SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-10382
GOHEALTH.MD, INC.
(Exact name of registrant as specified in its charter)
Nugget Exploration, Inc.
(former name of small business issuer)
NEVADA 83-0250943
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2051 Springdale Road, Cherry Hill, New Jersey 08003
(Address of principal executive offices and zip code)
Telephone: (800) 204-1902
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
At May 11, 2000 there were 4,339,603 shares outstanding of the Registrant's no
par value Common Stock.
<PAGE>
GOHEALTH.MD, INC.
INDEX TO FORM 10-QSB
March 31, 2000
Page
Number
Part I - Financial Information
Item 1. Financial Statements:
Balance Sheets - March 31, 2000 and December 31, 1999. 1
Statements of Operations for the three months
ended March 31, 2000 and March 31, 1999. 2
Statements of Cash Flows for the three months
ended March 31, 2000 and March 31, 1999. 3
Notes to Financial Statements. 4
Item 2. Management's Discussion and Analysis or Plan or Operations 5
Part II - Other Information 16
(i)
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 171,546 $ 38,791
Accounts receivable - 48
Prepaid expenses 10,083 3,800
Domain names - available for sale 38,834 38,834
------- -------
Total Current Assets 220,463 81,473
------- -------
Furniture and equipment, net 10,750 4,521
Website costs, net of accumulated amortization
of $17,297 at March 31, 2000 and -0- at
December 31, 1999 463,603 60,900
Deposits 500 5,500
------- -------
TOTAL ASSETS $ 695,316 $ 152,394
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable $ 35,380 $ 45,380
Accounts payable 228,485 66,042
Accrued expenses 24,694 9,694
Accrued interest payable 9,989 9,614
Due to former officer - 1,340
Due to officer 21,622 21,622
------- -------
Total Liabilities 320,170 153,692
------- -------
Stockholders' Equity (Deficit):
Common stock ($.01 par value, 25,000,000
shares authorized, 4,299,117 shares
issued and outstanding at March 31, 2000;
4,149,117 shares at December 31, 1999 42,991 41,491
Additional paid-in capital 4,870,094 3,214,594
Series A warrants subscriptions receivable - (269,500)
Unamortized consulting expense,
net of accumulated amortization of
$848,917 at March 31, 2000 and $316,667
at December 31, 1999 (1,738,083) (1,583,333)
Retained earnings (deficit) (2,799,856) (1,404,550)
--------- ---------
Total Stockholders' Equity (Deficit) 375,146 (1,298)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 695,316 $ 152,394
======= =======
The accompanying notes are an integral part of these financial statements.
[1]
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
March 31, March 31,
2000 1999
Sales:
Advertising revenue $ 461 $ -
Domain name sales - 200
Cost of sales - (140)
------ -------
Gross Profit 461 60
------ -------
Other Expenses:
General and administrative
(including depreciation of $875
for three months ended March 31,2000) 169,818 5,586
Marketing and license fees 162,276 -
Website costs(including amortization
of $17,297 for three months ended
March 31,2000 53,882 188
Advertising and promotion 70,222 2,266
Consulting fees (including
amortization of $532,250 for the
three Months ended March 31,2000 596,693 -
Content costs 12,500 -
Interest expense 376 -
------- -------
1,065,767 8,040
-------- -------
Net Loss (1,065,306) (7,980)
Beneficial Conversion Feature
of Warrants 330,000
--------- -------
Net Loss on Common Stock $(1,395,306) $ (7,980)
========= =====
Loss per Share:
Basic loss per share $ (.32) (.00)
=== ===
Diluted loss per share $ (.32) (.00)
=== ====
Basic common shares outstanding 4,299,117 3,000,000
========= =========
Diluted common shares outstanding 4,299,117 3,000,000
========= =========
The accompanying notes are an integral part of these financial statements.
