ONHEALTH NETWORK CO, S-3, 1999-06-22

ONHEALTH NETWORK CO
S-3, 1999-06-22
PREPACKAGED SOFTWARE

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As filed with the Securities and Exchange Commission on June 22, 1999
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ONHEALTH NETWORK COMPANY
(Exact name of registrant as specified in its charter)

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<TABLE>
<S> <C> <C>
Washington 7372 41-1686038
(State of incorporation Primary Standard Industrial (I.R.S. Employer
or organization) Classification Code Number Identification No.)
</TABLE>

808 Howell Street, Suite 400
Seattle, Washington 98101
(206) 583-0100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
----------------
ROBERT N. GOODMAN
Chief Executive Officer
808 Howell Street, Suite 400
Seattle, Washington 98101
(206) 583-0100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies of all communications to:

<TABLE>
<S> <C>
C. KENT CARLSON STEVEN R. FINLEY
GARY J. KOCHER Gibson, Dunn & Crutcher LLP
CHRISTOPHER H. CUNNINGHAM 200 Park Avenue
Preston Gates & Ellis LLP New York, New York 10166-0193
701 Fifth Avenue Suite 5000 (212) 351-4000
Seattle, Washington 98104-7078
(206) 623-7580
</TABLE>
----------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement as the
Underwriters shall determine.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]

If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box:. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
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<CAPTION>
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Proposed Proposed
Amount maximum maximum Amount of
Title of each class of to be offering price aggregate registration
securities to be registered registered(1) per share(2) offering price(2) fee(2)
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<S> <C> <C> <C> <C>
Common Shares par value $.01.... 6,900,000 shares $8.6875 $59,943,750 $16,664.36
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</TABLE>
(1) Includes 900,000 shares that are being registered for an offering by the
Registrant upon the exercise of an over-allotment option to be granted to
the Underwriters.
(2) Estimated pursuant to Rule 457(c) solely for purposes of calculating
amount of registration fee, based upon the average of the high and low
prices reported on June 18, 1999, as reported on the Nasdaq Stock Market.

----------------

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PRELIMINARY PROSPECTUS June 22, 1999

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6,000,000 Shares

[LOGO OF ONHEALTH]

Common Stock

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OnHealth Network Company is offering 6,000,000 shares of common stock to be
sold in this offering.

On June 21, 1999, the last reported sale price of the common stock on the
Nasdaq SmallCap Market was $8.75 per share. The common stock is traded under
the Nasdaq symbol "ONHN." We have applied to have the common stock traded on
the Nasdaq National Market upon completion of this offering.

See "Risk Factors" beginning on page 5 to read about certain factors you should
consider before buying shares of our common stock.

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.

<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Public offering price $ $
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Underwriting discount
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Proceeds, before offering expenses, to OnHealth
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</TABLE>

The underwriters may also purchase up to an additional 900,000 shares of common
stock from OnHealth at the offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.

Delivery of the shares of common stock will be made on or about ,
1999, against payment in immediately available funds.

Warburg Dillon Read LLC

SG Cowen

CIBC World Markets
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[Artwork to come]

<PAGE>

Table of Contents

<TABLE>
<S> <C>
Forward-Looking Statements......................... i

Prospectus Summary................................. 1

Risk Factors....................................... 4

Use Of Proceeds.................................... 16

Capitalization..................................... 16

Selected Financial Data............................ 17

Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................................ 18

Business........................................... 24

Management......................................... 40

Description of Our Securities...................... 41

Principal Shareholders............................. 43

Underwriting....................................... 45

Legal Matters...................................... 46

Experts............................................ 46

Where You Can Find More Information................ 47

Index to Financial Statements...................... F-1
</TABLE>
Forward-Looking Statements

This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We have based these forward-looking statements largely on
our current expectations and projections about future events and trends
affecting the financial condition of our business. These forward-looking
statements are subject to a number of risks, uncertainties and assumptions
about OnHealth Network Company, including:

. The expectation that we will become the leading online health information
network depends on our ability to continue to:

. produce and obtain high quality editorial content;

. implement effective traffic and brand-building programs; and

. react effectively to competitive conditions within the market,
including the introduction and further development of competitive
websites.

. The expectation that we will see a growth in revenue and positive net
income as a result of our shift in focus to an online health information
network depends on:

. consumer interest;

. the ability to obtain successful revenue sources from advertisers;
and

. other general market and competitive conditions within the Internet
health market.

See "Risk Factors" and "Business" elsewhere in this prospectus.

i
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Prospectus Summary

This summary highlights certain information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, especially the
risks of investing in our common stock discussed under "Risk Factors." Except
as otherwise noted, all information in this prospectus assumes no exercise of
the underwriters' over-allotment option. References in this prospectus to
"OnHealth," the "Company," "we," "our" and "us" refer to OnHealth Network
Company, a Washington corporation.

Our Business

We are a leading independent source of original, informative, timely and
trusted consumer-oriented health and wellness information, products and
services on the Web. Our website, onhealth.com, is a consumer-focused online
health destination dedicated to the management of personal and family health
and well-being. We employ ten full-time staff editors and writers and we use
over 100 health and medical writers and contributors, enabling us to update our
website daily with original health-related features. By providing users with a
broad range of original in-depth reporting, substantive resources and
references, community discussions, direct access to experts, interactive tools
and exclusive search capabilities, onhealth.com combines the strength of
credible journalism with the power of online interactivity.

We launched our website in July 1998. During March 1999, onhealth.com
attracted 973,295 visits, an increase of 53% from our December 1998 visits,
according to Internet Profile Corporation. While we have achieved our traffic
growth largely without the benefit of traditional advertising, we plan to
launch a coordinated traditional media advertising and public relations
campaign designed to build our brand through the use of television, radio,
outdoor, print and online media. This campaign will coincide with the relaunch
of our onhealth.com website in the third quarter of 1999. We also distribute in
excess of 60,000 daily and weekly broadcast e-mails to registered users who
have requested our Daily Briefing, Weekly Newsletter and Personal Health
Tracker. This private and personalized e-mail allows our users to stay current
on the health-related subjects most important to themselves and their families.
To date, we have developed distribution partnerships and content sharing
relationships resulting in over 700 websites that drive traffic to our website.
We intend to aggressively expand our content and distribution partnerships with
both online and traditional media partners that can direct additional users to
our website.

Because we are not aligned or affiliated with any one individual,
institution or medical organization, we are able to provide an independent
voice and serve as a trusted consumer advocate for health-related issues. We
believe this will allow us to build a loyal and dedicated audience that will
fuel multiple revenue opportunities. While we believe the demographics of our
users are highly attractive to advertisers, we are developing our website to
generate revenue opportunities from multiple sources, including
advertising/sponsorships, e-commerce transactions and content syndication. We
have launched a shopping area on our website designed to offer our users a wide
variety of health and wellness products including prescription and over-the-
counter drugs, vitamins, herbs, books and gifts.

Our Market Opportunity

According to Cyber Dialogue, an industry research firm, during 1998,
approximately 22 million adults in the United States searched online for health
and medical information. Cyber Dialogue estimates that approximately 70% of the
persons searching for health and medical information online believe the
Internet empowers them by providing them with information before and after they
go to a doctor's office. Cyber Dialogue also estimates that in the year 2000,
the number of adults in the United

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States searching for online health and medical information will grow to
approximately 33 million. In addition, the Internet is enabling advertisers and
online merchants to inexpensively reach vast, yet highly targeted audiences,
and to measure in real-time the effectiveness of their programs.

The quality and breadth of health oriented websites varies widely and to
date no clear brand has emerged as the leading provider of trusted consumer-
oriented health and wellness information on the Internet. Most of these
websites do little more than repurpose and repackage non-proprietary content
without tailoring such content for the consumer and providing context, insight
or analysis. Many offer little disclosure about their affiliations, the sources
of their information and potential conflicts of interest. Additionally, many
health websites are poorly designed, difficult to navigate and do not
understand the needs of women as the principle gatekeepers of the healthcare
dollar. Accordingly, we believe there is a substantial and growing unmet need
for a well-known, trusted, comprehensive health-related website that addresses
consumers' health needs accurately and intelligently while providing a
satisfying consumer experience. Moreover, we believe that such a website will
have the ability to generate significant revenue from a variety of sources,
including advertising and commerce.

Our Strategy

Our goal is to become the premier source of consumer-oriented health and
wellness information and services on the Internet. We intend to achieve this
goal by implementing the following strategies:

. Leveraging and enhancing our expansive proprietary health content;

. Providing consumers with a compelling Internet health experience;

. Establishing onhealth.com as the premier brand for health and wellness
information on the Internet;

. Capitalizing on revenue generating opportunities; and

. Engaging in selective acquisitions and strategic partnerships

Our History

Until January 1998, our traditional line of business had been the
development, production and distribution of medical CD-ROM titles. We also
supplied video, animation and graphic assets to a health and medical cable
television channel. In late 1997, our Board of Directors revised our business
strategy and brought in an entirely new management team and other key employees
skilled in the development of Internet websites, and in 1998, we focused on the
development of a consumer-oriented health and wellness website.

We were originally incorporated in 1990 in the State of Minnesota under the
name Interactive Television, Inc. We changed our name to Interactive Ventures,
Inc. in 1991, IVI Publishing, Inc. in 1993, and, in connection with our move
to, and re-incorporation in the State of Washington, OnHealth Network Company
in June 1998. Our principal executive offices are located at 808 Howell Street,
Suite 400, Seattle, Washington 98101. Our telephone number is (206) 583-0100.

This prospectus includes statistical data regarding the Internet industry.
Such data are taken or derived from information published by sources including
Internet Profile Corporation, Cyber Dialogue Inc. and Jupiter Communications,
LLC, media research firms specializing in market and technology measurement on
the Internet, and International Data Corporation, a provider of market and
strategic information for the technology industry. Although we believe that
such data are generally indicative of the matters reflected therein, such data
are inherently imprecise, and we caution you not to place undue reliance on
such data.

2
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The Offering

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<S> <C>
Shares offered by OnHealth.. 6,000,000 shares
Shares to be outstanding
after the offering......... 22,212,420 shares
Use of proceeds............. Increased sales and marketing efforts, working
capital and other general corporate purposes,
including possible future strategic alliances and
acquisitions.
Current Nasdaq SmallCap
Market symbol and proposed
Nasdaq National Market
symbol..................... ONHN
</TABLE>

The shares to be outstanding after the offering excludes 4,272,994 shares
issuable on the exercise of currently outstanding stock options and 239,469
shares issuable on the exercise of currently exercisable warrants. The number
of shares outstanding after the offering is based on shares outstanding on June
16, 1999. See "Capitalization."

Summary Financial Data

You should read the following summary financial data together with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section later in this prospectus as well as OnHealth's financial
statements and related notes also contained later in this prospectus.

<TABLE>
<CAPTION>
March 31, 1999
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December 31,
1998 Actual As adjusted
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(Unaudited)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents...................... $ 2,119 $13,751 $62,101
Working capital (deficiency)................... (1,158) 12,542 60,892
Total assets................................... 3,894 17,037 65,387
Long term debt................................. -- -- --
Shareholders' equity (deficit)................. (301) 13,282 61,632
</TABLE>

The as adjusted information gives effect to the sale of 6,000,000 shares of
common stock to be sold in this offering at an assumed public offering price of
$8.75 per share, and the application of the net proceeds from the sale of the
shares, after deducting the underwriting discount and estimated offering
expenses payable by OnHealth. See "Use of Proceeds."

3
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Risk Factors

You should carefully consider the risks and uncertainties described below
before making an investment decision. Our business, financial condition and
operating results could be adversely affected by any of the following factors,
in which event the trading price of our common stock could decline, and you
could lose part or all of your investment. The risks and uncertainties
described below are not the only ones that we face. Additional risks and
uncertainties not presently known to us, or that we currently think are
immaterial, may also impair our business operations.

Risks Related to Our Business

We have a history of losses and negative cash flow and anticipate continued
losses.

Since our inception, we have incurred significant losses and negative cash
flow, and as of March 31, 1999, had an accumulated deficit of approximately
$93.7 million. We have not achieved profitability and expect to continue to
incur operating losses for the foreseeable future as we fund operating and
capital expenditures in areas such as expansion of our network, 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 business model also
assumes that those 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 we cannot
assure you that we will ever achieve or sustain profitability or that our
operating losses will not increase in the future.

Since we recently changed our business focus, we essentially are a new company
and accordingly are subject to those risks associated with a new company.

Even though we were founded in 1990, we have only been active online since
1996 and the onhealth.com website was not actually "launched" until July 1998.
As a result, our company is essentially a new venture. Therefore, we do not
have a significant operating history upon which you can evaluate us and our
prospects, and you should not rely upon our past performance to predict our
future performance. In transitioning to our new business model, we are
substantially changing our business operations, sales and implementation
practices, customer service and support operations and management focus. We are
also facing new risks and challenges, including a lack of meaningful historical
financial data upon which to plan future budgets, competition from a wider
range of sources, the need to develop strategic relationships and other risks
described below. We cannot guarantee that we will be able to successfully
transition to our new business model.

