, PA 19103
Wyndhurst Capital Group, LLC................................ 57,846 6.5%
575 S. Charles Street
Suite 200
Baltimore, MD 21201(13)
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership is based on
873,367 shares outstanding as of June 1, 1999. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of
June 1, 1999 are deemed outstanding for the purpose of computing the
percentage ownership of the person holding such options but are not deemed
outstanding for computing the percentage ownership of any other person.
Unless otherwise indicated below, the persons and entities named in the
table
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have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
(2) Assumes no exercise of the underwriters' over-allotment option.
(3) Includes 700 shares issuable upon exercise of warrants and 100,000 shares
issuable upon exercise of options.
(4) Includes 1,667 shares issuable upon exercise of options.
(5) Includes 1,667 shares issuable upon exercise of options.
(6) Includes 1,000 shares issuable upon exercise of options.
(7) Includes 2,100 shares issuable upon exercise of warrants.
(8) Includes 57,846 shares beneficially owned by Wyndhurst Capital Group, LLC.
Mr. Goodman is Managing Director of the Wyndhurst Capital Group, LLC.
(9) Includes 127,680 shares beneficially owned by Medical Advisory Systems, Inc.
Mr. Pickett is Chairman of the Board and President of Medical Advisory
Systems, Inc. and beneficially owns approximately 17% of their common stock.
Mr. Pickett disclaims beneficial ownership of all shares of common stock
owned by MAS.
(10) Includes 21,389 shares, 21,389 shares and 128,330 shares beneficially owned
by Javelin Capital Fund, L.P., TD Origen Capital Fund, L.P. and
Tullis-Dickerson Capital Focus II, L.P., respectively. Director Dickerson is
a principal of Tullis-Dickerson Capital Focus II, L.P., Javelin Capital
Fund, L.P. and TD Origen Capital Fund, L.P. Mr. Dickerson disclaims
beneficial ownership of all shares of common stock owned by Tullis-Dickerson
Capital Focus L.P. and its affiliated funds.
(11) Includes 22,523 shares issuable upon exercise of warrants and 104,334
shares issuable upon exercise of options.
(12) Includes 63,833 shares beneficially owned by Premier Research Worldwide,
Ltd. Dr. Morganroth is Chief Executive Officer and a Director of Premier
Research Worldwide, Ltd. Also includes 6,000 shares held by members of his
immediate family. Dr. Morganroth disclaims beneficial ownership of all
shares of common stock owned by PRWW. Dr. Morganroth was a director until
June 1999.
(13) Includes 19,723 shares issuable upon exercise of warrants.
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DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Upon completion of this offering our authorized capital stock will consist
of 2.5 million shares of common stock and 1.0 million share of preferred stock.
The following description is only a summary of the material provisions of our
common stock and preferred stock. You should refer to our Amended and Restated
Certificate of Incorporation and Bylaws which are incorporated by reference and
the applicable provisions of Delaware law for additional details regarding our
capital stock.
COMMON STOCK
As of June 1, 1999 there were 636,619 shares of common stock outstanding.
Each outstanding shares of common stock is, and the shares of common stock
outstanding upon completion of this offering will be, fully paid and
nonassessable.
DIVIDENDS
Subject to any prior dividend rights of the holders of preferred stock,
dividends may be paid in cash, in property or in shares of the capital stock of
AmericasDoctor.com as determined by our Board of Directors out of funds legally
available therefor.
VOTING
Holders of our common stock are entitled to vote on all matters to be voted
on by our stockholders, including the election of directors and, except as
otherwise required by law, by-law or provided in any resolution adopted by our
Board of Directors with respect to any series of our preferred stock, the
holders of our common stock exclusively will possess all voting power. Each
share of our common stock is entitled to one vote on all matters. Holders of our
common stock do not have cumulative voting rights, which means that the holders
of a majority of the shares voted can elect all of the directors then standing
for election.
LIQUIDATION VALUE
After the satisfaction in full of any liquidation preferences of holders of
our preferred stock, holders of our common stock are entitled to ratable
distribution of the remaining assets available for distribution to stockholders
in the event of our liquidation, dissolution or winding up.
OTHER
Our common stock is not subject to redemption, whether by operation of a
sinking fund or otherwise. Holders of our common stock are not entitled to
preemptive rights under our Amended and Restated Certificate of Incorporation or
under our Amended and Restated Bylaws. The rights, preferences and privileges of
holders of our common stock are subject to, and may be adversely affected by,
the rights of holders of any shares of preferred stock which we may issue in the
future.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is .
PREFERRED STOCK As of June 1, 1999, we had 1.0 million shares of preferred
stock authorized. We have designated 133,333 shares of preferred stock as our
Series A convertible preferred stock and 151,103 shares as our Series B
redeemable convertible preferred stock. As of June 1, 1999, there were 133,333
shares of Series A preferred stock and 103,883 shares of Series B preferred
stock outstanding. The Series B redeemable convertible preferred stock is
redeemable at any time within 180 days after
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June 1, 2005. Each share of Series A convertible preferred stock and Series B
redeemable convertible preferred stock is convertible, at the option of the
holder, into a share of common stock.
Upon completion of this offering, all outstanding shares of preferred stock
will be converted on a one-to-one basis into 237,216 shares of common stock.
However, following this conversion, under our Amended and Restated Certificate
of Incorporation, our Board of Directors will have the authority, without
further action by the stockholders, to issue up to 1.0 million shares of
preferred stock in one or more series. Our Board of Directors can fix the
rights, preferences and privileges of the shares of each series and any
qualifications, limitations or restrictions and relative, participating,
optional and other special rights, and such qualifications, limitations and
restrictions, as are stated in the resolution adopted by our Board of Directors
providing for the issue of such series and as are permitted by the Delaware
General Corporation Law.
WARRANTS
As of June 2, 1999 there were warrants outstanding to purchase a total of
23,220 shares of common stock at a price of $0.01 per share.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates corporate acquisitions. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:
- the Board of Directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
- on or subsequent to such date the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders.
A "business combination" generally includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to AmericasDoctor.com and, accordingly, may discourage attempts to
acquire us.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Amended and Restated Certificate of Incorporation provides that, except
to the extent permitted by Delaware law, our directors shall not be personally
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty as a director. Under Delaware law, the directors have a fiduciary
duty to us that is not eliminated by this provision of the certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or that involve
intentional misconduct, or knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of
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dividends or approval of stock repurchases or redemptions that are prohibited by
the Delaware law. This provision also does not affect the directors'
responsibilities under any other laws, such as the federal securities laws.
Section 145 of the Delaware corporate law empowers a corporation to
indemnify its directors and officers and to purchase insurance with respect to
liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- arising under Section 174 of the Delaware corporate law; or
- for any transaction from which the director derived an improper personal
benefit.
Delaware law provides further that the indemnification permitted by that law
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under a corporation's bylaws, any agreement, a vote of
stockholders or otherwise. Our Amended and Restated Certificate of Incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the Delaware corporate law and provides that we may
fully indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that such person is or was an employee, director or officer of
AmericasDoctor.com or is or was serving at our request as an employee, director
or officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding.
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SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale described below, sales
of substantial amounts of our common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act (the "Affiliates"). The remaining shares of our common
stock held by existing stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption from
registration under Rule 144 or 701 promulgated under the Securities Act, which
rules are summarized below.
As a result of the contractual restrictions described below and the
provisions of Rule 144 and 701, the restricted securities generally will be
available for sale in the public market on the date which is one year from the
date of acquisition by the holder of such shares, subject to the volume
limitations and other conditions of Rule 144. The shares could be available for
resale immediately upon the expiration of such 180-day period in the event of a
favorable interpretation by the Securities and Exchange Commission of certain
provisions of Rule 144.
LOCK-UP AGREEMENTS
In connection with this offering, all of our officers, directors and certain
of our stockholders will sign lock-up agreements under which they will agree not
to transfer or dispose of, directly or indirectly, any shares of our common
stock or any securities convertible into or exercisable or exchangeable for
shares of our common stock, for a period of 180 days after the date of this
prospectus. Transfers or dispositions can be made sooner with the prior written
consent of .
After this offering, we will have outstanding shares of common stock,
and shares issuable under currently exercisable outstanding options and
warrants. Of these shares, shares being offered hereby will be freely
tradeable. Subject to compliance with the lock-up agreements described above,
this leave shares eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
After the date of this prospectus: .............................................................
Upon the filing of a registration statement to register for resale shares of common stock
issuable upon the exercise of options granted under our 1999 Long-Term Incentive Plan: .......
At various times after 90 days from the date of this prospectus: ...............................
At various times after 180 days from the date of this prospectus: ..............................