[2]
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
March 31, March 31,
2000 1999
Cash Flows from Operating Activities:
Net loss on common stock $(1,395,306) $ (7,980)
Adjustment to reconcile net loss to net cash
used in operating activities:
Amortization 549,547 -
Depreciation 875 -
Value of contributed services by
officers 40,000 -
Beneficial conversion feature 330,000 -
Changes in assets and liabilities:
Decrease in accounts receivable 48 -
Increase in prepaid expenses (6,283) -
Decrease in deposits 5,000 -
Increase in Domain names - available for sale (13,987)
Increase in stock proceeds receivable - (3,000)
Increase in accounts payable 162,443 13,258
Increase in accrued expenses 15,000 -
Increase in accrued interest payable 375 -
------- ------
Net cash used in operating activities (298,301) (11,709)
------- ------
Cash Flows from Investing Activities:
Purchase of equipment (7,104) -
Purchase of website (20,000) -
------- ------
Net cash used in investing activities (27,104) -
------- ------
Cash Flows from Financing Activities:
Proceeds from sale of common stock
and stock warrants 200,000 3,000
Proceeds (payoff) of notes payable (10,000) 10,200
Payoff of notes payable to former officer (1,340) -
Proceeds from collection of Series
A warrants subscribed for 269,500 -
------- ------
Net cash provided by financing activities 458,160 13,200
------- ------
Net Increase in Cash 132,755 1,491
Cash, Beginning of Period 38,791 -
------- -----=
Cash - End of Period $ 171,546 $ 1,491
======= ======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ -
======= =====
Taxes $ - $ -
======= =====
Supplemental Disclosures of Non Cash Investing
and financing activities:
Purchase of Website for common stock $ 400,000 $ -
======= ======
The accompanying notes are an integral part of these financial statements.
[3]
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Nature of Business
GoHealth.MD, Inc. ("GoHealth" or "Company"), a development stage company, was
incorporated under the laws of the State of Delaware on February 23, 1999.
GoHealth.MD, Inc. is engaged in providing through the Internet an
advertising network and Internet presence for independently-owned health food
stores, health care providers and others.
On November 10, 1999, GoHealth and Nugget Exploration, Inc. (collectively with
its subsidiaries herein referred to as "Nugget") completed a planned Stock
Exchange Agreement and Plan of Merger. Under the terms of the agreement,
GoHealth became a wholly-owned subsidiary of Nugget and a wholly-owned
subsidiary of Nugget merged with and into GoHealth. The stockholders of
GoHealth received one share of common stock of Nugget for each share of
GoHealth common stock held, resulting in the current stockholders of GoHealth
owning approximately 81% of Nugget common stock.
Principles of Consolidation
The accompanying financial statements consolidate the accounts of the parent
company and its wholly-owned subsidiary. All significant intercompany accounts
and transactions have been eliminated in consolidation. The financial
statements include the results of operations of Nugget since November 10, 1999.
NOTE 2
The December 31, 1999 balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, the accompanying
unaudited financial statements contain all adjustments necessary to present
fairly the financial position as of March 31, 2000 and the statements of
operations for the three months ended March 31, 2000 and 1999 and the
statements of cash flows for the three months ended March 31, 2000 and 1999.
The statements of operations for the three months ended March 31, 2000 and 1999
are not necessarily indicative of results for the full year.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, these financial statements should be read in
conjunction with the financial statements and accompanying notes included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31,1999.
NOTE 3
Earnings per share are based on the weighted average number of common shares
outstanding including common stock equivalents.
[4]
<PAGE>
GOHEALTH.MD, INC..
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion of the financial condition and results of
operations of our company should be read in conjunction with the financial
statements and the notes to the statement included elsewhere in this Report.
Overview
On November 10, 1999, our wholly owned subsidiary, Nugget Holding
Company, merged into GoHealth.MD Inc., a Delaware corporation, a development
stage company (the"Merger"). Prior to the Merger, we had no operations and were
looking to consummate a business combination with another company which had
operations. As a result of the Merger, GoHealth.MD Inc., the Delaware
corporation, became our wholly owned subsidiary, and the shareholders of the
Delaware corporation received 81% of our outstanding common stock. On January
19, 2000, we changed our name from Nugget Exploration, Inc. to GoHealth.MD,
Inc. For accounting purposes, the Merger was treated as GoHealth.MD, Inc., the
Delaware corporation, acquiring Nugget Exploration, Inc., and hence for this
Management's Discussion section and accounting purposes, references to the
"company," "us" and "we" refer to the operations of GoHealth.MD, Inc., the
Delaware corporation. Accordingly, we also changed our accounting year to the
calenda r year, the accounting year of GoHealth.MD Inc., the Delaware
corporation.
