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 September 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 November17, 2000 there were 5,234,117 shares outstanding of the
Registrant's no par value Common Stock.
<PAGE>
GOHEALTH.MD, INC.
INDEX TO FORM 10-QSB
September 30, 2000
Page
Number
Part I - Financial Information
Item 1. Financial Statements:
Balance Sheets - September 30, 2000 and December 31, 1999. 1
Statements of Operations for the three and nine months
ended September 30, 2000 and September 30, 1999. 2
Statements of Cash Flows for the nine months
ended September 30, 2000 and September 30, 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
September 30, December 31,
2000 1999
ASSETS (Unaudited) (Audited)
Current Assets:
Cash $ 45,317 $ 38,791
Notes receivable 18,750 -
Accounts receivable 1,433 48
Accrued interest receivable 156 -
Prepaid expenses 3,061 3,800
Domain names - available for sale 41,568 38,834
------- ------
Total Current Assets 110,285 81,473
Furniture and equipment, net 9,000 4,521
Website costs, net of accumulated amortization
of $108,558 at September 30, 2000 and $ -0-
at December 31, 1999 372,342 60,900
Deposits 500 5,500
------- -------
TOTAL ASSETS $ 492,127 $ 152,394
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable $ 162,880 $ 45,380
Accounts payable 363,432 66,042
Accrued expenses 25,194 9,694
Accrued interest payable 11,581 9,614
Due to former officer - 1,340
Due to officer 21,622 21,622
------- -------
Total Liabilities 584,709 153,692
======= =======
Stockholders' Equity (Deficit):
Common stock ($.01 par value,
25,000,000 shares authorized,
5,234,117 shares issued and
outstanding at September 30, 2000;
4,149,117 shares at December 31, 1999) 51,741 41,491
Additional paid-in capital 8,638,557 3,214,594
Series A warrants subscriptions receivable - (269,500)
Unamortized consulting expense, net of
accumulated amortization of $2,641,617
at September 30, 2000 and $316,667 at
December 31, 1999 (593,783) (1,583,333)
Retained earnings (deficit) (8,189,097) (1,404,550)
--------- ---------
Total Stockholders' Equity (Deficit) (92,582) (1,298)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 492,127 $ 152,394
======= =======
____________________
The accompanying notes are an integral part of these financial statements.
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Sales:
Advertising revenue $ 19,970 $ 48 $ 37,720 $ 48
Domain name sales - 900 1,471 1,300
------ --- ------ -----
Total Revenue 19,970 948 39,191 1,348
Cost of sales - 630 1,050 910
------ --- ----- ---
Gross Profit 19,970 318 38,141 438
------ --- ------ ---
Other Expenses:
General and administrative 123,078 58,708 410,563 69,521
Marketing and license fees 113,194 5,716 374,787 7,286
Website costs 130,214 4,555 365,588 13,011
Advertising and promotion 87,497 1,480 340,720 19,052
Consulting fees 3,191,236 - 4,886,579 -
Interest expense 1,211 314 1,951 694
--------- ------ --------- ------
3,646,430 70,773 6,380,188 109,564
--------- ------ --------- -------
Net Loss (3,626,460) (70,455) (6,342,047) (109,126)
Beneficial Conversion Feature of Warrants - - 442,500 -
--------- ------ ------- -------
Net Loss on Common Stock $(3,626,460) $ (70,455) $(6,784,547) $ (109,126)
========= ====== ========= =======
Loss per Share:
Basic loss per share $(0.73) $(0.02) $(1.42) $(0.03)
==== ==== ==== ====
Diluted loss per share $(0.73) $(0.02) $(1.42) $(0.03)
==== ==== ==== ====
Basic common shares outstanding 4,953,682 3,777,117 4,775,969 3,777,117
========= ========= ========= =========
Diluted common shares outstanding 4,953,682 3,777,117 4,775,969 3,777,117
========= ========= ========= =========
____________________
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
2000 1999
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(6,784,547) $ (109,126)
Adjustment to reconcile net loss to net cash
used in operating activities:
Amortization 2,433,508 -
Interest income accrued on notes receivable (156)
Depreciation 2,625 -
Value of services by officers contributed
to paid in capital 112,000 -
Writedown of Investment 5,000 -
Beneficial conversion feature 442,500 -
Issuance of stock and stock options for services 2,525,563 -
Changes in assets and liabilities:
Increase in accounts receivable (1,385) (48)
Increase in stock subscriptions receivable - (1,400)
Decrease in prepaid expenses 739 -
Decrease in deposits 5,000 -
Increase in Domain names - available for sale (2,734) (27,577)
Increase in accounts payable 297,390 37,806
Increase in accrued expenses 15,500 4,694
Increase in accrued interest payable 1,967 -
-------- -------
Net cash used in operating activities (947,030) (95,651)
------- -------
Cash Flows from Investing Activities:
Purchase of equipment (7,104) -
Acquisition of investment (5,000) -
Purchase of website (20,000) (55,555)
------ -------
Net cash used in investing activities (32,104) (55,555)
------ -------
Cash Flows from Financing Activities:
Proceeds from sale of common stock and stock warrants 600,000 200,600
Principal payment of loan from former officer (1,340) -
Proceeds from officer loan - 21,622
Proceeds of notes payable 170,000 38,000
Principal payments- notes payable (52,500) -
