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 June 30, 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 August 10, 2000 there were 4,744,603 shares outstanding of the Registrant's
no par value Common Stock.
<PAGE>
GOHEALTH.MD, INC.
INDEX TO FORM 10-QSB
June 30, 2000
Page
Number
Part I - Financial Information
Item 1. Financial Statements:
Balance Sheets - June 30, 2000 and December 31, 1999. 1
Statements of Operations for the three and six months
ended June 30, 2000 and June 30, 1999. 2
Statements of Cash Flows for the six months
ended June 30, 2000 and June 30, 1999. 3
Notes to Financial Statements. 4
Item 2. Management's Discussion and Analysis
or Plan or Operations 6
Part II - Other Information 16
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $ 45,930 $ 38,791
Accounts receivable 1,500 48
Prepaid expenses 7,432 3,800
Domain names - available for sale 41,568 38,834
------ ------
Total Current Assets 96,430 81,473
Furniture and equipment, net 9,875 4,521
Website costs, net of accumulated amortization
of $68,483 at June 30, 2000 and -0- at
December 31, 1999 412,417 60,900
Deposits 500 5,500
------- ------
TOTAL ASSETS $ 519,222 $ 152,394
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable $ 35,380 $ 45,380
Accounts payable 281,308 66,042
Accrued expenses 27,694 9,694
Accrued interest payable 10,353 9,614
Due to former officer - 1,340
Due to officer 21,622 21,622
------- -------
Total Liabilities 376,357 153,692
------- -------
Stockholders' Equity (Deficit):
Common stock ($.01 par value, 25,000,000 shares
authorized, 4,564,117 shares issued and
outstanding at June 30, 2000;
4,149,117 shares at December 31, 1999 45,641 41,491
Additional paid-in capital 6,126,194 3,214,594
Series A warrants subscriptions receivable - (269,500)
Unamortized consulting expense,
net of accumulated amortization
of $1,620,667 at June 30, 2000 and $316,667
at December 31, 1999 (1,466,333) (1,583,333)
Retained earnings (deficit) (4,562,637) (1,404,550)
--------- ---------
Total Stockholders' Equity (Deficit) 142,865 (1,298)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 519,222 $ 152,394
======= =======
[1]
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Six Months
Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
Sales:
Advertising revenue $ 17,289 $ - $ 17,750 $ -
Domain name sales 1,471 200 1,471 400
------ --- ------ ---
Total Revenue 18,760 200 19,221 400
Cost of sales 1,050 140 1,050 280
------ --- ------ ---
Gross Profit 17,710 60 18,171 120
------ --- ------ ---
Other Expenses:
General and
administrative 128,777 5,227 287,485 10,813
Marketing and
license fees 99,317 1,570 261,593 1,570
Website costs 157,881 8,268 235,374 8,456
Advertising and promotion 183,002 15,306 253,223 17,572
Consulting fees 1,098,650 - 1,695,343 -
Interest expense 364 380 740 380
--------- ------ --------- ------
1,667,991 30,751 2,733,758 38,791
--------- -------- --------- ------
Net Loss (1,650,281) (30,691) (2,715,587) (38,671)
Beneficial Conversion
Feature of Warrants 112,500 - 442,500 -
--------- ------ ------- ------
Net Loss on Common Stock $(1,762,781) $ (30,691) $(3,158,087) $(38,671)
========= ====== ========= ======
Loss per Share:
Basic loss per share $(.39) $(.01) $(.69) $(.01)
=== === === ===
Diluted loss per share $(.39) $(.01) $(.69) $(.01)
=== === === ===
Basic common shares
outstanding 4,564,117 3,046,000 4,564,117 3,046,000
========= ========= ========= =========
Diluted common shares
outstanding 4,564,117 3,046,000 4,564,117 3,046,000
========= ========= ========= =========
[2]
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended
June 30, June 30,
2000 1999
Cash Flows from Operating Activities:
Net loss on common stock $(3,158,087) $ (38,671)
Adjustment to reconcile net loss to net cash
used in operating activities:
Amortization 1,372,483 -
Depreciation 1,750 -
Value of services by officers
contributed to paid in capital 76,000 -
Beneficial conversion feature 442,500 -
Issuance of stock and stock options
for services 380,250
Changes in assets and liabilities:
Increase in accounts receivable (1,452)
Increase in stock subscriptions receivable (1,400)
Increase in prepaid expenses (3,632) -
Decrease in deposits 5,000 -
Increase in Domain names - available for sale (2,734) (28,207)
Increase in accounts payable 215,266 18,365
Increase in accrued expenses 18,000 8,108
Increase in accrued interest payable 739 172
------- -------
Net cash used in operating activities (653,917) (41,633)
------- ------
Cash Flows from Investing Activities:
Purchase of equipment (7,104) -
Purchase of website (20,000) (30,003)
------ ------
Net cash used in investing activities (27,104) (30,003)
------ ------
Cash Flows from Financing Activities:
Proceeds from sale of common stock
and stock warrants 430,000 112,200
Proceeds from loan from officer - 21,622
Proceeds (payoff) of notes payable (10,000) 38,100
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 688,160 171,922
------- -------
Net Increase in Cash 7,139 100,286
Cash, Beginning of Period 38,791 -
------- -------
Cash - End of Period $ 45,930 $ 100,286
====== =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ -
=== ===
Taxes $ - $ -
=== ===
Supplemental Disclosures of Non-Cash Investing and
Financing Activity:
Purchase of website in exchange
for common stock $ 400,000 $ 10,200
======= ======
Value of consulting services exchanged
for common stock and warrants to
purchase common stock $ 1,187,000 $ -
========= ======
[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 June 30, 2000 and the results of operations
for the three and six months ended June 30, 2000 and 1999 and the cash flows
for the six months ended June 30, 2000 and 1999.