Our ability to generate profits, if any, will depend on our ability to:

. attract consumers to our website;

. attract advertisers to our website;

. generate e-commerce revenue from our website; and

. control costs.

We anticipate continued significant operating losses at least through 2000,
as our website is improved and marketed and the OnHealth network is enhanced.
We cannot assure you that we will ever attain profitability.

4
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Our business model relies to a large extent on advertising revenue from our
website. We cannot provide any assurance that we will generate significant
advertising revenue.

Our future is highly dependent on increased use of the Internet as an
advertising medium. We expect to derive a substantial amount of our revenue
from advertising and sponsorships. The Internet advertising market is new,
extremely competitive 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 the 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.
To date, advertisers have not, by their actions, shown that they believe in the
Internet as a legitimate advertising medium.

Advertising rates quoted by different vendors vary widely, making it
difficult for us to project future levels of advertising revenue. Internet
advertising rates are based in part on third-party estimates of an individual's
use of an Internet website. These estimates of use are called impressions. Such
estimates are often based on sampling techniques or other imprecise measures,
and may materially differ from our own estimates. We do not know if advertisers
will accept our or other parties' measurements of impressions. Since the
Internet advertising industry is in its infancy, universally accepted standards
measuring the effectiveness of a particular Internet advertisement have not
been established or widely embraced. Our advertising revenue 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 and, therefore, our business.

In order to compete for advertising dollars with the growing number of Internet
websites, we must establish, maintain and strengthen our brand.

In order to expand our audience of users and increase our online traffic, we
must establish, maintain and strengthen our brand. For us to be successful in
establishing our brand, we believe healthcare consumers must perceive us as a
trusted source of healthcare information, and advertisers and merchants must
perceive us as an effective marketing and sales channel for their products and
services. As discussed in this prospectus, we are increasing 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.

In addition, to remain competitive with other Internet companies, including
the numerous other Internet health-related websites, we must continue to
enhance and improve the responsiveness, functionality and features of our
website and develop other products and services. This will require us to:

. develop or license increasingly complex technology; and

. create an easy to use and functional e-commerce component to our website.

We may not succeed in developing or introducing such features, functions,
products and services in order to attract consumers. Such failure would
adversely affect our business, results of operations and financial condition.

5
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Since our advertising contracts are for short terms and often guarantee a
minimum number of impressions, we cannot be sure that we will continue to
attract Internet advertisers.

The majority of our advertising contracts have been for terms averaging
three months in length, with relatively few longer-term advertising contracts.
We cannot assure you that our current advertisers will continue to purchase
advertisements on our website. In addition, our advertising contracts typically
guarantee the advertiser a minimum number of impressions. To the extent that
minimum impression levels are not achieved for any reason, we may be required
to "make good" or provide additional impressions after the contract term.
Providing additional impressions may adversely affect the availability of
advertising inventory. This may, in turn, adversely affect our business,
results of operations and financial condition.

We depend on third-party relationships, many of which are short-term or
terminable, to generate traffic on our website.

In order to expand our network, we have entered into a number of strategic
relationships which involve the payment of funds for prominent or exclusive
carriage of our healthcare information and services. These transactions are
premised on the assumption that the traffic we obtain from these arrangements
will permit us to earn revenue in excess of the payments made to partners. 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. We have entered into distribution relationships with
several companies, and we intend to enter into additional relationships in the
future. Most of these distribution relationships are short term in nature and
may not be renewed or may be canceled by our distribution partner. Although we
view our distribution relationships as a key factor in our overall business
strategy, our distribution partners may not view their relationships with us as
significant to their business, and they may later decide to end their
commitment to us or even decide to compete directly with us in the future. We
cannot guarantee that any distribution partner will perform its obligations as
agreed or contemplated or that we would be able to specifically enforce any
distribution agreement. Our arrangements with our distribution partners
generally do not establish minimum performance requirements, but instead rely
on the voluntary efforts of our distribution partners. Therefore, we cannot
guarantee that these relationships will be successful.

Most of our arrangements with third-party Internet websites:

. do not require future minimum commitments to use our services;

. are not exclusive; and

. are short-term or may be terminated at the convenience of the other
party.

In addition, we do not have agreements with many website operators that
provide links to onhealth.com, and those operators with which we do may
terminate such links at any time without notice. As a result, we cannot assure
you that our existing relationships will result in sustained business
relationships or the generation of significant revenue for us. Failure of one
or more of our strategic relationships to achieve or maintain market acceptance
or commercial success or the termination of one or more successful strategic
relationships could have a material adverse effect on our business, results of
operation and financial condition.

Since our website relies on some content that we do not create, it is possible
that we may not be able to provide such content in the future.

While we produce much of the editorial content found on our website, some of
our content is licensed from third parties. Accordingly, we rely on the
expertise, technical capability, name recognition and willingness to syndicate
content for branding and distribution of others. As health-related content

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grows on the web, there will be increasing competition for the best health
information suppliers. This may result in certain content becoming unavailable
or in significantly higher content prices. Such an outcome could make our
website less attractive or useful for a user and could have a material adverse
effect on our business and financial performance.

Our business is changing rapidly, which could cause our quarterly operating
results to vary and our stock price to fluctuate.

Our revenue and operating results may vary significantly from quarter to
quarter due to a number of factors, not all of which are in our control. If we
have a shortfall in revenue in relation to our expenses, or if our expenses
precede increased revenue, then our results of operations would be materially
adversely affected. This would likely affect the market price of our common
stock in a manner which may be unrelated to our long-term operating
performance. Important factors which could cause our results to fluctuate
materially include:

. our ability to attract and retain users;

. our ability to attract and retain advertisers and sponsors;

. our ability to attract and retain customers and maintain customer
satisfaction for our existing and future e-commerce offerings;

. new Internet websites, services or products introduced by us or our
competitors;

. the level of Internet and other online services usage;

. our ability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;

. our ability to successfully integrate operations and technologies from
any acquisitions, joint ventures or other business combinations or
investments; and

. technical difficulties or system downtime affecting the operation of our
website.

In addition, as our market develops, seasonal and cyclical patterns may
emerge. These patterns may affect our revenue. We cannot yet predict to what
extent our operations will prove to be seasonal. Due to the factors noted above
and the other risks discussed in this section, you should not rely on quarter-
to-quarter comparisons of our results of operations as indicators of future
performance. It is possible that in some future periods our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock may underperform or decrease.

Our success depends in large part on the continuing efforts of two individuals.
In addition, our success depends on our ability to continue to attract, retain
and motivate highly skilled employees.

Our development and operation is substantially dependent on the services of
our President and Chief Executive Officer, Robert N. Goodman, and on our
General Manager, Rebecca Farwell. If we lost the services of either Mr. Goodman
or Ms. Farwell, our business would be severely affected. Our ability to execute
our growth plan and be successful also depends on our continuing ability to
attract, retain and motivate other highly skilled employees. As we continue to
grow, we will need to hire

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additional personnel in all operational areas. Competition for personnel
throughout the Internet industry is intense. We may be unable to retain our key
employees or attract, assimilate or retain other highly qualified employees in
the future. We have from time to time in the past experienced, and we expect to
continue 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 our current personnel, our
business will be adversely affected.

To successfully compete in the Internet health field, we must continue to
improve the product we offer and increase the number of people using our
website.

To do so, we will have to significantly increase our operating expenses to:

. develop new distribution channels;

. fund greater levels of research and development;

. add editorial content;

. increase our sales and marketing operations;

. broaden our customer support capabilities; and

. establish brand identity and strategic alliances.

Such planned expansions, however, will require substantial capital. We
cannot guarantee that such capital will be available, or if available, that the
terms on which such capital is available will be acceptable to us. If we raise
additional cash through the issuance of equity or convertible debt securities:

. the percentage ownership of our shareholders will be reduced;

. shareholders may experience additional dilution upon the conversion of
any such debt securities; and

. such securities may have rights, preferences or privileges senior to
those of the holders of common stock.

Any future acquisitions we make of companies or technologies may result in
disruptions to our business and/or the distraction of our management, due to
difficulties in assimilating acquired personnel and operations.

We may acquire or make investments in complementary businesses,
technologies, services or products if appropriate opportunities arise. From
time to time we engage in discussions and negotiations with companies regarding
our acquiring or investing in such companies' businesses, products, services or
technologies, and we regularly engage in such discussions and negotiations in
the ordinary course of our business. Some of those discussions also contemplate
the other party making an investment in our company. We cannot assure you that
we will be able to identify future suitable acquisition or investment
candidates, or if we do identify suitable candidates, that we will be able to
make such acquisitions or investments on commercially acceptable terms or at
all. If we acquire or invest in another company, we could have difficulty in
assimilating that company's personnel, operations, technology and software. In
addition, the key personnel of the acquired company may decide not to work for
us. If we make other types of acquisitions, we could have difficulty in
integrating the acquired products, services or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our
results of operations. Furthermore, we may incur indebtedness or issue equity
securities to pay for any future acquisitions. The issuance of equity
securities would be dilutive to our existing shareholders.

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Much of our website relies on owned or licensed intellectual property and we
cannot be sure that such rights are protected from the use of others, including
potential competitors.

We regard much of our website and its technology as proprietary and try to
protect it by relying on trademarks, copyrights, trade secret laws and
confidentiality agreements with consultants. In connection with our license
agreements with third parties, we seek to control access to and distribution of
our technology, documentation and other proprietary information. Even with all
of these precautions, it could be possible for someone else to either copy or
otherwise obtain and use our proprietary information without our authorization
or to develop similar technology independently. Effective trademark, copyright
and trade secret protection may not be available in every country in which our
services are made available through the Internet, and policing unauthorized use
of our proprietary information is difficult and expensive. We cannot be sure
that the steps we have taken will prevent misappropriation of our proprietary
information. Such misappropriation could have a material adverse effect on our
business. In the future, we may need to go to court to either enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Such litigation might
result in substantial costs and diversion of resources and management
attention.

We currently license from third parties certain technologies incorporated
into onhealth.com. As we continue to introduce new services that incorporate
new technologies, we may be required to license additional technology from
others. We cannot be sure that these third-party technology licenses will
continue to be available on commercially reasonable terms, if at all.

We may have liability for products sold over, or information retrieved from,
our website.

Because any of the materials on our website may be downloaded or viewed, and
such materials could be sent to others, we could be sued for:

. defamation;

. negligence;

. copyright or trademark infringement;

. medical malpractice or personal injury; or

. other theories based on the nature and content of such materials.

We could also be exposed to liability with respect to third-party
information that may be accessible:

. through our website, or

. through content and materials that may be posted by our users on
discussion boards that we offer.

Such claims might include, that by directly or indirectly providing links to
websites operated by third parties, we are liable for copyright or trademark
infringement or other wrongful actions by such third parties through such
websites. It is also possible that, if any third-party information provided on
our website contains errors, third parties could make claims against us for
losses they incur relying on such information. Insurance may not be adequate to
cover any such potential liabilities. Even if such claims do not result in
liability, we could incur significant costs in investigating and defending
against such claims.

In addition, patients who file lawsuits against doctors often name as
defendants all persons or companies with any relationship to the doctors. As a
result, patients may file lawsuits against us based on advice rendered by
physicians through our website. In addition, a court or government agency may

9
<PAGE>

take the position that our delivery of health information, or information
delivered by a third-party website that a consumer accesses through our
website, exposes us to malpractice or other personal injury liability for
wrongful delivery of healthcare services or erroneous health information. We
cannot assure you that the amount of insurance we maintain with insurance
carriers will be sufficient to cover all of the losses we might incur from
these claims and legal actions. In addition, insurance for some risks is
difficult, impossible or too costly to obtain, and as a result, we may not be
able to purchase insurance for some types of risks.

We have recently experienced and are currently experiencing rapid growth in our
business. If we are unable to manage this growth our business could be harmed.

We have experienced and are currently experiencing a period of significant
growth. This growth has placed, and the future growth we anticipate in our
operations will continue to place, a significant strain on our resources. As
part of this growth, we will have to implement new operational and financial
systems and procedures and controls, expand, train and manage our employee
base, and maintain close coordination among our technical, accounting, finance,
marketing, sales and editorial staffs. If we are unable to manage our growth
effectively, our business, results of operations and financial condition could
be adversely affected. In addition, all of the members of our senior management
joined us in late 1997, 1998 or early 1999. Thus, we have a very new management
team which has not worked together for very long. We cannot assure you that our
management team will be able to work together effectively or successfully
manage our growth.

It is possible that we may have year 2000 problems. As a result, our computer
systems could fail.