As of March 31, 2000, our company had not conducted any significant
business. Because of this lack of prior operations, assets and industry
position, we must be considered a development stage company. Consequently,
there can be no assurance that viable commercial operations can be achieved or
sustained even if we are successful in raising all the capital we require.
Our principal business is operating Healthmall.com, an Internet-based
consumer healthcare network consisting of a consumer-focused interactive
website and affiliate relationships with certain other websites. In November
1999, we changed the principal focus of our business strategy from registration
and marketing of .MD domain names to operating healthcare websites. We intend
to derive revenues by providing advertising on our website and through
affiliations with other entities.
Our website, www.Healthmall.com, which we launched in November 1999,
currently has a focus on alternative healthcare with the following components:
- healthcare content on a wide variety of subjects, including
information on acute ailments, chronic illnesses, nutrition, fitness
and wellness, as well as alternative healthcare;
- access to healthcare practitioner databases including chiropractors,
massage therapists, naturopathic physicians, and medical physicians;
- an interactive chat room; and
- tools that permit users to personalize their on-line experience.
Our overall plan calls for the development of network affiliates, such as
health and fitness websites, to provide easy access to the information and
services we offer on www.Healthmall.com to their respective customers. We have
only established two network affiliates to date.
[5]
<PAGE>
We also provide Internet related services directed to healthcare
practitioners. To date these services have focused on chiropractors, massage
therapists and naturopathic physicians. These services include the following:
- developing websites;
- providing a directory of healthcare practitioners on our
Healthmall.com website; and
- registering of .MD domain names.
Plan of Operations
Our objective is to establish Healthmall.com and other websites as a
trusted and comprehensive source of consumer healthcare information and
services on the Internet. Healthmall.com was created to empower consumers to
better manage their personal health with comprehensive, relevant and timely
information. Our business model is to earn advertising and subscription
revenues from advertisers, merchants, manufacturers and healthcare providers
who desire to reach a highly targeted community of healthcare consumers on the
Internet.
Our business strategy incorporates the following key elements:
- provide consumers with high quality healthcare content to attract
users to www.Healthmall.com, and promote their loyalty to our
website;
- syndicate content through affiliates to promote traffic growth;
- develop and expand on-line healthcare communities to allow users with
similar health- related experiences to exchange information and
gather news and knowledge in a secure, anonymous environment;
- provide consumers with unique features and tools; and
- provide an attractive and useful website that can deliver advertising
in a highly targeted manner, thereby commanding higher advertising
rates.
In order to grow our operations and increase our revenue, we will need
incur significant advertising and promotional expenses and will need to hire
additional personnel in all phases of our operation. We would particularly like
to hire salespersons in order to further implement our primary operating
strategy of generating revenue from:
- advertising;
- content syndication; and
- electronic commerce.
There can be no assurance that we will have the resources to increase our
advertising and promotional expenses or to hire the necessary personnel and
managers in order to achieve growth in our operations and revenues, and any
failure to do so could have a material adverse effect on our operating results.
[6]
<PAGE>
Our growth strategy relies on our ability to raise further capital and
upon the skills of our management. There can be no assurance that we will be
successful in these endeavors. Forces that can contribute to the lack of
success in implementing this growth strategy include, among other things: (i)
regulatory bodies and governmental regulations affecting our operations, (ii)
availability of funding on a timely basis, and (iii) functionality. If our
ability to expand our network infrastructure is constrained in any way we could
lose customers and suffer damage to our operating results.