</TABLE>
In addition, as described below, certain of our shareholders have the right
to require AmericasDoctor.com to register for sale to the public some or all of
their shares.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year
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would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
- 1% of the number of shares of our common stock then outstanding, which
will equal approximately shares immediately after this offering; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to availability of current public information about
us.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an Affiliate, is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
RULE 701
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell such shares in reliance upon Rule 144 but without compliance
with certain restrictions. Rule 701 provides that affiliates may sell their Rule
701 shares under Rule 144 without complying with the holding period requirement
and that non-affiliates may sell such shares in reliance on Rule 144 without
complying with the holding period, public information, volume limitation or
notice provisions of Rule 144.
In addition, we intend to file registration statements under the Securities
Act as promptly as possible after the effective date to register shares to be
issued pursuant to our employee benefit plan. As a result, any options or rights
exercised under the 1999 Long-Term Incentive Plan (including the Directors Plan)
or any other benefit plan after the effectiveness of the registration statements
will also be freely tradable in the public market. As of March 31, 1999, there
were outstanding options under our 1999 Long-Term Incentive Plan for the
purchase of 272,222 shares of common stock, none of which were exercisable.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Upon completion of this offering, the holders of 466,852 shares of common
stock (the "registrable securities") are entitled to have their shares
registered by us under the Securities Act under the terms of agreements between
us and the holders of the registrable securities. After such registration, these
shares would become freely tradeable without restriction under the Securities
Act. Subject to limitations specified in the agreement, these registration
rights include the following:
- The holders of at least 40% of the then outstanding registrable securities
may require that we use our reasonable best efforts to register the
registrable securities for public resale.
- If we register any common stock, either for our own account or for the
account of other security holders, the holders of registrable securities
are entitled to include their shares of common stock in such registration,
subject to the ability of the underwriters to limit the number of shares
included in the offering in view of market conditions
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- Holders of the then outstanding registrable securities having an aggregate
fair market value of $2,500,000 may require us to register all or a
portion of their registrable securities on Form S-3 when use of such form
becomes available to us.
Under the registration rights agreements we also have agreed to indemnify
the holders of registration rights. We will bear all registration expenses other
than underwriting discounts and commissions. All registration rights terminate
on the date ten years following the closing of this offering, or, with respect
to each holder of registrable securities, at such time as the holder is entitled
to sell all of its shares in any three-month period under Rule 144 of the
Securities Act.
None of MAS, PRWW, Tullis-Dickerson Capital Focus II, L.P. (and its
affiliates who are shareholders of our common stock), Wyndhurst or GE Capital
Equity Investments, Inc. will have any obligation or other restrictions on
resale with respect to any registrable securities, other than restrictions
imposed by lock-up agreements described above and applicable securities laws.
Registrations of any shares of common stock held by these shareholders would
result in these shares being freely tradable without restriction under the
Securities Act upon the effective date of the registration. Any sales of
registrable securities by these shareholders, after such shares have been
lawfully registered, could have a material adverse effect on the trading price
of our common stock.
STOCK INCENTIVE PLAN
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 290,000 shares of our common stock reserved
for issuance under our 1999 Long-Term Incentive Plan and the shares reserved for
issuance upon exercise of outstanding non-plan options. As of March 31, 1999,
options to purchase 272,222 shares of our common stock were issued and
outstanding. Upon the expiration of the lock-up agreements described above, at
least shares of our common stock will be subject to vested options (based on
options outstanding as of , 1999). Such registration statement is expected
to be filed and become effective as soon as practicable after the effective date
of this offering. Accordingly, shares registered under such registration
statement will, subject to vesting provisions and Rule 144 volume limitations
applicable to our Affiliates, be available for sale in the open market
immediately after the 180-day lock-up agreements expire.
Prior to this offering, there has been no public market for our common
stock, and the effect, if any, that the sale or availability for sale of shares
of additional common stock will have on the trading price of the common stock
cannot be predicted. Nevertheless, sales of substantial amounts of such shares
in the public market, or the perception that such sales could occur, could
adversely affect the trading price of the common stock and could impair our
future ability to raise capital through an offering of our equity securities.
87
<PAGE>
UNDERWRITING
AmericasDoctor.com has entered into an underwriting agreement with the
underwriters named below. Warburg Dillon Read LLC and are acting as
representatives for the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
a number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------------------------------------------- -------------
<S> <C>
Warburg Dillon Read LLC...........................................................
---
Total ....................................................................... --
---
---
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances. The underwriting agreement provides that the obligations of
the several underwriters are subject to certain conditions precedent, including,
but not limited to, the absence of any material adverse change in
AmericasDoctor.com's business and the receipt of certain certificates, opinions
and letters from AmericasDoctor.com and its counsel.
The representatives have advised AmericasDoctor.com that the underwriters
propose to offer the shares of common stock directly to the public at the public
offering price set forth on the cover page of this prospectus, and to certain
dealers, at such price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may allow, a concession not in excess
of $ per share to other underwriters or to certain other dealers. After
this offering of shares of common stock, the price and other selling terms may
be changed by the underwriters.
AmericasDoctor.com has granted to the underwriters an option, exercisable no
later than 30 days after the date of this prospectus, to purchase up to a total
of additional shares of common stock to cover over-allotments, if any, at
the public offering price set forth on the cover page of this prospectus, less
the underwriting discounts and commissions. To the extent that the underwriters
exercise such option, each of the underwriters will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number of shares of common stock set forth next to such
underwriter's name in the preceding table bears to the total number of shares of
common stock offered hereby. AmericasDoctor.com will be obligated, pursuant to
the option, to sell such shares to the underwriters to the extent the option is
exercised.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by AmericasDoctor.com:
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE TOTAL WITH FULL EXERCISE
OF OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
- ----------- ----------------------- ------------------------
<S> <C> <C>
$ $ $
</TABLE>
AmericasDoctor.com estimates that the total expenses of the offering,
excluding the underwriting discount, will be approximately .
88
<PAGE>
AmericasDoctor.com has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect thereof.
The executive officers, directors and certain other shareholders of
AmericasDoctor.com have agreed that they will not, without the prior written
consent of Warburg Dillon Read LLC, offer, sell or otherwise dispose of any
shares of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock for a
period of 180 days after the date of the underwriting agreement.
AmericasDoctor.com has agreed that it will not, without the prior written
consent of Warburg Dillon Read LLC, offer, sell or otherwise dispose of any
shares of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that
AmericasDoctor.com may issue shares upon the exercise of options granted prior
to the date hereof and outstanding warrants, and may grant additional options
under its 1999 Long-Term Incentive Plan, provided that, without the prior
written consent of Warburg Dillon Read LLC, such additional options shall not be
exercisable during such period.
The representatives have informed AmericasDoctor.com that they do not expect
discretionary sales by the underwriters to exceed five percent of the shares
offered by this Prospectus.
The underwriters have reserved for sale up to shares for
employees, directors and certain other persons associated with
AmericasDoctor.com. These reserved shares will be sold at the public offering
price that appears on the cover of this prospectus. The number of shares
available for sale to the general public in the offering will be reduced to the
extent reserved shares are purchased by such persons. The underwriters will
offer to the general public, on the same terms as other shares offered by this
prospectus, any reserved shares that are not purchased by such persons.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiation among representatives of the underwriters and
AmericasDoctor.com. Among the factors to be considered in determining the public
offering price will be:
- prevailing market conditions;
- our results of operations in recent periods;
- our present stage of development;
- the market capitalizations and stages of development of other companies
which we and the representatives of the underwriters believe to be
comparable to us; and
- estimates of our business potential.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the shares,
so long as stabilizing bids do not exceed a specified maximum.
- Over-allotments and syndicate covering transactions -- The underwriters
may create a short position in the shares by selling more shares than are
set forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage in
syndicate covering transactions by purchasing shares in the open market.
The representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
89
<PAGE>
- Penalty bids -- If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither AmericasDoctor.com nor the underwriters makes any representation or
prediction as to the effect that the transactions described above may have on
the price of the shares. These transactions may occur on the Nasdaq National
Market or otherwise. If such transactions are commenced, they may be
discontinued without notice at any time.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for AmericasDoctor.com by Simpson Thacher & Bartlett, New York, New York
and for the underwriters by Willkie Farr & Gallagher, New York, New York.
EXPERTS
The financial statements of AmericasDoctor.com on December 31, 1998,
December 31, 1997, for the year ended December 31, 1998 and the period from
August 8, 1997 (inception) to December 31, 1997, appearing in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION ABOUT
AMERICASDOCTOR.COM
We have filed a registration statement on Form S-1, including amendments
thereto, relating to the common stock offered hereby with the Securities and
Exchange Commission. This prospectus contains all of the material information
relating to this offering. Additional information is provided in the exhibits
and schedules to the registration statement of which this prospectus is a part.
