As filed with the Securities and Exchange Commission on April 14, 2000
Registration No. 333-94695
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2 to
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GoHealth.MD, Inc.
(Name of small business issuer in our charter)
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Nugget Exploration, Inc.
(Former name of small business issuer)
Nevada 7370 83-0250943
(State of jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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2051 Springdale Road
Cherry Hill, New Jersey 08003
(800) 204-1902
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Dr. Leonard Vernon, President
2051 Springdale Road
Cherry Hill, New Jersey 08003
(800) 204-1902
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices and name, address and telephone number
of agent for service)
Copies of Communications to:
Russell U. Schenkman, Esq.
Hale & Schenkman
13 Roszel Road, Suite C-225
Princeton, New Jersey 08540
Telephone: 609-452-0110
Facsimile: 609-799-1555
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each class Amount of securities Proposed Maximum Proposed maximum Amount of
of securities to be to be registered (1) Offering per share aggregate registration
registered offering price fee
<S> <C> <C> <C> <C>
Common Stock, 1,764,500 (2) $6,175,575(2) $3.50 (2) $1,600
par value $0.01,
per share
</TABLE>
(1) Represents the shares of common stock being registered for resale by the
selling securityholders.
(2)Includes common stock issuable upon exercise of warrants and options.
Pursuant to Rule 416, the shares of common stock offered hereby also include
such presently indeterminate number of shares of common stock as shall be
issued by us to the selling securityholder upon exercise of the warrants and
options. That number of shares is subject to adjustment under anti-dilution
provisions included in the warrants and options covering the additional
issuance of shares by GoHealth resulting from stock splits, stock dividends
or similar transactions.
(3)Estimated pursuant to Rule 457(c) and (g) under the Securities Act of 1933
solely for purposes of computing the amount of the registration fee. The fee
for the common stock was based on the average of the bid and ask price of the
common stock reported on the Over-the-Counter (OTC) Bulletin Board on
April 12, 2000
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant will file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CROSS REFERENCE SHEET
CAPTION IN FORM SB-2 CAPTION IN PROSPECTUS
- --------------------------------- ------------------------------------
1. Front of Registration State Front Cover
and outside front
cover of Prospectus
2. Inside front and outside back Inside Front
cover of Prospectus
3. Summary information and
Risk Factors Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Business
10. Directors, Executive Officers,
Promoters and Control Directors and Executive
Persons Officers
11. Security Ownership of Certain Security Ownership of Certain
Beneficial Owners and Management Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts
and Counsel Not Applicable
14. Disclosure of Commission
Position of Indemnification Indemnification for Securities
for Securities Act Liabilities Act Liabilities
15. Organization in last five years Not applicable
16. Description of business Business
17. Management's Discussion and
Analysis or Plan of Management's Discussion and
Operations Analysis or Plan of Operations
18. Description of Property Business
19. Certain Relationships
and Related Transactions Certain Relationships and
Related Transactions
20. Market for Common Equity
and Related Stockholder Market for Common Equity
Matters and Related Stockholder Matters
21. Executive Compensation Executive Compensation
22. Financial Statements Financial Statements
23. Changes in Disagreements
with Accountants on Changes in Disagreements
Accounting and Financial with Accountants on
Disclosure Accounting and Financial
Disclosures
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED APRIL ____, 2000
1,764,500 SHARES
GOHEALTH.MD, INC.
COMMON STOCK
1,764,500 shares of common stock are being offered by our securityholders
named under the heading "Selling Securityholders" appearing at page 20. We
will not receive any of the proceeds from the sale of common stock by the
securityholders. However, we will receive amounts upon exercise of outstanding
options or warrants.
Securityholders will pay sales or brokerage commissions or discounts with
respect to sales of their shares.
The shares of common stock described in this prospectus are for resale. The
shares offered are being registered due to GoHealth's obligation to those
securityholders. The securityholders may elect to sell shares of common stock
described in this prospectus through brokers at the price prevailing at the
time of sale or at negotiated prices. The common stock may also be offered in
block trades, private transactions or otherwise at prices to be negotiated.
Our common stock is traded on the National Association of Securities Dealers,
Inc., OTC Bulletin Board under the symbol "GOMD." On April 5, 2000, the price
for our common stock was $3.75 per share.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS,
SEE "RISK FACTORS" ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
April , 2000
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY 3
RISK FACTORS 7
SELLING SECURITYHOLDERS 20
USE OF PROCEEDS 21
PLAN OF DISTRIBUTION 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 23
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 27
BUSINESS 28
DIRECTORS AND EXECUTIVE OFFICERS 43
EXECUTIVE COMPENSATION 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 45
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 47
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS 48
DESCRIPTION OF SECURITIES 49
INDEMNIFICATION FOR SECURITY ACT LIABILITIES 50
LEGAL MATTERS 51
EXPERTS 51
FINANCIAL STATEMENTS F-1
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PROSPECTUS SUMMARY
This summary highlights certain information found in greater detail
elsewhere in this prospectus. In addition to this summary, we urge you to read
the entire prospectus carefully, especially the risks of investing in our
common stock discussed under "Risk Factors" before you decide to buy our common
stock.
OUR COMPANY
Overview
Our Company is incorporated in Nevada. Our executive offices are located at
2051 Springdale Road, Cherry Hill, New Jersey 08003, and our telephone number
is 800-204-1902. Our world wide web address is http://www.gohealth.md.
Information contained on our website is not part of this prospectus.
On November 10, 1999, our wholly-owned subsidiary merged into GoHealth.MD,
Inc., a Delaware corporation. 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
24, 2000, we changed our name to GoHealth.MD, Inc.
Our Business
For the period ended December 31, 1999 we did not conduct any significant
business and we only generated revenues of $1,380. Because of our lack of
prior operations, assets and industry position, we are 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
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- tools that permit users to personalize their on-line experience.
According to PC Data Online our Healthmall.com website had attracted over
381,000 unique users for the month of February 2000 and 129,000 unique users
for the month of January 2000. 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 believe that if we can establish network affiliates we will benefit from
these affiliate relationships through:
- broader exposure of our brand;
- higher volumes of traffic being driven to www.Healthmall.com; and
- revenues derived from distribution of our websites' content.
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.
On January 20, 2000, we acquired all the right, title and interest to the
Healthsites.com domain name from Prometrics Consulting, Inc. On March 23, 2000,
we introduced a new Internet search engine service using this domain name,
which assists both consumers seeking to quickly access specific healthcare
information and advertisers seeking to increase traffic to their website as
well as their visibility to consumers. Although we have not generated any
revenues to date from this website, our search service is designed to generate
revenue based on the number of consumer click-throughs resulting from an
advertiser's listing on our Healthsites.com(TM) website.
Our Market Opportunity
Healthcare is a large segment of the U.S. economy, and health, and medical
information is one of the fastest growing areas of interest on the Internet.
We believe that companies that establish a clear brand identity as a trusted
source of online healthcare information and services will have a significant
opportunity to capitalize on multiple revenue sources, including
direct-to-consumer advertising and e-commerce.
Our Business Model
Our objective is to establish Healthmall.com and Healthsites.com as a trusted
and comprehensive source of consumer healthcare information and services on the
Internet. 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.
We also intend to earn revenues by e-commerce transactions through a
contractual relationship with Dr. James Corea for the sale of vitamins and
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other nutritional products on the www.Healthyfirst.com website. No revenues
were earned in 1999 from this contractual relationship.
Our Strategy
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.
THE OFFERING
Shares registered in this Prospectus:
Warrants 839,500(1)
Options 335,000(1)
Shares 590,000
Total shares registered in this Prospectus: 1,764,000
Shares outstanding after the Offering: 5,474,103(2)
OTC Bulletin Board symbol: GOMD
(1) Under the terms of registration agreements between GoHealth and the
selling securityholders, GoHealth has agreed to register all shares of common
stock issuable upon exercise of warrants and options to purchase an aggregate
of 1,174,500 shares.
(2) Assumes exercise of all of the options and warrant, but excludes shares
issuable upon exercise of options and warrants not registered in this
prospectus.
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SUMMARY FINANCIAL DATA
The summary consolidated statement of operations data from the period ended
December 31, 1999 is derived solely from our audited consolidated financial
statements. For accounting purposes, the merger of our wholly-owned subsidiary
into GoHealth.MD, Inc., a Delaware corporation on November 10, 1999 was treated
as an acquisition of us by GoHealth.MD Inc., the Delaware corporation.
Accordingly, we changed our accounting year to the calendar year, the
accounting year of GoHealth.MD Inc., the Delaware corporation. The summary
financial data as of December 31, 1999 and for the period then ended
consolidate the accounts of the parent company and the wholly owned subsidiary.
You should read the following summary financial data in conjunction with the
financial statements and notes to those statements.
From February 23, 1999(date of inception)
to December 31, 1999
Statement of Operations Data:
Revenues $ 1,380
Net Loss (596,050)
Net Loss on Common Stock (1,404,550)
Basic and Fully Diluted
Loss Per Share (0.34)
Balance Sheet Data: At December 31, 1999
Cash & Cash Equivalents $ 38,791
Total Assets 421,894
Total Liabilities 153,692
Stockholder's Equity 268,202
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RISK FACTORS
Investing in the common stock involves certain risks. You should review these
"Risk Factors" beginning on page 7.
PLAN OF DISTRIBUTION
Selling securityholders may sell common stock in the over-the-counter market
or on any exchange on which our common stock is listed. Shares may also be
sold in block transactions or private transactions or otherwise, through
brokers or dealers. Brokers or dealers may be paid commissions or receive
sales discounts. The selling securityholders must pay their own commissions
and absorb the discounts. Brokers or dealers used by the selling
securityholders may be deemed to be underwriters under the Securities Act. In
addition, the selling securityholders will be underwriters under the Securities
Act with respect to the common stock offered.
This prospectus contains certain forward-looking statements which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified because the context of the statement includes works
such as "may," "will," "except," "anticipate," "intend," "estimate,"
"continue," "believe," or other similar words. Similarly, statements that
describe our future plans, objectives and goals are also forward-looking
statements. Our factual results, performance or achievements could differ
materially from those expressed or implied in these forward-looking statements
as a result of certain factors, including those listed in "Risk Factors" and
elsewhere in this prospectus.
RISK FACTORS
INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER THE FOLLOWING DISCUSSION OF RISKS AS WELL AS OTHER INFORMATION IN THIS
PROSPECTUS BEFORE EXERCISING WARRANTS OR OPTIONS. THE RISKS AND UNCERTAINTIES
NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY IMPAIR
OUR BUSINESS OPERATIONS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS COULD BE HARMED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
EXCEPT FOR HISTORICAL INFORMATION, THE INFORMATION CONTAINED IN THIS
PROSPECTUS AND IN OUR SEC REPORTS ARE "FORWARD LOOKING" STATEMENTS ABOUT OUR
EXPECTED FUTURE BUSINESS AND PERFORMANCE. OUR ACTUAL OPERATING RESULTS AND
FINANCIAL PERFORMANCE MAY PROVE TO BE VERY DIFFERENCE FROM WHAT WE MIGHT HAVE
PREDICTED AS OF THE DATE OF THIS PROSPECTUS.
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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 for the period ended December 31, 1999, we only
generated $80 in advertising revenues and $1,300 from the sale of .MD domain
names. 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.
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. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements for detailed information on our
extremely limited operating history.
We are a Development Stage Company and have a history of losses, negative cash
flow and anticipate continued losses.
In 1999, we sustained a net loss of $596,050 and incurred a charge of
$808,500, which resulted in a net loss to our common stockholders of
$1,404,500. We also used cash of $331,111 in our operating and investing
activities. 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. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We must establish, maintain and strengthen our brand in order to attract users
to our network and generate advertising.
In order to expand our audience of users and increase our on-line traffic, we
must establish, maintain and strengthen our brand. For us to be successful in
establishing our brand, healthcare consumers must perceive us as a trusted
source of healthcare information, and advertisers,
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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 advertising revenues of $80 for
the period ended December 31, 1999, 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. Most of our current or potential
advertising customers have little or no experience advertising over the
Internet and have allocated only a limited portion of their advertising budgets
to Internet advertising. 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. Such customers
may find Internet advertising to be less effective for promoting their products
and services relative to traditional advertising media. 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, Fact and Comparisons and
Screaming Media.com. 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 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
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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.
We depend on third party transactions and relationships, which are short-term
or terminable.
We depend, and will continue to depend, on a number of third-party
relationships to increase traffic on Healthmall.com and thereby generate
advertising and other revenues. Outside parties on which we depend include
unrelated website operators that provide, or we believe will provide, links to
Healthmall.com, providers of healthcare content and Burst! Media, L.L.C., the
on-line property representation company which provides us with advertising
sales services. Our arrangements with third-party Internet sites and other
third-party service providers generally are not exclusive and are short-term or
may be terminated at the convenience of either party. We cannot provide
assurances that the third parties regard these relationships as important to
their own respective businesses and operations. They may reassess their
commitment to us at any time in the future and may develop their own
competitive services or products.
Further, in order to expand our network, we may need to enter into strategic
alliances, which may involve the payment of significant funds for prominent or
exclusive carriage of our healthcare information and services. Such
transactions are premised on the assumption that the traffic obtained from
these arrangements will permit us to earn revenues in excess of the payments
made. This assumption is not yet proven, and if we are unsuccessful in
generating sufficient resources to offset these expenditures, we will likely be
unable to operate our business.
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.
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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.
Nevertheless, very soon we will need to change the host of our websites in
order to accommodate the increased traffic we have experienced on our website
as well as our projected future growth. 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 are currently
negotiating with a company to host our website, but have not entered into an
agreement as of this date. If we are unable to change the host of our
websites, our business will suffer.
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.
No assurance of success of Healthsite.com
We launched our Healthsites.com (TM) search engine service on March 23, 2000.
We may not be able to successfully commercialize this search service, which
would have a material adverse effect on our business. Moreover, upon
widespread commercial introduction, we may find that this program will not be
able to satisfactorily perform all of the functions for which it is being
designed or that it is not reliable or durable in extensive applications.
We have not yet commenced significant marketing activities relating to our
services and have limited marketing experience and limited financial, personnel
and other resources to undertake extensive marketing activities. Our future
ability to generate revenue from our Healthsites.com (TM)website will depend
upon our ability to get advertisers and generate traffic to the site. If we
are unable to enter into and maintain marketing agreements or arrangements
which generate significant traffic to our Healthsites.com (TM) website on
commercially acceptable terms, this aspect of our business will be damaged.
Even if we enter into strategic marketing agreements with third parties they
may not result in our ability to increase our revenues.
In order to provide high quality search results in response to search queries
by consumers, Healthsites.com (TM) will require supplemental search results to
display in addition to the search results paid for by our clients.
Supplemental search data is expected to constitute a very high percentage of
the search results displayed by Healthsites.com (TM). Since we just commenced
our website all of the results displayed by Healthsites.com (TM) are currently
provided by Nextopia Software Corporation. We are currently relying on
Nextopia as our sole source of supplemental search results displayed by
Healthsites.com. Pursuant to our agreement with Nextopia, which expires in
February 2001, and which is automatically renewable on a monthly basis
thereafter, we will be required to make minimum aggregate monthly payments for
supplemental search results. If we fail to make any required payments,
Nextopia. could terminate its services, which would result in a material
interruption of our operations until such time as we can obtain an alternative
source for such services. Alternative sources may not be available, and any
reliable third-party supplier will likely be a competitor.
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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 have applied for federal registration of the mark "GoHealth.MD" and
"Healthsites.com" as well as other service and trademarks we deem important to
our business. A potentially conflicting pending application has been made with
the US Department of Commerce's Patent and Trademark Office with regard to
"GoHealth.MD." If we lose our right to use this mark, we could be forced to
change our corporate name and adopt a new domain name. These changes could
confuse current and potential customers and adversely impact our business.
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. Litigation, which could result
in substantial cost to and diversion of our efforts, may be necessary (i) to
enforce any trademarks, or copyrights, (ii) to protect trade secrets or
know-how we own or to defend ourselves against claimed infringement of the
rights of others, or (iii) to determine the scope and validity of the
proprietary rights of others. Adverse determinations in litigation could
subject us to significant liabilities to third parties, could require that we
seek licenses from third parties and could prevent us from manufacturing,
selling or using our products, any of which could have a material adverse
effect on our business, financial condition and results of operations. We are
not currently a party to any litigation.
We have limited sales, marketing and management experience.
Although our President, Leonard F. Vernon, has experience in marketing other
products, he has only limited marketing experience with Internet products and
services. We will therefore need
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to hire sales and marketing personnel. There can be no assurance that such
personnel will be able to work effectively with Dr. Vernon.
Our capital requirements may require additional financing which may not be
available.
We estimate that we have sufficient cash resources to fund operations through
December 2000. If our cash resources prove to be insufficient at that time, or
prior to that time, we may be required to seek additional debt or equity
financing to fund the costs of continuing operations until we achieve positive
cash flow. We have no current commitments or arrangements for additional
financing and there can be no assurance that any additional debt or equity
financing will be available to us on acceptable terms, or at all. If we are
unable to satisfy our capital requirements, we may not be able to effectively
compete in the marketplace or continue operations.