We have a very limited operating history on which to base an evaluation of
our business and prospects. Our prospects must be considered in light of the
risks uncertainties, expenses and difficulties frequently encountered by
companies in their early stage of development, particularly companies in new
evolving markets such as the Internet market. In view of the rapidly evolving
nature of our business and our limited operating history, we believe that
period-to-period comparisons of revenues and operating results are not
necessarily meaningful and should not be relied upon as indications of future
performance.
Results of Operations
We had advertising revenues of $461 for the three months ended March 31,
2000, as compared to no advertising revenues and revenues from the sale of
domain names of $200 for the period from our inception on February 23, 1999 to
March 31, 1999. Our gross profit was $461 for the three months ended March 31,
2000.
For the three months ended March 31, 2000, other expenses totaled
$1,065,767, which consisted of the following:
- Consulting fees in the amount of $596,693;
- Advertising and promotion expenses in the amount of $70,222;
- General and administrative expenses in the amount of $169,818;
- Marketing and licensing fees associated with the Healthmall.com
and the Healthsites.com websites in the amount of $162,276;
- Website development costs related to our Healthmall.com and
Healthsites. Com websites in the amount of $53,882;
- Content for our websites in the amount of $12,500; and
- Interest expense in the amount of $376, principally from loans
by William Hanna, one of our officers and directors.
For the period from our inception to March 31, 1999, we incurred expenses
of $7,980, consisting of $5,586 in general and administrative expenses, $188
for website development costs, and $2,266 for advertising and promotion
expenses.
As a result of the foregoing, we had a net loss of $1,065,306 for the
three months ended March 31, 2000, as compared to net loss of $7,980 for the
period from our inception to March 31, 1999. For the three months ended March
31, 2000, we also incurred a charge of $330,000, which resulted in a net loss
to common stockholders of $1,395,306. The charge was attributable to the
beneficial conversion feature granted to purchasers of warrants.
[7]
<PAGE>
The loss per basic and diluted share was $.32 for the three months ended
March 31, 2000 as compared to a loss $.00 per basic and diluted share for the
period from our inception to March 31, 1999.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
equity financing. For the three months ended March 31, 2000, we received
proceeds in the amount of $200,000 from the sale of shares of our common stock
and warrants to purchase our common stock. In addition, we received $269,500
from the collection of subscriptions we previously received from the sale of
Series A Warrants, which entitle the holders to the purchase 269,500 shares of
our common stock at $1.00 per share.
We have a working capital deficif of $99,707 as of March 31, 2000. In order
to continue to our operation, we will need to receive unds from the exercise of
outstanding warrants and options or through other equity or debt financing.
There can be no assurance that we will receive any proceeds from the exercise
of warrants or options or that we will be able to obtain the necessary funds to
fund our operations.
For the three months ended March 31, 2000, we used $298,301 from operating
activities. We also used $27,104 in investing activities which consisted of the
purchase of website assets for $20,000 and the purchase of equipment in the
amount of $7,104.
On January 20, 2000, we entered into an agreement with Prometrics
Consulting, Inc., for the purchase of all Prometrics' interest in the domain
name, Healthsites.com and for Prometrics providing us with 100 hours of
advisory services regarding developing Healthsites.com as a search engine and
in assisting us in developing strategic alliances for the Healthsites.com
website. We paid to Prometrics $20,000 in cash, issued Prometrics 50,000
shares of our common stock and an option to purchase 100,000 shares of our
common stock at $2.00 per share until August 27, 2009.
We received $458,160 from financing activities, which included the
proceeds from the sale of common stock and stock warrants and the proceeds
from the collection of subscriptions for Series A Warrants.
As a result of the foregoing, for the three months ended March 31, 2000,
cash increased by $132,755 to $171,546.
Year 2000 Issues
The year 2000 issue arises because many computerized systems use two
digits rather than four digits to identify a year. Date sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors when
information using 2000 dates is processed. In addition, similar problems may
arise in some systems that use certain dates in 1999 to represent something
other than a date. The effects of the year 2000 issue may be experienced
before, on or after January 1, 2000, and if not addressed, the impact on
operations and financial reporting may range from minor errors to significant
systems failures which could effect an entity's ability to conduct normal
business operations. It is possible that all aspects of the Year 2000 issue
affecting us, including those related to the efforts of customers or third
parties, will not be fully resolved. We have confirmed that our significant
service providers are currently Year 2000 compliant.