We could be affected by Year 2000 issues related to non-compliant
information technology systems or non-IT systems that we operate or that are
operated by third parties. We have substantially completed assessment of our
internal and external IT systems and non-IT systems. At this point in our
assessment, we are not currently aware of any Year 2000 problems relating to
systems we operate or that are operated by third parties that would have a
material adverse effect on our business, results of operations or financial
condition, without taking into account our efforts to avoid such problems.
Based on our assessment to date, we do not anticipate that costs associated
with remediating our non-compliant IT systems or non-IT systems will be
material, although there can be no assurance to such effect.

We believe that the most likely worst case Year 2000 scenario is a failure
beyond our control, such as a prolonged telecommunications or electrical
failure. Such a failure would:

. prevent us from operating our business;

. prevent users from accessing our website; and

. change the behavior of advertising customers or persons accessing our
website.

We believe that the primary business risks, in the event of such failure,
would include:

. lost advertising revenue;

. increased operating costs, loss of customers or persons accessing our
website; and

. other business interruptions of a material nature, as well as claims of
mismanagement, misrepresentation or breach of contract.

Any such problems would have a material adverse effect on our business. We
have not made any contingency plans to address such risks.

10
<PAGE>

Our network could be penetrated. This could result in a disruption in our
website.

Experienced programmers or "hackers" could attempt to penetrate our network
security. Because a hacker who is able to penetrate our network security could
misappropriate proprietary information or cause interruptions in our products
and services, we may be required to expend capital and resources to protect
against or to alleviate problems caused by such parties. In addition, we may
not have a timely remedy against a hacker who is able to penetrate our network
security. Such purposeful security breaches could have a material adverse
effect on our business, results of operations and financial condition. In
addition, the inadvertent transmission of computer viruses could expose us to a
risk of loss or litigation and potential liability.

If today's economic conditions deteriorate, our future results of operations
would be adversely affected.

Time spent on the Internet by individuals, purchases of new computers and
purchases of membership subscriptions to Internet websites are typically
discretionary for consumers and may be particularly affected by adverse trends
in the general economy. The success of our operations depends to a significant
extent upon discretionary consumer spending, including economic conditions
affecting disposable consumer income such as employment, wages and salaries,
business conditions, interest rates, availability of credit and taxation. In
addition, our business strategy relies on advertising by, and agreements with,
other Internet companies. Any significant deterioration in general economic
conditions that adversely affected these companies could also have a material
adverse effect on our business.

We have no plans to pay cash dividends, and investors should not buy our common
stock expecting to receive dividends.

We intend to retain all of our earnings, if any, for use in the business and
do not anticipate paying any cash dividends in the foreseeable future.

Our business may face additional risks and uncertainties not presently known to
us which could cause our business to suffer.

In addition to the risks specifically identified in this Risk Factors
section or elsewhere in this prospectus, we may face additional risks and
uncertainties not presently known to us or that we currently deem immaterial
which ultimately impair our business, results of operations and financial
condition.

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 network 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, our business will be materially adversely
affected.

The Internet industry is highly competitive and changing rapidly, and we may
not have the resources to compete adequately.

The number of Internet websites offering users healthcare content, products
and services is vast and increasing at a rapid rate. These companies compete
with us for users, advertisers, e-commerce

11
<PAGE>

transactions and other sources of online revenue. 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
develops as a communication and commercial medium.

There are a number of competitors delivering online health content who will
also seek advertising revenue, and it is likely that more competitors will
emerge in the near future. Such competitors include, among others:
WebMD/Healtheon, Mayo Health O@sis, drkoop.com, Mediconsult and InteliHealth.
Many of these competitors have more cash available to spend, longer operating
histories and stronger brand recognition than we do. Some have internal
distribution or other opportunities to support their business that we neither
have nor are able to replicate for a reasonable investment. As expressed
above, we believe that the number of other health care Internet companies that
rely on Internet-based advertising revenue will increase substantially in the
future. Accordingly, we will likely face increased competition, resulting in
increased pricing pressures on our advertising rates, which could have a
material adverse effect on our business.

We believe that the principal competitive factors in attracting advertisers
to our website include:

. the amount of traffic on our website;

. brand recognition;

. customer service;

. the demographics of our user base;

. our ability to offer targeted audiences; and

. the overall cost effectiveness of the advertising medium we offer.

Our business is dependent on the continuous, reliable and secure operation of
our website and related tools and functions we provide.

All companies that rely on the Internet are dependent upon the continuous,
reliable and secure operation of Internet servers and related hardware and
software. If that service is interrupted, consumers would be inconvenienced
and commercial clients would suffer from a loss in advertising or transaction
delivery. This would result in a revenue loss to us. Even though our computer
and communications hardware are protected through physical and software
safeguards, they are still vulnerable to fire, earthquake, flood, power loss,
telecommunications failures, physical or software break-ins and similar
events. We do not have a complete back-up for all of our computer and
telecommunications facilities and do not carry business interruption insurance
to protect us in the event of a catastrophe. Such an event could lead to
significant negative impacts on our business. We also depend on third parties
to provide users with web browsers and Internet and online services necessary
for access to our website. In the past, users have occasionally experienced
difficulties with Internet and online services due to system failures,
including failures unrelated to our systems. Any sustained disruption in
Internet access provided by third parties could have a material adverse effect
on our business.

We retain confidential customer information in our database. Therefore, it
is critical that our facilities and infrastructure remain secure and are
perceived by consumers to be secure. Despite the implementation of security
measures, our infrastructure may be vulnerable to physical break-ins, computer
viruses, programming errors or similar disruptive problems. A material
security breach could damage our reputation or result in liability to us.

12
<PAGE>

Since we operate an Internet-based network, our business is subject to
government regulation relating to the Internet which could impair our
operations.

Because of the increasing use of the Internet as a communication and
commercial medium, the government has adopted and may adopt additional laws and
regulations with respect to the Internet covering such areas as:

. user privacy,

. pricing,

. content,

. taxation,

. copyright protection, and

. the distribution of health care products or advice over the Internet.

Since we operate a healthcare network over the Internet, our business is
subject to government regulation specifically relating to medical devices, the
practice of medicine and pharmacology, healthcare regulation, insurance 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 online, covering areas such as:

. the regulation of medical devices;

. the practice of medicine and pharmacology and the sale of controlled
products such as pharmaceuticals online;

. the regulation of government and third-party cost reimbursement; and

. the regulation of insurance sales.

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 regulations. 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 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 may be excluded from coverage under the terms of
our current general liability insurance policy.

Federal and State Healthcare Regulation. We earn a service fee when users on
our website purchase prescription pharmacy products from certain of our e-
commerce partners. 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 e-commerce revenue strategy, we
believe that the service fees we receive from our e-commerce partners are for
the primary purpose of marketing and do not constitute payments that would
violate

13
<PAGE>

federal or state "anti-kickback" laws. However, 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.

Internet capacity constraints may impair the ability of consumers to access our
website, which could hinder our ability to generate advertising revenue.

Our success will depend upon the ability of the communications industry to
provide Internet access and carry Internet traffic. The Internet may not prove
to be a viable commercial medium because of:

. inadequate development of the necessary infrastructure such as a reliable
network backbone;

. timely development of complementary products such as high speed modems;

. delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity; or

. increased government regulation.

If the Internet continues to experience significant growth in the number of
users and the level of use, then the Internet infrastructure may not be able to
continue to support the demands placed on it.

Risks Related to the Offering

There may be substantial sales of our common stock after the offering.

Sales of substantial amounts of our common stock in the public market
following this offering, or the perception that such sales will occur, could
have a material adverse effect on the market price of the common stock. We, our
directors, executive officers and certain other employees and existing
shareholders, holding an aggregate of shares of common stock, have
agreed not to offer, sell or contract to sell or otherwise dispose of any
common stock for a period of days after the date of this prospectus without
the prior written consent of Warburg Dillon Read LLC, subject to certain
exceptions. In its sole discretion, and at anytime without notice, Warburg
Dillon Read LLC may release all or any portion of the shares subject to such
lock-ups.

In connection with entering into acquisitions and strategic relationships,
we have issued and may continue to issue common stock and options and warrants
to purchase significant amounts of our common stock. The issuance of
significant amounts of common stock, options or warrants in the future,
particularly options and warrants with exercise prices below the fair market
value of the common stock at the time of issuance, could have a material
adverse effect on our business, financial condition or operating results or on
the market price for the common stock.

Our three largest shareholders have significant influence on any matter before
our shareholders.

According to filings made with the SEC, our three largest shareholders have
beneficial ownership of 7,630,050 shares, or 47.1%, of our outstanding common
stock (34.4% on a pro forma basis for the completion of this offering, assuming
such shareholders do not participate in this offering). As a result, these
shareholders, if they act as a group, will be able to exert significant
influence on all matters requiring shareholder approval, including the election
of directors and approval of significant corporate transactions. Such control
may have the effect of accelerating, delaying or preventing a change in
control. For more information, see "Principal Shareholders."

14
<PAGE>

Investors will be relying on our management's judgment regarding the use of
proceeds from this offering.

Our management will have broad discretion with respect to the use of the net
proceeds from this offering, and investors will be relying on the judgment of
our management regarding the application of these proceeds. Presently,
anticipated uses include the funding of operating losses and for general
corporate purposes, including expansion of our network, advertising, brand
promotion, content development and working capital. We may also use a portion
of the proceeds for strategic alliances and acquisitions and to repay debt. We
have not yet determined the amount of net proceeds to be used specifically for
each of the foregoing purposes. Please see "Use of Proceeds."

Our need for additional financing is uncertain as is our ability to raise
further financing if required.

We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least 12 months
after the date of this prospectus. During this time period, we may need to
raise additional funds, however, to respond to business contingencies which may
include the need to:

. fund more rapid expansion;

. fund additional marketing expenditures;

. develop new or enhance existing editorial content, features or services;

. enhance our operating infrastructure;

. respond to competitive pressures; or

. acquire complementary businesses or necessary technologies.

If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our shareholders will be reduced,
and these newly-issued securities may have rights, preferences or privileges
senior to those of existing shareholders, including those acquiring shares in
this offering. We cannot assure you that additional financing will be available
on terms favorable to us, or at all. If adequate funds are not available or are
not available on acceptable terms, our ability to fund our operations, take
advantage of unanticipated opportunities, develop or enhance editorial content,
features or services, or otherwise respond to competitive pressures would be
significantly limited.

Market prices of emerging Internet companies have been highly volatile, and the
market for our stock may exhibit volatility as well.

The stock market has experienced significant price and trading volume
fluctuations, and the market prices of technology companies, particularly
Internet-related companies, have been extremely volatile. Exceptional share
price and trading volume changes have accompanied recent public offerings by
Internet companies in the first days and weeks after the securities were
released for public trading. Investors may not be able to resell their shares
at or above the initial public offering price. Please see "Underwriting." In
the past, following periods of volatility in the market price of a public
company's securities, securities class action litigation has often been
instituted against that company. Such litigation could result in substantial
costs and a diversion of management's attention and resources.

Certain provisions of our governing documents and Washington law may have anti-
takeover effects.

Certain provisions of our Amended and Restated Articles of Incorporation and
By-laws and Washington law could make it more difficult for a third party to
acquire us, even if a change in control would be beneficial to our
shareholders. For more information, see "Description of Our Securities."

15
<PAGE>

Use of Proceeds

We estimate that the net proceeds to us from the sale of the 6,000,000
shares of common stock in this offering will be approximately $48.4 million
($55.8 million if the underwriters' over-allotment is exercised in full),
assuming a public offering price of $8.75 per share and after deducting
estimated underwriting discounts and commissions and offering expenses payable
by us.

We expect to use the net proceeds of this offering to finance operations
while we continue to incur operating losses, to expand our marketing efforts
and for general corporate purposes, including approximately $25.0 million for
advertising and brand promotion, and the remainder for content development and
licensing and working capital. We may also use a portion of the proceeds for
the acquisition of, or investment in, companies, technologies or assets that
complement our business.

Pending these uses, we intend to invest the net proceeds from this offering
in short term, investment grade, interest bearing instruments.

Capitalization

The following table shows the unaudited capitalization of OnHealth Network
Company as of March 31, 1999 on an actual basis, and as adjusted to reflect the
estimated net proceeds of the offering to be received by us as described in
"Use of Proceeds." You should read this table in connection with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this prospectus.

<TABLE>
<CAPTION>
March 31, 1999
---------------------
Actual As Adjusted
-------- -----------
(In thousands)
<S> <C> <C>
Shareholders' equity:
Common stock, $.01 par value: 29,000,000 shares
authorized actual, and 100,000,000 shares authorized as
adjusted; 16,049,613 shares issued and outstanding
actual, and 22,049,613 shares issued and outstanding as
adjusted(1)............................................ $ 160 $ 220
Additional paid-in capital................................ 106,797 155,087
Accumulated deficit....................................... (93,675) (93,675)
-------- --------
Total shareholders' equity and capitalization......... $ 13,282 $ 61,632
======== ========
</TABLE>
- --------
(1) Excludes 4,035,250 shares of common stock that were subject to outstanding
options and 356,020 shares that were subject to outstanding warrants with a
weighted average exercise price of $8.21 per share in each case as of March
31, 1999. In June 1999, the Company increased its authorized shares of
common stock to 100,000,000 shares.