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.
One of our control persons was previously subject to disciplinary action in the
medical industry.
Dr. Vernon has a previous disciplinary action by the New Jersey State Board of
Medical Examiners in which he was given an 18-month suspension of his license,
30 days of which were to be active with a monetary penalty of $3,000. Dr.
Vernon failed to perform the required community service and pay the fine and
the suspension was imposed for a full 18 months. This disciplinary action was
taken after the determination that Dr. Vernon's application to the Educational
Commission of Foreign Medical Graduates was misleading. Dr. Vernon currently
possesses an unrestricted license to practice chiropractic in the State of New
Jersey and there is no pending disciplinary action against him in any of the
states in which he is licensed.
No assurance that our business will be achieved or be able to sustain market
acceptance.
We have not undertaken formal market studies with respect to the market
potential for the services such as those we plan to offer and currently offer,
and none are planned. Therefore, there can be no assurance that our planned
business operations will achieve, or if achieved that it will be able to
sustain, market acceptance, or sufficient market acceptance to make our
operations commercially viable. Our failure to achieve market acceptance (or
sufficient market acceptance to
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make our operations profitable), would have a material adverse effect upon our
business and financial condition and could result in our failure to achieve, or
sustain, viable commercial operations of any kind in the future. In such
event, it is likely that investors herein would lose their entire investment.
Risks Related to Our Industry
Consumers and the healthcare industry must accept the Internet as a source of
healthcare content and services for our business model to be successful.
To be successful, we must attract to our websites a significant number of
consumers as well as other participants in the healthcare industry. To date,
consumers have generally looked to healthcare professionals as their principal
source for health and wellness information. Our business model assumes that
consumers will use healthcare information available on our network, that
consumers will access important healthcare needs through electronic commerce
using our website, and that local healthcare organizations will affiliate with
us. This business model is not yet proven, and if we are unable to successfully
implement our business model, we may not be able to continue our business.
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;
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- - 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.
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;
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- 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 the Healthyfirst.com
website. 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.
Our success depends on increased adoption of the Internet as a means for
commerce.
Our future success depends heavily on the acceptance and use of the Internet
as a means for commerce. The widespread acceptance and adoption of the
Internet for conducting business are likely only in the event that the Internet
provides businesses with greater efficiencies and other advantages. If
commerce on the Internet does not continue to grow, or grows more slowly than
expected, our growth would decline and our business would be seriously harmed.
Consumers and businesses may reject the Internet as a viable commercial medium
for a number of reasons, including:
- Potentially inadequate network infrastructure;
- Delays in the development of Internet enabling technologies and performance
improvements;
- Delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity;
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- Delays in the development of security and authentication technology
necessary to effect secure transmission of confidential information;
- Changes in, or insufficient availability of, telecommunications services to
support the Internet; and
- Failure of companies to meet their customers' expectation in delivering
goods and services over the Internet.
Reliance on Internet servers.
We rely on the Internet and, accordingly, depend upon the continuous, reliable
and secure operation of Internet servers and related hardware and software.
Recently, several large Internet commerce companies suffered highly publicized
system failures which resulted in adverse reactions to their stock prices,
significant negative publicity and, in certain instances, litigation. We have
also suffered service outages from time to time, although to date none of these
interruptions has materially adversely affected our business operations or
financial condition. To the extent that our service is interrupted, our users
will be inconvenienced, our commercial customers will suffer from a loss in
advertising or transaction delivery and our reputation may be diminished. Some
of these outcomes could directly result in a reduction in our stock price,
significant negative publicity and litigation. Our computer and communications
hardware are protected through physical and software safeguards. However, they
are still vulnerable to fire, storm, flood, power loss, telecommunications
failures, physical or software break-ins and similar events. We do not have
full redundancy for all of our computer and telecommunications facilities and
do not maintain a backup data facility. We do not have any type of business
interruption insurance to protect us in the event of a catastrophe. We also
depend upon third parties to provide potential users with web browsers and
Internet and on-line services necessary for access to our website. In the past,
our users have occasionally experienced difficulties with Internet and other
on-line services due to system failures, including failures unrelated to our
systems. Any sustained disruption in Internet access provided by third parties
could adversely impact our business.
Risks Relating to the Offering
There is a limited market for our common stock.
Currently only a limited trading market exists for our common stock. Our
common stock trades on the OTC Bulletin Board under the symbol "GOMD." The
Bulletin Board is a limited market and subject to substantial restrictions and
limitations in comparison to the NASDAQ system. Any broker/dealer that make a
market in our stock or other person that buys or sells our stock could have a
significant influence over its price at any give time. We cannot assure you
that the market in our common stock will be sustained. As a result, holders of
our common stock may be unable to readily sell the stock they hold or may not
be able to sell it at all.
Our stock price had been volatile
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The history relating to the prices of newly public companies indicates that
there may be significant volatility in the market price of our common stock.
More particularly, since trading began in January 1, 1999, the market price of
our common stock has fluctuated between a low of $.062 per share and a high of
$6.00 per share, a 9,600% variance. As a result, holders of our common stock
may be subject to wide fluctuations in the value of their investment.
Sales of common stock registered in this offering could cause a decline in our
stock price.
Assuming all shares registered in this offering are sold, we will have
5,474,103 shares outstanding after this offering is completed. In addition to
the shares to be sold under this offering, we have outstanding 2,900,000 shares
of "restricted securities" held by our officers and directors. The remaining
117,690 shares held by persons other than our officers and directors will be
available in the future for sale under Rule 144(k). Under Rule 144(k)
restricted securities may be sold by non-affiliates of GoHealth without
restriction on volume limits. All shares registered in this offering will be
freely tradable. If all of the 1,764,000 shares registered are issued it will
increase the available free trading shares as of the date of this prospectus by
approximately 274%. A significant amount of common stock coming on the market
at any given time could result in a decline in the price of such stock or
increased volatility.
Possible inability to sell in the secondary market.
In October 1990, Congress enacted the "Penny Stock Reform Act of 1990" to
counter fraudulent practices common in stock transactions of companies which do
not meet certain capital requirements, trading price requirements or listings
requirements. We currently do not meet such requirements and therefore stock
transactions involving our common stock would be subject to requirements of the
Penny Stock Reform Act including:
- - Brokers and/or dealers, prior to effecting a transaction in our common stock,
are required to provide investors with written disclosure documents containing
information concerning various aspects of the market for our common stocks as
well as specific information about our common stock and the transaction
involving the purchase and sale of the stock, such as price quotes and
broker/dealer and associated person compensation; and
- - Subsequent to effecting a transaction, the broker is required to deliver
monthly or quarterly statements containing specific information about our
common stock.
These requirements will most likely negatively affect the ability of
purchasers herein to sell our common stock in the secondary market, if any.
We have not declared and do not intend to declare dividends.
Any investor who purchases our common stock should not anticipate receiving
any dividends on their common stock at any time in the foreseeable future.
Payment of dividends is within the absolute discretion of our board of
directors and there can be no assurances that cash dividends will ever be paid
on the common stock or that their value will ever increase.We have not paid
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dividends nor, by reason of our contemplated financial requirements, do not
anticipate paying any dividends upon our common stock in the future.
Some of our stockholders own a significant amount of our common stock and can
exercise control over all matters submitted to a vote of shareholders.
As of March 28, 2000, Sandra Vernon, the wife of Leonard F. Vernon, William
Hanna and Kevin O'Donnell in aggregate beneficially own approximately 72% of
our common stock. As a result, these stockholders are able to exercise
significant influence, and in most cases control, over most matters requiring
approval by our stockholders, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying, deterring or preventing a change in control that
may otherwise be beneficial to you.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public over the Internet at the SEC's website at http://www.sec.gov.
We have filed a registration statement with the SEC on Form SB-2 to register
the shares being offered. This prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information
with respect to us and our common stock, you should refer to the registration
statement and to the exhibits and schedules filed as part of the registration
statement, as well as the documents discussed below.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update or supersede this information.
This prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a
contract or other document, you should read the copy filed as an exhibit to the
registration statement or incorporated in the registration statement by
reference.
We incorporate by reference any future filings we make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
all of the shares are sold.
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You may request a copy of these filings, at no cost, by writing to us at 2051
Springdale Road, Cherry Hill, New Jersey 08003, Attention: Leonard F. Vernon.
You can review and copy the registration statement, its exhibits and schedules
at the public reference facilities maintained by the SEC as described above.
The registration statement, including its exhibits and schedules, are also
available on the SEC's website.
SELLING SECURITYHOLDERS
The following table lists the selling securityholders, the number of shares of
common stock held by each selling securityholder as of the commencement date of
this offering, the number of shares included in the offering and the shares of
common stock held by each such selling securityholder after the offering.
1,174,000 shares included in the prospectus are issuable to the selling
securityholders upon the exercise of options or warrants.
<TABLE>
<CAPTION>
Shares of Common Ownership Ownership Percentage of
Stock Included in Before the after the Common stock owned
Name Prospectus Offering(6) Offering(7) after the Offering(8)(7)
<S> <C> <C> <C> <C>
MCOM Management Corp. 683,000 (1) 683,000 0 *
MCM Stork Fund, L.P. 100,000 100,000 0 *
Carribean Communications 20,000 20,000 0 *
Neil Messina 10,000 10,000 0 *
Cindy Dolgin 10,000 10,000 0 *
Gerald Golub 10,000 10,000 0 *
June Morfit 5,000 5,000 0 *
Alfred Molina 5,000 5,000 0 *
Robin Villani 5,000 5,000 0 *
Michael Fazio 2,000 2,000 0 *
Thomas Butterfield, Inc. 5,000 5,000 0 *
Jeffrey Morfit 20,000 20,000 0 *
Sandra Vernon 100,000 2,000,000 1,900,000 35%
Prometrics Consulting, Inc. 150,000(2) 150,000 0 *
Martin Ciner 20,000(3) 24,000 4,000 *
Michael Marks 15,000 23,000 8,000 *
Scott Hankinson 100,000(3) 108,000 8,000 *
Marketing Manag. Prof. 15,000(3) 19,000 4,000 *
Joseph McGowen 15,000(3) 19,000 4,000 *
Robert Lipinski 50,000(3) 54,000 4,000 *
Thomas Capato 10,000(3) 14,000 4,000 *
Frank Casey 15,000(3) 23,000 8,000 *
Anthony Iancale 2,000(3) 6,000 8,000 *
Thomas Flynn, Sr. 2,000(3) 10,000 8,000 *
Thomas Flynn, III 110,000(3)(4) 114,000 4,000 *
Dawn Polizzi 5,000(3) 9,000 4,000 *
Anthony Pietrafesa 10,000(3) 15,332 5,332 *
Mark Keminosh 8,000(3) 16,000 8,000 *
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Joseph DiGaetano 25,000(3) 29,000 4,000 *
Alexander Zlatnik 2,500(3) 10,500 7,500 *
Millennium Consulting, Inc. 30,000(5) 30,000 0 *
Gary Crooks 5,000(5) 5,000 0 *
John Madden 5,000(5) 5,000 0 *
Harvey Benn 150,000(5) 170,000 20,000 *
Frank Gettson 25,000(5) 45,000 20,000 *
J. Erick Kishbaugh 20,000(5) 44,000 24,000 *
</TABLE>
(1) Includes 450,000 shares issuable upon exercise of warrants.
(2) Includes 100,000 shares issuable upon exercise of options.
(3) Issuable upon exercise of Series A Warrants.
(4) Includes 100,000 shares issuable upon exercise of warrants.
(5) Issuable upon exercise of options.
(6) Consists of all shares owned by the selling securityholders as of March 31,
2000, plus the shares included in this prospectus.
(7) Assumes the sale of all shares registered in this offering.
(8) * Represents less than 1%.
We agreed with the selling stockholders to file with the Securities and
Exchange Commission, under the Securities Act of 1933, as amended, a
registration statement on Form SB-2, of which this prospectus is a part, with
respect to the resale of the shares of common stock, and have agreed to prepare
and file such amendments and supplements to the registration statement as may
be necessary to keep the registration statement effective for one year
following the date it is declared effective.
USE OF PROCEEDS
We will not receive any proceeds from the sale by the selling stockholder's of
the common stock offered by this prospectus. The shares of common stock will
be sold from time to time by the selling stockholders at prevailing market
prices. We will receive approximately $1,664,500 if all of the warrants and
options for underlying shares of common stock being registered are exercised.
We expect to use these proceeds, if any, for general corporate purposes.
PLAN OF DISTRIBUTION
The shares may be sold or distributed from time to time by the selling
stockholders or by pledgees, donees or transferees of, or successors in
interest to, the selling stockholders, directly to one or more purchasers
(including pledgees) or through brokers, dealers or underwriters who may act
solely as agents or may acquire shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices, which may be changed. The
distribution of the shares may be effected in one or more of the following
methods:
- - Ordinary brokers' transactions, which may include long or short sales;
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- - Transactions involving cross or block trades or otherwise on the OTC
Bulletin Board;
- - Purchases by brokers, dealers or underwriters as principals and resale by
such purchasers for their own accounts pursuant to this prospectus;
- - "At the market" to or through market makers or into an existing market for
the common stock;
- - In other ways not involving markets makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
- - Through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise); or
- - Any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales of shares in the course of hedging
the positions they assume with the selling stockholders. The selling
stockholder may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealer of the shares,
which shares may be resold thereafter pursuant to this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders, the purchasers of shares for whom
such broker-dealers may act as agent or to whom they may sell as principal, or
both (which compensation as to a particular broker-dealer may be in excess of
customary commissions). The selling stockholders and any broker-dealers acting
in connection with the sale of the shares hereunder may be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933,
and any commissions received by them and any profit realized by them on the
resale of shares as principals may be deemed underwriting compensation under
the Securities Act of 1933. Neither GoHealth nor the selling stockholders can
presently estimate the amount of such compensation, nor knows of any existing
arrangements between the selling stockholders and any other stockholder,
broker, dealer, underwriter or agent relating to the sale or distribution of
the shares.
We will not receive any proceeds from the sale of the shares pursuant to this
prospectus. We have agreed to bear the expenses of the registration of the
shares, including legal and accounting fees, and such expenses are estimated to
be approximately $73,100.
We have informed the selling stockholders that certain anti-manipulative rules
contained in Regulation M under the Securities Exchange Act of 1934 may apply
to their sales in the market
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and has furnished the selling stockholders with a copy of such rules and have
informed them of the need for delivery of copies of this prospectus.
The selling stockholders may also use Rule 144 under the Securities Act of
1933 to sell the shares if they meet the criteria and conform to the
requirements of such Rule.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONMANAGEMENT'S
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. 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. 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. On January 24, 2000, we changed our
name to GoHealth.MD Inc.
For the year ended December 31, 1999, our company had not conducted any
significant business. Because of our 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.
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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 hire four salespersons by the end of the second quarter of fiscal 2000 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
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in our operations and revenues, and any failure to do so could have a material
adverse effect on our operating results.
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 $80 and revenues from sales of .MD domain names
of $1,300 for the period from inception, February 23, 1999, to December 31,
1999. Our gross profit was $470, or 34% of sales.
Other expenses totaled $596,520, which consisted of the following:
- - Consulting fees in the amount of $331,867, consisting primarily of the
amortization of the value of the consulting agreement entered into with MCOM
Management Corp. on November 16, 1999 under we agreed to pay MCOM $5,000 per
month until October 2000 and MCOM was issued 300,000 shares of common stock
and warrants to purchase 500,000 shares of common stock, which was valued at
$1,900,000;
- - Advertising and promotion expenses in the amount of $115,876;
- -
General and administrative expenses in the amount of $87,894;
- - Marketing and licensing fees associated with the Healthmall.com website and
.MD domain names in the amount of $18,988;
- - Website development costs related to our Healthmall.com website in the amount
of $40,660; and
- - Interest expense in the amount of $1,235, principally from loans by William
Hanna, one of our officers and directors.
As a result of the foregoing, we had a net loss of $596,050. We also incurred
a charge of $808,500, which resulted in a net loss to common stockholders of
$1,404,550. The charge was attributable to the beneficial conversion feature
granted to the purchasers of Series A warrants, which Series A Warrants were
subscribed for in December 1999.
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The loss per basic and diluted share was $0.34.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
equity financing. As of December 31, 1999, we received cash proceeds in the
amount of $252,600 from the sale of shares of our common stock and warrants to
purchase our common stock. In addition, we received $50,000 from the exercise
of warrants to purchase 50,000 shares of our common stock.
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.
As of December 31, 1999, we had outstanding options and warrants to purchase
1,017,000 shares of our common stock at prices from $.50 to $2.50 per share and
subscriptions to purchase Series A warrants, which will entitle the holders to
purchase 269,500 shares of common stock for $1.00 per share until December 31,
2002.
During 1999, we acquired the following assets, which are an important part of
our business:
Healthmall.com Domain Name. This domain name was purchased on April 26, 1999
from Moiz Balkhi, trading as Computerized Professional Enrichment Services, for
$5,500 and the issuance of 2,000 shares of common stock and warrants to
purchase 2,000 shares of common stock for $2.50 per share until September 30,
2003, valued a $5,200.