[8]
<PAGE>
There can be no assurance that governmental agencies, utility companies,
Internet access companies, third-party service providers and others outside of
our control will be Year 2000 compliant. The failure by such entities to be
Year 2000 compliant could result in a systemic failure beyond our control, such
as a prolonged Internet, telecommunications or electrical failure, which could
also prevent us from delivering Healthmall.com, decrease the use of the
Internet or prevent users from accessing Healthmall.com, any of which would
have a material adverse effect on our business, results of operations and
financial condition.
To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues.
Forward Looking Statements
The information provided in this report may contain "forward looking"
statements or statements which arguably imply or suggest certain things about
our future. Statements which express that we "believe", "anticipate",
"expect", or "plan to" as well as other statements which are not historical
fact, are forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based on
assumptions that we believe are reasonable, but a number of factors could cause
our actual results to differ materially from those expressed or implied by
these statements. We do not intend to update these forward looking statements.
Investors are advised to review the "Additional Cautionary Statements" section
below for more information about risks that could affect our financial results.
Additional Cautionary Statements
Our limited operating history makes an evaluation of our business difficult.
We commenced operations of our Internet operations with our
www.Healthmall.com website in November 1999 and we have only generated minimal
revenues. Prior to November 1999, our business consisted primarily of
registering .MD domain names. Accordingly, we have had a very limited operating
history. Companies, such as our company, in an early stage of development
frequently encounter enhanced risks and unexpected expenses and difficulties.
These risks and difficulties include our ability to:
- attract an audience of users to our Internet-based consumer
healthcare network;
- increase awareness of our brand;
- offer compelling on-line content, services and e-commerce
opportunities;
- attract a large number of advertisers who desire to reach our
users;
- respond effectively to the offerings of competitive providers of
healthcare information on the Internet;
- continue to develop and upgrade our technology; and
- attract, retain and motivate qualified personnel.
[9]
<PAGE>
We also depend on the growing use of the Internet for advertising,
commerce and communication, and on general economic conditions. We cannot
assure you that our business strategy will be successful or that we will
successfully address these risks or difficulties. If we fail to address
adequately any of these risks or difficulties our business would likely suffer.
We are a Development Stage Company and have a history of losses, negative cash
flow and anticipate continued losses.
Since our inception we have incurred losses and negative cash flow. As a
development stage company we have not achieved profitability and expect to
continue to incur significant operating and capital expenditures in areas such
as expansion of our advertising, brand promotion, content development, sales
and marketing, and operating infrastructure. Our business model assumes that
consumers will be attracted to and use healthcare information and related
content available on our Internet-based consumer healthcare network which will
in turn, allow us the opportunity to sell advertising designed to reach those
consumers. Our model is not yet proven, and we cannot assure you that we will
ever achieve or sustain profitability or that our operating losses will not
increase in the future. If we do not achieve profitability, we may not be able
to continue our business.
Our capital requirements may require additional financing which may not be
available.
If our cash resources prove to be insufficient at that time, or prior to
that time, we may be required to seek additional debt or equity financing to
fund the costs of continuing operations until we achieve positive cash flow. We
have no current commitments or arrangements for additional financing and there
can be no assurance that any additional debt or equity financing will be
available to us on acceptable terms, or at all. If we are unable to satisfy
our capital requirements, we may not be able to effectively compete in the
marketplace or continue operations.
We must establish, maintain and strengthen our brand in order to attract users
to our network and generate advertising.
In order to expand our audience of users and increase our on-line traffic,
we must establish, maintain and strengthen our brand. For us to be successful
in establishing our brand, healthcare consumers must perceive us as a trusted
source of healthcare information, and advertisers, merchants and manufacturers
must perceive us as effective marketing and sales channel for their products
and services. We will need to increase substantially our marketing budget in
our efforts to establish brand recognition and brand loyalty. Our business
could be materially adversely affected if our marketing efforts are not
productive or if we cannot strengthen our brand.