Proceeds from collection of Series A warrants
subscribed for 269,500 -
------- -------
Net cash provided by financing activities 985,660 260,222
--------- -------
Net Increase in Cash 6,526 109,016
Cash, Beginning of Period 38,791 -
------ -------
Cash - End of Period $ 45,317 $ 109,016
====== =======
</TABLE>
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
For the Nine Months Ended
September 30, September 30,
2000 1999
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 139 $ -
=== ===
Taxes $ - $ -
=== ===
Supplemental Disclosures of Non-Cash Investing and
Financing Activity:
Purchase of website in exchange for common stock $ 400,000 $ 10,200
======= ======
Stock issued in exchange for notes receivable $ 18,750 $ -
======= ======
Value of consulting services exchanged for common
stock and warrants to purchase common stock $ 1,335,400 $ -
========= ======
___________________
accompanying notes are an integral part of these financial statements.
</TABLE>
<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 September 30, 2000 and the results of
operations for the three and nine months ended September 30, 2000 and 1999 and
the cash flows for the nine months ended September 30, 2000 and 1999.
The statements of operations for the three and nine months ended September 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 along with the SB-2 Registration Statement filed reflecting the
completed Stock Exchange Agreement and Plan of Merger between Nugget and
GoHealth.
NOTE 3
Earnings per share are based on the weighted average number of common shares
outstanding including common stock equivalents.
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 4
Depreciation of $875 and $2,625, respectively, for the three months and nine
months ended September 30, 2000 is included in general and administrative
expense. Amortization of $39,975 and $108,558, respectively, for the three
months and nine months ended September 30, 2000 is included in Website costs.
Consulting fees include amortization of $1,020,950 and $2,324,950,
respectively, for the three months and nine months ended September 30, 2000.
Depreciation and amortization was $ -0- for the three months and nine months
ended September 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. In
conjunction with such agreement, the Company has recorded, officer compensation
and paid in capital, of $36,000 and $112,000 for the three months and nine
months ended September 30, 2000, and zero for the three months and nine months
ended September 30, 1999.
NOTE 6
Notes Receivable
Notes receivable as of September 30, 2000 consist of the following:
Note receivable from Millenium Consulting $15,000
Note receivable from Gary Crooks 3,750
------
$18,750
======
Both Millenium Consulting and Gary Crooks are stockholders and warrant holders.
These notes, which bear interest at 10% per annum were paid by November 16,
2000. They were executed in exchange for common stock that was issued upon the
exercise of options and warrants on August 25, 2000.
NOTE 7
Notes Payable
Notes executed during the three months ended September 30, 2000 consisted of
the following:
Amount payable to a stockholder $25,000
======
Amount payable to a stockholder $50,000
======
Amount payable to a greater than 5%
stockholder $75,000
======
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7 (Continued)
The amount payable to a stockholder for $25,000 was executed on August 1, 2000,
bears interest at 5% per annum and was due on August 31, 2000, the amount still
is outstanding, and management has indicated that no demand for payment has
been received by the Company. Management also is confident that it can
successfully negotiate an extension of this note for an additional 120 days.
The amount payable for $50,000 to a stockholder was executed on August 30,
2000, bears interest at 10% per annum and is due on December 29, 2000. The
amount payable to the greater than 5% stockholder was executed on September 2,
2000, bears interest at 10% per annum and is due on January 3, 2001.
NOTE 8
On July 28, 2000, the Company entered into an agreement to purchase the assets
of a business involved in the alternative medicine information industry for
$12,500. The Company made an initial $5,000 payment and failed to complete the
transaction. As of the date of these financial statements management is unable
to effectively exercise control over this investment and consequently has
written down their investment to zero.
The Company had entered into an Agreement and Plan of Merger with a private
company which was not completed. The Company executed mutual releases with the
parties involved and according to management, has incurred legal fees in
connection with the transaction of approximately $7,000.
On July 13, 2000, the Company issued 100,000 shares of common stock to a private
company for services pursuant to an agreement to enter into a business
combination. This transaction was cancelled. The Company recognized
consulting expense of $437,500 based on the market price of its common stock on
the date these shares were issued, pursuant to the letter of intent underlying
this proposed combination.