Hlthmall.com Domain Name and Website. This domain name and associated website
was purchased on April 26, 1999 from Robert H. Savar for $20,000 and the
issuance of 2,000 shares of common stock and warrants to purchase 2,000 shares
of common stock for $2.50 per share until September 30, 2003 valued at $5,200.
As part of the agreement with Mr. Savar, we have agreed to use his company,
World Wide Web Communications, Inc., as the host for our Healthmall.com
website.
James Corea's Vitalabs. On December 13, 1999, we entered into an agreement
with Dr. James Corea, trading as James Corea's Vitalabs, under which we
purchased certain rights regarding the www. Healthyfirst.com website into
perpetuity for $25,000. Under the agreement, we are to receive 50% of the gross
profits after expenses generated from the Healthyfirst.com website.
We used $240,727 from operating activities. We also used $90,384 in investing
activities which consisted of: the purchase of website assets for $45,300; the
purchase of furniture and equipment in the amount of $6,009; and liabilities
assumed in connection with the merger of $39,075.
We received $369,902 from financing activities, which included proceeds from
the sale of common stock and stock warrants, proceeds of notes payable and
proceeds from officer's loan.
As a result of the foregoing, cash increased by $38,791 to $38,791.
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
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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 "Risk Factors" section above for more
information about risks that could affect our financial results.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
After the merger between a subsidiary of ours and GoHealth.MD Inc., a
Delaware corporation, we have retained the services of our merger partner's
independent certified public accountant, Samuel Klein & Co., as of December 1,
1999, for all of our needs. Jones, Jensen & Company, our previous accountant,
was dismissed by our board of directors on December 1, 1999, in connection with
the November 10, 1999 merger. This dismissal was unrelated to Jones, Jensen &
Company's competence, practices and procedures. Jones, Jensen & Company's
financial statement reports did not contain any adverse opinion or disclaimer
of opinion, but did include a going concern paragraph.
Jones, Jensen & Company has informed us that it will provide the SEC a letter
containing its position with the foregoing statements regarding our change in
certifying accountant.
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BUSINESS
Background
For the period ended December 31, 1999, we did not conduct any significant
business and we only generated revenues of $1,380. Because of our lack of
prior operations, assets and industry position, we are 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.
According to PC Data Online, our Healthmall.com website attracted over 381,000
unique users for the month of February 2000 and 129,000 unique users for the
month of January 2000. For February 2000, our website ranked number 13 among
all health sites on the web, and ranked number 1,671 among all websites. For
the month of February 2000, the average time spent on the website was 3 minutes
and 7 seconds and the page views per user was 6.2 pages. For the month of
January 2000, the average time spent on the website was 2 minutes and 24
seconds and the page views per user was 7.1 pages.
Over 60,000 people have registered with our Healthmall.com website by
requesting to receive our news letter electronically, or by participating in
our contest program regarding vitamin purchasing and utilization habits.
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 believe that if we can
establish network affiliates we will benefit from these affiliate relationships
through:
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- broader exposure of our brand;
- higher volumes of traffic being driven to www.Healthmall.com; and
- revenues derived from distribution of our websites' content.
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.
On January 20, 2000, we acquired all the right, title and interest to the
Healthsites.com domain name and website from Prometric Consulting, Inc. On
March 23, 2000, we introduced a new Internet search engine service, using this
domain name, which assists both consumers seeking to quickly access specific
healthcare information and advertisers seeking to increase traffic to their
website as well as their visibility and traffic to consumers. Although we have
not generated any revenues to date from this website, our search service is
designed to generate revenue based on the number of consumer click-throughs
resulting from an advertiser's listing on our Healthsites.com(TM) website.
Industry Overview
The Internet has become an important alternative to traditional media,
enabling millions of consumers to seek information, communicate with one
another and execute commercial transactions electronically. The number of
worldwide web users is expected to grow significantly in the future.
The Internet is distinct from traditional media in that it offers real-time
access to dynamic and interactive content and instantaneous communication among
users. These characteristics, combined with the fast growth of Internet users
and usage, have created a powerful, rapidly expanding direct marketing and
sales channel. Advertisers can target very specific demographic groups, measure
the effectiveness of advertising campaigns and revise them in response to
real-time feedback. We believe that all participants in the healthcare industry
will benefit from the Internet because of its unique attributes as an open,
low-cost and flexible technology for the exchange of information and execution
of electronic transactions. Portals, such as AOL, Excite, the Go Network,
Lycos, MSN and Yahoo!, have established themselves as leading pathways for a
broad variety of information. Users are augmenting these portals with
subject-specific vertical portals, which are becoming one of the fastest
growing segments of the Internet. These vertical portals are using brand
awareness driven by high quality topical content and significant market
resources to establish themselves as destinations for highly concentrated
groups of users.
In addition, on-line communities have emerged that allow users with similar
interests to engage in interactive activities. Until recently, use of the
Internet consisted mainly of users seeking one-way, static information on
topics of interest to them. Technologies have recently been developed which
allow users greater flexibility to create and personalize content, communicate
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with users having similar interests and engage in other interactive activities.
We believe that on-line communities are particularly relevant to users
interested in healthcare issues, since medical information is often complex and
users value communication with peers who face, or have faced, the same health
conditions, leveraging the aggregated community to benefit each member.
Healthcare is large segment of the U.S. economy, and we believe health and
medical information is one of the fastest growing areas of interest on the
Internet. We believe that companies that establish a clear brand identity as a
trusted source of on-line consumer healthcare information and services will
have a significant opportunity to capitalize on multiple revenue sources,
including direct-to-consumer advertising and e-commerce.
Business Strategy
Our primary objectives are to establish Healthmall.com as a trusted and
comprehensive source of consumer healthcare information and services on the
Internet and to establish our new Healthsites.com search engine as a
comprehensive search engine for healthcare. Our secondary objective is to
provide various healthcare practitioner services over the Internet. Our
business strategy incorporates the following key elements:
Establish the Healthmall.com Brand. To create a strong brand by empowering
individuals to better manage their personal health. We also intend to enhance
our brand through the establishment of associations with notable leaders in the
consumer healthcare field. We currently have one association with radio
personality Dr. James Corea, who has a radio show which is aired in the
Philadelphia metropolitan area. We are currently engaged in a campaign to
increase awareness of the Healthmall.com. brand among consumers, healthcare
professionals, and other websites. We intend to allocate significant amount of
our available resources to further develop and build brand recognition through
on-line advertising, general advertising, strategic alliances and other
marketing initiatives.
Provide Consumers with Healthcare Content of High Quality. On our
Healthmall.com website, we currently provide our users with high quality
healthcare content, including information on acute ailments, chronic illnesses,
nutrition, fitness and wellness, and access to medical databases, publications,
and real-time medical news.
Syndicate Content Through Affiliates to Promote Traffic Growth. We have
entered into an agreement with Dr. James Corea to operate and provide content
to the website Healthyfirst.com. We are also negotiating a nonexclusive
agreement with Pharmor Corporation, a leading pharmacy chain, to use
Healthmall.com as a source for consumer healthcare content on their website
www.pharmor.com. We plan to expand our network by continuing to establish
relationships with affiliates that have the ability to direct additional users
to our website.
Provide Consumers with Unique Features and Tools. Our Healthmall.com website
is designed to provide easy access to innovative features and tools. We intend
to continue to add useful tools to enable our users to personalize their
on-line experience. We believe that our tools and features will continue to
encourage users to visit our website frequently and increase the likelihood of
users selecting Healthmall.com. as their preferred website for health-related
issues.
Provide an Attractive Advertising Site. We believe our ability to target
specific users, the interactive nature of our website and the demographic
characteristics of our users will be
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attractive to pharmaceutical, healthcare and other companies that advertise on
the Internet. By identifying users interested in a particular health-related
topic or who desire to address a particular health condition, we believe we can
deliver advertising in a highly targeted manner, thereby commanding higher
advertising rates.
Healthmall.com
Healthcare Information.
Our goal is to provide consumer-focused healthcare information for the
health-conscious public, individuals with a health condition, and individuals
who have recovered from illness or injury, all at a level the average consumer
can understand. Our current focus is on alternative healthcare. We currently
provide a variety of healthcare content, including information on acute
ailments, chronic illnesses, nutrition, fitness and wellness, as well as
alternative healthcare, and access to medical databases, other publications,
and real-time medical news. To encourage interactivity, we provide links to
relevant communities and other features from each content page. Examples of
healthcare information that we currently provide include:
Information Sources
----------- -------
- - Physician-authored articles on common Produced in house
medical conditions
- - Updated health-related news and PRNewswire
editorials on topics of current interest
- - Medline medical article search National Library of Medicine
- - Information regarding the interaction Facts and Comparisons
among various drugs and other substances
- - Information on pharmaceuticals and Facts and Comparisons
over-the-counter drugs
- - Healthcare news and research information Screaming Media.com
PR Newswire. We have a nonexclusive contract with PRNewswire under which we
are provided healthcare and pharmaceutical news releases free of charge in
exchange for having PRNewswire as the exclusive corporate newswire on our
website for a period of one year.
National Library of Medicine. We obtain public information from the National
Library of Medicine free of charge and co-branded it on Healthmall.com.
Facts and Comparisons. We are provided content based on a deposit which we
have paid for a contract. We are currently negotiating a nonexclusive one-year
renewable contract. We do not believe that Fact and Comparison has contracted
with other websites, however, it may do so in the future.
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Screaming Media. We have entered into a one year renewable custom content
agreement commencing on April 1, 2000 for health related content for the
website.
We expect that competitive factors will create a continuing need for us to
improve and add to our healthcare content. Accordingly, we intend to seek
additional sources of healthcare information and expand the breadth of our
content offerings. We cannot provide assurances that we will be able to
maintain relationships with third parties that supply us with content. If we
lose a provider of content and are not able to replace them our Healthmall.com
website will be adversely affected.
Tools.
We currently provide several interactive tools and intend on developing other
tools. We believe our tools and features will enable us to obtain and retain
users. To enhance the experience of our current and future users, we intend to
develop additional tools and features. Examples of tools that we have already
developed include:
Drug Herb Interaction Guide. Our drug herb interaction guide, allows users to
quickly and easily search for potential interactions of prescription and
over-the-counter drugs with herbal remedies and vitamins.
Check Your Medication. This tool enables the user to search for prescription
drugs by brand or generic name, and then displaying various information in
English or Spanish about the drug. Examples of the displayed information are:
the intended clinical use of the drug, the drugs side effects, and certain
precautions about using the drug.
Body Mass Index Calculator. This tool calculates the body mass index of a
person based on information that the user provides. The body mass index is
then used to determine whether a person is overweight or obese.
Site Search. This tool allows users to search the entire Healthmall.com
website for specific health and medical information. We also provide access to
Medline, a large database of medical information provided by the National
Library of Medicine.
Physician Databases. We provide to consumers access to a database containing
over 375,000 physicians names, address and specialties. This database is
provided to us, without cost, from Med.NA, Inc.
Health Food Store Database. Healthmall.com features a large database of
health food stores. This searchable database contains more than 5,000 health
food stores in the United States and includes their name, address and phone
number. The database is routinely updated and expanded.
Contest. We recently commenced a contest on our Healthmall.com website
whereby users who register and complete a questionnaire receive a bottle of
vitamins free of charge and are eligible to win a one year supply of vitamins
of up to $600 annually. This promotion is conducted in conjunction with
Pharmor Corporation. Information from questionnaires are added to our
database. In the future we may offer other contests or change the terms of the
current contest.
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Health Risk Assessments. We recently introduced an interactive questionnaire
providing users a quick and easy way to assess their health and find corrective
measures they can take to reduce health-related risks.
Listed below are some of the tools that we are presently developing.
Deployment of these tools will involve our successful acquisition and
integration of the required content and related technology. We cannot assure
you that these tools will be successfully deployed on a timely basis, or at
all, or that users will find these features attractive.
Healthmall.com Personal Medical Record. We plan to offer a personal medical
record which will allow users to establish and maintain a lifelong record of
personal health and medical information in a secure portion of our database. We
presently plan to add a personal medical record feature to our website in the
second half of 2000.
My Disease. This product is intended to allow consumers to receive email
newsletters with health news and information tailored to their specific needs.
We presently plan to add this tool to our website in the second half of 2000.
Recipe Database. This feature is intended to provide a customized, searchable
database of recipes meeting specific dietary requirements of the user, such as
low-fat, low-salt diets. We presently plan to add this tool to our website in
the second half of 2000.
Affiliate Relationships
Dr. James Corea - Healthyfirst.com. On December 13, 1999, we entered into an
agreement with Dr. James Corea, trading as James Corea's Vita-labs, under which
we have purchased the following rights into perpetuity:
- to operate, manage and host Dr. Corea's www.Healthyfirst.com website;
- to design or redesign the website;
- to add additional content to the website;
- to establish hyperlinks to the website; and
- to solicit and sell advertising on the website and advertise and market the
website on search engines.
Under the agreement, we are to receive 50% of the gross profits after expenses
generated from the Healthyfirst.com website.
Healthyfirst.com is a health information site that is targeted towards
listeners of Dr. James Corea's radio show which is aired in the Philadelphia
metropolitan area . The site has a shopping cart which allows the visitor to
purchase vitamins and other nutritional products. All other requests by a
visitor for information as well as use of interactive tools are linked to
Healthmall.com.
Pharmor Corporation. We are conducting a vitamin contest in conjunction with
Pharmor Corporation. We are also negotiating a nonexclusive agreement with
Pharmor Corporation to use
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Healthmall.com as a source for consumer healthcare content on their web site
www.pharmor.com.
Chat Room
We currently operate a single chat room conducted by Dr. James Corea and
sponsor by Pharmor Corporation. Since January 1, 2000, we have conducted one
chat session in which 31 visitors posted questions. We plan on further
expanding the chat room and developing others.
New Business-Healthsites.com (TM)
On January 20, 2000, we acquired all the right, title and interest to the
Healthsites.com domain name from Prometrics Consulting, Inc.
Healthsites.com(TM), which went on-line on March 23, 2000, is designed to
assist both consumers seeking to quickly access specific healthcare information
and advertisers seeking to increase traffic to their website as well as their
visibility and traffic with consumers.
Industry Overview
Internet advertisers rely on websites providing web directories or "search
engines" as one of the means of supplying an audience for their websites and
advertising message. These search services enable consumers to search the
Internet for a listing of web sites matching a descriptive word or phrase. We
believe that search services are one of the tools on the Internet frequently
used by persons seeking to obtain information about offerings of products and
services. As a result, websites providing search services typically offer
advertisers exposure to the Internet audience. These websites frequently offer
advertisers the opportunity to target consumer interests based on keyword or
topical search requests.
We intend to tailor our array of services to improve the consumer search
experience and more effectively link healthcare advertisers with their target
consumers. We believe that the pay per visitor business model is becoming more
important to online marketers and that corporate managers will seek out
promotional alternatives or supplements to banner advertisements. As a result,
we believe that companies seeking more effective ways to drive qualified
traffic to their corporate web sites may increasingly include the goal of
gaining higher placements on search engines in their strategy.
Strategy
We have designed our new search service to generate revenue based on the
number of consumer click-throughs resulting from an advertiser's listing on our
Healthsites.com(TM) web site. The click-through rate will be determined by an
auction among advertisers bidding on the same words or phrases. We anticipate
that the Healthsites.com(TM) search service will also generate additional
revenue from banner advertising to be placed on search result pages.
Search results on the Healthsites.com(TM) search service will be rank-ordered
through a competitive bidding process in which each advertiser's bid will
represent the amount it will pay
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Healthsites.com(TM) for each consumer click-through. The advertiser with the
highest bid will be listed first in the search results, with the remaining
advertisers appearing in descending bid amount order. Since advertisers must
pay for each click-through to their website, we expect that they will select
and bid only on those search words or phrases that they believe are most
relevant to their business offerings.
Advertisers desiring placement within the same search categories will bid
against one another for prime placement, with the winning bid being at least
$.01 greater than the next highest bid. The bid rate refers to the price an
advertiser will pay for each click-through on the category search result page.
Healthsites.com(TM) clients will pay only for traffic generated by the listing
placement. Healthsites.com(TM) will allow advertisers to target as many key
words as they wish with the resources they deem appropriate to attract
customers. For example, a client may have 20 different search word placements,
but decide it needs to be ranked first for only 5 of these word searches, with
the remaining 15 words having a fourth place ranking.
Websites that do not commercially offer healthcare products or services for
purchase by consumers (such as those sponsored by government or charitable
organizations) will generally be ranked below commercial websites in search
results generated by the Healthsites.com search service because we believe that
such data constitutes non-relevant information or "clutter" for consumers who
are seeking commercial websites from which they can actually purchase goods or
services. We do not prominently inform visitors to our web site that
non-commercial websites are not prioritized by our search service. We do not
believe that either our failure to prioritize such information or to inform
visitors that we do not prioritize this information will have any adverse
effect on a visitor's perception of our website or on our business. Because of
our policy of reducing clutter on our web site, we will also limit the number
of banner advertisements appearing on the Healthsites.com(TM) search result
pages. Our focus is to provide a healthcare search service for consumers that
will be easy to navigate and return the most relevant results for each
category. We intend for our website to be user-and advertiser-friendly.