Our business model relies on Internet advertising and sponsorship activities
which may not be effective or profitable marketing media.
Our future is highly dependent on increased use of the Internet as an
advertising medium. Although we have only had minimal advertising revenues to
date, our future depends on deriving revenues from advertising. The Internet
advertising market is new and rapidly evolving, and we cannot yet predict its
effectiveness as compared to traditional media advertising. As a result,
demand and market acceptance for Internet advertising solutions are uncertain.
The adoption of Internet advertising, particularly by those entities that have
historically relied upon traditional media for advertising, requires that
acceptance of a new way of conducting business, exchanging information and
advertising products and services. We cannot assure you that the market for
Internet advertising will continue to emerge or become sustainable. If the
market for Internet advertising fails to develop or develops more slowly than
we expect, then our ability to generate advertising revenue would be materia
lly adversely affected, and we may not be able to continue our business
[10]
<PAGE>
Various pricing models are used to sell advertising on the Internet. It
is difficult to predict which, if any, will emerge as the industry standard,
thereby making 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 are available that limit or prevent advertising from being
delivered to an Internet user's computer. Widespread adoption of this software
could adversely affect the commercial viability of Internet advertising.
We depend on third parties to provide content pursuant to nonexclusive
arrangements, which are short-term or terminable.
We intend to produce only a portion of the healthcare content that will be
found on the Healthmall.com network. We will rely on third-party organizations
that we believe have the appropriate expertise, technical capability, name
recognition, reputation for integrity, and willingness to syndicate product
content for branding and distribution by others. These entities currently
include PR Newswire, National Library of Medicine, and Fact and Comparisons.
As health-related content grows on the Internet, we believe that there will be
increasing competition for the best product suppliers which may result in a
competitor acquiring a key supplier on an exclusive basis, or in significantly
higher content prices. Such an outcome could make the Healthmall.com network
less attractive or useful for an end user, which could reduce our advertising
and potential e-commerce revenues.
We cannot provide assurances that we will be able to maintain
relationships with third parties that supply us with content, software or
related products or services that are crucial to our success, or that such
content, software, products or services will be able to sustain any third-party
claims or rights against their use. Also, we cannot assure that the content,
software, products or services of those companies that provide access or links
to our website will achieve market acceptance or commercial success.
Accordingly, we cannot assure that our existing relationships will result in
sustained business partnerships, successful product or service offerings or the
generation of significant revenues.
In order to execute our growth plan we must attract, retain and motivate highly
skilled employees, and we face significant competition from other Internet and
new media companies in doing so.
Our ability to execute our growth plan and be successful also depends on
our ability to attract, retain and motivate highly skilled employees. To date,
we have relied on Leonard F. Vernon, President, as our only employee, as well
as third party consultants to develop and operate our business. As we continue
to grow, we will need to hire additional personnel in all operational areas.
Competition for personnel throughout the Internet and related new-media
industry is intense. We may be unable to retain or attract, assimilate or
retain other highly qualified employees in the future. We expect to experience
in the future, difficulty in hiring and retaining highly skilled employees with
appropriate qualifications. If we do not succeed in attracting new personnel
or retaining and motivating personnel, our business will be adversely affected.
[11]
<PAGE>
If we achieve growth, our inability to manage growth could harm our business.
If we achieve growth and are unable to manage our growth effectively, our
business, results of operations and financial condition could be adversely
affected.
If our ability to expand our infrastructure is constrained in any way we could
lose customers and suffer damage to our operating results.
Presently, a relatively limited number of consumers use our website. We
may not be able to accurately project the rate or timing of increases, if any,
in the use of our website or to expand and upgrade, or afford to pay companies
to expand and upgrade our systems and infrastructure to accommodate such
increases.
We must continue to expand and adapt the network infrastructure to
accommodate additional users, increase transaction volumes and changing
consumer and customer requirements. Our systems may not accommodate increased
use while maintaining acceptable overall performance. Service lapses could
cause our users to instead use the on-line services of our competitors.
We may have liability for information we provide on our website or which is
accessed from our Website.