We believe statements and descriptions contained in this prospectus as to the
contents of contracts or other documents referred to in this prospectus are
complete in all material respects and, in each instance, reference is also made
to the copy of such contract or other document filed as an exhibit to the
registration statement. For further information about AmericasDoctor.com and
this offering, reference is made to our complete registration statement,
including exhibits and schedules.
A copy of the registration statement may be inspected by anyone without
charge at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Northwestern Atrium Center
Washington, D.C. 20549 13(th) Floor 500 West Madison Street
New York, New York 10048 Chicago, Illinois 60661
</TABLE>
You may also obtain copies of all or any part thereof, including any exhibit
thereto, from the SEC upon the payment of certain fees prescribed by the SEC.
You may obtain information regarding the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.
The SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
90
<PAGE>
AMERICASDOCTOR.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheets as of December 31, 1997 and 1998 and March 31, 1999 (unaudited)............................. F-3
Statements of Operations for the Period from August 8, 1997 (Inception) Through December 31, 1997, the Year
Ended December 31, 1998, and the Three Months Ended March 31, 1998 and 1999 (unaudited).................. F-4
Statements of Changes in Stockholders' Equity for the Period From August 8, 1997 (Inception) Through
December 31, 1997, the Year Ended December 31, 1998, and the Three Months Ended March 31, 1999
(unaudited).............................................................................................. F-5
Statements of Cash Flows for the Period From August 8, 1997 (Inception) Through
December 31, 1997, the Year Ended December 31, 1998, and the Three Months Ended
March 31, 1998 and 1999 (unaudited)...................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
AmericasDoctor.com, Inc.:
We have audited the accompanying balance sheets of AmericasDoctor.com, Inc.
(a Delaware corporation) as of December 31, 1997 and 1998, and the related
statements of operations, changes in stockholders' equity, and cash flows for
the period from August 8, 1997 (inception) through December 31, 1997, and for
the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 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 financial position of AmericasDoctor.com, Inc., as
of December 31, 1997 and 1998, and the results of its operations and its cash
flows for the period from August 8, 1997 (inception) through December 31, 1997,
and the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland
June 4, 1999
F-2
<PAGE>
AMERICASDOCTOR.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1997 1998 1999
---------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 67,035 $ 270,698 $ 2,321,965
Accounts receivable..................................................... -- 61,500 134,750
Other receivables....................................................... 15,000 -- --
Prepaid expenses........................................................ 50,000 1,019,735 967,867
---------- ------------ ------------
Total current assets................................................ 132,035 1,351,933 3,424,582
PROPERTY AND EQUIPMENT, net............................................... -- 445,226 684,643
OTHER ASSETS.............................................................. 8,833 45,961 147,456
---------- ------------ ------------
Total assets........................................................ $ 140,868 $ 1,843,120 $ 4,256,681
---------- ------------ ------------
---------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses................................... $ 24,892 $ 619,474 $ 555,205
Deferred income......................................................... -- -- 13,500
Notes payable........................................................... -- 444,350 40,850
Convertible debt........................................................ 24,091 -- --
Current portion of capital lease obligation............................. -- 2,436 2,547
---------- ------------ ------------
Total current liabilities........................................... 48,983 1,066,260 612,102
CAPITAL LEASE OBLIGATION, net of current portion.......................... -- 5,769 5,089
---------- ------------ ------------
Total liabilities................................................... 48,983 1,072,029 617,191
---------- ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, par value $.01 per share; 133,333
shares authorized; liquidation value $30 per share; 0, 0, and 133,333
shares issued and outstanding......................................... -- -- 1,333
Common stock, par value $.01 per share; 1,000,000, 1,000,000 and
2,500,000 shares authorized; 123,752, 462,982, and 593,992 shares
issued and outstanding; 0, 56,437, and 20,751 shares subscribed....... 1,237 5,194 6,147
Warrants to purchase common stock....................................... -- 1,117,911 300,589
Additional paid-in capital.............................................. 132,500 6,239,556 11,957,078
Stock subscription receivable........................................... (366) (1,127,204) (325,174)
Deferred compensation................................................... -- (180,967) (163,252)
Accumulated deficit..................................................... (41,486) (5,283,399) (8,137,231)
---------- ------------ ------------
Total stockholders' equity.......................................... 91,885 771,091 3,639,490
---------- ------------ ------------
Total liabilities and stockholders' equity.......................... $ 140,868 $ 1,843,120 $ 4,256,681
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
AMERICASDOCTOR.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 8,
1997
(INCEPTION)
THROUGH YEAR ENDED THREE MONTHS ENDED
DECEMBER DECEMBER MARCH 31,
31, 31, ---------------------
1997 1998 1998 1999
----------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE.................................... $ -- $ 61,500 $ -- $ 215,830
----------- ---------- --------- ----------
OPERATING EXPENSES:
Content and production expenses.......... -- 2,472,991 17,000 2,036,181
Product development...................... -- 973,803 110,000 206,288
Sales and Marketing...................... -- 587,291 22,500 283,306
General and administrative............... 11,812 595,815 13,955 466,775
Depreciation and amortization............ -- 35,570 -- 44,329
----------- ---------- --------- ----------
Total operating expenses............... 11,812 4,665,470 163,455 3,036,879
----------- ---------- --------- ----------
Operating loss....................... (11,812) (4,603,970) (163,455) (2,821,049)
----------- ---------- --------- ----------
OTHER INCOME (EXPENSE):
Interest income.......................... -- 1,618 -- 14,942
Interest expense......................... (29,674) (639,561) (59,182) (47,725)
----------- ---------- --------- ----------
Total other expense.................... (29,674) (637,943) (59,182) (32,783)
----------- ---------- --------- ----------
Net loss............................. $ (41,486) $(5,241,913) $(222,637) $(2,853,832)
----------- ---------- --------- ----------
----------- ---------- --------- ----------
BASIC AND DILUTED LOSS PER COMMON SHARE.... $ (0.34) $ (22.36) $ (1.80) $ (6.30)
----------- ---------- --------- ----------
----------- ---------- --------- ----------
WEIGHTED-AVERAGE SHARES USED IN COMPUTING
BASIC AND DILUTED LOSS PER COMMON
SHARE.................................... 123,752 234,480 123,752 452,683
----------- ---------- --------- ----------
----------- ---------- --------- ----------
PRO FORMA BASIC AND DILUTED LOSS PER
SHARE.................................... $ (0.34) $ (22.36) $ (1.80) $ (5.39)
----------- ---------- --------- ----------
----------- ---------- --------- ----------
WEIGHTED-AVERAGE SHARES USED IN COMPUTING
PRO FORMA BASIC AND DILUTED LOSS PER
COMMON SHARE............................. 123,752 234,480 123,752 529,719
----------- ---------- --------- ----------
----------- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AMERICASDOCTOR.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------ ------------------
NUMBER PAR NUMBER PAR
OF SHARES VALUE OF SHARES VALUE WARRANTS
--------- ------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
Balance at August 8, 1997 (inception)... -- $ -- -- $ -- $ --
Issuance of common stock to
founders............................ -- -- 123,752 1,237 --
Conversion feature of convertible
debt................................ -- -- -- -- --
Net loss.............................. -- -- -- -- --
--------- ------ --------- ------ ----------
Balance at December 31, 1997............ -- -- 123,752 1,237 --
Conversion feature of convertible
debt................................ -- -- -- -- --
Issuance of common stock.............. -- -- 350,815 3,508 1,030,445
Exchange of convertible debt for
common stock........................ -- -- 44,852 449 --
Issuance of warrants in connection
with debt refinancing............... -- -- -- -- 87,466
Payment of stock subscription
receivable.......................... -- -- -- -- --
Stock option grants................... -- -- -- -- --
Amortization of deferred
compensation........................ -- -- -- -- --
Net loss.............................. -- -- -- -- --
--------- ------ --------- ------ ----------
Balance at December 31, 1998............ -- -- 519,419 5,194 1,117,911
Issuance of Series A Convertible
Preferred Stock (unaudited)......... 133,333 1,333 -- -- 315,410
Issuance of common stock
(unaudited)......................... -- -- 42,938 429 118,085
Exercise of warrants (unaudited)...... -- -- 52,386 524 (1,250,817)
Payment of stock subscription
receivable (unaudited).............. -- -- -- -- --
Amortization of deferred compensation
(unaudited)......................... -- -- -- -- --
Net loss (unaudited).................. -- -- -- -- --
--------- ------ --------- ------ ----------
Balance at March 31, 1999 (unaudited)... 133,333 $1,333 614,743 $6,147 $ 300,589
--------- ------ --------- ------ ----------
--------- ------ --------- ------ ----------
<CAPTION>
ADDITIONAL STOCK TOTAL
PAID-IN SUBSCRIPTION DEFERRED ACCUMULATED STOCKHOLDERS'
CAPITAL RECEIVABLE COMPENSATION DEFICIT EQUITY
----------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at August 8, 1997 (inception)... $ -- $ -- $ -- $ -- $ --
Issuance of common stock to
founders............................ -- (366) -- -- 871
Conversion feature of convertible
debt................................ 132,500 -- -- -- 132,500