The statements of operations for the three and six months ended June 30, 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.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 4
Depreciation of $875 and $1,750, respectively, for the three months and six
months ended June 30, 2000 is included in general and administrative expense.
Amortization of $51,186 and $68,483, respectively, for the three months and six
months ended June 30, 2000 is included in Website costs. Consulting fees
include amortization of $771,750 and $1,304,000, respectively, for the three
months and six months ended June 30, 2000. Depreciation and amortization was $
-0- for the three months and six months ended June 30, 1999.
NOTE 5
The current officers and directors of the Company have entered into agreements
with the Company that state that they will forego salaries until the Company's
revenues exceed $1,000,000 or at the discretion of the Board of Directors. The
Company has recorded as an expense of the period and as paid in capital, the
estimated value of services contributed by these officers and directors for the
six months ended June 30, 2000.
NOTE 6
Subsequent Events
On August 1, 2000 the Company executed a promissory note to a stockholder for
$25,000. The note bears interest at 5% per annum and is due by August 31,
2000.
In July, 2000, the Company issued 50,000 shares of common stock upon the
exercise of 50,000 Series A warrants by a warrant holder.
On July 3, 2000 the Company issued 25,000 shares of common stock pursuant to a
consulting agreement entered into on April 20, 2000. The Company recognized
consulting expense of $132,813 based upon the market value of these shares on
the date they were issued.
[5]
<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
calendar year, the accounting year of GoHealth.MD Inc., the Delaware
corporation.
As of June 30, 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.
[6]
<PAGE>
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.
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 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.
[7]
<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 $17,289 and $17,750, respectively, for the
three and six months ended June 30, 2000, as compared to no advertising
revenues for the three and six months ended June 30, 1999. We had revenues
from sales of domain names of $1,471 for the three and six months ended June
30, 2000, as compared to $200 and $400, respectively for the three and six
months ended June 30, 1999. Our gross profit was $17,710 for the three months,
and $18,171 for the six months, ended June 30, 2000 as compared to $60 and
$120, respectively, for the three and six months ended June 30, 1999.
For the three months and six months ended June 30, 2000, other expenses
totaled $1,667,991 and $2,733,758, respectively, which consisted of the
following:
Three months Six months
Ended 6/30/00 Ended 6/30/00
Consulting fees: $1,098,650 $1,695,343
Advertising and promotion expenses: $ 183,002 $ 253,223
General and administrative expenses: $ 128,777 $ 287,485
Marketing and licensing fees
associated with the Healthmall.com
and the Healthsites.com websites: $ 99,317 $ 261,593
Website development costs related
to our Healthmall.com and
Healthsites. Com websites: $ 157,881 $ 235,374
Interest expense: $ 364 $ 740
For the three and six months ended June 30, 1999, we incurred total
expenses of $30,751 and $38,791, respectively.
[8]
<PAGE>
As a result of the foregoing, we had a net loss of $1,650,281 for the
three months, and $2,715,587 for the six months, ended June 30, 2000 as
compared to net loss of $30,691 for the three months and $38,671 for the six
months, ended June 30, 1999. For the three and six months ended June 30,
2000, we also incurred charges of $112,500 and $442,500, respectively, which
resulted in a net loss to common stockholders of $1,762,781 for the three
months, and $3,158,087 for the six months, ended June 30, 2000. The charge was
attributable to the beneficial conversion feature granted to purchasers of
warrants.
The loss per basic and diluted share was $.39 for the three months and
six months ended June 30, 2000 as compared to a loss $.01 per basic and
diluted share for the three and six months ended June 30, 1999.
Liquidity and Capital Resources
As of June 30, 2000, we had a working capital deficit of $279,927. In
order to continue to finance our operations, we will need to receive funds
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.
Since inception, we have financed our operations primarily through private
equity financing. For the six months ended June 30, 2000, we received proceeds
in the amount of $430,000 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 entitling the holders to the purchase 269,500 shares of our common
stock at $1.00 per share.
On April 27, 2000, we borrowed $20,000 from William Hanna Consultants,
Inc., an affiliate of one of our officers, directors and principal
shareholders, for working capital, which we repaid on May 5, 2000.
For the six months ended June 30, 2000, we used $653,917 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.
For the six months ended June 30, 2000, we received $688,160 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 six months ended June 30, 2000, cash
increased by $7,139 to $45,930.
On August 1, 2000, the Company borrowed $25,000 from a stockholder
pursuant to a promissory note bearing interest at 5% per annum and due on
August 31, 2000 for working capital.
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
[9]
<PAGE>
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.
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
Working capital deficit - additional financing which may not be available.
As of June 30, 2000, we had a working capital deficit of $279,927. In
order to continue to finance our operations, we will need to receive funds
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.
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:
[10]
<PAGE>
-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.
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.
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
[11]
<PAGE>
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 materially adversely affected,
and we may not be able to continue our business
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.
[12]
<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
[13]
<PAGE>
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 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."
Since we operate an Internet network, our business is subject to government
regulation relating to the Internet, which could impair our operations.
[14]
<PAGE>
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
[15]
<PAGE>
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.
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 private 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.
[16]
<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 April 20, 2000, we filed a Form 8-K/A, listing Item 4, a change
in registrant's certifying accountants, which event occurred on November 10,
1999.
<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: August 11, 2000 By: /s/ Leonard F. Vernon
Leonard F. Vernon, President
(principal financial officer)