We may also have liability for information we provide on our website or
which is accessed from our website. Because users of the website access health
content and services relating to a condition they may have and may distribute
our content to others, third parties may sue us for defamation, negligence,
copyright or trademark infringement, personal injury or other matters. We could
also become liable if confidential information is disclosed inappropriately.
These types of claims have been brought, sometimes successfully, against
on-line entities in the past. Others could also sue us for the content and
services that are accessible from our website through links to other websites
or through content and materials that may be posted by users in our chat room
or bulletin board. Allegations of impropriety, even if unfounded, could
therefore have a material adverse effect on our reputation and business.
Consumers may also sue us if any of the products or services which we may
sell on or through our website are defective, fail to perform properly or
injure the user, even if such goods and services are provided by unrelated
third parties.
We may not be able to adequately protect our proprietary rights.
We are relying upon a combination of copyright, trademark and trade secret
laws, nondisclosure and other contractual provisions to protect our
proprietary rights. Notwithstanding these safeguards, it may be possible for
competitors to imitate our products and services or to develop independently
non-infringing competing products and services. Such actions could materially
and adversely affect the number of users of our websites, which would
materially and adversely affect our business.
Rapid technological change in our industry could outdate our websites and
services.
The market for our websites is characterized by rapidly changing technology
and continuing development of customer requirements. The future success of our
business will depend in large part upon our ability to develop and market our
websites at an acceptable cost, and successfully anticipate or respond to
technological changes in customer requirements on a cost-effective and timely
basis. There can be no assurance that our development efforts will be
successful or that the emergence of new technologies, industry standards or
[12]
<PAGE>
customer requirements will not render our technology or websites obsolete or
uncompetitive. In addition, to the extent that we determine that new
technologies or equipment are required to remain competitive, the acquisition
and implementation of such technologies and equipment are likely to require
significant capital investment. If we are not able to acquire or implement
such new technologies or equipment, we will not be able to effectively compete
in the marketplace.
We are competing in the Internet industry with a number of other companies,
including larger, well known entities who possess greater financial resources.
We compete directly for users, advertisers, e-commerce merchants, syndication
partners and other affiliates with numerous Internet and non-Internet
businesses, including:
Health-related on-line services or websites targeted at consumers, such as
accesshealth.com, ahn.com, betterhealth.com, drweil.com,
healthcentral.com, healthgate.com, intelihealth.com, mayohealth.org;
mediconsult.com, onhealth.com, thriveonline.com and webmd.com;
On-line and Internet portal companies, such as America Online, Inc.;
drkoop, Inc., Microsoft Network; Yahoo! Inc.; Excite, Inc.; Lycos
Corporation and Infoseek Corporation;
Electronic merchants and conventional retailers that provide healthcare
goods and services competitive to those available from links on our
website;
Hospitals, HMOs, managed care organizations, insurance companies and other
healthcare providers and payors which offer healthcare information through
the Internet; and
Other consumer affinity groups, such as the American Association of
Retired Persons, SeniorNet and ThirdAge Media, Inc. which offer
healthcare-related content to specific demographic groups.
Many of these actual and potential competitors are likely to enjoy
substantial competitive advantages compared to us, including:
the ability to offer a wider array of on-line 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.
Increased competition could result in a loss of revenues or a reduction in
our prices or an increase in our losses from operations. To be competitive, we
must respond promptly and effectively to challenges of technological change,
evolving standard of our competitor's innovations by continuing to enhance our
product and services. There is no assurance that we will have the financial
resources, technical expertise, marketing and support capabilities to continue
to compete successfully. Competition is likely to increase significantly as
new companies enter the market and current competitors expand their services.
Please see "Business-Competition."
[13]
<PAGE
Since we operate an Internet network, our business is subject to government
regulation relating to the Internet, which could impair our operations.
We are subject not only to regulations applicable to businesses generally,
but also laws and regulations directly applicable to electronic commerce.