16
<PAGE>

Selected Financial Data

The Statements of Operations Data for the years ended December 31, 1996,
1997 and 1998 and the Balance Sheet Data as of December 31, 1997 and 1998 are
derived from our audited financial statements, which are included elsewhere in
this prospectus. The Statements of Operations Data for the years ended December
31, 1994 and 1995 and the Balance Sheet Data as of December 31, 1994, 1995 and
1996 are derived from our audited financial statements that are not included in
this prospectus. The Statements of Operations Data for the three months ended
March 31, 1998 and 1999 and Balance Sheet Data as of March 31, 1999 are derived
from our unaudited financial statements included elsewhere in the prospectus
and which, in the opinion of management, reflect all adjustments necessary for
a fair presentation of that data. All such adjustments are of a normal
recurring nature. This selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Financial Statements of OnHealth and the related notes
included elsewhere in this prospectus.

<TABLE>
<CAPTION>
Three Months
Years Ended December 31, Ended March 31,
------------------------------------------------ ----------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ------- -------
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations
Data:
Net revenue............. $ 7,013 $ 11,970 $ 9,470 $ 3,761 $ 1,522 $ 330 $ 200
Cost of revenue......... 2,402 6,231 5,076 2,541 767 407 30
-------- -------- -------- -------- -------- ------- -------
Gross margin............ 4,611 5,739 4,394 1,220 755 (77) 170
Operating expenses:
Product development,
editorial and design.. 19,503 7,494 5,651 4,243 3,744 728 1,185
Sales and marketing.... 9,694 7,473 2,705 1,347 5,626 436 2,366
General and
administrative........ 5,585 5,647 6,364 6,892 2,404 743 886
Investment in
affiliate............. 2,263 -- -- -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Total operating
expenses............... 37,045 20,614 14,720 12,482 11,774 1,907 4,437
-------- -------- -------- -------- -------- ------- -------
Loss from operations.... (32,434) (14,875) (10,326) (11,262) (11,019) (1,984) (4,267)
Interest income
(expense).............. 1,177 641 169 (158) 84 12 107
Other income (expense).. -- -- -- 473 (4) (281) --
-------- -------- -------- -------- -------- ------- -------
Total interest and other
income (expense)....... 1,177 641 169 315 80 (269) 107
-------- -------- -------- -------- -------- ------- -------
Net loss................ $(31,257) $(14,234) $(10,157) $(10,947) $(10,939) $(2,253) $(4,160)
======== ======== ======== ======== ======== ======= =======
Net loss applicable to
common shareholders.... $(31,257) $(14,254) $(10,336) $(13,965) $(11,964) $(2,253) $(4,160)
======== ======== ======== ======== ======== ======= =======
Net loss per common
share
Basic and diluted...... $ (4.75) $ (1.90) $ (1.36) $ (1.73) $ (1.12) $ (0.22) $ (0.28)
======== ======== ======== ======== ======== ======= =======
Weighted Average shares
outstanding........... 6,583 7,484 7,580 8,056 10,680 10,150 14,930
======== ======== ======== ======== ======== ======= =======

</TABLE>

<TABLE>
<CAPTION>
December 31, March 31,
--------------------------------------------- ----------
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- ----------
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 20,653 $ 7,759 $ 3,462 $ 2,488 $ 2,119 $13,751
Working capital
(deficiency)........... 20,735 8,607 3,230 (1,252) (1,158) 12,542
Total assets............ 32,101 18,352 13,411 4,577 3,894 17,037
Long term debt.......... -- -- 3,500 -- -- --
Shareholders' equity
(deficit).............. 26,968 12,880 2,900 18 (301) 13,282
</TABLE>

17
<PAGE>

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Overview

We are a leading independent source of original, informative, timely and
trusted consumer-oriented health and wellness information, products and
services on the Web. Our website, onhealth.com, is a consumer-driven online
health destination dedicated to the management of family health and well-being.
By providing users with original in-depth reporting, substantive resources and
references, community discussions, direct access to experts, interactive tools
and exclusive "smart" search capabilities, onhealth.com combines the strength
of credible journalism with the power of online interactivity.

Until January 1998, our traditional line of business had been CD-ROM
development, production and distribution. We were also a supplier of video,
animation and graphic assets to a health and medical cable television channel.
In late 1997, our Board of Directors revised our business strategy and brought
in an entirely new management team and other key employees skilled in the
development of Internet websites. In 1998, we focused on developing an
Internet-delivered, consumer-oriented health and wellness website. Accordingly,
our revenue model as compared to prior years, has changed to concentrate on
online revenue sources as opposed to CD-ROM based product sales and licensing.

In July 1998, we relaunched the onhealth.com website and focused on
generating advertising revenue. We have a wide variety of advertisers on our
website including healthcare and other non-healthcare advertisers. In March
1999, we launched a shopping area on our site designed to offer our consumers
the ability to purchase a wide variety of health and wellness products and
related products. To date, we have e-commerce relationships with drugstore.com,
VitaminShoppe, Amazon.com, SelfCare, American Greetings, ProFlowers and
enews.com, and expect to continue to add additional categories and partners.

Results of Operations

Three Months Ended March 31, 1998 and 1999

Net revenue

Net revenue for the three months ended March 31, 1998 and 1999 was as
follows:

<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1999
----- -----
(In thousands)
<S> <C> <C>
Online ....................................................... $ 89 $ 146
Contract development and other................................ 197 35
Product sales and licensing .................................. 44 19
----- -----
Net revenue................................................. $ 330 $ 200
===== =====
</TABLE>

Net revenue in the three-month period ended March 31, 1999 decreased by
$130,000, or 39%, to $200,000, from $330,000 in the same period in 1998. The
decrease is primarily due to the reduction in

18
<PAGE>

contract development revenue and other of $162,000, or 82%, and product sales
and licensing revenue of $25,000, or 57%, which were partially offset by an
increase in online revenue of $57,000, or 64%. The decrease in both contract
development revenue and other and product sales and licensing revenue generally
reflects our shift toward online efforts. We do not anticipate receiving any
significant revenue from contract development and other or product sales and
licensing in the future. The increase in online revenue reflects increased
advertising revenue and website sponsorship from our website.

Gross margin

Gross margin as a percentage of net revenue was 85% in the first quarter of
1999 compared to a negative gross margin of 23% for the same period in the
previous year. The improvement in gross margin in 1999 was primarily due to the
high margins of online revenue in relation to the gross margin achieved in the
first quarter of 1998 for CD-ROM revenue. In the first quarter of 1999, cost of
revenue consisted primarily of third-party royalties relating to content sales
and advertising and sponsorship revenue.

Operating expenses

Total operating expenses in the first quarter of 1999 increased $2.5
million, or 133%, to $4.4 million, from $1.9 million in the first quarter of
1998. The increase was primarily due to increased sales and marketing efforts
related to our website and increased product development, editorial and design
expenses.

Product development, editorial and design. The increase in product
development, editorial and design expenses during the first quarter of 1999 of
$457,000, or 63%, from the first quarter of 1998 reflects an increase in
headcount to 23 at March 31, 1999, up from 14 at March 31, 1998, as well as an
increase in the use of outside contractors. Product development, editorial and
design expenses consisted primarily of compensation, consulting fees, third-
party content acquisition costs and website maintenance and enhancement costs.

Sales and marketing. The increase in sales and marketing expenses of $1.9
million, or 443%, from the first quarter of 1998 was primarily the result of
increased advertising expenses related to our website.

General and administrative. The increase in general and administrative
expenses during the first quarter of 1999 of $143,000, or 19%, from the first
quarter of 1998 was due primarily to an increase in investment banking fees.

Interest income (expense)

Interest income (expense) consisted of interest income of $107,000 in the
first quarter of 1999 compared to interest income of $12,000 in the same period
of the previous year. The increase is due to the greater availability of funds
in the first quarter of 1999 as a result of equity offerings consummated after
the first quarter of 1998.

Other income (expense)

Other income (expense) for the three months ended March 31, 1998 included
$281,000 related to cable television licensing royalties.

Income taxes

We have not recorded a current or deferred provision for Federal income
taxes for the periods presented due to the history of losses incurred.

19
<PAGE>

Years Ended December 31, 1996, 1997 and 1998

Net revenue

Net revenue for the years ended December 31, 1996, 1997 and 1998 was as
follows:

<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
(In thousands)
Product sales and licensing.......................... $5,152 $1,990 $ 754
Online............................................... 1,000 58 388
Contract development and other....................... 1,346 1,220 380
Cable television licensing........................... 1,972 493 --
------ ------ ------
Net revenue........................................ $9,470 $3,761 $1,522
====== ====== ======
</TABLE>

Net revenue for 1996, 1997 and 1998 of $9.4 million, $3.7 million and $1.5
million, respectively, represents a decrease of 60% from 1997 to 1998 and 60%
from 1996 to 1997. The 1997 to 1998 decrease is due to a substantial reduction
in product sales and licensing revenue of $1.2 million, or 62%, a reduction in
contract development revenue and other of $840,000, or 69%, and a reduction in
cable television licensing revenue of $493,000, or 100%. These decreases were
partially offset by a $330,000, or 569%, increase in online revenue. The 1998
product sales and licensing revenue includes a $603,000 payment related to
minimum sales requirements from a terminated CD-ROM distribution agreement. The
decrease from 1996 to 1997 is due to a substantial reduction in product sales
and licensing revenue of $3.1 million, or 61%, a substantial reduction in cable
television licensing revenue of $1.5 million, or 75%, and a decrease in online
revenue from $1.0 million to $58,000.

Product sales and licensing revenue

Product sales and licensing revenue has declined steadily over the past few
years. The decrease generally reflects market conditions for CD-ROM products,
our cancellation of a CD-ROM distribution agreement, and the lack of new CD-ROM
product releases as we shifted our focus toward online efforts. In 1995, we
entered into a five year distribution agreement which allowed for the
promotion, marketing and distribution of certain of our CD-ROM products. The
agreement also provided for minimum levels of sales through the year 2000. In
December 1998, we received a $603,000 payment related to minimum sales
requirements from the termination of the CD-ROM distribution agreement. We do
not anticipate receiving any product sales or licensing revenue from CD-ROM
products in the future as we have discontinued this line of business.

Online revenue

From 1997 to 1998, online revenue increased from $58,000 to $388,000, an
increase of $330,000, or 569%. This increase reflects increased advertising
revenue and website sponsorship from our website which we re-designed and re-
launched in July 1998. The 1997 online revenue of $58,000 included website
sponsorships, advertising and premium services revenue related to onhealth.com
and the former O@sis website. In September 1997, we entered into an agreement
with Mayo Foundation which included the full transfer to Mayo of our ownership
interest in the O@sis website. The $1,000,000 of online revenue in 1996 relates
to nonrefundable advances paid to us under an exclusive agreement signed with
AT&T in October 1995 and the discontinuance by AT&T of the AT&T Health website
in August 1996.

Contract development revenue and other

From 1997 to 1998, contract development revenue and other decreased
$840,000, or 69%. The decrease generally reflected our shift toward online
efforts. From 1996 to 1997, contract development revenue and other decreased
slightly, representing management's efforts to control costs and focus on more
profitable contracts.

20
<PAGE>

Cable television licensing revenue

Cable television licensing revenue reflects revenue from our content and
royalty agreement with America's Health Network ("AHN"). Under the agreement,
we began licensing multimedia content to AHN in May 1995 and were to receive
minimum licensing royalties over the life of the agreement. The revenue was
being recognized evenly over the expected life of the agreement. Due to the
gradual increase in actual payments versus the straight-line revenue
recognition policy, we recorded a receivable for the difference between the
revenue recognized and the cash received during the early years of the
contract. The $1.5 million decrease in revenue from 1996 to 1997 was a result
of us not receiving payments due to AHN's financial difficulties. In June 1997,
as a result of not receiving our quarterly payment, we fully reserved the
outstanding AHN receivable.

Gross margin

Gross margin as a percentage of net revenue was 50% in 1998 compared to 32%
in 1997. The improvement in gross margin in 1998 was primarily due to the high
margins on online revenue and the product sales distribution agreement
termination revenue.

Gross margin as a percentage of net revenue was 32% in 1997 compared to 46%
in 1996. The decrease in gross margin in 1997 was partially due to continued
lower gross profits realized on CD-ROM retail sales, but was primarily due to
decreases in higher margin cable television licensing and online revenue.