We have recently entered into a one year agreement, with automatic one month
renewals thereafter, with Nextopia Software Corporation, a data information
provider, to provide supplemental data for the Healthsites.com(TM) search
engine so that consumers will receive comprehensive search results in response
to their search queries. Utilizing Nextopia's database of websites,
Healthsites.com(TM) can display search results in addition to the listings paid
for by our advertisers.
Cross Marketing
The advertisers who utilize our Healthmall.com are a source of potential
clients for our Healthsites.com(TM). Thus, our strategy to obtain clients for
Healthsites.com(TM) includes extensive cross-marketing. In addition, we intend
to market our consumer base from Healthmall.com to increase revenue from
existing clients by generating more click-throughs to our clients' web sites
and to attract new clients. We intend to create this base through promotion
and strategic marketing programs.
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Healthcare Practitioner Services
As a secondary objective we provide Internet related services to healthcare
practitioners through website development, directory listings and .MD domain
names. We initially believed that registering and hosting .MD domain names
would be an important revenue generation part of our business. We have
recently concluded otherwise and have changed the focus of our business
strategy to healthcare websites rather than the registration of .MD domain
names and other healthcare practitioner services that are not directly related
to the websites.
Website Development and Hosting.
We establish an online presence for the chiropractor by developing a website
as well as an e-mail account for the chiropractor. This online presence will
be performed free-of-charge for the first six months. At the end of the six
months, the chiropractor will have the option of staying online for an annual
fee of $150.00 or terminate the service. We have established, or are in the
process of establishing, websites for over 200 chiropractors. No chiropractor
has paid us any fees, since no chiropractor has had an online presence for six
months. Depending on the success of this service with chiropractors, we may
offer similar options for other healthcare practitioners.
Directory Listings
On our website www.healthmall.com, we have created directories for licensed
chiropractors, massage therapists and licensed naturopathic doctors. The
directories include the name, address and phone number of the healthcare
practitioner. We currently have approximately 3,700 licensed chiropractors,
20,000 massage therapists and 3,000 licensed naturopathic physicians listed on
these directories. The information on these directories is derived from
various professional membership directories as well as voluntary requests to be
included in the directories. To date, 175 chiropractors have requested to be
included on the directory. All of the database directories are searchable by
name, address, city, state or zip code. In addition, we license from Med.NA,
Inc., at no cost to us, a directory of over 375,000 licensed medical doctors
and doctors of osteopathic medicine which includes in addition to the doctor's
name, address and telephone number, the type of insurance which the doctor par
ticipates and which can be searched by medical specialty. A doctor can log on
our website and register with MedNA to have his/her name added to the
directory.
.MD Domain Names
We register and host .MD domain names directly from our Internet website,
located at www.GoHealth.MD. Anyone can access this site and register for an
available domain name with the .MD extension. We have a strategic alliance
with a Florida company, Domain Name Trust, Inc., which has a licensing
agreement with the country of Moldova, a small Eastern European country which
was assigned a monopoly over the ".MD" top-level domain extension by the
Internet Assigned Numbers Authority, a United States government agency, in
conjunction with the United Nations' International Organization for
Standardization.
We derive revenues from the registration of .MD domain names from our website
www.GoHealth.MD. On our www.GoHealth.MD website, a person can enter a name that
they
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want to register for a one year period. The annual cost is $299. Currently
under our agreement with Domain Name Trust, as a result of our making a $10,500
prepayment ($35 per domain name), we will receive $235 for the first 300 domain
names which are registered through our website after January 1, 2000. We have
registered four domain names under this program. After 300 domain names are
registered, we are to receive $100 for each domain name registered at our
website. In addition, we will receive $50 per year for the renewal of each
domain name initially registered on our website.
Revenue Opportunities.
Our company is a development stage company and as of December 31, 1999 we have
not conducted any significant operations. Our operating strategy is presently
comprised of three primary means of generating revenue:
- advertising;
- content syndication; and
- electronic commerce.
Advertising. The healthcare industry spends billions of dollars every year to
market products and services to consumers. We believe that health portals and
other vertically focused websites are uniquely positioned to attract a
significant share of these advertising expenditures. By identifying users
interested in a particular health-related topic or who desire to address a
particular health condition, we believe we can sell advertising in a highly
targeted manner, thereby commanding higher advertising rates.
Merchants can purchase advertising on our website in two ways. Banner
advertising is generally sold based on the number of impressions received by
the advertisement and its position on the website. This type of advertising
frequently encourages the user to move to other web pages which describe the
advertiser's product and solicit a direct response from the user. Sponsorships
are contracts that typically grant advertisers rights to promote their products
on a specific portion of the website. Sponsorships are designed to support
broad marketing objectives, including brand awareness, product introductions,
research and transactions, generally on an exclusive basis. Accordingly,
sponsorships are sold based on their duration, the portion of the website
sponsored and the number of impressions delivered.
We have entered into an agreement with Burst Media, an advertising agency that
sells advertising space on the Internet for websites. In addition, we directly
solicit potential advertisers. The actual rates vary that we receive vary from
advertiser to advertiser. Our agreement with Burst Media provides that Burst
Media retains 40% of the advertising revenue that they generate. For February
2000, 7,336 users have clicked on our advertising sites on Healthmall.com as
compared to 4,534 users for January 2000.
We are at varying stages of establishing links with websites possessing easy
to remember domain names. Since launching the Healthmall.com website, we have
developed advertising relationships with the following companies:
Onhealth.com., Drkoop.com, Pharmor.com, Natraflex, The Simple Truth.com,
Vivacity.com, Nature's Source's, Permalean, Nutriceutical Technology
Corporation, Northeast Health Institute and Nourishing Foods, Inc.
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Content Syndication. We plan to enter into agreements and establish
relationships with other companies to generate revenues and traffic growth to
our website. Our current content agreements generally stipulate that all
content provided by Healthmall.com must retain a legend indicating "Provided by
Healthmall.com: and is subject to an acceptable use policy that defines how and
where the content may be used. Editorial content and/or content control
generally remain the exclusive right of the healthmall.com network. We believe
that by allowing other high-traffic websites and portals to offer our content
we will gain broad exposure of our brand and drive high volumes of traffic to
the healthmall.com website, thereby allowing us to generate more advertising
revenues.
E-Commerce. We currently provide users with the ability to access a
nutritional and vitamin products through our operation of the Healthyfirst.com
website with Dr. James Corea. Under our agreement with Dr. Corea, we receive
50% of the gross profits after expenses generated by the website. We may
develop other e-commerce opportunities in the future.
Marketing
We will be seeking distribution relationships with leading search engines and
portal companies, as well as with major Internet access providers. Distribution
relationships serve to build our brand and drive traffic to the Healthmall.com
website. By increasing our brand exposure and traffic through distribution
relationships, our goal is to have Healthmall.com become an effective means for
advertising healthcare products on the Internet. We have submitted our URL to
all major search engines at no cost to us. In addition, we have listed our
Healthmall.com website on the following search engines for which we pay a fee:
- Goto.com search engine. We pay a monthly fee of approximately $10,000 to
Goto.com for our Healthmall.com website. Goto.com is a pay for position
search engine which allows individual websites to bid for a position in
the search engine with regard to certain key words. The highest bid goes
to the top of the list for a particular word.
- Alta Vista search engine. We have rankings the direct traffic to our
Healthmall.com website from the ALTA VISTA search engine as well as search
engine positioning with the entity known as REAL NAMES. We anticipate
paying approximately $1,000 on an annual basis for approximately 10
keywords which appear on the ALTA VISTA search results.
We intend to distribute and advertise our websites and services through major
trade shows. As an example, we have participated in the Natural Health Food
Expo in October 1999 in Baltimore, Maryland, as well as the Florida
Chiropractic Association convention in December 1999 in Naples, Florida. We
also plan to attend large state medical conventions that offer large physician
attendance.
We also use mailing lists, as well as E-mail and various selective media
outlets, such as the Journal of the American Medical Association and other
largely circulated medical and speciality medical journals, such as the Journal
of the American Chiropractic Association. We may eventually expand our
marketing in the field of dentistry and podiatry.
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Sales and Support Organization
We currently do not have any sales staff. All our selling efforts to date have
been conducted by our President and sole employee, Leonard F. Vernon. Our goal
is to hire four persons as sales staff. Our longer term goal is to divide the
country into four regions, each with a sales manager and a sales team of two to
four member under each sales manager. An inside sales person is also expected
to be added to handle orders from customers, as well as provide customers with
literature and product information.
Competition
A large number of Internet companies compete for users, advertisers, e-
commerce transactions and other sources of on-line revenue. The number of
Internet websites offering users healthcare content, products and services is
vast and increasing at a rapid rate. In addition, traditional media and
healthcare providers compete for consumers' attention both through traditional
means as well as through new Internet initiatives. We believe that competition
for healthcare consumers will continue to increase as the Internet grows as a
communication and commercial medium.
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.
We believe that competition in our industry is based primarily on:
- - the quality and market acceptance of healthcare content;
- - brand recognition;
- - the quality and market acceptance of new enhancements to current content; and
- - features and tools.
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Our competitive position in our market as compared to our competitors is
difficult to characterize due principally to the variety of current and
potential competitors, the emerging nature of the market, and our being in the
market for only a short period of time. We believe that our markets are still
evolving, and we cannot assure you that we will be able to compete
successfully.
Additionally, many of our competitors are likely to enjoy substantial
competitive advantages compared to our company, including:
- the ability to offer a wider array of on-line products and services;
- larger production and technical staffs;
- greater name recognition;
- larger customer and user bases; and
- greater financial resources.
To be competitive, we must respond promptly and effectively to the challenges
of technological change, evolving standards and our competitors' innovations by
continuing to enhance our products and services, as well as our sales and
marketing channels. Increased competition could result in a loss of our market
share or a reduction in our prices or margins, any of which could adversely
affect our business. Competition is likely to increase significantly as new
companies enter the market and current competitors expand their services
Business Interruptions
Our operations are dependent on our ability to protect our computer equipment
against damage from fire, earthquakes, power loss, telecommunications failures
and similar events. A significant portion of our computer equipment, including
virtually all of our equipment devoted to our Internet services, is located at
the facilities of World Wide Communications, Inc. in Cherry Hill, New Jersey.
Any equipment damage or failure that causes interruptions in our operations
could have a materially adverse effect on our business. We do not have an
insurance policy covering such interruptions, although we are investigating
such coverage.
Additionally, Year 2000 problems may disrupt our operations which could result
in lost revenues and increased operating costs. Because our business depends on
computer software, we have assessed the Year 2000 readiness of our systems. We
are satisfied with our state of readiness, but we cannot make any assurances
that we will avoid the Year 2000 problem. Any problems arising from Year 2000
complications could potentially result in lost revenues and increased costs.
Security Risks
Our software and equipment are vulnerable to computer viruses or similar
disruptive problems caused by our customers or other Internet users. Computer
viruses or problems caused by third parties could lead to interruptions, delays
or cessation in service to our customers. Furthermore, inappropriate use of
the Internet by third parties could also potentially jeopardize the security of
confidential information stored in the computer systems of our customers. We
do not have product liability or other insurance to protect against risks
caused by computer viruses or other
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misuse of software or equipment by third parties. Although we attempt to limit
our liability to customers for these types of risks through contractual
provisions, no assurances can be given that these limitations will be
enforceable or effective.
We retain confidential customer information in our database. Therefore, it is
critical that our facilities and infrastructure remain secure and are perceived
by consumers to be secure. Despite the implementation of security measures,
our infrastructure may be vulnerable to physical break-ins, computer viruses,
programming errors or similar disruptive problems. A material security breach
could damage our reputation or result in liability.
Technology And Systems
Our websites are hosted by World Wide Web Communications, Inc. at their
facilities in Cherry Hill, New Jersey, with what we understand are the latest
Internet hardware and software technologies. In connection with our acquisition
of the hlthmall.com website from Robert H. Savar, we entered into a contract
with World Wide Web Communications, Inc. under which we pay a monthly fee for
web hosting services.
Exodus IT-class co-location facilities provide a secure, high availability and
high bandwidth space for our servers. This includes redundant OC-3 and OC-12
backbone connections to the Internet, uninterruptible power supplies with
diesel generator backup, all housed in a copper-lined, earthquake-proof
building. Direct connections via "T-1" and DSL lines allow the main office to
connect seamlessly and reliably to the servers and the Internet. A farm of
Intergraph IS-8000 and IS80 mission-critical servers are housed behind a
redundant F5 Big/IP switcher for complete software and hardware fault
tolerance and load leveling. These servers run Microsoft Windows NT Enterprise
Server with Internet Information Server 4.0, Active Server Pages with a
proprietary page caching system and publishing tools for Web page hosting and
production management. All advertisement hosting and reporting is handled
through NetGravity Ad Server, a powerful ad management and forecasting
toolset.
Our Health Risk Assessments tool utilizes Microsoft SiteServer tools and
technologies, which provides customized web crawling, user profile management,
nightly process runs and e-mail support.
Microsoft SQL Server databases are heavily used for all content, process
management and tracking needs. Offsite backups occur regularly throughout the
day to protect against a total system failure.
While we believe World Wide Web Communications hosting site is an acceptable
solution for current needs, we are negotiating an agreement with another party
for a more enhanced hosting site and more enhanced services for the anticipated
growth of our website.
Regulation
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. We may expand our application and service offerings into areas that
subject it to FDA regulation. We have no experience in complying with FDA
regulations.
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The practice of medicine and pharmacology requires licensing under applicable
state law. We have endeavored to structure our website and affiliate
relationships to avoid violation of state licensing requirements, but 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. Further, any liability based on a determination that we
engaged in the practice of medicine without a license could expose us to civil
or criminal liability. We do not maintain insurance against such liabilities.
We may earn a service fee when users on our website purchase prescription
pharmacy products from certain of our prospective Internet partners. We
anticipate that the fee would not be based on the value of the sales
transaction but rather on a fee per visit basis. 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. Although there is
uncertainty regarding the applicability of these regulations to our Internet
revenue strategy, we believe that any service fees we receive are for the
primary purpose of marketing and do not constitute payments that would violate
federal or state "anti-kickback" laws. However, if our programs are 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.
Employees/Consultants
Currently, Leonard F. Vernon, our President is our only employee. We have
entered into consulting agreements and have hired consultants from time to time
to assist in our operations.
On November 16, 1999, we entered into a management consulting agreement with
MCOM Management Corp., under which MCOM agreed to conduct marketing research in
the Internet health industry. MCOM also confers with our management daily
regarding our operations and implementing our business plan. MCOM is also
expected to provide investment relations for us by interacting with brokerage
firms and investment and acquisition candidates for us. We have agreed to pay
MCOM $5,000 per month through October 2000 and we issued to MCOM 300,000 shares
of our common stock and a warrant to purchase 500,000 shares of our common
stock through December 31,2000. The first 100,000 shares exercisable under the
warrant are exercisable at $1.00 per share and the remaining 400,000 shares are
exercisable at $2.00 per share.
We have also entered into one year consulting agreements on August 23, 1999
with Dr. Harvey Benn, D.O. and Dr. Frank Gettson, a chiropractor. Under the
agreements, Dr. Benn and Dr. Gettson agreed to provide us consultancy services
from time to time and provided advisory service in designing and formatting our
website to attract other medical professionals. As part of the agreements, we
issued to Dr. Benn an option to purchase 150,000 shares of our common stock for
$1.00 per share until July 2009 and to Dr. Gettson an option to purchase 25,000
shares for $1.00 per share until July 2009.
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On January 20, 2000, in connection with our purchase of the Healthsites.com
domain name from Prometrics Consulting, Inc., Prometrics Consulting, Inc.
agreed to provide one hundred hours of advisory services in connection with our
Healthsites.com website and agreed to assist us in developing strategic
alliances for the website. For the purchase and the consulting services we
paid Prometrics $20,000 and issued them 50,000 shares of our common stock and
an option to purchase 100,000 shares of our common stock at $2.00 per share
until August 27, 2009.
On March 10, 2000, we entered into a one year business consulting agreement
with American Benefit Systems, Inc., a New Jersey corporation, which is wholly
owned by Daniel Lanktree. Under the Consulting Agreement, American Benefit
System, Inc. is required to (i) develop prospects, schedule meetings, assist in
negotiation of contracts with health related companies; (ii) provide strategic
marketing and sales expertise; (iii) assist in raising capital; (iv) consult on
corporate planning and growth; and (v) assist in identifying suitable
candidates for our management team. We issued to American Benefit Systems,
Inc. 10,000 shares of our common stock and 100,000 warrants to purchase shares
of our common stock at $1.50 per share until March 10, 2005.
Property
Our offices are located at 2051 Springdale Road, Cherry Hill, New Jersey.
Also present at this location are the offices of Able Imaging, Inc., a wholly
owned entity of William D. Hanna, one of our directors. We do not pay rent to
Mr. Hanna for such facilities.