Although there are currently few such laws and regulations, state, federal and
foreign governments may each adopt a number of these laws and regulations. Any
such legislation or regulation could dampen the growth of the Internet and
decrease its acceptance as a communications and commercial medium. If such a
decline occurs, companies may decide in the future not to use our products and
services. This decrease in the demand for our products and services would
seriously harm our business and operating results.
Any new laws and regulations may govern or restrict the following issues:
User privacy;
The pricing and taxation of goods and services offered over the Internet;
The content of websites;
Consumer protection; and
The characteristics and quality of products and services offered over the
Internet.
For example, the Telecommunications Act of 1986 prohibits the transmission of
certain types of information and content over the Internet. The scope of this
Act's prohibition is currently unsettled. In addition, although courts
recently held substantial portions of the Communications Decency Act
unconstitutional, federal or state governments may enact, and courts may
uphold, similar legislation in the future. Future legislation could expose
companies involved in Internet commerce to liability.
Since we operate a healthcare network over the Internet, our business is also
subject to government regulation specifically relating to medical devices, the
practice of medicine and pharmacology, healthcare regulation and other matters
unique to the healthcare area.
Laws and regulations have been or may be adopted with respect to the
provision of healthcare- related products and services on-line, covering areas
such as:
The regulation of medical devices;
The practice of medicine and pharmacology and the sale of controlled
products such as pharmaceuticals on-line; and
The regulation of government and third-party cost reimbursement.
FDA Regulation of Medical Devices. Some computer applications and software
are considered medical devices and are subject to regulation by the United
States Food and Drug Administration. We do not believe that our current
applications or services will be regulated by the FDA; however, our
applications and services may become subject to FDA regulation. Additionally,
we may expand our application and service offerings into areas that subject us
to FDA regulation. We have no experience in complying with FDA regulation. We
believe that complying with FDA regulations would be time consuming, burdensome
and expensive and could delay or prevent our introduction of new applications
or services.
Regulation of the Practice of Medicine and Pharmacology. The practice of
medicine and pharmacology required licensing under applicable state law. While
we do not believe our website and affiliate relationships violate state
licensing requirements, a state regulatory authority may at some point allege
that some portion of our business violates these statutes. Any such allegation
could result in a material adverse effect on our business.
[14]
<PAGE>
Federal and State Healthcare Regulation. We earn a fee when users on our
website purchase health food and vitamin products from a current e-commerce
partner. In addition, in the future we may earn a service fee when users on
our website purchase prescription pharmacy products. Federal and state
"anti-kickback" laws prohibit granting or receiving referral fees in connection
with sales of pharmacy products that are reimbursable under federal Medicare
and Medicaid programs and other reimbursement programs. If our program were
deemed to be inconsistent with federal or state law, we could face criminal or
civil penalties. Further, we would be required either not to accept any
transactions which are subject to reimbursement under federal or state
healthcare programs or to restructure our compensation to comply with any
applicable anti-kickback laws or regulations. In addition, similar laws in
several states apply not only to government reimbursement but also to
reimbursement by priva te insurers. If our activities were deemed to violate
any of these laws or regulations, it could cause a material adverse affect on
our business, results of operations and financial condition.
[15]
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits
None
(b) Current Reports of Form 8-K
On March 29, 2000, we filed a Form 8-K, listing Item 8, a change in
fiscal year, which event occurred on January 13, 2000.
[16]
<PAGE>
GOHEALTH.MD, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
GOHEALTH.MD, INC.
Date: May 12, 2000 By: /s/ Leonard F. Vernon
Leonard F. Vernon, President
(principal financial officer)
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-END] MAR-31-2000
[CASH] 171,546
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 220,463
[PP&E] 10,750
[DEPRECIATION] 0
[TOTAL-ASSETS] 695,316
[CURRENT-LIABILITIES] 320,170
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 42,991
[OTHER-SE] 332,155
[TOTAL-LIABILITY-AND-EQUITY] 375,146
[SALES] 461
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 1,065,767
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] (1,065,306)
[INCOME-TAX] 0
[INCOME-CONTINUING] (1,395,306)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (1,395,306)
[EPS-BASIC] (.32)
[EPS-DILUTED] (.32)
</TABLE>