Net loss.............................. -- -- -- (41,486) (41,486)
----------- ------------ ------------ ----------- -------------
Balance at December 31, 1997............ 132,500 (366) -- (41,486) 91,885
Conversion feature of convertible
debt................................ 287,500 -- -- -- 287,500
Issuance of common stock.............. 5,158,823 (1,127,204) -- -- 5,065,572
Exchange of convertible debt for
common stock........................ 448,156 -- -- -- 448,605
Issuance of warrants in connection
with debt refinancing............... -- -- -- -- 87,466
Payment of stock subscription
receivable.......................... -- 366 -- -- 366
Stock option grants................... 212,577 -- (212,577) -- --
Amortization of deferred
compensation........................ -- -- 31,610 -- 31,610
Net loss.............................. -- -- -- (5,241,913) (5,241,913)
----------- ------------ ------------ ----------- -------------
Balance at December 31, 1998............ 6,239,556 (1,127,204) (180,967) (5,283,399) 771,091
Issuance of Series A Convertible
Preferred Stock (unaudited)......... 3,361,685 -- -- -- 3,678,428
Issuance of common stock
(unaudited)......................... 1,105,020 -- -- -- 1,223,534
Exercise of warrants (unaudited)...... 1,250,817 -- -- -- 524
Payment of stock subscription
receivable (unaudited).............. -- 802,030 -- -- 802,030
Amortization of deferred compensation
(unaudited)......................... -- -- 17,715 -- 17,715
Net loss (unaudited).................. -- -- -- (2,853,832) (2,853,832)
----------- ------------ ------------ ----------- -------------
Balance at March 31, 1999 (unaudited)... $11,957,078 $ (325,174) $(163,252) $(8,137,231) $3,639,490
----------- ------------ ------------ ----------- -------------
----------- ------------ ------------ ----------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
AMERICASDOCTOR.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 8,
1997
(INCEPTION) THREE MONTHS ENDED
THROUGH YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------------
1997 1998 1998 1999
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................. $ (41,486) $ (5,241,913) $ (222,637) $ (2,853,832)
Adjustments to reconcile net loss to net cash used in
operating activities--
Depreciation and amortization.................... -- 35,570 -- 44,329
Amortization of deferred financing costs......... 1,767 105,330 10,201 43,733
Amortization of deferred compensation............ -- 31,610 -- 17,715
Non cash interest expense........................ 24,091 395,909 40,303 --
Changes in operating assets and liabilities--
Increase in accounts receivable.................. -- (61,500) -- (73,250)
(Increase) decrease in other receivables......... (15,000) 15,000 10,000 --
(Increase) decrease in prepaid expenses.......... (50,000) (969,735) (100,000) 51,868
Increase in other assets......................... -- (2,065) -- (17,728)
Increase (decrease) in accounts payable and
accrued expenses............................... 24,892 623,187 19,606 (191,769)
Increase in deferred revenue..................... -- -- -- 13,500
------------- ------------- ----------- -------------
Net cash used in operating activities.......... (55,736) (5,068,607) (242,527) (2,965,434)
------------- ------------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................. -- (472,096) -- (283,746)
------------- ------------- ----------- -------------
Net cash used in investing activities.......... -- (472,096) -- (283,746)
------------- ------------- ----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.......................... 50,000 944,350 59,000 --
Proceeds from issuance of common stock............... 871 5,013,011 -- 2,026,088
Proceeds from issuance of preferred stock............ -- -- -- 3,678,428
Proceeds from convertible debt....................... 132,500 287,500 222,500 --
Repayments of note payable........................... (50,000) (500,000) -- (403,500)
Repayments of capital lease obligation............... -- (495) -- (569)
Payments of deferred financing costs................. (10,600) -- (17,800) --
------------- ------------- ----------- -------------
Net cash provided by financing activities...... 122,771 5,744,366 263,700 5,300,447
------------- ------------- ----------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS.............. 67,035 203,663 21,173 2,051,267
CASH and Cash Equivalents, beginning of period......... -- 67,035 67,035 270,698
------------- ------------- ----------- -------------
CASH and Cash Equivalents, end of period............... $ 67,035 $ 270,698 $ 88,208 $ 2,321,965
------------- ------------- ----------- -------------
------------- ------------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
AmericasDoctor.com, Inc., formerly America's Doctor, Inc. and Ask-A-Doctor,
Inc. (the "Company"), is a Delaware corporation that operates a site on America
Online ("AOL") and the World Wide Web. AmericasDoctor.com operates an
interactive Internet healthcare information destination for consumers. The
Company offers consumers free, real-time interaction with healthcare
professionals and easy access to relevant and reliable healthcare information.
The Company's destination features a free 24-hour doctor chat service that
enables consumers to have live on-line one-on-one chats with doctors and other
healthcare professionals and a variety of interactive healthcare content such as
lectures and live educational programs, a growing library of information on
acute ailments, chronic illnesses, nutrition, pharmacology and other topics, as
well as health and medical publications and news. The Company has designed their
doctor chat service to enable their users, through the assistance, expertise and
insight of doctors and healthcare professionals, to successfully find relevant
and reliable healthcare information on-line in response to their health
questions. The Company is also expanding their site to integrate community Web
pages that focus on the needs of people sharing specific health conditions and
interests. The Company offers hospitals the opportunity to be an exclusive
sponsor of their Internet services within a market defined by zip code, and also
provide sponsors with opportunities to feature their healthcare professionals on
their site. The Company generates revenue from hospital and commercial
sponsorships of educational programs in addition to access fees charged to
e-commerce partners.
The Company was formerly a development stage company and continues to have
uncertainties related to development stage enterprises including the expectation
that substantial time will occur before the company generates operating profits.
The Company has sustained losses and negative cash flows from operations since
its inception. The Company's ability to meet its obligations in the ordinary
course of business is dependent upon its ability to raise additional financing
through public or private equity financings, establish profitable operations,
enter into collaborative or other arrangements, or secure other sources of
financing to fund operations. As described in Note 9, in June 1999, the Company
received approximately $7.0 million, net of offering costs, through investment
transactions, which included the issuance of common stock and Series B
redeemable convertible preferred stock.
The Company has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in the
new and rapidly evolving markets for internet products and services. These risks
include the failure to develop and extend the Company's on-line service brands,
the rejection of the Company's services by Web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its on-line services, the ability to maintain current strategic
relationships and distribution partnerships and develop new ones, the need to
attract and retain healthcare sponsors, as well as other risks and
uncertainties. In the event the Company does not successfully implement its
business plan, certain assets may not be recoverable. The accompanying financial
statements do not include any adjustments which may result from the outcome of
these uncertainties.
UNAUDITED FINANCIAL STATEMENTS
The interim financial statements as of March 31, 1999 and for the three
months ended March 31, 1998 and 1999 are unaudited. In the opinion of
management, such unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. The unaudited financial statements reflect, in the opinion
of management, all material adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position,
results of operations and cash flows. The unaudited results of operations
F-7
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)
and the unaudited cash flows for the three months ended March 31, 1999, are not
necessarily indicative of the results of operations or cash flows which may be
expected for the remainder of 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRODUCT DEVELOPMENT COSTS
Material software development costs incurred prior to the establishment of
technological feasibility are expensed as incurred. Costs incurred subsequent to
the establishment of technological feasibility are capitalized. Based upon the
Company's product development process, technological feasibility is established
upon completion of a working model. Costs incurred by the Company between
completion of the working model and the point at which the product is ready for
use have been insignificant.
REVENUE RECOGNITION
To date, the Company's revenues have been derived primarily from hospital
and educational sponsorship fees. Revenues from sponsorship agreements are
recognized ratably over the terms of the related contracts, typically one year.
The Company will also recognize access fees from e-commerce partners ratably
over the terms of the respective agreements. The company has also realized site
development fees related to the up front customized design and setup work for
e-commerce partners. These fees are recognized in the period in which the design
work is performed and collection is reasonably assured, as specified in the
contracts, typically within the first year of the contract term.
INCOME TAXES
The Company provides for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes."
SFAS No. 109 requires an asset and liability-based approach in accounting for
income taxes. Deferred income tax assets and liabilities are recorded to reflect
the tax consequences on future years of temporary differences of revenue and
expense items for financial statement and income tax purposes. Valuation
allowances are provided against assets when it is determined that it is more
likely than not that the assets will not be realized prior to the expiration of
the respective carryforward periods.