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors, their respective ages and their
positions as of December 31, 1999 are as follows:
Name Age Position(s) and Office(s)
Dr. Leonard F. Vernon 44 President, Treasurer and Director
William D. Hanna 54 Vice President, Assistant Secretary
and Director
Kevin O'Donnell 51 Secretary
Dr. Leonard F. Vernon, became our president, treasurer and a director on
November 10, 1999 in connection with the merger with GoHealth.MD, Inc., the
Delaware corporation. Dr. Vernon was the founder, and continues to be the
President and director of GoHealth.MD Inc., the Delaware corporation, which is
now operated as our wholly-owned subsidiary as a result of the merger. Dr.
Vernon has managed and maintained a private practice of chiropractic for over
20 years. He is licensed to practice chiropractic in New Jersey, Delaware and
Pennsylvania. From 1990 to 1999, Dr. Vernon was the President and Chairman of
Imaging Management Associates, Inc., a Colorado corporation, which operated
outpatient diagnostic imaging centers.
William D. Hanna became one of our directors and our vice president on
November 10, 1999 in connection with the merger with GoHealth.MD, Inc., the
Delaware corporation. Mr. Hanna continues to be a director of GoHealth.MD Inc.,
the Delaware corporation, which is now operated as our wholly-owned subsidiary
as a result of the merger. Mr. Hanna attended
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Philadelphia Community College and has extensive experience in real estate and
site development. Previous to his retirement more than five years ago, Mr.
Hanna spent 20 years in the construction industry as a steel erector and owner
of his own business. In the past five years, Mr. Hanna has served as the chief
executive officer of a durable medical equipment company and has also been a
co-owner of a provider of discounted health care services.
Kevin O'Donnell became our Secretary on November 10, 1999 in connection with
the merger with GoHealth.MD, Inc., the Delaware corporation. Mr. O'Donnell
continues to be a director and secretary of GoHealth.MD Inc., the Delaware
corporation, which is now operated as our wholly-owned subsidiary as a result
of the merger. Mr. O'Donnell is a 1976 graduate of Rutgers University (B.A.
Political Science). From 1978 to 1990, he was employed by Burlington
Industries as an operations manager and then as Northeast Regional Sales and
Marketing Manager. From 1990 through 1998, Mr. O'Donnell served as a Director
and/or Director of Operations of Imaging Management Associates, Inc, a Colorado
corporation, which operated outpatient diagnostic imaging centers.
Board of Directors
Directors are elected to serve until the next annual meeting of stockholders
and until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been
elected and have qualified.
Section 16 Reporting
Our current directors did not timely file required Forms 3 after their
respective appointments on November 10, 1999, until December 28, 1999. Sandra
Vernon, the wife of one of our directors and our president, Dr. Leonard Vernon,
acquired more than 10% of our common stock in the November 10, 1999 merger with
GoHealth.MD, Inc., the Delaware corporation and filed a Form 3 on December 28,
1999.
Based solely upon our review of Forms 3, 4 and 5 and amendments thereto
furnished to us under Rule 16a-3(a) since May 31, 1999, we are not aware of any
other person who was a director, officer, or beneficial owner of more than ten
percent of our common stock and who failed to file reports required by Section
16(a) of the Securities Exchange Act of 1934 in a timely manner.
EXECUTIVE COMPENSATION
The following tables set forth information with respect to the compensation
received for year ended December 31, 1999 by our President and our other most
highly compensated individuals. No compensation in excess of $100,000 was
awarded to, earned by, or paid to any executive officer or director during the
year ended December 31, 1999.
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Annual Compensation Long-Term
Compensation
Awards
Name and Principal Position Fiscal Salary Bonus Common Stock
Year Underlying
Common Stock
Underlying
Options
Dr. Leonard Vernon, President 1999 0 (1) 0 0
Tyson Schiff, President 1999 0 $500(2) 0
William Hanna, Vice President 1999 0 0 115,000(3)
Kevin O'Donnell, Secretary 1999 0 0 115,000(3)
(1) Dr. Leonard Vernon has never received compensation for his services.
However, in the event our revenues exceed $1,000,000 or at the discretion of
the board of directors, Dr. Vernon will receive an annual salary of
approximately $145,000.
(2) In October 1998, Tyson Schiff received a $500 bonus for serving as our
president and director.
(3) Originally issued by GoHealth.MD Inc., the Delaware corporation, prior to
the Merger.
STOCK OPTIONS GRANTED IN 1999 FISCAL YEAR
Name Number of Shares of Percent of Total Exercise Expiration
Common Stock options granted Price Date
Underlying Options To Employees
Granted
William Hanna 115,000 50% $0.50 2/23/06
Kevin O'Donnell 115,000 50% $0.50 2/23/06
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information concerning ownership of our
common stock as of April 6, 2000. The table discloses each person known to be
the beneficial owner of more than five percent (5%) of our common stock. The
table also shows the stockholdings of our directors, as well as the shares held
by directors and executive officers as a group. The notes accompanying the
information in the table below are necessary for a complete understanding of
the figures provided.
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Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
MCOM Management Corp. 683,000(1) 14.6%
350 Fifth Avenue,
Suite 5807
New York, NY 10118
Michael Morfit 783,000(2) 16.7%
350 Fifth Avenue,
Suite 5807
New York, NY 10118
Sandra Vernon
2051 Springdale Road
Cherry Hill, NJ 08003 2,000,000 47.2%
William D. Hanna
2051 Springdale Road
Cherry Hill, NJ 08003 615,000(3) 14.1%
Dr. Leonard Vernon
2051 Springdale Road
Cherry Hill, NJ 08003 2,000,000(4) 47.2%
Kevin O'Donnell
2051 Springdale Road
Cherry Hill, NJ 08003 615,000(5) 14.1%
Executive Officers and
Directors as a Group 3,230,000 72.4%
(1) Includes 450,000 shares of our common stock which may be acquired upon the
exercise of outstanding warrants held by MCOM Management Corp. MCOM Management
Corp. is wholly owned by Michael Morfit.
(2) Includes 233,000 shares of our common stock and warrants to purchase
450,000 shares of our common stock held by MCOM Management Corp., which is
wholly owned by Michael Morfit. Also includes 100,000 shares of our common
stock held by MCM Stork Fund, L.P., which is managed by MCM Capital, L.L.C., a
limited liability company for which Michael Morfit is the managing member.
(3) Includes 115,000 shares of our common stock which may be acquired upon the
exercise of outstanding stock options held by Mr. Hanna.
(4) Includes 2,000,000 shares owned by Sandra Vernon, the wife of Dr. Leonard
Vernon. Dr. Vernon disclaims beneficial ownership of such shares.
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(5) Includes 115,000 shares of our common stock which may be acquired upon the
exercise of outstanding stock options held by Mr. O'Donnell.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1983, Dr. Leonard Vernon one of our directors, our president and the
husband of Sandra Vernon, our largest shareholder, received a disciplinary
action by the New Jersey State Board of Medical Examiners in which he was given
an 18-month suspension of his license, 30 days of which were to be active with
a monetary penalty of $3000. Dr. Vernon failed to perform the required
community service and pay the fine and the suspension was imposed for a full 18
months. This disciplinary action was taken after the determination that Dr.
Vernon's application to the Educational Commission of Foreign Medical Graduates
was misleading. Dr. Vernon currently possesses an unrestricted license to
practice chiropractic in the New Jersey, Pennsylvania and Delaware and there is
no pending disciplinary action against him in any of the states in which he is
licensed.
On May 10, 1999, we rescinded a purchase and sale agreement with Imaging
Management Associates, Inc., a Colorado corporation, and an employment
agreement with Leonard F. Vernon, both dated December 9, 1998, due to Imaging
Management Associates, Inc.'s failure to satisfy a condition required for the
closing of the agreement of sale. Dr. Leonard F. Vernon, our current President,
was the President of Imaging Management Associates, Inc. at that time. Pursuant
to the rescission agreement, we agreed with Imaging Management Associates, Inc
and Dr. Vernon to rescind and terminate, from the beginning, the purchase and
sale agreement and the employment agreement, and all shares of our common stock
which were issued in contemplation of a closing of the transaction were
returned to us and canceled.
Our offices are located at 2051 Springdale Road, Cherry Hill, New Jersey,
which also houses the offices of Able Imaging, Inc., a wholly owned entity of
William D. Hanna, one of our directors. We do not pay rent to Mr. Hanna for
such facilities.
We have obtained a total of $38,000 pursuant to three working capital loans
from William Hanna Consultants, Inc., an entity controlled by William Hanna,
one of our directors. All of these notes are unsecured, require all interest
and principal be repaid in one lump sum and bear 5% interest per annum. A
$25,000 April 26, 1999 Note was due to be repaid on May 26, 1999, and was
extended indefinitely. No additional consideration was tendered for this
indefinite extension. A $10,000 Note dated March 29, 1999, was repaid in full
on January 20, 2000. The interest on this Note was waived by Mr. Hanna. A
$3,000 Note dated May 2, 1999 matures on May 2, 2000. We have not made any
payments of interest or principal on the April 26, 1999 Note or the May 2, 1999
Note.
Ken Kurtz currently owns less than 5% of our outstanding common stock. Prior
to the November 10, 1999 merger with GoHealth.MD, Inc., the Delaware
corporation, however, he owned in excess of 50% of the common stock. Mr.
Kurtz received 400,000 shares pursuant to a November 30, 1998 consulting
agreement with us whereby he agreed to assist in preparing employment
agreements, contracts and other filings required by the Securities and Exchange
Commission and all other necessary state and Federal regulatory bodies, and in
referring to us an
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independent auditor and attorney. All amounts owing to Mr. Kurtz have been
paid, all services have been rendered and the agreement is no longer in effect.
According to a financial consulting agreement with Park Street Investments,
Inc. executed on March 5, 1998, Park Street assisted with our administration
and recapitalization. Park Street also agreed to actively pursue and negotiate
a merger or business combination with a third party on our behalf. GoHealth.MD
Inc., the Delaware corporation, was introduced to us through the efforts of Mr.
Kurtz and Park Street. Park Street paid all costs associated with these
responsibilities through the date of the merger. As part of this consulting
agreement, on June 22, 1998, for a $15,100 investment we issued 48,709 shares
of common stock to a designee of Park Street -- First Avenue, Ltd., a limited
partnership organized under the laws of the State of Utah. Ken Kurtz, being a
general partner of First Avenue, Ltd. and the president of Park Street,
indirectly controls such shares. All amounts owing to Park Street have been
paid, all services have been rendered and the agreement is no longer in effect.
MARKET PRICE AND RELATED SHAREHOLDER MATTERS
Our common stock is currently traded through the over-the-counter market on
the National Association of Securities Dealers, Inc. Bulletin Board ("NASD
Bulletin Board") under the symbol "GOMD." Prior to January 19, 2000, our
common stock was traded through the NASD Bulletin Board under the symbol
"NUGT." Limited trading has occurred over the past several years.
The following table set forth below lists the range of high and low bids of
our common stock for each fiscal quarter for the last two calendar years and
through March 24, 2000 as reported by the NASD Bulletin Board. The prices in
the table reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.
The amounts, and all other shares and price information contained in this
document, have been adjusted to reflect the stock splits.
Period Ended December 31, 1998 High Low
First Quarter $0.02 $0.001
Second Quarter $0.02 $0.005
Third Quarter $0.02 $0.001
Fourth Quarter $7.00 $0.062
Period Ended December 31, 1999
First Quarter $6.00 $0.062
Second Quarter $3.250 $0.33
Third Quarter $4.50 $1.25
Fourth Quarter $6.00 $2.00
Period Ended December 31, 2000
-48-
<PAGE>
First Quarter (to April 5, 2000) $6.00 $2.75
As of April 5, 2000, the average of the closing price of our common stock as
reported by the NASD Bulletin Board was $3.75. As of April 5, 2000, we had
approximately 631 shareholders of record.
We have never paid a cash dividend on our common stock. It is our present
policy to retain earnings, if any, to finance the development and growth of our
business. Accordingly, we do not anticipate declaring any cash dividends in
the foreseeable future.
DESCRIPTION OF SECURITIES
General
Our Articles of Incorporation, as amended authorize the issuance of 25,000,000
shares of common stock, $.01 par value. As of April 6, 2000, there were
4,299,603 shares of common stock outstanding and an aggregate of 1,606,500
options and warrants to purchase common stock.
In October 1998, our common stock experienced a 1-for-310 reverse stock split
and all fractional shares were rounded up. Immediately after the reverse
split, we had approximately 97,117 total shares of issued and outstanding.
Simultaneous with this reverse stock split the number of shares of common stock
authorized for issuance was reduced 1-for-10, from 50,000,000 to 5,000,000.
At our 1999 annual meeting, held on August 16, 1999, our Board of Directors
and the holders of a majority of the outstanding common stock increased the
number of authorized shares of our common stock to 25,000,000 from 5,000,000.
The following is a summary description of our capital stock and certain
provisions of our Amended Articles of Incorporation and Bylaws, copies of which
have been incorporated by reference as exhibits to the registration statement
of which this prospectus forms a part. The following discussion is qualified
in its entirety by reference to such exhibits. We have also included a summary
description of only those options and warrants held by selling stockholders
which does not describe all our outstanding options and warrants.
Common Stock
The holders of the common stock (i) have equal and ratable rights to dividends
from funds legally available therefor, when, as and if declared by our Board of
Directors; (ii) are entitled to share ratably in all of the assets available
for distribution to holders of common stock upon liquidation, dissolution or
winding up of our affairs; (iii) do not have pre-emptive, subscription or
conversion rights (there are no redemption or sinking fund provisions
applicable to our common stock), and (iv) are entitled to one non-cumulative
vote per share on all matters which shareholders may vote at all meetings of
shareholders. All shares of common stock now outstanding are fully paid for and
non-assessable and all shares which are part of this offering, when issued,
will be fully paid for and non-assessable.
-49-
<PAGE>
Options and Warrants Included in this Prospectus
Of the total of 1,764,500 shares registered for sale by the selling
securityholders, 885,000 shares are issuable upon exercise of options and
warrants issued to consultants. These consultants warrants and options are
immediately exercisable, have an exercise price of $.50 to $2.00 and have terms
from two to ten years.
In addition, we have sold Series A Warrants to purchase 379,500 shares of
common stock. The Series A Warrants have an exercise price of $1.00 per share
and expire on December 31, 2002. Series A warrants to purchase 90,000 shares
of common stock have been exercised to date. All of the shares issuable upon
exercise of the warrants are being registered.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Securities
Transfer & Trust, Inc., 12039 West Alameda Parkway, Lakewood, Colorado 80228,
telephone 303-986-5400.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our By-laws as amended, provide that our directors or officers shall not be
personally liable to GoHealth or its shareholders for damages for breach of
such director's or officer's fiduciary duty. The effect of this provision of
our By-laws, as amended, is to eliminate the right of GoHealth and its
shareholders (through shareholders' derivative suits on behalf of GoHealth) to
recover damages against a director or officer for breach of the fiduciary duty
of care as a director or officer (including breaches resulting from negligent
or grossly negligent behavior), except under certain situations defined by
statute.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to its directors, officers and controlling persons pursuant to
the foregoing provisions or otherwise, GoHealth has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock offered
will be passed upon by our legal counsel, Hale & Schenkman, Princeton, New
Jersey
EXPERTS
Financial statements of GoHealth.MD, Inc. as of December 31, 1999 and for the
period from our inception until December 31, 1999, appearing in this prospectus
and registration statement have been audited by Samuel Klein & Company,
independent auditors, as indicated in their reports thereon, appearing
elsewhere herein and are included in reliance upon the authority of such firm
as experts in accounting and auditing in rendering the reports.
-50-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accounts F-2
Balance Sheets F-3
Statement of Operations F-4
Statement of Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
GoHealth.MD, Inc.
(A Development Stage Company)
Cherry Hill, New Jersey 08003
We have audited the accompanying consolidated balance sheet of GoHealth.MD,
Inc. (A Development Stage Company) (formerly Nugget Exploration, Inc.) as of
December 31, 1999 and the related statements of operations, stockholders'
equity and cash flows for the period from inception (February 23, 1999) to
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GoHealth.MD, Inc. (A
Development Stage Company) as of December 31, 1999 and the results of its
operations and its cash flows for the initial period then ended in conformity
with generally accepted accounting principles.