Operating expenses

In 1998, product development, editorial and design costs were principally
related to our website. In 1997, development costs included primarily
onhealth.com development costs and CD-ROM development costs. From 1997 to 1998,
product development expenses decreased from $4.2 million to $3.7 million, a
decrease of $499,000, or 12%. The decrease reflects the lack of new 1998 CD-ROM
product releases, and a shift towards online publishing.

Product development, editorial and design expenses

Product development expenses were $4.2 million for 1997, a decrease of $1.4
million, or 25%, from 1996, due to our release of fewer CD-ROM products and our
shift to online publishing.

Sales and Marketing

Sales and marketing expenses in 1998 were $5.6 million as compared to $1.3
million in 1997, an increase of $4.3 million, or 318%. The increase primarily
relates to increased marketing activities for our website. In July 1998, we
began a marketing campaign to promote the launch of the website which included
online and radio advertising. In addition, we incurred distribution costs
related to agreements signed in July 1998 with GeoCities and Go Network.

Sales and marketing expenses were $1.3 million in 1997, compared to $2.7
million in 1996. The decrease of 50% was a result of the release of fewer CD-
ROM titles in 1997, decreases in expenditures to promote our products and a
smaller expense structure created by the downsizing of operations in late 1996.

General and Administrative

General and administrative expenses were $2.4 million in 1998, compared to
$6.9 million in 1997, a decrease of $4.5 million, or 65%. General and
administrative expenses consist primarily of compensation to administrative and
executive personnel, fees for professional services, facility costs and bad
debt expenses. The large decrease in 1998 relative to 1997 reflects
substantially reduced legal costs, reduced bad debt costs, and general cost
cutting measures including reduced rent costs from our relocation to smaller
facilities. The 1997 costs also included certain special charges including
costs to relocate the Company from Minneapolis to Seattle.

General and administrative expenses were $6.9 million in 1997 compared to
$6.4 million in 1996. The increase of 8% was due to extensive litigation and
special charges in 1997. We recorded $808,000

21
<PAGE>

in expenses related to a settlement of litigation with Viridis, Inc. and
received an adverse jury award of $480,000, plus interest from a dispute with
T. Randal Productions, et al. in 1997. In the fourth quarter of 1997, we
recorded charges of $1.6 million for the relocation of our headquarters from
Minneapolis to Seattle. These charges included $610,000 in severance to
officers and employees and $962,000 for asset dispositions and lease
termination costs. Also in 1997, we wrote-off $1.7 million in other assets
related to an agreement with Time Life, Inc. Excluding the litigation and
special charges, our reduction in general and administrative expenses was the
result of the downsizing of the facilities and personnel and management's
efforts to streamline operating costs.

Net interest income (expense)

Net interest income was $84,000 in 1998 compared to net interest expense of
$158,000 in 1997. The net interest income in 1998 relative to net interest
expense in 1997 reflects the lack of debt in 1998 relative to 1997. The 1997
net interest expense includes interest expense of $264,000 related to $3.5
million in convertible subordinated debentures, which were outstanding for ten
months in 1997. These debentures were converted to common stock in October
1997.

Net interest expense was $158,000 in 1997 compared to net interest income of
$169,000 in 1996. The net interest expense in 1997 versus net interest income
in 1996 reflects lower interest income earned from cash and cash equivalents
balances in 1997 relative to 1996 and higher interest expenses in 1997 related
to 1996. The interest expense relates to $3.5 million in convertible
subordinated debentures that were outstanding for two months in 1996 versus ten
months in 1997.

Other income (expense)

Other expense was $4,000 in 1998 compared to other income of $473,000 in
1997. The 1998 other expense of $4,000 included a $285,000 loss related to
fixed asset disposals, a $562,000 gain related to the collection of a
previously reserved accounts receivable, and a $281,000 revenue-sharing payment
related to the collection of the receivable.

The 1997 other income of $473,000 included a $2.7 million cash payment that
we received in connection with the transfer of ownership of the O@sis website
to Mayo. This was partially offset by other expense of $2.2 million in
connection with our conversion of convertible subordinated debentures to common
stock in October 1997. These debentures were originally issued in November
1996. The expense represents the excess of the fair market value of common
stock issued over the fair value of the common stock issuable pursuant to the
original conversion terms of the debentures.

Limitation on Use of Net Operating Loss and Other Tax Credit Carryforwards

At December 31, 1998, we had available net operating loss carryforwards of
approximately $81.9 million and available research and development credits of
approximately $339,000 for federal income tax purposes. The net operating loss
carryforwards and the credits expire at various times through 2013. These
carryforwards are subject to the limitations of Internal Revenue Code Section
382, which provides limitations on the availability of net operating losses to
offset current taxable income if significant ownership changes have occurred
for federal tax purposes. We incurred "ownership changes," pursuant to
regulations currently in effect under Internal Revenue Code Section 382, as a
result of sales of our preferred stock in 1992 and 1993 and may have incurred
ownership changes since that time.

Liquidity and Capital Resources

At March 31, 1999, we had positive working capital of $12.5 million compared
with negative working capital of $1.2 million at December 31, 1998. At
March 31, 1999, we had cash and cash equivalents of $13.7 million. During the
first quarter of 1999, total cash used by operating activities was $4.1
million, which was principally due to our net loss for the quarter. During the
year ended December 31, 1998, total cash used by operating activities was $10.0
million, which was primarily due

22
<PAGE>

to the net loss of $10.9 million. During the first quarter of 1999, investing
activities used net cash of $64,000 for purchases of computer equipment. During
the year ended December 31, 1998, investing activities used net cash of
$472,000 for purchases of computer equipment. During the first quarter of 1999,
financing activities provided cash of $15.8 million: $14.3 million from the
private placement of common stock in January 1999, $860,000 from the exercise
of stock options, and $624,000 from the exercise of warrants. During the year
ended December 31, 1998, financing activities provided cash of $10.1 million:
$5.7 million from the private placement of common stock, $5.0 million from the
issuance of convertible redeemable preferred stock and $1.1 million from the
exercise of stock options.

We believe that our cash and cash equivalents, together with the proceeds we
expect to receive in this offering, will be sufficient to fund our operations
for at least the next 12 months. Operations generated a negative cash flow
during 1996, 1997 and 1998, and we expect a significant use of cash in 1999 and
2000 as we market and expand our website. Any material unforeseen increase in
expenses or reductions in projected revenue will likely require us to seek
additional debt or equity financing. If additional cash is required we may need
to reduce our expenditures or curtail certain operations. We cannot be sure
that additional capital, on a debt or equity basis, will be found, or if found
that it will be on economically viable terms.

Year 2000

The Year 2000 issue refers to the potential for system and processing
failures of date-related data resulting from computer-controlled systems using
two digits rather than four to define the applicable year. For example,
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.

We could be affected by Year 2000 issues related to non-compliant IT systems
or non-IT systems that we operate or that are operated by third parties. We
have substantially completed assessment of our internal and external (third-
party) IT systems and non-IT systems. At this point in our assessment, we are
not currently aware of any Year 2000 problems relating to systems we operate or
that are operated by third parties that would have a material effect on our
business, results of operations or financial condition, without taking into
account our efforts to avoid such problems. Based on our assessment to date, we
do not anticipate that costs associated with remediating our non-compliant IT
systems or non-IT systems will exceed $100,000, although there can be no
assurance to such effect, and any such cost will be funded through operating
cash flows. To date, we have not incurred any significant costs related to the
assessment of, and preliminary efforts in connection with, our Year 2000
project and the development of a remediation plan. We do not currently expect
that the Year 2000 issue will materially adversely affect our financial
condition or results of operations. We cannot guarantee that our systems or the
systems of other companies on which our systems rely will be timely converted
or that other companies will convert their systems at all or in a manner
compatible with our systems. If there is a delay in converting these systems or
if the conversions are not compatible, it could have a material adverse effect
on our business, financial condition and results of operations.

To the extent that our assessment is finalized without identifying any
additional material non-compliant IT systems we operate or that are operated by
third parties, the most reasonably likely worst case Year 2000 scenario is a
systemic failure beyond our control, such as a prolonged telecommunications or
electrical failure. Such a failure could prevent us from operating our
business, prevent users from accessing our website, or change the behavior of
advertising customers or persons accessing our website. We believe that the
primary business risks, in the event of such failure, would include, but not be
limited to, lost advertising revenue, increased operating costs, loss of
customers or persons accessing our website, or other business interruptions of
a material nature, as well as claims of mismanagement, misrepresentation, or
breach of contract, any of which could have a material adverse effect on our
business, results of operations and financial condition. We have not made any
contingency plans to address such risks.

23
<PAGE>

Business

Business Overview

We are a leading independent source of original, informative, timely and
trusted consumer-oriented health and wellness information, products and
services on the Web. Our website, onhealth.com, is a consumer-focused online
health destination dedicated to the management of personal and family health
and well-being. We employ ten full-time staff editors and writers and we use
over 100 health and medical writers and contributors, enabling us to update our
website daily with original health-related features. By providing users with a
broad range of original in-depth reporting, substantive resources and
references, community discussions, direct access to experts, interactive tools
and exclusive Personal Health Tracker search capabilities, onhealth.com
combines the strength of credible journalism with the power of online
interactivity.

We launched our website in July 1998. During March 1999, onhealth.com
attracted 973,295 visitors, an increase of 53% from our December 1998 visits,
according to Internet Profile Corporation. While we have achieved our traffic
growth largely without the benefit of traditional advertising, we plan to
launch a coordinated traditional media advertising and public relations
campaign designed to build our brand through the use of television, radio,
outdoor, print and online media. This campaign will coincide with the relaunch
of our onhealth.com website in the third quarter of 1999. We also distribute in
excess of 60,000 daily and weekly broadcast e-mails to registered users who
have requested our Daily Briefing, Weekly Newsletter and Personal Health
Tracker. This private and personalized e-mail allows our users to stay current
on the health-related subjects most important to themselves and their families.
To date, we have developed distribution partnerships and content sharing
relationships resulting in over 700 websites that drive traffic to our website.
We intend to aggressively expand our content and distribution partnerships with
both online and traditional media partners that can direct additional users to
our website.

Industry

We believe that the aging of the U.S. population, the rise of restrictive
managed care programs and the emergence of the Internet have combined to create
substantial demand for resources and communities that enable consumers to
better understand and control the decisions that affect their personal health.

The Internet is emerging as an important alternative to traditional media
enabling millions of consumers to seek information, communicate and conduct
commerce. According to International Data Corporation, the number of Internet
users worldwide will grow from approximately 100 million in 1998 to 320 million
by 2002. The Internet is empowering consumers by providing immediate, low cost
access to highly topical, interactive content and communities. In addition, the
Internet is enabling advertisers and online merchants to inexpensively reach
vast, yet highly targeted audiences, and to measure in real-time the
effectiveness of their programs. We believe that healthcare industry
constituents will benefit from the Internet's unique attributes as an open,
low-cost, flexible technology for the exchange of information and for commerce.

24
<PAGE>

The healthcare industry is the single largest segment of the U.S. economy,
representing approximately $1.2 trillion in spending or 14% of the U.S. gross
domestic product. Over the past decade, the healthcare industry has changed
radically as employers seeking to reduce their healthcare costs have turned
from indemnity insurance to managed health plans. Approximately 180 million
people, or 90% of the insured U.S. population, are now subject to some form of
managed care. We believe that consumers increasingly question the motivations
of their caregivers and are more inclined to take an active role in the
decisions that affect their health and wellness as well as that of their
families.

Consumers are seeking more information in order to actively manage their
personal health and wellness. However, traditional sources of healthcare
information such as print publications, are often voluminous, reference-
oriented and outdated while other media, including television and radio, lack
the analysis and insight consumers demand. As a result, many consumers are
turning to the Internet to obtain health information. According to Cyber
Dialogue, an industry research firm, during 1998, approximately 22 million
adults in the United States searched online for health and medical information.
Cyber Dialogue estimates that approximately 70% of the persons searching for
health and medical information online believe the Internet empowers them by
providing them with information before and after they go to a doctor's office.
Cyber Dialogue also estimates that in the year 2000, the number of adults in
the United States searching for online health and medical information will grow
to approximately 33 million, and they will spend approximately $150 billion for
all types of health-related products and services.

Industry research has indicated that women tend to be the health care
decision-makers within their households and therefore are the primary seekers
of health and wellness information. Internet use among women has increased
rapidly in recent years (from 5% of all users in early 1994 to an estimated 51%
by the end of 1999). These trends are of particular importance to advertisers
since women are estimated to have disproportionate control or influence over
consumer spending in the United States. Spending on advertising targeted to
women is generally considered to represent the largest single category of
advertising in the United States. According to industry experts, women control
66% of family healthcare expenditures, make 75% of all healthcare decisions and
control or influence over 80% of all purchase decisions. In addition, industry
research indicates that women spend less time than men surfing the Internet and
tend to spend more time visiting destinations that meet their needs.