EARNINGS PER SHARE COMMON SHARE
SFAS No. 128, "Earnings per Share," ("SFAS 128") became effective in the
fourth quarter of 1997 and requires two presentations of earnings per
share--"basic" and "diluted." Basic earnings per share is computed by dividing
income (loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. The computation of diluted earnings
per share is similar to basic earnings per share, except that the
weighted-average common shares outstanding are increased to include the number
of additional common shares that would have been outstanding if the potentially
dilutive stock options and warrants outstanding were exercised. The outstanding
stock options and warrants were not included in the computation of diluted
earnings per common share for any of the periods presented since their effect
would have been antidilutive.
PRO FORMA EARNINGS PER SHARE
Pro Forma earnings per common share is presented pursuant to SFAS 128. Pro
forma basic and diluted loss per share is computed using the weighted average
number of shares of common stock outstanding giving effect to the conversion of
133,333 convertible preferred shares that will
F-8
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
automatically convert upon completion of the Company's initial public offering
(using the if-converted method) from the original date of issuance.
STOCK OPTION PLANS
As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), the Company measures compensation expense for its stock-based
employee compensation plans using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and provides pro forma disclosures of net income and earnings per
share as if the fair value-based method prescribed by SFAS 123 had been applied
in measuring compensation expense. The Company uses the Black-Scholes option
pricing model to estimate the fair value of options and warrants granted. The
Company accounts for options granted to non-employees based upon the fair value
at date of grant.
USE OF ESTIMATES
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.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to credit risk
consist primarily of cash and accounts receivable. The Company maintains cash
with various major financial institutions. The Company limits the amount of
credit exposure with any one financial institution and believes that no
significant concentration of credit risks exists with respect to cash balances.
Trade receivables subject the Company to the potential for credit risk with
customers in the healthcare and pharmaceutical industries. Approximately 65% of
the Company's accounts receivable and revenue was represented by a single
pharmaceutical customer at December 31, 1998 which exposes the Company to a
concentration of credit risk.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable, accounts payable and notes payable approximate
their fair values.
F-9
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 8, 1997 THREE MONTHS ENDED
(INCEPTION)
THROUGH YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
----------------- ------------ --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH PAID FOR:
Interest....................................................... $ 454 $ 44,128 $ -- $ 3,992
----- ------------ --------- ---------
----- ------------ --------- ---------
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Capital lease obligation....................................... $ -- $ 8,700 $ -- $ --
----- ------------ --------- ---------
----- ------------ --------- ---------
Exchange of convertible debt and accrued interest for common
stock........................................................ $ -- $ 448,605 $ -- $ --
----- ------------ --------- ---------
----- ------------ --------- ---------
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed under the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Computer equipment and software............................................ 3-5 years
Office equipment........................................................... 5 years
</TABLE>
Equipment under capital leases and leasehold improvements are depreciated
and amortized over their useful lives or the term of the lease, whichever is
shorter.
Property and equipment consisted of the following as of December 31, 1998:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Computer equipment and software...................................................... $ 229,819
Office equipment..................................................................... 242,277
Leased equipment..................................................................... 8,700
---------
480,796
Less--Accumulated depreciation and amortization...................................... (35,570)
---------
Property and equipment, net.......................................................... $ 445,226
---------
---------
</TABLE>
Depreciation expense for the year ended December 31, 1998 was $35,570.
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The Company's accounts payable and accrued expenses as of December 31, 1997,
1998 and March 31, 1999, are composed of the following:
<TABLE>
<CAPTION>
1997 1998 MARCH 31, 1999
--------- --------- --------------
<S> <C> <C> <C>
(UNAUDITED)
Accounts payable............................................................ $ 10,930 $ 163,110 $ 349,113
Accrued payroll............................................................. -- 58,476 19,041
Accrued professional fees................................................... -- -- 161,000
Accrued interest............................................................ 3,362 -- --
Other accrued expenses...................................................... 10,600 397,888 26,051
--------- --------- --------------
Total accounts payable and accrued expenses................................. $ 24,892 $ 619,474 $ 555,205
--------- --------- --------------
--------- --------- --------------
</TABLE>
F-10
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
5. NOTES PAYABLE
Notes payable consisted of the following obligations as of December 31, 1998
and March 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- ---------------
<S> <C> <C>
(UNAUDITED)
Note payable to a commercial bank, due on demand, interest at prime rate plus
1/2%. During the year ended December 31, 1998, the average rate was 8.85%... $ 400,000 $ --
Demand notes payable to a stockholder; interest at prime rate plus 1/2%.
During the year ended December 31, 1998, the average rate was 8.85%......... 44,350 40,850
-------- -------
$ 444,350 $ 40,850
-------- -------
-------- -------
</TABLE>
6. CONVERTIBLE DEBT
Beginning November 13, 1997 through July 1, 1998, the Company entered into
unsecured convertible promissory notes convertible into common shares of the
Company at 50% of the current market price on date of conversion for total cash
consideration of $420,000, bearing interest at 18%. On July 3, 1998, the
promissory notes were converted, including accrued interest, to 44,852 shares of
common stock of the Company at a per share price of $10.
The beneficial conversion feature was valued separately at issuance. The
intrinsic value of the beneficial conversion feature was calculated at the
commitment date as the difference between the conversion price and the fair
value of the Company's common stock into which the promissory notes were
convertible, multiplied by the number of shares into which the promissory notes
were convertible. The discount of $420,000, the difference between the fair
market value on the date of issuance and conversion price was accounted for as
additional interest expense and amortized using the effective interest method
from the date of issuance through the date the securities are first convertible.
Interest expense recorded under this method for the period from August 8, 1997
(inception) through December 31, 1997, the year ended December 31, 1998 and for
the three months ended March 31, 1998 (unaudited) was $24,091, $395,909 and
$40,303 respectively.
7. PREPAID EXPENSES
Under the terms of the Company's three-year contract with AOL, the Company
paid an up-front carriage fee of $1.2 million and is also committed to pay
$75,000 per month through April 2000 for total cash consideration of $3.0
million. The Company commenced full operation of its site on AOL in September
1998, and the contract runs through June 2001. The upfront carriage fee has been
recorded as a prepaid expense and the total carriage fee is being amortized over
the period through June 2000. Pricing terms have not been established for the
third year of the contract.
F-11
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
As of December 31, 1998 and March 31, 1999 (unaudited), the unamortized AOL
prepaid balance was approximately $952,000 and $831,000 respectively. In
addition to AOL, the remaining balance of prepaid expenses consists primarily of
prepaid insurance, maintenance and other.
The Company estimates that a significant portion of its traffic is derived
from AOL. There is no assurance that fees paid by the Company to AOL will remain
at current levels or at commercially reasonable levels beyond June 2000.
Further, if the financial condition and operations of AOL were to deteriorate
significantly, or if the traffic to the Company's site generated by AOL were to
substantially decrease, the Company's revenues could be adversely affected.
8. INCOME TAXES
The actual income tax expense for the period from August 8, 1997 (inception)
to December 31, 1997, and for the year ended December 31, 1998, is different
from the amount computed by applying the statutory federal income tax rate to
losses before income tax expense. The reconciliation of these differences is as
follows:
<TABLE>
<CAPTION>
1997 1998
--------- ------------
<S> <C> <C>
Tax benefit at federal statutory rate..................................................... $ 5,914 $ 1,790,346
State income taxes, net of federal income tax effect...................................... 870 261,816
Increase in valuation allowance........................................................... (6,784) (2,052,162)
--------- ------------
Income tax expense...................................................................... $ -- $ --
--------- ------------
--------- ------------
</TABLE>
The tax effects of the temporary differences between amounts recorded as
assets and liabilities for financial reporting purposes and amounts reported for
income tax purposes as of December 31, 1997 and 1998 are as follows.
<TABLE>
<CAPTION>
1997 1998
--------- -----------
<S> <C> <C>
Deferred Tax Assets:
Start-up costs........................................................................... $ 4,607 $ 248,976
Depreciation............................................................................. -- 2,029
Net operating loss carryforward.......................................................... 2,177 1,816,465
Valuation allowance...................................................................... (6,784) (2,058,946)
--------- -----------
$ -- $ 8,524
--------- -----------
--------- -----------
Deferred Tax Liabilities:
Prepaid expenses......................................................................... $ -- $ 4,084
Software amortization.................................................................... -- 4,440
--------- -----------
$ -- $ 8,524
--------- -----------
--------- -----------
</TABLE>
As of December 31, 1997 and 1998, the Company has available for income tax
purposes, a net operating loss carryforward of approximately $0 and $4.6 million
respectively, which expires in various amounts through 2013. The utilization of
the carryforwards are dependent upon the ability of the Company to generate
sufficient taxable income during the carryforward periods. Utilization of the
net operating loss carryforward may be subject to an annual limitation, due to
the ownership change limitations provided by the Internal Revenue Code of 1986.