On August 22, 2000, the Company filed a form S-8 to register 350,000 shares
issued to a consultant on July 24, 2000 for services rendered through that
date. The Company recorded $1,575,000 consulting expense based on the market
price of its common stock on the date these shares were issued.
On August 24, 2000, the Company reduced the exercise price from $2.00 to $1.00
per share on warrants to purchase 100,000 shares of common stock which were
issued to MCOM Management Corp. ("MCOM") pursuant to an existing consulting
agreement. On that same date MCOM exercised these warrants. The Company
recorded consulting expense of $148,500 based upon the change in the exercise
price of the warrants. This cost will be amortized over the remaining term of
this consulting agreement which is approximately two months.
On August 28, 2000, the Company entered into an agreement with a consultant in
which the consultant will provide technical services and support for the
Company 's website design and hosting business. This agreement is for a one
year term, and can be cancelled by either party upon thirty days written
notice. If not cancelled, the Company will be obligated to pay $25,999 over the
term of the agreement.
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 9
Subsequent Events
Pursuant to a consulting agreement entered into on April 20, 2000, the Company
was required to issue 25,000 shares of common stock to a consultant on October
1, 2000 and another 25,000 shares on November 1, 2000. These shares have not
yet been issued. The Company will recognize consulting expense in the fourth
quarter of 2000 based upon the market value of its common stock on the date
that the shares are issued.
On October 1, 2000 the Company entered into agreements with five consultants
for services to be rendered over a 1 year period. The Company issued 250,000
shares of common stock to these consultants on that date, and will recognize
$953,125 consulting expense based on the market price of its common stock on
the date of the agreements. This cost will be amortized over the term of these
agreements.
On October 20, 2000 the Company executed a letter of intent to enter into an
agreement with Prometrics Consulting, Inc., a Pennsylvania privately held
corporation ("Prometrics"). Under this agreement the Company issued 1,000,000
shares of its common stock to Prometrics. In exchange for these shares
Prometrics will provide the Company with comprehensive management and support
services including but not limited to legal, financial, human resources,
information technology services, real estate services, and web hosting services
for a period of three years. The Company will also own a 51% voting equity
interest in a corporation to be formed, GoHealthNetwoRx Inc. The remaining 49%
of this entity will be owned by Prometrics. GoHealthNetwoRx will be engaged in
master contract administration of professional services to early stage growth
companies. Included in this letter of intent is the requirement that the
Company issue to Prometrics an additional 1 million shares of common stock when
the cumulative revenue of the Company reaches $4 million over a three year
period. The Company will also be required to issue an additional 1 million
shares of common stock when the cumulative revenue of the Company reaches $8
million over a three year period.
<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 September 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.
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
[6]
<PAGE>
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 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.
[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 $19,970 and $37,720, respectively, for the
three and nine months ended September 30, 2000, as compared to $48 in
advertising revenues for the three and nine months ended September 30, 1999. We
had revenues from sales of domain names of $0 and $1,471 for the three and nine
months ended September 30, 2000, as compared to $900 and $1,300, respectively
for the three and nine months ended September 30, 1999. Our gross profit was
$19,970 for the three months, and $38,141 for the nine months, ended September
30, 2000 as compared to $318 and $438, respectively, for the three and nine
months ended September 30, 1999.
For the three months and nine months ended September 30, 2000, other
expenses totaled $3,646,630 and $6,380,188, respectively, which consisted of
the following:
Three months Nine months
Ended 9/30/00 Ended 9/30/00
Consulting fees: $3,191,236 $4,886,579
Advertising and promotion expenses: $ 87,497 $ 340,720
General and administrative expenses: $ 123,078 $ 410,563
Marketing and licensing fees
associated with the Healthmall.com
and the Healthsites.com websites: $ 113,194 $ 374,787
Website development costs related
to our Healthmall.com
and Healthsites. Com websites: $ 130,214 $ 365,588
Interest expense: $ 1,211 $ 1,951
For the three and nine months ended September 30, 1999, we incurred total
expenses of $70,773 and 109,564, respectively.
[8]
<PAGE>
As a result of the foregoing, we had a net loss of $3,626,460 for the three
months, and $6,342,047 for the nine months, ended September 30, 2000 as
compared to net loss of $70,455 for the three months and $109,126 for the nine
months, ended September 30, 1999. For the nine months ended September 30,
2000, we also incurred charges of $442,500, which resulted in a net loss to
common stockholders of $6,784,547 for the nine months, ended September 30,
2000. The charge was attributable to the beneficial conversion feature granted
to purchasers of warrants. The loss per basic and diluted share was $.73 for
the three months, and $1.42 for the nine months, ended September 30, 2000 as
compared to a loss $.02 per basic and diluted share for the three months, and
$.03 for the nine months, ended September 30, 1999.