/s/Samuel Klein and Company
SAMUEL KLEIN AND COMPANY
Newark, New Jersey
March 28, 2000
F-2
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current Assets:
Cash $ 38,791
Accounts receivable 48
Subscription receivable 269,500
Prepaid expenses 3,800
Domain names - available for sale 38,834
-------
Total Current Assets 350,973
-------
Furniture and equipment, net of accumulated
depreciation of $1,488 4,521
-------
Other Assets:
Deposits 5,500
Website costs 60,900
-------
Total Other Assets 66,400
-------
TOTAL ASSETS $ 421,894
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 45,380
Accounts payable 66,042
Accrued expenses 9,694
Accrued interest payable 9,614
Due to former officer 1,340
Due to officer 21,622
-------
Total Liabilities 153,692
Stockholders' Equity:
Common stock ($.01 par value, 25,000,000
shares authorized, 4,149,117 shares issued
and outstanding) 41,491
Additional paid-in capital 3,214,594
Unamortized consulting expenses,
net of accumulated amortization
of $316,667 (1,583,333)
Retained earnings (deficit) (1,404,550)
---------
Total Stockholders' Equity 268,202
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 421,894
=======
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 23, 1999)
TO DECEMBER 31, 1999
Sales:
Advertising revenue $ 80
Domain name sales 1,300
Cost of Sales (910)
-----
Gross Profit 470
-----
Other Expenses:
General and administrative expenses 87,894
Marketing and licensing fees 18,988
Website costs 40,660
Advertising and promotion 115,876
Consulting fees 331,867
Interest expense 1,235
-------
596,520
-------
Net Loss (596,050)
Beneficial Conversion Feature of Warrants 808,500
-------
Net Loss on Common Stock $ (1,404,550)
=========
Loss per Share:
Basic loss per share $ (.34)
===
Diluted loss per share $ (.34)
===
Basic common shares outstanding 4,149,117
=========
Diluted common shares outstanding 4,149,117
=========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (FEBRUARY 23, 1999)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
$.01 Par Value Additional Unamortized During the Total
Number Paid-In Consulting Development Stockholders'
of Shares Amount Capital Expense Stage Equity
<S> <C> <C> <C> <C> <C> <C>
At Inception on February 23, 1999 $ $ $ $ $
Issuance of Common Stock
at $.01 per share 3,000,000 30,000 (27,000) 3,000
Issuance of Shares and Warrants
in Private Placement 96,000 960 247,640 248,600
Issuance of Shares and Warrants
for Services 4,000 40 10,360 10,400
Issuance of Common Stock in Connection
with Reverse Merger 697,117 6,971 (46,046) (39,075)
Issuance of Common Stock and Warrants in
Connection with Consulting Agreement 300,000 3,000 1,897,000 (1,900,000) -
Issuance of Common Stock and Warrants
for Services 2,000 20 5,180 5,200
Exercise of Warrants 50,000 500 49,460 49,960
Subscription Receivable on Sale
of "Series A" Warrants 269,500 269,500
Net Loss on Common Stock for the
Period from Inception February 23,
1999 to December 31, 1999 316,667 (1,404,550) (1,087,883)
Beneficial Conversion Feature of Warrants 808,500 808,500
------- ----- --------- --------- --------- ----------
4,149,117 $41,491 $3,214,594 $(1,583,333) $(1,404,550) $ 268,202
========= ======= ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (FEBRUARY 23, 1999)
TO DECEMBER 31, 1999
Cash Flows from Operating Activities:
Net loss on common stock $ (1,404,550)
Adjustment to reconcile net loss to net cash
used in operating activities:
Amortization 316,667
Depreciation 1,488
Beneficial Conversion Feature 808,500
Changes in assets and liabilities:
Increase in accounts receivable (48)
Increase in prepaid expenses (3,800)
Increase in deposits (5,500)
Increase in Domain names - available for sale (38,834)
Increase in accounts payable 66,042
Increase in accrued interest payable 9,614
Increase in accrued expenses 9,694
-------
Net cash used in operating activities (240,727)
Cash Flows from Investing Activities:
Purchase of website (45,300)
Purchase of furniture and equipment (6,009)
Cost of acquisition net of cash acquired (39,075)
-------
Net cash used in investing activities (90,384)
-------
Cash Flows from Financing Activities:
Proceeds from sale of common stock and stock warrants 301,560
Proceeds of notes payable 45,380
Proceeds from officers loans 22,962
-------
Net cash provided by investing activities 369,902
-------
Net Increase in Cash 38,791
Cash - Inception (February 23, 1999) -
-------
Cash - End of Period (December 31, 1999) $ 38,791
======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ -
======
Taxes $ -
======
Supplemental Disclosure of Noncash Investing
and Financing Activities:
Issuance of common stock and warrants for
services $ 15,600
======
Series A warrants subscribed for $ 269,500
-------
Acquisition:
Notes payable assumed $ (7,380)
Liabilities assumed, net of cash (30,355)
Loans from officers (1,340)
------
Cost of acquisition, net of cash acquired $ (39,075)
======
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
GOHEALTH.MD, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. will be 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.
The merger was accounted for as a purchase. However, since the stockholders of
GoHealth will own approximately 81% of Nugget outstanding shares, and therefore
have control, they will be deemed to be the acquirer and no step up in basis
will be reflected and no goodwill will be recorded by the company. This
accounting treatment is in accordance with the Securities and Exchange
Commission staffs' view that the acquisition by a public shell of assets of a
business from a private company for a significant number of shares should be
accounted for at historical costs and accounted for as a reverse merger.
Principles of Consolidation
The accompanying financial statements as of December 31, 1999 and for the
period then ended 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
Revenue Recognition
The Company's revenues will be derived principally from advertising, content
syndication, electronic commerce and the sale of domain names.
The Company intends to generate advertising revenue from banner advertising and
from sponsorships. Banner advertising is generally sold based on the number of
impressions received by the advertisement and its position on the website.
This type of advertising frequently encourages the user to move to other web
pages which describe the advertiser's product and solicit a direct response
from the user. Sponsorships are contracts that typically grant advertisers
rights to promote their products on a specific portion of the website.
Sponsorships are designed to support broad marketing objectives, including
brand awareness, product introductions, research and transactions, generally on
an exclusive basis. Accordingly, sponsorships are sold based on their
duration, the portion of the website sponsored and the number of impressions
delivered. Advertising revenues on both banner and sponsorship contracts are
recognized ratably over the period in which the advertisement is displayed,
provided that no significant Company obligations remain at the end of a period
and collection of the resulting receivable is probable. Company obligations
typically include guarantees of minimum number of "impressions," or times that
an advertisement appears in pages viewed by users of the Company's online
properties. To the extent minimum guaranteed impressions are not met, the
Company will defer recognition of the corresponding revenues until the
remaining guaranteed impression levels are achieved.
The Company also plans to earn revenues on sponsorship contracts from fees
relating to the design, coordination, and integration of customers' content and
links into online media properties. These development fees are recognized as
revenue once the related activities have been performed and the customer's web
links are available. The Company plans to structure agreements that may
provide for the Company to receive revenues from electronic commerce
transactions. These revenues will be recognized by the Company upon
notification from the advertiser of revenues earned. Revenues from barter
transactions will be recognized during the period in which the advertisements
are displayed. Barter transactions will be recorded at the fair value of the
goods or services provided or received, whichever is more readily determinable
in the circumstances.
The Company also derives revenues for the registration and hostings of .MD
domain names directly from its website www.GoHealth.MD and for an annual fee
which will be recognized as earned.
Domain Names - Available for Sale
Domain name - available for sale, are stated at the lower of cost or market,
consists of specific domain names purchased and are valued at the purchase
price. When a domain name is sold, the purchase price for that specific name
is removed at cost.
Website Costs
Website costs include only those costs paid to third parties for the purchase
of websites or relating to the purchase of websites or the application
development phase of website design and implementation. Those costs will be
amortized over their future expected utility which is estimated to be 5 years.
Use of Management's Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS 121 requires that if facts and circumstances
indicate that the cost of fixed assets or other assets may be impaired, an
evaluation of recoverability would be performed by comparing the estimated
future undiscounted pre-tax cash flows associated with the asset to the asset's
carrying value to determine if a write-down to market value or discounted
pre-tax cash flow value would be required.
Advertising and Promotional Costs
Advertising expenditures of the Company's programs and services are expensed in
the period the advertising costs are incurred. Advertising and promotional
costs for the period from inception (February 23, 1999) to December 31, 1999
were $115,876.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130, (SFAS
130) "Reporting Comprehensive Income". This statement establishes rules for
the reporting of comprehensive income and its components which require that
certain items such as foreign currency translation adjustments, unrealized
gains and losses on certain investments in debt and equity securities, minimum
pension liability adjustments and unearned compensation expense related to
stock issuances to employees be presented as separate components of
stockholders' equity. The adoption of SFAS 130 had no impact on total
stockholders' equity for the period presented in these financial statements.
Start-Up Activities
The American Institute of Certified Public Accountants recently issued
Statement of Position ("SOP") 98-5, "Reporting the Costs of Start-Up
Activities." SOP 98-5 requires start-up costs, as defined, to be expensed as
incurred and is effective for financial statements for fiscal years after
December 15, 1998. The Company currently expenses all start-up costs as
incurred and the application of SOP 98-5 will have no material impact on the
Company's financial statements.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25,
(APB 25) "Accounting for Stock Issued to Employees" in accounting for its
employee stock option plans. Under APB 25, when the exercise price of the
Company's employee stock options equals or is above the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
In accounting for options granted to persons other than employees, the
provisions of Financial Accounting Standards Board Statement No. 123, (FASB
123) "Accounting for Stock Based Compensation" are applied in accordance with
FASB 123 at the fair value of these options.
Earnings (Loss) Per Share
The Company calculates earnings per share in accordance with SFAS No. 128,
"Computation of Earnings Per Share" and SEC Staff Accounting Bulletin No. 98.
Accordingly, basic earnings per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during the
period. Common equivalent shares consist of the incremental common shares
issuable upon the conversion of the Preferred Stock (using the if-converted
method) and shares issuable upon the exercise of stock options (using the
treasury stock method); common equivalent shares are excluded from the
calculation if their effect is anti-dilutive.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109, (SFAS
109) "Accounting for Income Taxes". SFAS 109 requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
2. PLAN OF OPERATIONS
For the year ended December 31, 1999, the Company had not conducted any
significant business. Because of this lack of prior operations, assets and
industry position, the Company must be considered a development stage company.
Consequently, there can be no assurance that viable commercial operations can
be achieved or sustained even if the Company is successful in raising all the
capital that it requires.
The 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, the
Company changed the principal focus of business strategy from registration and
marketing of .MD domain names to operating the healthcare websites. The
Company intends to derive revenues by providing advertising on their website
and through affiliations with other entities.
The website, www.Healthmall.com, which was 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.
The Company's overall plan calls for the development of network affiliates,
such as health and fitness websites to provide easy access to the information
and services offered on www.Healthmall.com to their respective customers. The
Company has only established two network affiliates to date.
The Company also provides 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 the Healthmall.com
website; and
- registering of .MD domain names.
The Company plans 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. The
Company's 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.
The Company's 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 the 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 operations and increase revenue, the Company needs to incur
significant advertising and promotional expenses and the Company plans to hire
additional personnel in all phases of their operation, particularly in order to
further implement their primary operating strategy of generating revenue from:
- advertising;
- content syndication; and
- electronic commerce.
There can be no assurance that the Company will have the resources to increase
their advertising and promotional expenses or to hire the necessary personnel
and managers in order to achieve growth in operations and revenues, and any
failure to do so could have a material adverse effect on operating results.
In addition, the Company's strategy relies on their ability to raise further
capital and upon the skills of their management. There can be no assurance
that they 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 the
Company's operations, (ii) availability of funding on a timely basis, and (iii)
functionality. If the Company's ability to expand their network infrastructure
is constrained in any way they could lose customers and suffer damage to their
operating results.
The Company has a very limited operating history on which to base an evaluation
of their business and prospects. Their 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 order to continue to finance operations, the Company 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 the Company will
receive any proceeds from the exercise of warrants or options or that the
Company will be able to obtain the necessary funds to fund its operations.
3. NOTES PAYABLE
The following is a summary of the Company's notes payable at December 31, 1999:
Payable to William Hanna on demand, with interest accrued
at 5% per annum, unsecured $25,000
Payable to William Hanna Consultants on March 29, 2000,
with interest accrued at 5% per annum, unsecured, this was
repaid in full on January 20, 2000 10,000
Payable to William Hanna Consultants on May 2, 2000, with
interest accrued at 5% per annum, unsecured 3,000
Demand Note Payable to an individual, 9%, unsecured 2,290
Demand Note Payable to an individual, 9%, unsecured 5,090
------
$45,380
======
4. DUE TO OFFICER
As of December 31, 1999, the Company is indebted to an officer in the amount of
$21,622. This is a noninterest bearing loan payable on demand.
5. PROVISION FOR INCOME TAXES
For the period from inception (February 23, 1999) to December 31, 1999, the
Company had a loss on common stock of $1,449,550. No tax expense or benefit
has been reported in the financial statements due to the uncertainty of future
operations.
6. COMMON STOCK
The authorized capital stock of the Company consists of 25,000,000 shares of
Common Stock, par value $.01 per share.
The Company issued 3,000,000 shares of Common Stock to the incorporators of the
Company for $3,000.
The Company offered a total of 500 Units at a price of $5,200 per Unit, which
were offered on a "best efforts, all or none" basis with respect to the first
20 units of the Company's Common Stock and a detachable warrant entitling the
holder to purchase 2,000 shares of Common Stock. The Company conducted the
Offering in such a manner that the Shares will be sold only to certain
Accredited Investors as such term is defined in Rule 501 of Regulation D under
the Act, and to not more than 35 other nonaccredited investors, and who satisfy
any additional requirements of their state of residency. The pricing and the
terms of the securities were arbitrarily determined by the Company and had no
relationship to the Company's assets, book value or results of operations or
any other generally accepted criteria of value. The Units were being offered
and sold exclusively through the Company by its Officers, as well as selected
dealers, if any, and their officers, directors and employees could pur chase
the Units on the same terms and conditions as other investors.
The minimum subscription price to investors was for $10,400 for 2 units. The
Company had the discretion to accept subscription offers for lesser amounts if
deemed to be in the Company's best interest and insofar as permitted by law.
Each Unit Warrant entitled the registered holder thereof to purchase up to
2,000 shares of Common Stock at a price of $2.50 per share (subject to
adjustment as described herein) at any time prior to the earlier of (i) May 31,
2003 or (ii) the date that the respective Unit Warrant is redeemed. If the
Company is able to complete an initial public offering ("IPO") of the Common
Stock, then beginning 12 months after the IPO, the Unit Warrants will be
subject to redemption by the Company at $0.10 per share of the Common Stock
that remains, subject each Unit Warrant on thirty (30) days prior written
notice if the average closing sales price of the Common Stock over any 10
consecutive trading days equals or exceeds 150% of the IPO price per share of
Common Stock.
During the months of 1999 and in connection with the private placement, the
Company issued 96,000 shares of its Common Stock and 96,000 detachable Warrants
and received proceeds of $249,600.
Also, during 1999, the Company issued 4,000 Shares and 4,000 Warrants in
connection with a website purchase and valued these services at $10,400. The
Company also issued 2,000 shares and 2,000 warrants for consulting services
valued at $5,200.
On November 16, 1999 the Company entered into a management consulting agreement
with MCOM Management Corp. ("MCOM") for management consulting, strategic
planning and marketing and advisor services. The agreement requires the
Company to compensate the management consulting company $5,000 per month
through October 2000, issue to the consultant 300,000 shares of its common
stock and requires the Company to issue warrants to the consultant to purchase
500,000 shares of the Company's common stock at exercise prices of $1.00 for
the first 100,000 shares and $2.00 per share for the next 400,000 shares.
In connection with this transaction, the Company recorded an expense of
$1,050,000 for the 300,000 shares granted, the market value of the Company's
common stock at the date of the agreements, and $850,000 for the intrinsic
value of the warrants to purchase 500,000 shares of the Company's common stock.
On December 13, 1999, 50,000 of the $1.00 warrants were exercised and the
Company issued 50,000 shares of its common stock and received proceeds of
$50,000.
On December 22, 1999, the Company issued, in connection with a private
placement offering, Series A warrants to purchase 269,500 shares of its common
stock at an exercise price of $1.00 per share until December 31, 2002. The
warrants were sold for $1.00 per common stock purchase warrant and resulted in
the Company receiving subscriptions totaling $269,500. The market price of the
Company's common stock at December 22, 1999 was $5.00 per share and created a
beneficial conversion feature to the warrant holders amounting to $3.00 per
warrant. As a result of this transaction, the Company recorded $808,500 as a
charge in computing net loss on common stock.
From January 1 to January 11, 2000, the Company sold 110,000 additional Series
A warrants in connection with their private placement. This included 75,000
warrants purchased by MCOM on January 10, 2000. The total Series A warrants
sold amounted to $379,500, all of which was received during the first quarter
of 2000. In addition, $90,000 Series A warrants were exercised during the
first quarter of 2000. The Company will record an estimated $330,000 charge to
common stock in fiscal year 2000 as a result of the beneficial conversion
feature to the purchasers of the additional 110,000 Series A warrants.
7. COMMITMENTS AND CONTINGENCIES
Employee Stock Options
The Company has reserved a total of 500,000 shares of its Common Stock for
grants of stock options to employees. A total of 230,000 options with an
exercise price of $.50 per share with terms expiring seven (7) years from the
respective dates of the grant have been granted to two of the Company officers
and directors as of December 31, 1999. All future grants are to have an
exercise price above $1.50 per share.