Due to the operating losses incurred by the
F-12
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
8. INCOME TAXES (CONTINUED)
Company, a valuation allowance has been established to reduce the net deferred
tax asset to its expected realizable value.
9. STOCKHOLDERS' EQUITY
COMMON STOCK AND WARRANTS
At the inception of the Company, 123,752 shares of common stock were issued
as founders stock at par value. As of December 31, 1997 the Company had a stock
subscription receivable of $366 related to 36,618 shares of common stock. This
receivable was fully paid during June 1998.
During 1998, indebtedness of the Company was refinanced, and in return for
their continued guarantee, certain officers received 3,500 warrants to purchase
additional shares of the Company's common stock at $0.01 per share. The
estimated fair value of these warrants at the date issued was $24.99 per share
using a Black-Scholes option pricing model and assumptions similar to those used
for valuing the Company's stock options as described below resulting in
recording approximately $87,000 in deferred financing costs, these costs are
being amortized over the life of the related debt.
During 1998, 49,369 warrants to purchase common shares at $0.01 per share
were issued to venture capital firms for their assistance in obtaining outside
financing. The estimated fair value of these warrants at the dates issued ranged
from $15.67 to $24.99 per share using a Black-Scholes option pricing model and
assumptions similar to those used for valuing the Company's stock options as
described below. The fair value of these warrants was recorded as a reduction in
paid-in capital of $1,030,446 from the associated equity transaction.
Concurrent with the issuance of the Series A convertible preferred stock
described below, the number of authorized shares of common stock was increased
to 2,500,000.
CONVERTIBLE PREFERRED STOCK
During February 1999, the Company authorized and issued 133,333 shares of
Series A convertible preferred stock with a par value of $0.01 and a liquidation
value of $30 per share with net proceeds to the Company of $3,678,428. The
preferred stock is convertible into an equal number of shares of common stock at
the option of the holder, with certain additional antidilutive protection
provided to the holder. Conversion is mandatory upon the closing of an
underwritten public offering that meets certain minimum conditions as to net
proceeds.
Concurrent with the issuance of the Series A convertible preferred stock the
number of authorized shares of preferred stock was increased to 1,000,000.
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK
During June 1999, the Company authorized 151,103 shares of Series B
redeemable convertible preferred stock with a par value of $0.01 per share and
issued 103,883 shares at a price of $66.18 per share. The preferred stock is
convertible into an equal number of shares of common stock at the option of the
holder, with certain additional antidilutive protection provided to the holder.
Conversion is mandatory upon the closing of an underwritten public offering that
meets certain minimum conditions as to net proceeds. On the sixth anniversary of
the closing, the Series B holders have the
F-13
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
9. STOCKHOLDERS' EQUITY (CONTINUED)
option to put their shares of preferred stock to the Company at their
liquidation preference of $7.5 million. In connection with this financing, an
existing shareholder exercised preemptive rights to purchase 9,958 shares for
additional proceeds to the Company of approximately $659,000.
In connection with the issuance of the Series B redeemable, convertible
preferred stock, there were three warrants granted that will be exercisable
contingent upon the occurrence of certain events. A warrant to purchase shares
of common stock for $0.01 per share may become exercisable if there is a
qualified offering or sale of the Company and a certain rate of return has not
been achieved by the Series B shareholders. A warrant to purchase 18,000 shares
of Series B redeemable convertible, preferred stock for $0.01 per share may
become exercisable if the Company fails to complete a qualified offering by
December 31, 1999. A warrant to purchase an additional 37,776 shares of Series B
redeemable, convertible preferred stock for $66.18 per share may become
exercisable if by October 15, 1999 the Company has not completed a qualified
offering or executed any agreement that generates $5.0 million of proceeds for
the Company.
CEO OPTIONS
During 1998, the Company granted options for 100,000 shares to its chief
executive officer at an exercise price of $10.00 per share. The 100,000 options
vest upon the occurrence of certain events. These options are being accounted
for as variable plan options. Concurrent with the issuance of the Series B
redeemable convertible preferred stock, the 100,000 options vested 100%, which
will result in a compensation charge in June 1999 of approximately $5.6 million.
In March 1999, the Company granted 40,000 options to its chief executive
officer at an exercise price of $225 per share.
SHAREHOLDERS' RIGHTS AGREEMENT
The Shareholders' Rights Agreement contains provisions relating to the
voting of shares, appointment of Board of Director members, and termination of
employees. The Shareholders' Rights Agreement terminates upon the completion of
an initial public offering with a pre-money aggregate capitalization of not less
than $75 million at an aggregate offering price of not less than $15 million.
STOCK OPTION PLANS
The Company has a stock option plan (the "Plan") authorizing the grant of
options to employees, consultants and non-employee directors. Under the Plan,
the Company may grant options to purchase up to 290,000 shares of common stock
to its employees, consultants and non-employee directors. Stock options expire
ten years from the date granted. During 1998, the Company granted options to
purchase 119,600 shares in accordance with the Plan. Shares available for future
grants amounted to 170,400 as of December 31, 1998 and approximately 27,000 as
of March 31, 1999.
The Company applies APB Opinion 25 and related interpretations in accounting
for the plans. During the year ended December 31, 1998, the Company granted
options with exercise prices below fair value. The Company has recorded deferred
compensation of $212,577 during 1998 based upon the difference between the fair
market value on the grant date and the option exercise price. The deferred
compensation is being amortized over the option vesting periods of three years.
Compensation expense
F-14
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
9. STOCKHOLDERS' EQUITY (CONTINUED)
of $31,610 was recorded for the year ended December 31, 1998 related to these
options. Had compensation cost for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, the Company's net loss
and earnings per share would have been changed to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
1997 1998
--------- ------------
<S> <C> <C>
Net loss:
As reported........................................................ $ 41,486 $ 5,241,913
Pro forma.......................................................... 41,486 5,246,920
Loss per share:
As reported........................................................ (0.34) (22.36)
Pro forma.......................................................... (0.34) (22.38)
</TABLE>
A summary of options transactions during the year ended December 31, 1998 is
as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
--------- -----------
<S> <C> <C>
Outstanding December 31, 1997........................................... -- $ --
1998 Activity:
Granted............................................................... 119,600 10.00
--------- -----------
Outstanding December 31, 1998........................................... 119,600 10.00
-----------
Granted............................................................... 142,972 84.00
--------- -----------
Outstanding March 31, 1999.............................................. 262,572 $ 50.30
--------- -----------
--------- -----------
</TABLE>
As of December 31, 1998 and March 31, 1999, there were no options
exercisable.
The weighted-average fair value of options granted during 1998 was $8.02 per
share. The weighted-average remaining contractual life of outstanding options at
December 31, 1998 was 9.5 years. The following table provides further
information on the options, which were granted with exercise prices below fair
value for the year, ended December 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED WEIGHTED FAIR VALUE
AVERAGE AVERAGE OF COMMON
EXERCISE FAIR STOCK ON
SHARES PRICE VALUE GRANT DATE
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Options whose exercise price is less than the fair value of the
stock on the grant date........................................... 119,600 $ 10.00 $ 8.02 $ 16.51
</TABLE>
F-15
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
9. STOCKHOLDERS' EQUITY (CONTINUED)
The Company has computed for pro forma disclosure purposes the value of all
options granted during 1998 using the Black-Scholes option pricing model as
prescribed by SFAS No. 123 and the following weighted-average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate...................................... 4.18%--5.61%
Expected life.............................................. 3 years
Volatility................................................. 0%
Dividend rate.............................................. 0%
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
CAPITAL LEASE
During 1998, the Company entered into a capital lease to purchase equipment
for $8,700. Accumulated amortization for this equipment was $313 at December 31,
1998. Payments during the year ended December 31, 1998, totaled $620. Future
minimum lease payments as of December 31, 1998, are as follows:
<TABLE>
<S> <C>
Year ending December 31:
1999................................................................ $ 3,720
2000................................................................ 3,720
2001................................................................ 3,100
---------
Total minimum lease payments...................................... 10,540
Less--Amounts representing imputed interest......................... (2,335)
---------
Present value of net minimum payments............................... 8,205
Less--Current portion............................................... (2,436)
---------
Capital lease obligation, net of current portion.................... $ 5,769
---------
---------
</TABLE>
OPERATING LEASES
The Company has entered into various operating leases with varying terms
expiring through 2001. Payments made under these agreements totaled
approximately $0 and $58,191 for the years ended December 31, 1997 and 1998,
respectively.