Liquidity and Capital Resources
As of September 30, 2000, we had a working capital deficit of $474,424. 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 nine months ended September 30, 2000, we received
proceeds in the amount of $600,000 from the sale of shares of our common
stock and warrants to purchase our common stock. We have also received
$269,500 from the collection of subscriptions for Series A Warrants entitling
the holders to the purchase 269,500 shares of our common stock at $1.00 per
share.
For the nine months ended September 30, 2000, we used $947,030 from
operating activities. We also used $32,104 in investing activities which
consisted of the purchase of website assets for $20,000, purchase of assets
from another entity in the amount of $5,000 and the purchase of furniture and
equipment in the amount of $7,104.
For the nine months ended September 30, 2000, we received $985,660 from
financing activities, which included the proceeds from the sale of common stock
and stock warrants, the proceeds from the collection of subscriptions for
Series A Warrants, and loan proceeds, less repayment of certain notes.
As a result of the foregoing, for the nine months ended September 30,
2000, cash increased by $6,526 to $45,317.
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.
On August 1, 2000, we borrowed $25,000 for working capital from a
stockholder pursuant to a promissory note bearing interest at 5% per annum,
which was originally due on August 31, 2000. The note is still outstanding and
no demand for payment has been made. We believe that we can successfully
negotiate an extension of time in which to payoff this note.
[9]
<PAGE>
On August 24, 2000, we reduced the exercise price from $2.00 per share to
$1.00 per share on warrants to purchase 100,000 shares of common stock, which
were issued to MCOM Management Corp. ("MCOM") pursuant to a consulting
agreement on November 16, 1999. On that same date, MCOM exercised the
warrants.
On September 2, 2000, we borrowed $75,000 from Sandra Vernon, a principal
shareholder, and on August 30, 2000, we borrowed $50,000 from Kevin O'Donnell,
a shareholder and officer. The notes are due 120 days after their issuance and
bear simple interest at a rate of 10% per annum.
On July 13, 2000, we issued 100,000 shares of common stock to Prometrics
Consulting, Inc. as a break-up fee pursuant to the terms of an agreement,
which we terminated.
On July 24, 2000, we entered into a consulting agreement with Marc Sporn.
Pursuant to the agreement, Mr. Sporn agreed for a maximum period of three
years to provide assistance to GoHealth.MD in regulatory filings and press
releases, develop general plans for expansion of GoHealth.MD's business,
provide consulting services in developing GoHealth.MD's management structure,
and plan an acquisition strategy. In connection with the consulting agreement,
we issued 350,000 shares of our common stock, and on August 22, 2000 we filed a
Form S-8 registration statement registering said shares.
In September 2000, we entered into an agreement and plan of merger with
Herb Companion Press, Inc. After the end of September 30, 2000 quarter, we
agreed with Herb Companion Press, Inc. not to pursue the merger and terminated
the agreement and plan of merger.
Subsequent Events
On October 1, 2000, we entered into consulting agreements with five
individuals to provide various business and medical consulting services over a
one year period. Pursuant to the consulting agreements, we issued a total of
250 ,000 shares of our common stock.
On October 20, 2000, we entered into an agreement with Prometrics
Consulting, Inc., a Pennsylvania corporation ("Prometrics"). Pursuant to this
agreement, we issued 1,000,000 shares of our common stock to Prometrics in
exchange for: (i) Prometrics providing to GoHealth.MD for a period of three
years comprehensive management and support services to implement GoHealth.MD's
market strategies, including but not limited to legal, financial, human
resources, information technology services, marketing services, real estate
services, complete web hosting and network support services, full project
management services to support information technology infrastructure projects,
project management, public relations; and (ii) 51% of the voting equity
interests in a corporation to be formed by Prometrics(the remaining 49% of the
voting equity interests being owned by Prometrics), which is to provide master
contract administration of professional services to early stage growth
companies. We also have agreed to issue Prometrics an additional 1,000,000
shares of our common stock upon our cumulative revenues reaching $4 million
over a three year period, and an additional 1,000,000 shares of our common
stock upon our cumulative revenues reaching $8 million over a three year
period.
[10]
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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 September 30, 2000, we had a working capital deficit of $474,225. 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:
-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.
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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 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.
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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.
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
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.
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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.
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.
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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; &WP6-34;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.
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
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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.
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PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS OF FORM 8-K
(a)Exhibits
None
(b)Current Reports of Form 8-K
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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: November 17, 2000 By: /s/ Leonard F. Vernon
Leonard F. Vernon, President
(principal financial officer)
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