There are currently over 15,000 websites providing health information. The
quality and breadth of these websites varies widely and to date no clear brand
has emerged as the leading provider of trusted consumer-oriented health and
wellness information on the Internet. Most of these websites do little more
than repurpose and repackage non-proprietary content without tailoring such
content for the consumer and providing context, insight or analysis. Many offer
little disclosure about their affiliations, the sources of their information
and potential conflicts of interest. Additionally, many health websites are
poorly designed, difficult to navigate and do not understand the needs of women
as the principle gatekeepers of the healthcare dollar. Accordingly, we believe
there is a substantial and growing unmet need for a well-known, trusted,
comprehensive health-related website that addresses consumers' health needs
accurately and intelligently while providing a satisfying consumer experience.
Moreover, we believe that such a website will have the ability to generate
significant revenue from a variety of sources, including advertising and
commerce.

Our Strategy

Our goal is to become the premier source of consumer-oriented health and
wellness information and services on the Internet. We intend to achieve this
goal by implementing the following strategies:

25
<PAGE>

Leverage and Enhance Our Expansive Proprietary Health Content. We believe
that the breadth, depth and quality of the proprietary health content we
provide, together with the fact that our content is tailored for the consumer,
substantially differentiates onhealth.com from other health information
websites and represents a competitive advantage. During the remainder of 1999,
we will aggressively add reference material, condition center partners,
applications, tools and personalization functionality. In addition, we have
partnered exclusively in certain disease areas with best-of-breed content
partners including the Cleveland Clinic, Beth Israel Deaconess Cancer Center,
the Mount Sinai Cardiovascular Institute, the Scripps Clinic and the Stanford
University Medical Center. Our content, which is archived and searchable,
ranges from clinical medicine to alternative medicine and from reference
material to journalistic exploration of relevant health topics. We are not
affiliated with any single health system, payor or individual, and we are free
to provide multiple perspectives on health topics. We intend to continue to
differentiate OnHealth by expanding and enhancing our proprietary consumer
health content.

Provide Consumers with a Compelling Health Experience. We are highly focused
on providing consumers who visit our website with a compelling experience that
not only addresses their initial needs, but also gives them multiple reasons to
spend more time at and return more often to our website. Accordingly, our
website is designed for easy navigation and is intended to be both informative
and engaging. Our experienced creative team understands the multi-dimensional
nature of publishing on the Internet. The team is adept at mixing information,
images, interactive tools, personalization and rich media. Our expansion plans
for 1999 include a variety of new environments and experiences for consumers.

Establish Onhealth.com as the Premier Brand for Health and Wellness
Information on the Internet. We intend to establish onhealth.com as the premier
health brand that consumers associate with trustworthiness and view as their
one-stop, complete resource for health and wellness information on the
Internet. To this end, we have developed and intend to launch in July 1999, a
coordinated advertising and public relations campaign using television, radio,
outdoor, print and online media. We plan to also continue to expand our
distribution agreements with search engines, portals and Internet service
providers. Currently, over 700 websites drive traffic to onhealth.com,
including Snap.com, GeoCities and AOL's Digital City New York. Our management
team is experienced at building consumer brands for Internet and traditional
media companies including MSNBC, The Discovery Channel, Starwave/ESPN Internet
Ventures and Conde Nast Publications. We believe that employing traditional
media branding techniques will be critical to establishing a leading brand and
will provide the best return on investment.

Capitalize on Revenue Generating Opportunities. We intend to leverage the
growth in our consumer base by exploiting opportunities to develop multiple
revenue streams including advertising/sponsorship, e-commerce/transaction,
syndication of content and subscription to premium services. In the first
quarter of 1999, we launched a health products shopping area on our website and
we plan to continue to expand our relationships with leading web e-tailers to
offer consumers a full range of health and wellness related products and
services. Unlike many of our competitors, we have an opportunity to leverage
our proprietary content and interactive tools through syndication to provide an
additional revenue stream. We also believe that health consumers are interested
in premium subscription offerings such as personalized smoking cessation and
dietary programs, personalized health and condition reports and direct access
to leading medical experts. By pursuing diversified revenue opportunities, we
seek to reduce our dependence on and exposure to any single revenue stream.

Engage in Selective Acquisitions and Strategic Partnerships. We believe that
there will be significant consolidation in the online health category. We have
a focused business development effort, and are seeking acquisition and
strategic partnership opportunities. We are continually evaluating strategic
relationships with various distribution and media outlets that can serve to
drive traffic to our website and/or increase opportunities to generate e-
commerce/transaction revenue. We intend to pursue

26
<PAGE>

acquisitions that have the potential to augment our current operations in six
primary categories: content, applications, products, revenue, traffic and
intellectual capital/people.

The OnHealth Website

Onhealth.com provides timely and relevant coverage of health news and
issues, substantive resources and references, community discussions, direct
access to experts, interactive tools and exclusive "Personal Health Tracker"
search capabilities to enable consumers to actively manage the health and well-
being of themselves and their families. On our website, consumers will find
complete coverage of important health issues and broad database reference
materials in an interactive, visually pleasing and personalized format. The
site consists of the following services and features, many of which are unique
to OnHealth.

CHANNELS DESCRIPTION
- --------------------------------------------------------------------------------

News and Reports

. The Daily Briefing The Daily Briefing is original journalism,
. In-Depth Reports updated twice daily. The Daily Briefing
provides summaries of relevant health and
medical news to provide consumers with
practical healthcare information.

We publish seven to ten In-Depth-Reports each
week covering topics from child immunization
to balanced living to the latest advancements
in medical technology.

Each day's reports are archived along with the
hundreds of thousands of other pages of our
material, which has created an extensive and
varied database of healthcare content.

- --------------------------------------------------------------------------------
Ask Our Experts

. Women's Health Our experts answer user questions each weekday
. Children's Health on these core topics of interest. These
. Fitness and Nutrition doctors, PhDs and respected authors also
. Active Aging appear regularly in chat shows and within
. Sexual Health discussion areas on our website.
. Managed Care
. Balanced Living This material is exclusive to our website and
. Health and Beauty contributes to the growing archive of expert-
. Listening to the Body answered questions searchable from anywhere on
the website.

- --------------------------------------------------------------------------------
Medical Centers

. Cleveland Clinic -- Each medical center condition area is a co-
Gastrointestinal Disorders branded mini-site created exclusively with
. Scripps Clinic -- OnHealth in conjunction with leading medical
Allergy institutions from around the country. Each
Asthma institutional partner is a leading expert in
. Mount Sinai -- the particular condition area and each devotes
Cardiovascular Diseases significant internal resources for patient
. Beth Israel Deaconess outreach and education.
Cancer Center --
Breast Cancer Each center is filled with hundreds of pages
. International Diabetes of reference material, discussion groups,
Center updates on patient care, and doctor-answered
questions that target major diseases which
affect significant patient populations.

<PAGE>

CHANNELS DESCRIPTION
- --------------------------------------------------------------------------------

Live Events

. OnHealth Live!
OnHealth Live! is a weekly audio webcast
broadcast Tuesday evenings with host Brooke
Gladstone of National Public Radio. The show
features experts who answer questions from the
audience about important health and wellness
topics from depression to humor and its effect
on healing. Audio archive and text transcripts
from each show are added each week to
OnHealth's searchable database.

. Daily Expert Chat Shows In our Daily Expert Chat Shows, experts discuss
relevant health issues. For example, on
Thursdays, OnHealth presents "Health in the
News" that features experts who make the
latest medical studies understandable for
consumers.

. Live Surgeries Our Live Surgeries webcast live surgeries from
the Stanford Medical Center at least once a
month. Host surgeons narrate the surgeries and
field questions from the audience. Surrounded
by original educational material and the
surgeon-answered questions, this feature creates
a valuable reference tool for patients,
potential patients and their families.

- --------------------------------------------------------------------------------
Health and Medical References

Proprietary Content Our website is a research-rich resource that
. Illness and Disease contains hundreds of thousands of pages of
Database proprietary content. We have created an
. Alternative Practices Guide extensive amount of original reference content
. Herbal Database specifically for consumers. This material is
. Emergency Care Guide written by medical writers, then reviewed and
. Stop Smoking Center approved by doctors. Our reference material is
. "Doctor Says" Video readily re-licensable by and desirable to
Reference to Common distribution partners. Selected examples of
Ailments our proprietary content include:
. Allergy Index
. Healthy Eating Reference The Illness and Disease Database contains
Guide encyclopedic entries for conditions. We intend
to continue to expand the number of conditions
in this database.

Our website provides information on
alternative healthcare management through the
Herbal Database, which contains encyclopedic
entries and illustrations, as well as the
Alternative Practices guide, that is designed
to help consumers understand various practices
from naturopathy to homeopathy to acupuncture
and more.

The Healthy Eating Reference Guide provides
features on nutrition and eating well,
interactive food pyramids based on healthy
diets around the world, and a database of healthy
recipes. Also included are guides to reading
nutritional labels, tips for shopping and
discussion groups.

28
<PAGE>

CHANNELS
DESCRIPTION
- --------------------------------------------------------------------------------
Health and Medical References
. OnHealth Reviewed Websites The OnHealth Reviewed Websites area contains a
review of over 250 websites. This creates a
source for finding trustworthy websites on the
Internet on important health and medical
conditions. Websites are reviewed for up to
date content, credibility and affiliation.

Repackaged Public Information
. Reading Room Materials As part of our ongoing effort to provide
sources of credible health information, the
Reading Room areas are consumer-friendly re-
packaged selections from government health and
medical sources such as the National
Institutes of Health and the Centers for
Disease Control. These materials are derived
from dense and hard-to-find material, but
through extensive editorial selecting and
repackaging become useful consumer guides.
Additionally, these materials extend the depth
of content available through our reference
channel.

Licensed Third Party Content
. USP Drug Database
. Vitamins and Minerals
. Medical Dictionary
. Medline

We supplement our proprietary content with
third party licensed reference material and
links to other health sites. These
arrangements provide our users with one-stop
health research capabilities.

- --------------------------------------------------------------------------------
My Wellness Manager

. Personal Health Tracker We believe that personalization is fundamental
. OnHealth Clip and Save to creating a functional, daily relationship
. Favorite discussions with consumers by managing a family's health.
. Local resources My Wellness Manager is designed to encourage
. Favorite websites return visits by providing an easy to use tool
. Newsletter and Daily for managing a family's health.
Briefing sign-up
. Access points to personal My Wellness Manager provides a single place to
tools and calculators store and update all the personalizable
. Smoking Cessation program functions within the website, from the
. Saved Risk Assessment Personal Health Tracker to saving direct links
Profile to favorite discussion groups to user
personalized programs. My Wellness Manager
gives consumers a way to save time and effort
in a secure and personal environment.

We intend to expand the functionality and
integrate My Wellness Manager into off-line
relationships, for doctor visits, provider
issues, holding and owning personal records
information, alerting and supporting events
like pediatric visits or prescription
expirations.

- --------------------------------------------------------------------------------
Interactive Tools

. Personal Health Tracker The Personal Health Tracker is a free, private
searching service to track, retrieve and save
important health news. Users choose up to ten
categories of health conditions or areas, and
each day the Tracker searches a condition-
specific database fed by daily newswire
stories and OnHealth's new content. When the
Tracker's "smart search" capabilities find new
information available on the user's choices,
it sends an e-mail alert and the user
retrieves and can save the information in a
private, personal set of folders.

29
<PAGE>

CHANNELS DESCRIPTION
- --------------------------------------------------------------------------------
Interactive Tools

. Personal Health Assessment A multi-question Personal Health Assessment
. Smoking Cessation Program assessment tool that gives users a relative
. Broadcast Newsletters risk rating and delivers tailored information
. Calculators and services based on the assessment.
. Quizzes
. Health Surveys The Smoking Cessation Program is a self-
. Clip and Send directed interactive program that creates a
step-by-step approach: reinforcement,
information and reminders for quitting
smoking.

Broadcast Newsletters provide our users with a
weekly e-mail newsletter alerting them to the
latest In-Depth Reports, expert columns,
events and more. In addition, the Daily
Briefing is sent out through e-mail and
includes links for additional information
directly from e-mail.

Calculators, quizzes and surveys give our
users a personal way to interact with
important health information. These quick and
easy-to-use interactive tools are entertaining
and encourage repeat usage.

Users can clip and send any page on the
website directly to someone with a personal
note from the sender.

- --------------------------------------------------------------------------------
Interactive Communities

. Women's Health Our ability to integrate appropriate daily
. Men's Health journalism and events into the community
. Healthy Living and Wellness discussions and support chats make our
. Pregnancy communities a more valuable and effective
. Parenthood resource for our users. Communities are
. Diseases and Conditions important to health consumers who want to find
. Sexuality others with similar conditions to share their
. Alternative Medicine information and support. Our communities are
. Managed Care and Insurance maintained by dedicated managers.
. Pet Health

- --------------------------------------------------------------------------------

Site Search, Refined Search Our search capability provides direct access
and Interconnected Databases to every part of the website from every page.
Refined Search capability allows users to
customize, target and sort their searches
against sections or subsets of the website.
Dynamically related linking on every page of
the website is possible because the entire
website is databased, and every piece of
content is categorized and cross-indexed.