As of December 31, 1998, future minimum lease payments under these leases
were as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 105,492
2000.............................................................. 79,641
2001.............................................................. 1,740
---------
$ 186,873
---------
---------
</TABLE>
F-16
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
EMPLOYMENT CONTRACTS
The Company has entered into employment contracts with certain officers, the
terms of which expire at various dates through February 2004. Such agreements
provide for annual base salary, stock options, severance packages and in some
instances discretionary bonuses and payments in the event of termination without
cause.
CALL CENTER AGREEMENT
During 1998, the Company entered into an agreement with Medical Advisory
Systems ("MAS"), a stockholder of the Company, whereby MAS manages the Company's
call center. As part of the agreement, the Company pays a monthly rental and
management fee. The agreement provides for payments of cost plus 20% plus
additional costs such as rent and runs through the expiration of the agreement.
This agreement can be terminated by MAS at any time.
The Company currently relies on its agreement with MAS to manage its chat
center operations. A risk exists that MAS physicians could engage in conduct
that could be considered the practice of medicine. A determination by any state
or federal regulatory agency that the Company is practicing medicine in
violation of applicable statutes could subject the Company to allegations of
malpractice and have a material adverse effect on its business, financial
condition and results of operations. Further, any operational difficulties or
other problems with the chat center operations or the Company's relationship
with MAS could result in consumer complaints and attrition or legal proceedings.
The failure of MAS to deliver these services would require the Company to obtain
these services from another operator or provide them internally which could
interrupt the Company's services.
During 1998, the Company paid $822,918 to MAS as part of the call center
agreement. During 1998, the Company sold stock on a subscription basis to MAS
enabling MAS to purchase 63,833 and 40,000 shares of common stock, par value
$0.01 per share, for $15.67 and $25.00 per share, respectively. As of December
31, 1998 and March 31, 1999, there were 56,437 and 20,751 shares issuable
respectively under the stock subscription agreement.
MARKETING SERVICE AGREEMENT
In March 1999, the Company entered into a $4.8 million consulting agreement
with Premier Research Worldwide, LTD ("PRWW"), a stockholder of the Company. The
agreement calls for PRWW to help the Company in leveraging its place as an
anchor tenant in the AOL web site to recruit patients for clinical research
projects. The consulting agreement has a term of twenty-four months, with an
effective date of January 1, 1999. Under the terms of the agreement, the Company
is to pay PRWW equal installments of $575,000 on the 15(th) day of March, June,
September and December of 1999 and 2000. The first of the required installments
was paid on March 15, 1999. The fee is being recorded as expense ratably over
the term of the agreement.
CONTINGENCIES
The Company's business and industry are subject to extensive government
regulation. Federal and state laws, regulations and statutes have been or may be
adopted with respect to healthcare, the internet and other on-line services
covering issue such as the practice of medicine, pharmacology and
F-17
<PAGE>
AMERICASDOCTOR.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1998
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
other professions, the payment of health-related products and services by
federal healthcare programs, including regulation of patient referrals and
copyright, trademark and other intellectual property protection of domain names.
11. RELATED-PARTY TRANSACTIONS
As of December 31, 1998, notes payable include $44,350 due to a stockholder
to fund operating activities.
Certain officers of the Company have personally guaranteed debt of the
Company. In exchange for their guarantee, they have received common stock or
warrants. The fair value of the stock and warrants granted of approximately
$87,000 was recorded as deferred financing costs and amortized as interest
expense over the term of the debt.
During 1998, Wyndhurst Capital ("Wyndhurst") assisted the Company in
negotiating various transactions and assisted the Company in obtaining equity
investors and debt financings. In return, the Company granted Wyndhurst warrants
to acquire 9,751 shares of the Company's common stock at an exercise price of
$0.01 and aggregate fees of $449,227 which have been recorded as reductions to
additional paid in capital. The warrants have been recorded at their fair value
of approximately $153,000, and have been recorded as a cost of the related
financing. The Company also paid Wyndhurst $33,600 in connection with the
issuance of convertible debt, which were capitalized as deferred financing costs
and amortized over the term of the debt. The managing director of Wyndhurst also
serves as a Director and Vice-Chairman of the Company. The Company is obligated
to pay Wyndhurst a fee of $10,000 per month which is credited against monies
owed to them related to specific financings or expensed in the absence of
specific financing transactions.
F-18
<PAGE>
[LOGO]
<PAGE>
- --------------------------------------------------------------------------------
- ---------------------
PROSPECTUS
- ---------------------
,000,000 SHARES
AMERICASDOCTOR.COM
COMMON STOCK
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
WARBURG DILLON READ LLC
, 1999
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THE SECURITIES.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate (except for the Commission and Nasdaq
National Market fees) of the fees and expenses payable by the Registrant in
connection with the offering of the common stock:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration fee................ $ 16,680
Transfer agent and registrar fee................................... *
Printing and engraving costs....................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
NASD filing fee.................................................... $ 6,500
Nasdaq National Market listing fee................................. *
Blue Sky fees and expenses......................................... *
Miscellaneous expenses............................................. *
---------
Total........................................................ $ *
---------
---------
</TABLE>
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* to be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for monetary damages for violations of the director's
fiduciary duty, except (i) for any breach of a director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemption) or (iv)
for any transaction from which a director derived an improper personal benefit.
Reference also is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or other
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
officer, director, employee or agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys' fees) which such officer or director
actually and reasonably incurred.
The Amended and Restated Certificate of Incorporation and the Amended and
Restated Bylaws of AmericasDoctor.com provide for indemnification of officers
and directors to the fullest extent
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permitted by applicable law. In addition, we have entered into contracts with
each of our independent directors requiring us to indemnify such persons and to
advance litigation expenses to such persons to the fullest extent permitted by
applicable law. Delaware law presently permits a Delaware corporation (i) to
indemnify any officer or director in any third-party or governmental actions
against them for expenses, judgments, fines and amounts paid in settlement and,
in derivative actions, for expenses, if the indemnitee acted in good faith and
in the manner he believed to be in or not opposed to the best interest of such
corporation and (ii) to advance expenses in any action, provided that such
officer or directors agrees to reimburse the corporation if it is ultimately
determined that he was not entitled to indemnification. The contracts also
require us to (i) indemnify such independent directors upon receipt of an
opinion of counsel in certain cases, (ii) pay indemnity demands pending a
determination of entitlement thereto, and (iii) demonstrate, in any action
brought thereunder, that such director was not entitled to indemnification under
applicable law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following table lists the recent sales of unregistered securities and
includes the type of security, the person to whom the securities were sold, the
consideration and the exemption from registration.
<TABLE>
<CAPTION>
SECURITIES
TITLE OF DATE OF ACT
SECURITY ISSUANCE PURCHASER(S) AMOUNT EXEMPTION CONSIDERATION
- ---------------------- ----------------- ---------------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
Common Stock.......... June 1, 1999 Medical Advisory 9,958 Section 4(2) $291,390.54
Systems, Inc.
March 4, 1999 A group of 22 27,778 Section 4(2) $1,000,008
individual accredited
investors
August 14, 1998 A group of 18 63,643 Section 4(2) $997,000
individual accredited
investors
July 2, 1998 Premier Research 63,833 Section 4(2) $1,000,000
Worldwide, Ltd.
July 2, 1998 Medical Advisory 63,833 Section 4(2) $1,000,000
Systems, Inc.
Series B Redeemable
Convertible Preferred
Stock................ June 1, 1999 GE Capital Equity 113,327 Section 4(2) $6,874,976.94
Investments, Inc., TD (103,883 of
Capital Focus II, which has been
L.P., TD Origen subscribed)
Capital Fund, L.P., TD
Javelin Capital Fund,
L.P.
Series A Convertible
Preferred Stock...... February 1, 1999 TD Capital Focus II, 113,333 Section 4(2) $3,999,990
L.P., TD Origen
Capital Fund, L.P., TD
Javelin Capital Fund,
L.P.
</TABLE>
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<TABLE>
<CAPTION>
SECURITIES
TITLE OF DATE OF ACT
SECURITY ISSUANCE PURCHASER(S) AMOUNT EXEMPTION CONSIDERATION
- ---------------------- ----------------- ---------------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
Convertible Unsecured
Notes................ Stock was issued A group of 35 Aggregate Section 4(2) $420,000
upon conversion individual investors principal
of the notes on amount of
October 1, 1998 $420,000. All
notes were
converted as of
October 1, 1998
into 44,852
shares of
common stock.