As referred to in Note 1, The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related Interpretations in accounting for its employee stock
options because, as discussed below, the alternative fair value accounting
provided for under FASB Statement No. 123 ("FASB" 123"), "Accounting for
Stock-Based Compensation," requires use of option valuation models that were
not developed for use in valuing employee stock options. Under APB 25, because
the exercise price of the Company's employee stock options equals the market
value of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information in accordance with FASB 123 is required to present net
loss and loss per share as if the Company had accounted for the employee stock
options under the fair value method of that statement. FASB 123 also provides
that if it is not possible to reasonably estimate the fair value of an option
at the grant or measurement date, then the compensation cost shall be based on
the current intrinsic value of the award which was determined to be immaterial.
Other Stock Options
On May 7, 1999 the Company granted 30,000 options to a consulting firm for
services rendered at an exercise price of $.50 per share. These options which
expire May 7, 2000 contain piggyback registration rights. The fair value of
these other stock options were estimated according to FASB 123 at the grant
dates using the Black Scholes option pricing model and were determined to be
immaterial.
On May 26, 1999 the Company granted 10,000 options to investment banking
consultants for services rendered at exercise prices of $.50 per share for
5,000 options and $1.00 for 5,000 options. These options which expire May 26,
2006 contain piggyback registration rights. The fair value of these other
stock options were estimated according to FASB 123 at the grant dates using the
Black Scholes option pricing model and were determined to be immaterial.
On June 12, 1999 the Company granted 20,000 options to a professional
consultant for services rendered. The options, which expire on June 12, 2006,
include piggyback registration rights, are exercisable 10,000 at an
exercise price of $1.00 and 10,000 at an exercise price of $1.50. The fair
value of these other stock options were estimated according to FASB 123 at the
grant dates using the Black Scholes option pricing model and were determined to
be immaterial.
In August 1999 the Company granted to two consultants who assisted in the
development of the Company's website, nonqualified stock options for the right
to purchase 175,000 shares of the Company's Common Stock. The options have an
exercise price of $1.00 and expire on July 2009 and contain piggyback
registrations rights. The fair value of these other stock options were
estimated according to FASB 123 at the grant dates using the Black Scholes
option pricing model and were determined to be immaterial.
Government Regulation
The Company is subject to local state and federal laws of the jurisdiction that
it operates in. The Company also believes that it will be subject to all
jurisdictions of its participants and clients.
Litigation
The Company is not a party to any litigation, nor is management aware of any
litigation currently threatened against the Company or any of its officers or
directors in their capacity as such.
Employment Agreements
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.
8. SUBSEQUENT EVENTS
On February 4, 2000, the Company granted to a consultant an option to purchase
100,000 shares of its common stock at an exercise price of $1.00 until December
31, 2001.
On January 24, 2000, the Company entered into an agreement and acquired the
right, title and interest to the Healthsites.com domain name. The Company
acquired these assets for the purchase price of $20,000, the issuance of 50,000
shares of its common stock valued at approximately $200,000 and the issuance of
an option valued at approximately $200,000, to purchase 100,000 shares at a
price of $2.00 per share until August 27, 2009.
On March 10, 2000 the Company entered into a one year consulting agreement
whereby the consultant has agreed to provide the company with the following
services:
(i) develop prospects, schedule meetings, assist in negotiation of contracts
with health related companies; (ii) provide strategic marketing and sales
expertise; (iii) assist in raising capital; (iv) consult on corporate planning
and growth; and (v) assist in identifying suitable candidates for the
management team.
In connection with this agreement, the Company will issue 10,000 shares of its
common stock and a warrant to purchase 100,000 shares of common stock at $1.50
per share until March 10, 2005.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation provide that we shall, to the fullest extent
permitted by the laws of the State of Nevada, as the same may be amended and
supplemented, indemnify our officers and directors under said laws, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of security holders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to benefit of the heirs,
executors, and administrators of such a person. We have the power to purchase
and maintain officers' and directors' liability insurance in order to insure
against the liabilities for which such officers and directors are indemnified.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers and control persons
pursuant to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the United States Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or control person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or control person, we will, unless in the opinion of counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933, as amended ,
and we will be governed by the final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses of this offering, all of
which we will pay:
SEC Registration Fee $ 1,600
Blue Sky Fees and Expenses 7,000
Accounting Fees and Expenses 15,000
Legal Fees and Expenses 40,000
Printing and Engraving Expenses 2,500
Transfer Agent and Registrar Fees and Expenses 1,000
Miscellaneous 5,000
Total $73,100
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
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All securities we sold during the last fiscal year were made pursuant to
exemptions under Section 4(2) under the Securities Act of 1933, as amended (the
"Act"), to accredited investors pursuant to Rule 506 under the Act. No
underwriting discounts or commissions were paid in connection with any of these
securities.
On June 22, 1998, for $15,100, we issued 48,709 shares of common stock to a
designee of Ken W. Kurtz, First Avenue, Ltd., a Utah limited partnership in
which Ken Kurtz is the general partner. Ken W. Kurtz is an accredited investor
and a shareholder of our company at the time of the purchase.
MCOM Management Corp. ("MCOM"), a Delaware corporation, was issued 300,000
shares of our common stock and warrants to purchase 500,000 shares of our
common stock pursuant to a November 16, 1999 management consulting agreement.
MCOM is wholly owned by Michael Morfit, an accredited investor. MCOM agreed to
render management consulting, strategic planning and marketing and advisory
services in exchange for (i) $5,000 per month through October 2000, (ii)
300,000 shares of our common stock and (iii) warrants to purchase 500,000
shares of our common stock through December 31, 2001 at exercise prices of
$1.00 for the first 100,000 shares and $2.00 per share for the next 400,000
shares. On December 13, 1999, MCOM exercised warrants to purchase 50,000
shares of our common stock and tendered $50,000 for the $1.00 per share warrant
exercise price.
On January 10, 2000, MCOM also acquired a warrant for 75,000 shares of our
common stock for $75,000 and, on the same day, exercised the warrant to
purchase 75,000 shares of our common stock for another $75,000. The warrants
were purchased in our private placement described in the next paragraph.
From November 12, 1999 to January 11, 2000, we conducted a private placement
of warrants to purchase shares of our common stock to the following persons,
who were stockholders of our company as a result of the November 10, 1999
merger with GoHealth.MD, Inc., the Delaware corporation. Each of these
warrants were purchased for $1.00, have an exercise price of $1.00 per share
and expire on December 31, 2002.
Stockholder Shares Issuable Upon Exercise of Warrants
Martin Ciner 20,000
Michael Marks 15,000
Scott Hankinson 100,000
Marketing Management Professionals 15,000
Joseph McGowen 15,000
Robert Lipinski 50,000
Thomas Capato 10,000
Frank Casey 15,000
Anthony Iancale 2,000
Thomas Flynn, Sr. 2,000
Thomas Flynn, III 10,000
Dawn Polizzi 5,000
Anthony Pietrafesa 10,000
Mark Keminosh 8,000
Joseph DiGaetano 25,000
Alexander Zlatnik 2,500
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Only Michael Marks and MCOM have exercised their warrants.
On January 20, 2000, we entered into an agreement with Prometrics Consulting,
Inc., a Pennsylvania corporation, which is wholly owned by Marc Duey, an
accredited investor, for the purchase of all Prometrics' interest in the domain
name, Healthsites.com and for Prometrics providing us with 100 hours of
advisory services regarding developing Healthsites.com as a search engine and
in assisting us in developing strategic alliances for the Healthsites.com
website. We paid to Prometrics $20,000 in cash, issued Prometrics 50,000
shares of our common stock and an option to purchase 100,000 shares of our
common stock at $2.00 per share until August 27, 2009.
On February 4, 2000, we entered into a consulting agreement with Thomas Flynn,
III, one of our shareholders, for legal services in connection with the
Healthsites.com transaction. We issued to Mr. Flynn a warrant to purchase
100,000 shares of our common stock for $1.00 per share until December 31, 2001.
On March 10, 2000, we entered into a business consulting agreement with
American Benefit Systems, Inc., a New Jersey corporation, which is wholly owned
by Daniel Lanktree, an accredited investor. The Consulting Agreement is for a
term of one year and provides that American Benefit System, Inc. will (i)
develop prospects, schedule meetings, assist in negotiation of contracts with
health related companies; (ii) provide strategic marketing and sales expertise;
(iii) assist in raising capital; (iv) consult on corporate planning and growth;
and (v) assist in identifying suitable candidates for our management team. In
connection with this agreement we issued 10,000 shares of our common stock and
100,000 warrants to purchase shares of our common stock at $1.50 per share
until March 10, 2005.
Pursuant to our obligations under the November 10, 1999 merger, we issued
options to purchase shares of our common stock to holders of options to
purchase shares of common stock of GoHealth.MD Inc., the Delaware corporation.
The options to purchase shares of our common stock contained the same terms as
the option holders had received from GoHealth.MD, Inc., the Delaware
corporation, prior to the merger. The persons listed below originally received
their options between May 1999 and August 1999 in recognition of services they
had rendered to GoHealth.MD, the Delaware corporation, prior to the merger. The
options were granted to Drs. Gettson and Benn, both of whom are medical
professionals, for their assistance in designing and formatting our website to
attract other medical professionals. Mr. Kishbaugh is an attorney who accepted
the options in lieu of payment for the legal services he rendered in connection
with our contract with Dr. James Corea, related to the website
www.healthyfirst.com. Millennium Consulting, Inc., and Messrs. Madden and
Crooks received their options in consideration for their services regarding the
structuring of terms of our private placement. The President of Millennium is
the wife of Gary Crooks. These options are exercisable at prices ranging from
$0.50 to $1.50, with the exception of the options held by Harvey Benn and Frank
Gettson, which have an exercise price of $1.00 per share, but which price is
subject to a fair market value revision. The options held by Millennium and
Messrs. Crooks and Madden expire in May 2006, while Mr. Kishbaugh's options
expire in June 2006, and Messrs. Benn and Gettson's options expire in July
2009.
Stockholder Shares Issuable Upon Exercise of Options
Millennium Consulting, Inc 30,000
Gary Crooks 5,000
John Madden 5,000
Harvey Benn 150,000
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Frank Gettson 25,000
J. Eric Kishbaugh 20,000
We issued to the following persons unregistered shares of our common stock in
connection with the November 10, 1999 merger in exchange for an equal number of
shares of common stock of GoHealth.MD, Inc., the Delaware corporation. All of
these persons were the founders of GoHealth.MD, Inc., the Delaware corporation,
and were originally issued the aggregate 3,000,000 shares from GoHealth.MD,
Inc., the Delaware corporation, at par value of $0.001 per share, or $3,000.
Sandra Vernon 2,000,000
William Hanna 500,000
Kevin O'Donnell 500,000
On February 23, 1999, GoHealth.MD Inc., the Delaware corporation, granted two
of its executive officers, Kevin O'Donnell and William Hanna, stock options to
each purchase 115,000 shares of its common stock with an exercise price of
$0.50 per share. These options expire on February 23, 2006. Pursuant to the
November 10, 1999 merger, we assumed the rights and obligations under these
option agreements and issued replacement options to Messrs. O'Donnell and Hanna
under the same terms.
The remainder of securities we issued without registration under the Act
within the last fiscal year were also issued pursuant to the November 10, 1999
merger. The stockholders set forth below received the same number of shares of
our common stock and warrants to purchase shares of our common stock as they
had held with GoHealth.MD Inc., the Delaware corporation, at the time of the
merger. The shares of common stock and warrants to purchase common stock were
originally issued pursuant to a private placement conducted between February
1999 and November 1999. Pursuant to this private placement, units were offered
at a price of $5,200 per unit, with each unit entitling an investor to 2,000
shares of common stock and a warrant entitling the holder to purchase 2,000
shares of common stock at $2.50 per share (subject to adjustment), at any time
prior to September 30, 2003. A total of 51 units, or 102,000 shares of common
stock and 102,000 warrants to purchase shares of common stock, w ere issued in
this private placement, in exchange for: (i) proceeds of $249,600 for 96,000
shares and 96,000 warrants, (ii) Internet website assets valued at $10,400 for
4,000 shares and 4,000 warrants (2,000 shares and 2,000 warrants were issued to
Moiz Balkhi and 2,000 shares and 2,000 warrants were issued to Robert H. Savar
in separate transactions for separate assets); (iii) consulting services
rendered by William Bromley, a doctor of chiropractic, in connection with his
assistance in the design and format of our website, valued at $5,200 for 2,000
shares and 2,000 warrants.
Shareholder Number of Shares and Warrants Issued
Robert Deacon, Sr. 2,667
Robert Deacon, Jr. 2,667
Frank Casey 4,000
Albert DiPasquale, M.D. 2,000
Thomas Flynn, III, Esq. 4,000
Scott Hankinson, M.D. 4,000
Marc Kahn, M.D. 4,000
Michael Marks, Esq. 4,000
Joseph McGowan, Jr., Esq. 2,000
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Mullica Hill-Family Practice 4,000
Anthony Pietrafesa 2,666
Moiz Balkhi 2,000
Market Management Professionals, Inc. 2,000
Alexander Zlatnik, MD 4,000
J. Erik Kishbaugh, Esq. 12,000
Martin Ciner 2,000
Harvey Benn, D.O. 10,000
Frank J. Gettson, D.C. 10,000
Market Management Professionals, Inc. 2,000
Robert Lipinski 2,000
Thomas Capato 2,000
Joseph DiGaetano 2,000
Mark Keminosh, D.C. 4,000
William Bromley, D.C. 2,000
Anthony Iancale 2,000
Dawn Polizzi 4,000
Thomas Flynn, M.D. 4,000
ITEM 27. EXHIBITS
Number Description
2.1 Stock Exchange Agreement and Plan of Merger dated September 30, 1999, by
and between Nugget Exploration, Inc., Nugget Holding Company and
GoHealth.MD, Inc.
3.1* Articles of Incorporation, as amended
3.2 By-Laws of Nugget Exploration, Inc.
3.3 Articles of Incorporation of GoHealth.MD, Inc.
3.4 By-Laws of GoHealth.MD, Inc.
4.1 Management Consulting Agreement dated November 1999, by and between Nugget
Exploration, Inc. and MCOM Management Corp.
4.2 Stock Option Agreement dated August 27, 1999, by and between GoHealth.MD,
Inc. and Harvey Benn
4.3 Stock Option Agreement dated August 27, 1999, by and between GoHealth.MD,
Inc. and Frank Gettson.
4.4 Stock Option Agreement dated May 7, 1999, by and between GoHealth.MD, Inc.
and Millennium Consulting, Inc.
4.5 Stock Option Agreement dated May 26, 1999, by and between GoHealth.MD,
Inc. and Gary Crooks
4.6 Stock Option Agreement dated May 26, 1999, by and between GoHealth.MD,
Inc. and John Madden
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4.7 Stock Option Agreement dated June 12, 1999, by and between GoHealth.MD,
Inc. and J. Eric Kishbaugh
4.8 Master Series A Warrant dated October 1, 1999, by and between Nugget
Exploration, Inc. and various entities as described in recent sales of
unregistered securities.
4.9 Master Unit Warrant dated November 12, 1999, by and between GoHealth.MD,
Inc. and various entities as described in recent sales of unregistered
securities.
5.1** Opinion of Hale & Schenkman
10.1 $10,000 Note dated March 29, 1999, by and between GoHealth.MD, Inc. and
William Hanna Consultants, Inc.
10.2 $25,000 Note dated April 26, 1999, by and between GoHealth.MD, Inc. and
William Hanna.
10.3 $3,000 Note dated May 2, 1999, by and between GoHealth.MD, Inc. and
William Hanna Consultants, Inc.
10.4 Contract of Sale dated April 26, 1999, and between GoHealth.MD, Inc. and
Robert H. Savar.
10.5 Contract of Sale dated April 26, 1999, by and between GoHealth.MD, Inc.
and Computerized Professional Enrichment Services Contract of Sale.
10.6 Independent Reseller Agreement dated March 22, 1999, by and between
GoHealth.MD, Inc. and Domain Name Trust, Inc.
10.7 Agreement dated November 16, 1999, by and between GoHealth.MD, Inc. and
Domain Name Trust, Inc.
10.8 Agreement dated May 5, 1999, by and between GoHealth.MD, Inc. and PR
Newswire.
10.9 Agreement dated December 13, 1999, by and between GoHealth.MD, Inc. and
Company X t/a James Corea's Vita-Labs.
10.10 Consulting Agreement dated August 23, 1999, by and between GoHealth.MD,
Inc. and Frank Gettson.
10.11 Consulting Agreement dated August 23, 1999, by and between GoHealth.MD,
Inc. and Harvey Benn.
10.12 Consulting Agreement dated November 30, 1998 by and between Nugget
Exploration, Inc. and Ken W. Kurtz, incorporated herein by reference
from the Company's previous filings.
10.13 Financial Consulting Agreement dated March 5, 1998, by and between
Nugget Exploration, Inc. and Park Street Investments, Inc.
10.14* Business Consulting Agreement dated March 10, 2000 by and between
GoHealth.MD, Inc. and American Benefit Systems, Inc.