30
<PAGE>

CHANNELS
DESCRIPTION
- --------------------------------------------------------------------------------
Local Health

. Local Health Directory The Local Health Directory provides national
. Clinical Trials localized directories for a variety of health
. Recommend-a-Doctor and medical information according to United
. American Medical States zip codes. This material is provided
Association's through a license with InfoSpace and
Doctor Finder integrated into our website.

Our Clinical Trials feature provides a
national listing of clinical trials by disease
and by region.

The Recommend-a-Doctor feature provides a
national database of more than 3,000
physicians created through our community of
users of personally recommended doctors.

The American Medical Association's Doctor
Finder tool provides links directly into the
American Medical Association database of
credentialed physicians in the United States.

- --------------------------------------------------------------------------------
Shopping

. Pharmacy -- Drugstore.com We have chosen reputable e-commerce partners
. Vitamins and Herbs -- to provide the choice of products and level of
VitaminShoppe service appropriate for health consumers.
. Holistic Woman -- SelfCare We believe that e-commerce for health requires
. Books -- Amazon.com depth of information and support to aid the
. Holidays and Gifts -- product-purchasing decision. Our health
ProFlowers and American products shopping area creates categories with
Greetings recommendations and has established a unique
. Magazines -- enews.com feature called "Time Savers" which provides a
. Healthy Food way for consumers to "Read About" a product or
. Entertainment associated condition, "Talk About" the issues
with others in our community areas, or "Buy
It" directly from our partner.

Content

Onhealth.com draws its information from an array of medical and healthcare
resources. Although we are committed to delivering high quality original
content, in order to continue to provide our users with the richest health
information solution, we also partner with a number of organizations and
entities to supply content to the website.

Original Journalism and Live Produced Events

We have assembled a staff of ten medical and health editors, journalists and
producers. Our senior editors have, on average, 12 years of medical and health
editorial and reporting experience from such outlets as Consumer Reports, San
Jose Mercury News, ABCNews.com, Mosby Medical Publishing and the Associated
Press. In addition, we rely on more than one hundred writers and contributors
who provide content to the website. The editorial staff has also assembled a
panel of doctors who review and update our medical reference material.

31
<PAGE>

Medical Center Content Exclusive to OnHealth

We have established exclusive partnerships with leading medical institutions
for extensive, condition-specific reference information and support for
particular activities such as live surgeries. We believe the collection of
these institutions creates a powerful and unique network with considerable
opportunity for additional activities and content. Partnering with many
institutions underscores OnHealth's commitment to providing multiples sources
and perspectives from credible parties.

We have chosen to partner with the following institutions for their
expertise in research, clinical work and patient education:

. Cleveland Clinic

. Beth Israel Deaconess Cancer Center

. Mount Sinai Cardiovascular Institute

. Scripps Clinic

. International Diabetes Center

3rd-Party Journalism and Licensed News Feeds and Features

We receive exclusive online monthly reports from HealthNews, published by
Massachusetts Medical Society, publishers of the New England Journal of
Medicine. In addition, we supplement our exclusive content with licensed news
and features from Reuters, NY Times Syndicate, Scripps and WellMed, among
others.

Onhealth.com Traffic

We launched our website in July, 1998, and during March 1999, onhealth.com
attracted 973,295 visits, an increase of 53% from our December 1998 visits,
according to Internet Profile Corporation. While we have achieved our traffic
growth without the benefit of traditional advertising, we plan to launch a
coordinated traditional media advertising and public relations campaign
designed to build the OnHealth brand through the use of television, radio,
outdoor, print and other media. This campaign will coincide with the relaunch
of our onhealth.com website in the third quarter of 1999. We also distribute in
excess of 60,000 daily and weekly broadcast e-mails to registered users who
have requested our Daily Briefing, Weekly Newsletter and Personal Health
Tracker. This private and personalized e-mail allows our users to stay current
on the health-related subjects most important to themselves and their families.
To date, we have developed distribution partnerships and content sharing
relationships resulting in over 700 websites that drive traffic to our website.
We intend to aggressively expand our content and distribution partnerships with
both online and traditional media partners that can direct additional users to
our website.

32
<PAGE>

Distribution

To date, we have developed distribution partnerships and content sharing
relationships resulting in over 700 websites that drive traffic to our website.
We intend to aggressively expand our content and distribution partnerships with
both online and traditional media partners that can direct additional users to
our website, thereby creating opportunities to generate multiple revenue
streams. We have and will continue to enter into distribution agreements with
leading search engine and portal companies; major Internet access providers;
community, news, information and other specialty websites; media companies;
promotional programs; other traditional media; and corporate/HMOs. By
increasing our brand exposure and traffic through significant distribution
agreements, we believe we will increase our attractiveness to advertisers as an
effective means of advertising both health-related and non-health-related
products. All of such relationships provide for a direct link to our website
either by clicking on our logo or by clicking on a headline or article that
then links back to our website. Headline links and articles are dynamically
served and automatically updated, allowing affiliate websites to feature fresh,
professional content while allowing us to reach desirable new audiences, build
our brand, and drive traffic to our website. A sample of our current
distribution relationships include:

33
<PAGE>

Key Distribution Partner
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Company/Site Type of Website Nature of Distribution
- ---------------------------------------------------------------------------------------
<C> <C> <S>
MindSpring Internet Service Our logo is prominently featured adjacent to
Provider/Other direct links to our In-Depth Reports and Ask Our
Experts headlines.
- ---------------------------------------------------------------------------------------
Motorola's Internet Service Motorola's iKno! Network features OnHealth's
iKno! Provider/Other Daily Briefings sent directly to customers'
pagers.
- ---------------------------------------------------------------------------------------
GeoCities Web Community We are the exclusive content provider of health
information on GeoCities health channel. We
provide access to our Daily Briefings, Ask our
Experts, In-Depth Reports and Resources, which
are featured in the "Health" Avenue. Our
headlines are also featured throughout the Health
sub-avenue and subsequent topic pages, where
users can link to onhealth.com to access the
complete stories.
- ---------------------------------------------------------------------------------------
Advance Internet News, Information Advance Internet's users can access Daily Health
(affiliate of and Content Tips, OnHealth Live, Ask Our Experts and Daily
Conde Nast) Briefings from ten local sites.
- ---------------------------------------------------------------------------------------
AOL's Digital News, Information AOL Digital City's Health Guide provides
City New York and Content consumers with our interactive health and
wellness information as well as community
resources, listings of health events, classes
and support groups specifically targeted to the
New York, Boston and Philadelphia areas. AOL
Digital City users have access to our Recommend
a Doctor Database, Conditions A-Z and Ask Our
Experts.
- ---------------------------------------------------------------------------------------
Better Homes News, Information The Better Homes and Gardens website features
and Gardens and Content Daily Briefings and Conditions A-Z in its health
channel.
- ---------------------------------------------------------------------------------------
Comcast Online News, Information Our logo is prominently featured with direct
Communications; and Content links to the OnHealth website. Daily Briefings,
Comcast@home; In-Depth Reports, Ask Our Experts, Conditions
and inyourtown.com Centers, Resources and Personal Health Tracker
are prominently featured in the Health Channel.
- ---------------------------------------------------------------------------------------
The Tampa Tribune News, Information We provide Tampa Bay Online users access to Daily
and NBC affiliate and Content Briefings, In-Depth Reports, Ask Our Experts,
WFLA Resources and Condition Centers.
- ---------------------------------------------------------------------------------------
ThirdAge News, Information We are a primary health content provider to
and Content ThirdAge, offering In-Depth Reports, Condition
Centers and Personal Health Tracker within its
Health Channel.
- ---------------------------------------------------------------------------------------
Weather.com News, Information We are the exclusive third party provider of
and Content allergy-related information to Weather.com.
Weather.com users have access to OnHealth's In-
Depth Reports, Ask Our Experts, Conditions A-Z
and Allergy Condition Center.
</TABLE>

34
<PAGE>

Branding

Our objective is to create the premier consumer health and wellness brand on
the Internet. While there has been a proliferation of health-related websites
on the Internet, we believe that no single participant has developed a
preeminent, recognizable brand with online consumers. In July 1999, we plan to
launch a coordinated traditional media advertising and public relations
campaign designed to build the OnHealth brand through the use of television,
radio, outdoor, print, and online media. We have set an integrated budget of
$25 million to be spent over the next year and we have retained TBWA/CHIAT/DAY
and Fleishman-Hillard to assist us in this undertaking. The full-scale media
and public relations activities will coincide with the relaunch of
onhealth.com.

Our management team has a proven track record of developing content and
building leading consumer brands at Internet and traditional media companies
such as MSNBC, The Discovery Channel, Starwave/ESPN Internet Ventures and Conde
Nast Publications. We believe that the strength of our management team is a key
factor that differentiates us from many of the other Internet health companies.
While many online providers of health information have established branding
strategies based on high profile alliances with Internet search engines,
portals and service providers, we believe that a traditional media advertising
strategy is an essential component to establishing any consumer brand and
especially an Internet brand. Due to management's background, we are able to
immediately apply a traditional media branding philosophy to the Internet based
service we provide.

The public relations activities coordinated through Fleishman-Hillard will
complement the advertising program and will likely include intensive media
relations support for the July relaunch of the website. This support will take
the form of an aggressive media outreach to the consumer and business press
with the goal of generating awareness of the website re-launch and brand
campaign.

Revenue Model

We intend to leverage the growth in our consumer base by exploiting
opportunities to develop multiple revenue streams including
advertising/sponsorship, e-commerce/transaction and syndication of content and
interactive tools. In the first quarter of 1999, we launched a health products
shopping area at our website and we plan to continue to expand our
relationships with leading web e-tailers to offer consumers a full range of
health-related products and services. Unlike many of our competitors, we have
an opportunity to leverage our proprietary content and interactive tools
through syndication to provide an additional revenue stream. We also believe
that health consumers are interested in premium subscription offerings such as
personalized smoking cessation and dietary programs, personalized health and
condition reports and direct access to leading medical experts. By pursuing
diversified revenue opportunities, we seek to reduce our dependence on and
exposure to any single revenue stream.

Advertising/Sponsorship Sales

Advertising on the Internet is rapidly becoming a viable commercial medium.
According to Jupiter Communications, advertising revenue on the Internet is
forecast to grow from $1.9 billion in 1998 to $4.4 billion in 2000 and $7.7
billion in 2002. We believe the demographics of our audience and our ability to
target specific users of our website are attractive to healthcare advertisers
and non-healthcare advertisers. We believe we have been able to create a
differentiated and productive advertising environment by providing the
following:

. targeted programs to reach the most desirable consumers;

. a wide variety and depth of sponsorship areas;

. long-term exclusive relationships for highly prized condition-specific
content;

. creative, beyond-banner programs that appeal to more aggressive
advertisers; and

. personalization and key word targets that provide flexible cross-site
delivery.

35
<PAGE>

We currently have approximately 40 different advertisers, five of which have
signed year-long commitment packages each ranging in total revenue to us from
$150,000 to $400,000. A partial list of healthcare advertisers we have
attracted includes: Johnson & Johnson, AstraZeneca Pharmaceuticals, SmithKline
Beecham, Pfizer, Schering-Plough, Glaxo Wellcome, Eli Lilly, Merck, Hoffman
LaRoche, Biogen, Hoechst Marion Roussel and SelfCare.

Our consumer-oriented content also provides attractive audiences for non-
healthcare advertisers. In addition to covering a broad range of wellness
editorial (fitness, nutrition, stress reduction, pregnancy, childbirth, sexual
health, health for seniors, alternative medicine, herbs and vitamins), we have
also developed a number of pre-packaged health-related sponsorship packages for
non-endemic advertisers in areas such as healthy eating, healthy travel,
healthy pet, fiscally fit, auto safety, Y2K baby, fitness file and holiday
packages.

A partial list of the non-healthcare advertisers we have attracted includes:
Citibank, Dr. Scholl's, Kellogg's, Ford, Talkway, Call Connect.com, GM
Buypower, GM Goodwrench, Pontiac, Buick LeSabre, Procter & Gamble, Infantime,
Women.com, Lifewise Family Financial Services, GeoCities, ESPN, Disney and
Microsoft.

E-commerce

Transactions. Our model for e-commerce is to generate revenue by focusing on
three areas: fees for guaranteed impressions, exclusivity fees and revenue
sharing. We believe our shopping channel has many advantages for the consumer,
including:

. Information from our articles, databases, experts and community, all from
one location, so that consumers can learn to manage their health and use
that information to make better-informed purchases of products and
services.