</TABLE>
We have issued an aggregate of 82,298 shares of common stock and warrants to
purchase shares of common stock as payment for services rendered by certain of
our officers and directors, the Wyndhurst Capital Group, LLC, Balance Capital,
LLC and Venture Consultants, LLC. These shares and warrants were issued between
June 1998 and May 1999.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Amended and Restated Certificate of Incorporation.**
3.2 Amended and Restated Bylaws.**
4.1 Registration Rights Agreement.**
5.1 Opinion of Simpson Thacher & Bartlett.**
9.1 Stockholders' Voting Trust Agreement.**
10.1 1999 Long-Term Incentive Plan.**
10.2 Employment Agreement with Scott M. Rifkin, M.D.**
10.3 Employment Agreement with Jeffrey J. Lefko.**
10.4 Employment Agreement with Allan C. Sanders.**
10.5 Employment Agreement with Laura Gill.**
10.6 Interactive Services Agreement with America Online, Inc.**
10.7 Call Center Service Agreement, as amended, with Medical Advisory Systems, Inc.**
10.8 Support and Service Agreement with Premier Research Worldwide, Ltd.**
10.9 Marketing Service Agreement with Premier Research Worldwide, Ltd.**
10.10 Consulting Agreement with Wyndhurst Capital Group LLC.**
10.11 Warrant to Purchase Series A Common Stock issued to Tullis-Dickerson Capital Focus II, L.P., dated
February 1, 1999.**
10.12 Warrant to Purchase Series A Common Stock issued to TD Origen Capital Focus, L.P., dated February 1,
1999.**
10.13 Warrant to Purchase Series A Common Stock issued to Javelin Capital Fund, L.P., dated February 1, 1999.**
10.14 Common Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.**
10.15 Common Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.**
10.16 Preferred Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.**
10.17 Preferred Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.**
10.18 Securities Purchase Agreement, dated June 1, 1999.**
10.19 Securities Purchase Agreement, dated February 1, 1999.**
10.20 Securities Purchase Agreement, dated July 2, 1999.**
10.21 Second Amended and Restated Shareholders' and Voting Agreement, dated June 1, 1999.**
10.22 Second Amended and Restated Registration Rights Agreement, dated June 1, 1999.**
10.23 Interactive Services Agreement, dated October 1, 1997, between AmericasDoctor.com, Inc. and America
Online, Inc.**
10.24 Agreement, dated February 12, 1999, between AmericasDoctor.com, Inc. and Smith & Nephew Inc.**
11.1 Statement regarding computation of per share earnings.**
12.1 Statements regarding computation of ratios.**
15.1 Letter regarding unaudited interim financial information.**
21.1 List of Subsidiaries**
23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).**
</TABLE>
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<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
23.2 Consent of Arthur Andersen LLP, independent public accountants.*
24.1 Power of attorney (included on signature page to this Registration Statement).**
27.1 Financial Data Schedule (EDGAR filed version only).*
</TABLE>
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* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules
None
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 14
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by a
registrant of expenses incurred or paid by a director, officer or controlling
person of such registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Owings Mills, State of
Maryland, on the 11th day of June, 1999.
<TABLE>
<S> <C> <C>
AMERICASDOCTOR.COM, INC.
By: /s/ SCOTT M. RIFKIN, M.D.
-----------------------------------------
Scott M. Rifkin
Chairman of the Board of Directors
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints each of Scott M. Rifkin, M.D. and Lewis S.
Goodman the true and lawful attorney-in-fact and agent of the undersigned, with
full power of substitution and resubstitution, for and in the name, place and
stead of the undersigned, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
including any filings pursuant to Rule 462(b) under the Act, and to file the
same, with all exhibits thereto and other documents in connection therewith with
the Commission, and hereby grants to such attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<S> <C> <C>
/s/ SCOTT M. RIFKIN, M.D. Chief Executive Officer,
- ------------------------------ President and Chairman of June 11, 1999
Scott M. Rifkin, M.D. the Board of Directors
/s/ JEFFREY J. LEFKO Executive Vice-President
- ------------------------------ of Sales and Marketing, June 11, 1999
Jeffrey J. Lefko Director
/s/ LEWIS S. GOODMAN
- ------------------------------ Vice Chairman of the Board June 11, 1999
Lewis S. Goodman of Directors
/s/ RONALD W. PICKETT
- ------------------------------ Director June 11, 1999
Ronald W. Pickett
/s/ THOMAS P. DICKERSON
- ------------------------------ Director June 11, 1999
Thomas P. Dickerson
/s/ ALLAN C. SANDERS
- ------------------------------ Chief Financial Officer June 11, 1999
Allan C. Sanders
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Amended and Restated Certificate of Incorporation.**
3.2 Amended and Restated Bylaws.**
4.1 Registration Rights Agreement.**
5.1 Opinion of Simpson Thacher & Bartlett.**
9.1 Stockholders' Voting Trust Agreement.**
10.1 1999 Long-Term Incentive Plan.**
10.2 Employment Agreement with Scott M. Rifkin, M.D.**
10.3 Employment Agreement with Jeffrey J. Lefko.**
10.4 Employment Agreement with Allan C. Sanders.**
10.5 Employment Agreement with Laura Gill.**
10.6 Interactive Services Agreement with America Online, Inc.**
10.7 Call Center Service Agreement, as amended, with Medical Advisory Systems, Inc.**
10.8 Support and Service Agreement with Premier Research Worldwide, Ltd.**
10.9 Marketing Service Agreement with Premier Research Worldwide, Ltd.**
10.10 Consulting Agreement with Wyndhurst Capital Group LLC.**
10.11 Warrant to Purchase Series A Common Stock issued to Tullis-Dickerson Capital Focus II, L.P., dated
February 1, 1999.**
10.12 Warrant to Purchase Series A Common Stock issued to TD Origen Capital Focus, L.P., dated February 1,
1999.**
10.13 Warrant to Purchase Series A Common Stock issued to Javelin Capital Fund, L.P., dated February 1, 1999.**
10.14 Common Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.**
10.15 Common Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.**
10.16 Preferred Stock Warrant issued to GE Capital Equity Investments, Inc., dated June 1, 1999.**
10.17 Preferred Stock Warrant issued to Tullis-Dickerson Capital Focus II, L.P., dated June 1, 1999.**
10.18 Securities Purchase Agreement, dated June 1, 1999.**
10.19 Securities Purchase Agreement, dated February 1, 1999.**
10.20 Securities Purchase Agreement, dated July 2, 1999.**
10.21 Second Amended and Restated Shareholders' and Voting Agreement, dated June 1, 1999.**
10.22 Second Amended and Restated Registration Rights Agreement, dated June 1, 1999.**
10.23 Interactive Services Agreement, dated October 1, 1997, between AmericasDoctor.com, Inc. and America
Online, Inc.**
10.24 Agreement, dated February 12, 1999, between AmericasDoctor.com, Inc. and Smith & Nephew Inc.**
11.1 Statement regarding computation of per share earnings.**
12.1 Statements regarding computation of ratios.**
15.1 Letter regarding unaudited interim financial information.**
21.1 List of Subsidiaries**
</TABLE>
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<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).**
23.2 Consent of Arthur Andersen LLP, independent public accountants.*
24.1 Power of attorney (included on signature page to this Registration Statement).**
27.1 Financial Data Schedule (EDGAR filed version only).*
</TABLE>
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* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
for AmericasDoctor.com, Inc. for the period from August 8, 1997 (inception) to
December 31, 1997 and the year ended December 31, 1998, (and to all references
to our Firm) included in or made part of this Form S-1 Registration Statement
under the Securities Act of 1933.
/s/ Arthur Andersen LLP
Baltimore, Maryland
June 10, 1999
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of AmericasDoctor.com as of and for the periods ended
December 31, 1997 and 1998 and March 31, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 4-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> AUG-07-1997 JAN-01-1998 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998 MAR-31-1999
<CASH> 67,035 270,698 2,321,965
<SECURITIES> 0 0 0
<RECEIVABLES> 0 61,500 134,750
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 132,035 1,351,933 3,424,582
<PP&E> 0 445,226 684,643
<DEPRECIATION> 0 35,570 79,899
<TOTAL-ASSETS> 140,868 1,843,120 4,256,681
<CURRENT-LIABILITIES> 48,983 1,066,260 612,102
<BONDS> 0 5,769 5,089
0 0 0
0 0 1,333
<COMMON> 1,237 5,194 6,147
<OTHER-SE> 90,648 765,897 3,632,010
<TOTAL-LIABILITY-AND-EQUITY> 140,868 1,843,120 4,256,681
<SALES> 0 0 0
<TOTAL-REVENUES> 0 61,500 215,830
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 11,812 4,665,470 3,036,879
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 29,674 639,561 47,725
<INCOME-PRETAX> (41,486) (5,241,913) (2,853,832)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (41,486) (5,241,913) (2,853,832)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (41,486) (5,241,913) (2,853,832)
<EPS-BASIC> (0.34) (22.36) (6.30)
<EPS-DILUTED> (0.34) (22.36) (6.30)
</TABLE>