10.15* Contract of Sale dated January 20, 2000 by and between GoHealth.MD,
Inc. and Prometrics Consulting, Inc.
21.1 List of subsidiaries
23.2* Consent of Samuel Klein & Company
23.3** Consent of Hale & Schenkman
* Filed herewith.
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** To be filed by Amendment
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
1) To file, during any period in which offers or sales are being made of the
securities registered hereby, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by section 10(a)(3) of the Securities
Act;
(ii) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and
(iii) include any additional or changed material information on the plan of
distribution.
1) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
2) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cherry Hill, State of New Jersey, on this 13th
day of April 2000.
GoHealth.MD, Inc.
By: /s/ Leonard F. Vernon
Dr. Leonard Vernon
Title: President
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Leonard F. Vernon President, Director April 13, 2000
Dr. Leonard Vernon
/s/ William Hanna Vice President, Assistant April 13, 2000
William Hanna Secretary & Director
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INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
3.1 Articles of Incorporation, as amended
10.14 Business Consulting Agreement dated March 10, 2000 by and between
GoHealth.MD, Inc. and American Benefit Systems, Inc.
10.15 Contract of Sale dated January 20, 2000 by and between GoHealth.MD,
Inc. and Prometrics Consulting, Inc.
23.2 Consent of Samuel Klein & Company
All exhibits referenced are included herewith.
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
GOHEALTH.MD, INC.
[RESTATED TO INCLUDE AMENDMENTS TO THE ARTICLES
OF INCORPORATION THROUGH JANUARY 24, 2000.]
We, the undersigned natural persons of the age of twenty-one years or more,
acting as incorporators of a corporation under the General Corporation Law of
Nevada, adopt the following Articles of Incorporation for such corporation.
FIRST: The name of the corporation is GoHealth.MD, Inc.
SECOND: The location of the principal office of this corporation within the
State of Nevada is One East First Street, Reno, County of Washoe, Nevada,
89501.
THIRD: The corporation shall have unlimited power to engage in and to do any
lawful act concerning any or all lawful businesses for which corporations may
be organized under the General Corporation Law of Nevada, this statement of
purpose and power being authorized specifically in Section 78.035, Nevada
Revised Statutes, 1957, as amended. The specific purpose of this corporation
within the scope of its broad authority is to engage in the business of
exploring for and developing natural resources including uranium, gold, silver,
petroleum and other minerals and engaging in all transactions relating thereto.
The specific and immediate purpose is not in limitation of the general powers
and authorities granted under law and, specifically, the General Corporation
Law of Nevada.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 25,000,000 shares, each having a par value of $0.01 per
share.
FIFTH: The members of the governing board shall be styled "directors." The
number of directors constituting the initial Board of Directors of the
corporation is three. The names and address of the persons who are to serve as
directors until the first annual meeting of shareholders or until their
successors are elected and shall qualify are:
Name Address
John W. MacGuire P.O. Box 2977
Casper, Wyoming 82602
James M. MacGuire 28 Green Turtle Road
Coronado Cays, San Diego, CA
Donald A. MacQueen 1756 South Chestnut
Casper, Wyoming 82601
The number of directors to be elected at each annual meeting of shareholders
or at a special meeting called for the election of directors shall be not less
than three nor more than nine, the exact number to be fixed by the By-laws.
SIXTH: The capital stock of this corporation shall not be subject to assessment
to pay the debts of the corporation, and, in this particular, these Articles of
Incorporation shall not be subject to amendment.
SEVENTH: The name and address of each incorporator is:
Name Address
John W. MacGuire 815 South Durbin
Casper, Wyoming 82601
Mary C. MacGuire 815 South Durbin
Casper, Wyoming 82601
John C. MacGuire 815 South Durbin
Casper, Wyoming 82601
EIGHTH: The corporation shall have perpetual existence.
NINTH: No holder of shares of stock of any class of the corporation, whether
now or hereafter authorized, shall have the preemptive right to purchase,
receive or subscribe for any of the unissued stock of the corporation, or for
any stock of the corporation hereafter authorized to be issued, or for bonds,
debentures, or other securities convertible into stock of any class of the
corporation, or for stock held in the treasury of the corporation; and all such
unissued and additional shares of stock, bonds, debentures, or other securities
convertible into stock of any class of the corporation, howsoever the same may
have been acquired, may be issued and disposed of by the Board of Directors to
such person as may be permitted by law as the Board of Directors in their
absolute discretion may deem advisable.
TENTH: Cumulative voting in the election of directors is not permitted.
ELEVENTH: All lawful restrictions on the sale or other disposition of shares
may be placed on all or a portion or portions of the certificate evidencing the
corporation's shares.
TWELFTH: The officers, directors and other members of management of this
corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this corporation has
expressed an interest as determined from time to time by the corporation's
Board of Directors as evidenced by resolutions appearing in the corporation's
Minutes. When such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors and other members of management of this corporation shall
be disclosed promptly to this corporation and made available to it. The Board
of Directors may reject any business opportunity presented to it and thereafter
any officer, director or other member of management may avail himself of such
opportunity. Until such time as this corporation, through its Board of
Directors, has designated an area of interest, the officers, directors and
other members of management of this corporation shall be free to engage in such
areas of interest on their own and this doctrine shall not limit the rights of
any officers, directors and other members of management of this corporation
shall be free to engage in such areas of interest on their own and this
doctrine shall not limit the rights of any officers, director or other member
of management of this corporation to continue a business existing prior to the
time that such area of interest is designated by this corporation. This
provision shall not be construed to release any employee of the corporation
(other than an officer, director or member of management) from any duties which
he may have to the corporation.
THIRTEENTH: The directors of this corporation are authorized to adopt,
confirm, ratify, alter, amend, rescind, and repeal Bylaws or any portion
thereof from time to time.
FOURTEENTH: The corporation hereby waives and precludes the application of the
anti-takeover provisions of Nevada Revised Statutes 78.378 to 78.3793, 78.434
and 78.444.
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS'
We consent to the reference to our firm under the caption Experts and to the
use of our report dated March 28, 2000 on the financial statements of
GoHealth.MD, Inc., that is made a part of this Registration Statement.
/S/SAMUEL KLEIN & COMPANY
SAMUEL KLEIN & COMPANY
Newark, New Jersey
April 13, 2000
Exhibit 10.14
GOHEALTH.MD, INC.
2051 Springdale Road
Cherry Hill, NJ 08003
BUSINESS CONSULTING AGREEMENT
AGREEMENT, made this 10th day of March, 2000 between American Benefit Systems,
Inc., having its principal place of business at 508 Main Street, Boonton, NJ
07005, Attn: Dan Lanktree, President, hereinafter the "Consultant" and
GOHEALTH.MD, INC., having a principal place of business at 2051 Springdale
Road, Cherry Hill, NJ 08003 hereinafter the "Company".
WHEREAS, GOHEALTH desires to obtain Consultant's experience with respect to
strategic marketing initiatives, introductions to key decision makers and
negotiations concerning agreement with "Health" related companies (i.e.
insurance companies, medical associations, drug and pharmaceutical companies),
and the Consultant to undertake to provide such services as herein set forth:
WITNESSETH
NOW, THEREFORE, the parties agree as follows:
1. TERM: This contract is for a one (1) year period from the date hereof.
2. NATURE OF SERVICES: Consultant will render advice and assistance to the
Company on business related matters and in connection therewith Consultant
shall:
A) Develop prospects, schedule meetings and assist in negotiation of contracts
between and amongst "Health" related companies on behalf of GOHEALTH.MD.
B) Attend meetings on behalf of GOHEALTH.MD and provide expertise on strategic
marketing and sale initiatives.
C) Assist in raising capital on behalf of GOHEALTH.MD.
D) Consult with GOHEALTH.MD on corporate planning and long-term growth of the
company.
E) Assist in identifying suitable candidates for the GOHEALTH.MD management
team.
3. COMPENSATION: GOHEALTH.MD agrees to pay the Consultant ten thousand (10,000)
shares of GOHEALTH.MD restricted stock and one hundred thousand warrants to
purchase GOHEALTH.MD stock with an exercise price of $1.50 that expires in five
(5) years. Such warrants shall be issued concurrent with the signing of this
agreement.
4. LIABILITY OF CONSULTANT: In furnishing GOHEALTH.MD with the management
advice and other services as herein provided, neither the consultant nor any
officer, director, or agent thereof shall be liable to GOHEALTH.MD or its
creditors for errors of judgment or for anything except malfeasence, bad faith,
or gross negligence in the performance of its
<PAGE>
duties or reckless disregard of
its obligations and duties under the terms of this agreement.
It is further understood and agreed that the Consultant may rely upon
information furnished to it reasonably believed to be accurate and reliable,
and that except as herein provided, Consultant shall not be responsible for any
loss suffered by GOHEALTH.MD by reason of GOHEALTH.MD's action or non-action on
the basis of any advice, recommendation, or approval of Consultant, its
employees, or agents.
The parties further acknowledge that Consultant undertakes no responsibility
for the accuracy of any statement made by management of GOHEALTH.MD contained
in prior releases of other communications, including but not limited to,
filings with the Securities and Exchange Commission and the National
Association of Securities Dealers.
5. STATUS OF CONSULTANT: Consultant shall be deemed to be an independent
contractor and, except as expressly provided or authorized in this agreement,
shall have no authority to act as agent for or represent GOHEALTH.MD.
6. OTHER ACTIVITIES OF CONSULTANT: GOHEALTH.MD recognized that Consultant now
renders and may continue to render consulting services to other companies which
may or may not have policies and conduct activities similar to those of
GOHEALTH.MD.
7. MISCELLANEOUS:
A) All final decisions with respect to consultation, advice and services
rendered by Consultant to GOHEALTH.MD shall vest with GOHEALTH.MD.
B) This agreement contains the entire agreement of the parties hereto and there
are no representations or warranties other than those contained herein.
Neither party may modify this Agreement unless the same is in writing and is
duly executed by both parties hereto.
C) The company may issue additional warrants to purchase shares of GOHEALTH.MD,
Inc. at an exercise price of $1.50 should the Company in its sole discretion
decide to issue such warrant.
D) Any controversy or claim arising our of or related to this Agreement shall
be settled by arbitration in accordance with the rules under the auspices of
the American Arbitration Association: any arbitration shall be conducted in the
State of New Jersey.
Agreed and Accepted on this 10th day March, 2000.
AMERICAN BENEFICIAL SYSTEM, INC.
By: /s/ Daniel Langtree
Daniel Langtree-President
Agreed and Accepted on this 10th day of March, 2000
GOHEALTH.MD, INC.
By: /s/ Leonard F. Vernon
Dr. Leonard F. Vernon, President
Exhibit 10.15
CONTRACT OF SALE
THIS CONTRACT is made on January 20th by and between GoHealth.MD, Inc., a
Nevada Corporation (the "Purchaser") and Prometrics Consulting, Inc. (the
"Seller").
RECITAL
WHEREAS, the Seller has legally registered Healthsites.com with Network
Solutions, Inc., the national registry for all domain names, and owns all
right, title and interest in the website constructed by the Seller in
connection with such domain name:
WHEREAS, the Purchaser desires to purchase from the Seller, and the Seller
desires to sell to the Purchaser, the Healthsites.com website and domain name,
as well as any and all rights, title and interest associated thereto which the
Seller holds:
THEREFORE, in consideration of the mutual promises and conditions contained in
this contract, the parties agree as follows:
PURCHASE AND SALE
1. The Purchaser shall purchase from the Seller, and the Seller shall sell to
the Purchaser, any and all of the Seller's right, interest and title in the
domain name Healthsites.com (the "Sale") for the purchase price of Twenty
Thousand Dollars ($20,000.00) payable at the closing of the Sale (the
"Closing") in the form of a company check, money order or wire funds.
Additionally the Purchaser will issue 50,000 (Fifty Thousand) shares of the
Purchaser's stock. These shares are being issued pursuant to rule 144, however
they will have piggyback registration rights. Seller agrees that he will act
in an advisory capacity for the company dedicating one hundred hours of time
during the next twelve (12) months, Seller further agrees to use his best
efforts in assisting the company in developing strategic alliances for its
health search engine. Furthermore, Seller shall have the right to purchase up
to 100,000 additional shares of Purchaser's stock (NUGT) at the option price of
$2.00 per share.
2. At the closing of the Sale, the Seller shall deliver to the Purchaser any
and all documentation in the Seller's possession reflecting the ownership and
registration of the domain names Healthsites.com with Network Solutions, Inc.,
as well as effectuate a domain name modification (as such term is commonly
understood) in favor of GoHealth.MD, Inc. The Seller shall additionally
deliver (or, to the extent delivery is impossible, make known) to the Purchaser
all other contracts, agreements and commitments pertaining to Seller's
ownership of said domain name Healthsites.com.
COMPLIANCE WITH LAW AND OTHER INSTRUMENTS
3. The Seller hereby represents that, to its best knowledge after reasonable
due diligence, the Seller is not in violation of any term or provision of any
charter, by-law, contract, agreement,
<PAGE>
instrument, judgment, decree , order,
statute, rule or regulation and that the Seller's execution, delivery and
performance of this contract will not result in any violation or in the
creation of any lien, encumbrance, or charge on any of the properties or assets
of Seller.
SELLER'S TITLE
4. The Seller warrants that it has good, absolute and marketable title to this
domain name and that it has been properly registered with Network Solutions,
Inc.
5. The Seller represents that it has no knowledge of any claim against it
under or in respect of, nor any reason to believe that it is or may be
infringing on or otherwise acting adversely to the rights of any person under
or in respect of any patent, trademark, service mark, trade name, copyright,
license, or other similar intangible property; and Seller is not aware of any
obligation or liability to make any payments by way of royalties, fees, or the
like to any owner or licensee of, or other claimant under any intangible
property with respect to its use or in connection with the conduct of Seller's
business or otherwise (other than any fees that may be owed from time to time
to Network Solutions, Inc.).
INDEMNIFICATION
6. The Seller shall indemnify the Purchaser, and the Purchaser shall indemnify
the Seller, on and after the Closing with respect to all claims, actions,
demands, losses, costs, expenses, liabilities (joint or several), penalties and
damages, including counsel fees incurred in investigating or attempting to
avoid or oppose the imposition of damages, resulting to the other from (1) any
inaccurate representation made by the Seller or the Purchaser, as the case may
be, in or under this contract, (2) breach of any of the warranties or covenants
made by the Seller or the Purchaser, as the case may be, in or under this
contract or (3) breach or default in the performance by the Seller or the
Purchaser, as the case may be, of any of the covenants to be performed by it
under this contract. The Seller shall indemnify the Purchaser for any debts,
liabilities, or obligations of the Seller specifically relating to
Go2Health.com other than those obligations expressly or reasonably assumed by
the Purchaser pursuant to this contract, and other than those that have been
communicated to the Purchaser by the Seller on or prior to the Closing Date.
AMENDMENT AND WAIVER
7. This contract may be amended or modified at any time and in all respects,
and any provision may be waived, by an instrument in writing executed by both
the Purchaser and the Seller, or by either of them in the case of a waiver of a
right or benefit under this contract of such waiving party.
SHAREHOLDERS' APPROVAL
8. Seller represents that the sale and transfer of this domain name by Seller,
as provided for in this contract have been approved by the board of directors
and by the requisite number of shareholders. As such Seller shall provide a
corporate resolution reflecting same. NOTICES
9. Any notices or other communications required or permitted under this
contract shall be sufficiently given if delivered personally or sent by
registered or certified mail, postage prepaid to the Seller located at 15100 SE
38th Street and the Purchaser at GoHealth.MD, Inc. located at 2051 Springdale
Road, Cherry Hill, New Jersey 08003 or at any other address furnished in
writing by one party to the other and shall be deemed to have been given as of
the date delivered or deposited in the United States mail as the case may be.
CHOICE OF LAW
10. It is the intention of the parties that the law of the State of New Jersey
shall govern the validity of this contract, the construction of its terms, and
the interpretation of the rights and duties of the parties.
ARBITRATION
11. Any dispute arising under this contract or relating to the sale and
purchase described in this contract shall be resolved under the commercial
arbitration rules of the American Arbitration Association.
HEADINGS
12. Headings contained in this contract are for reference purposes only and
shall not affect in any way the meaning or interpretation of this contract.
COUNTERPART EXECUTION
13. This contract may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
GENDER
14. All personal pronouns used in this contract shall include the other
genders whether used in masculine or feminine or neuter gener, and the singular
shall include the plural whenever and as often as may be appropriate.
PARTIES IN INTEREST
15. All the terms and provisions of this contract shall be binding on and
inure to the benefit of, and be enforceable by, the Seller, the Purchaser and
their respective successors and assigns.
INTEGRATED CONTRACT
16. This contract constitutes the entire agreement between the parties, and
there are no agreements, understandings, restrictions, warranties or
representations between the parties other than those set forth, provided for or
otherwise referenced in this contract.
ATTEST: GOHEALTH.MD, INC.
By: /s/ Leonard F. Vernon
Leonard F. Vernon, President
ATTEST: PROMETRICS CONSULTING, INC.
By: /s/ Marc Duey
Marc Duey