. OnHealth TimeSavers enable consumers to read about, discuss and purchase
various products. Every day, consumers can get information on timely
subjects, share ideas with others and buy the products they need to help
maintain their good health.

. Carefully selected online retailers who offer the best combination of
products and services, customer service, reliable and secure online
transaction capability and competitive prices.

We recently partnered with drugstore.com as our exclusive online drugstore,
VitaminShoppe as our exclusive vitamins and herbs merchant, and SelfCare as our
exclusive merchant in the Holistic Woman section. In addition to these partner
relationships, we have established various affiliate relationships. Under the
terms of the agreements governing affiliate relationships, we share in the
revenue from purchases made by consumers directed to the partner website from
our website. Affiliate merchants include Amazon.com, American Greeting Cards
Online, ProFlowers and enews.com.

In the near term, we anticipate that there will be approximately eight to
ten total categories in our shopping channel, all representing healthy living
extensions. Examples of additional categories to be added could include food
and cooking supplies, travel, healthy pets, insurance and music. We also plan
to add an assortment of gift baskets pertaining to health and life events, such
as sending a child to college or having a baby.

Longer-term shopping channel plans include offering e-commerce products and
services that have an interconnection to our audience and subject matter,
through a combination of partnering with various e-commerce websites, as well
as developing or acquiring our own e-commerce offerings. Products are expected
to include medical/health-related supplies, everyday health and wellness

36
<PAGE>

essentials, baby products, beauty products, home and garden, toys, music,
videos and financial services. We plan to continue to deepen the level and
types of services we offer based on consumer needs and requests, including
special commerce events, customized discounts on health products and more time-
saving buying opportunities focused on wellness and health management.

We intend to introduce premium services in the fourth quarter of 1999.
Possible examples of paid subscription services include: Ask a Doctor, where
users can submit questions to a doctor for a fee; and smoking cessation, weight
loss, stress management and pre-natal care programs.

Syndication Opportunities

We believe that our original content and interactive tools can be leveraged
into a broader revenue platform. Syndication of content and interactive tools
is a significant add-on revenue opportunity that arises naturally from our
strategy and branding program. Since we own a significant amount of our content
and interactive tools, we have the ability to syndicate content, interactive
tools and subsets of the website to other websites, offline media and/or
private label websites. We believe that syndication opportunities exist with
hospitals, pharmacy benefit management companies, corporations, health
maintenance organizations and associations, among others.

Technology and Systems

Our website uses Internet hardware and software technologies from, among
others, Compaq, Intergraph, F5 and Cisco, and software from Microsoft,
Netgravity and eShare. Exodus IT-class co-location facilities provide a secure,
high availability and high bandwidth environment for the OnHealth production
servers and testing servers. Exodus provides redundant OC-3 and OC-12 backbone
connections to the Internet, uninterruptible power supplies with diesel
generator backup, housed in a copper-lined, earthquake-resistant building
located in south Seattle. Direct connections to the hosting facility via T1 and
DSL lines allow our main office to reliably connect to the production
environment and the Internet.

All mission-critical database servers are designed to be redundant and
employ warm-backup technology to minimize downtime and maximize data integrity.
Multiple web servers and advertising servers are utilized to provide high-
availability. Traffic is balanced between all available servers through load
balancing, server monitoring hardware.

We believe that onhealth.com has been designed to be a stable and scaleable
solution sufficient for our foreseeable needs. See "Risk Factors -- Our
business is dependent on the continuous, reliable and secure operation of our
website and related tools and functions we provide."

Competition

The editorial environment in interactive media is new, highly competitive
and rapidly evolving. Since the Internet's commercialization in the mid 1990's,
the number of websites on the Internet competing for consumers' attention and
spending has proliferated with no substantial barriers to entry, and we expect
that competition will continue to intensify.

Our website competes directly for advertisers, users, e-commerce customers
and merchants, distribution and syndication partners and other affiliates with
numerous Internet and non-Internet businesses, including:

. health-related online services or websites targeted at consumers, such as
accenthealth.com, ahn.com, americasdoctor.com, betterhealth.com,
drkoop.com, drweil.com, healthcentral.com, healthgate.com,
intelihealth.com, mayohealth.org, mediconsult.com, thriveonline.com and
webmd.com;

37
<PAGE>

. online and Internet portal companies, such as America Online, Inc., Lycos
Corporation Microsoft Network, Excite, Inc., Infoseek Corporation, and
Yahoo! Inc.;

. 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 the principal competitive factors in attracting and
retaining users is the depth, breadth and timeliness of content, the ability to
offer compelling and relevant content and brand recognition. Other important
factors in attracting and retaining users include ease of use, service quality
and cost. In addition, we also compete with traditional media, including print
and television for users and advertising dollars. Our known and prospective
competitors are often significantly larger and better financed than us and may
be better able to afford a more intense competitive environment than OnHealth.
See "Risk Factors -- The Internet is highly competitive and changing rapidly,
and we may not have the resources to compete adequately."

Intellectual Property

We regard our copyrights, service marks, trademarks, trade secrets,
proprietary technology and similar intellectual property as critical to our
success, and we rely on trademark, copyright, trade secret and patent
protection to protect our proprietary rights. While we try to assure that the
quality of the OnHealth brand is maintained through such actions, there can be
no assurance that steps we have taken and continue to take to protect our
proprietary rights will be adequate or that third parties will not infringe on
our intellectual property. In addition, there can be no assurance that third
parties will not assert infringement claims against us which, even if not
meritorious, could result in the expenditure of substantial resources and
management effort. See "Risk Factors -- Much of our website relies on owned or
licensed intellectual property and we cannot be sure that such rights are
protected from the use of others, including potential competitors."

Employees

As of June 15, 1999, we employed 59 people on a full-time basis. When
conditions demand it, we also use part-time employees. None of our employees
are represented by a labor union and we consider our relationship with our
employees to be good. We believe that some measure of our future success is
dependent upon attracting and retaining qualified employees, and competition
for hiring such employees is intense.

Legal Proceedings

From time to time, we have been involved in legal proceedings in the normal
course of our operations. Other than as described below, we are not currently a
party to any pending or, to our knowledge, threatened legal proceedings in
which an adverse decision would have a material impact on our results of
operations or financial position. In June 1999, Jon Fisse, our newly named
Chief Operating Officer resigned from the Company before the Company and Mr.
Fisse were able to agree on the terms of his employment agreement. We have
filed a declaratory judgement action in the United States District Court for
the Western District of Washington seeking to declare that Mr. Fisse terminated
his employment and that we owe him no future remuneration or stock option
benefits. On the same day Mr. Fisse filed a lawsuit in the United States
District Court for the Southern District of

38
<PAGE>

New York, asserting that OnHealth violated his rights in connection with his
separation from OnHealth, seeking damages which, among other things, include
severance compensation and stock option benefits. We believe we have valid
defenses against Mr. Fisse's claims and intend to defend against such claims
vigorously.

Facilities

We lease approximately 7,000 square feet of space where our principal
executive and administrative offices are located at 808 Howell Street, Suite
400, Seattle, Washington 98101. The lease expires July 1, 2003. We also
maintain approximately 1,500 square feet of office space in Seattle that is
subleased on a month-to-month basis. In October 1998, we subleased
approximately 525 square feet of office space located at 420 Lexington Avenue,
Suite 300, New York, New York 10170. This sublease expires in September 1999.

39
<PAGE>

Management

Set forth are the directors, executive officers and key personnel of
OnHealth.

<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<C> <C> <S>
Robert N. Goodman................... 47 Chief Executive Officer, President
and
Director
Rebecca J. Farwell.................. 38 General Manager
Michael D. Conway................... 31 Vice President of Finance
Steven R. Cloherty.................. 31 Director of Technology
Michael A. Brochu................... 45 Chairman of the Board
Ann Kirschner....................... 48 Director
Ram Shriram......................... 42 Director
Rick Thompson....................... 39 Director
</TABLE>

Our executive officers are elected at the discretion of the Board of
Directors with no fixed term. There are no family relationships between or
among any of our executive officers or directors.

Robert N. Goodman joined OnHealth in December 1997 as President and Chief
Executive Officer and a member of our Board of Directors. From April 1997 to
December 1997, he was the director of business development for MSNBC
Interactive News, LLC. From December 1995 to April 1997, Mr. Goodman was an
independent consultant working for Microsoft Corporation. From November 1993 to
October 1995, he was Assistant General Counsel for The 3DO Company.

Rebecca J. Farwell joined OnHealth in February 1998 and currently serves as
General Manager. Prior to that, she was the editorial director for Discovery
Channel Online and Discovery Publishing. She began her career at The Discovery
Channel in 1987 as the managing editor of The Discovery Channel Magazine.

Michael D. Conway joined OnHealth in January 1998 as Controller and Vice
President of Finance. From November 1997 to December 1997, he worked as an
independent consultant for PhotoDisc, Inc., a developer of high-resolution
photographs on CD-ROM, and Sierra On-Line, Inc., a leader in entertainment
software. From May 1996 to October 1997, Mr. Conway served as the Accounting
Manager at Sierra On-Line, Inc. From August 1994 to May 1996, Mr. Conway served
as a Senior Accountant at Deloitte & Touche LLP. From October 1992 to August
1994, he held various positions at KPMG Peat Marwick, including Senior
Accountant.

Steven R. Cloherty Director of Technology, joined OnHealth in March 1998.
Before joining OnHealth, he worked as program manager for The Microsoft Network
Premier Services from March 1997 to March 1998. From August 1995 to March 1997,
he served as an Independent Contractor to Microsoft. From August 1994 to August
1995, he worked as a database developer for Pacific Interactive, an interactive
CD-ROM Developer. While at The Microsoft Network, Cloherty successfully
launched The MINT, American Movie Classics and Getworking Web sites, while
directing the development of MSN's Channel 5.

Michael A. Brochu has been a Director of the Company since April 1997 and
has also served as Chairman of the Board of Directors of the Company since
October 1997. Mr. Brochu has served as President and Chief Executive Officer of
Primus, Inc., a leader in entertainment software, since November 1997. From
October 1995 to October 1997, he served as President and Chief Operating
Officer of Sierra On-Line, Inc., a computer game software developer, and as its
Chief Financial Officer and Executive Vice President from July 1994 to October
1995. From 1987 to July 1994, Mr. Brochu served in the positions of Senior Vice
President, Chief Financial Officer and Chief Operating Officer of Burlington
Environmental, Inc., a division of Burlington Resources, Inc.

40
<PAGE>

Ann Kirschner has been a Director of the Company since February 1998. Ms.
Kirschner is currently the executive director of Columbia Media Enterprises.
From December 1994 to December 1998, she served as Vice President of NFL
Interactive for NFL Enterprises, Inc. Ms. Kirschner was responsible for the
launch of the NFL's official website, the official Super Bowl website and Team
NFL. Prior to December 1994, she served as President of Comma Communications
for more than two years.

Ram Shriram has been a Director of the Company since February 1998. Mr.
Shriram is Vice-President of Business Development at Amazon.com. Prior to its
acquisition by Amazon.com, Mr. Shriram served as President and Chief Operating
Officer of Junglee Corporation, a company that enables Web users to locate,
compare and transact goods and services on the Internet. Previously,
Mr. Shriram served as Vice President of Netscape Communications Corporation
from February 1994 to February 1998. Mr. Shriram was Netscape's Director,
Channel Sales of Network Computing Devices, from October 1990 to November 1994.

Rick Thompson has been a Director of the Company since February 1998. Mr.
Thompson has served as Vice President and General Manager of Microsoft
Corporation's Hardware Division since October 1987. Mr. Thompson manages the
division's product lines and oversees development.

Description of Our Securities

Common Stock

Our Articles of Incorporation authorize us to issue 100,000,000 shares of
common stock and 1,000,000 shares of preferred stock. As of June 16, 1999,
there were 16,212,420 shares of common stock outstanding and no shares of
preferred stock outstanding. Each holder of a share of common stock gets one
vote per share on all matters submitted to a vote of shareholders but may not
cumulate votes for the election of directors. Holders of common stock also are
entitled to receive dividends as may be declared by the Board of Directors out
of funds legally available. In the event of our dissolution, liquidation or
winding up, holders of common stock are entitled to share in all assets which
remain after the satisfaction of any claims of creditors or of the holder of
any securities senior to the common stock. Holders of common stock have no
preemptive, subscription, redemption or conversion rights. All the outstanding
shares of common stock are fully paid and nonassessable.

Warrants

As of June 16, 1999, we had outstanding warrants to purchase 239,469 shares
of common stock with various parties with varying exercise prices and
termination dates. Certain of these warrant holders have piggy-back
registration rights.

Provisions Affecting Acquisitions and Business Combinations

The Washington Business Corporations Act contains certain provisions that
may have the effect of delaying or discouraging another person or company from
a hostile takeover of us. Chapter 23B.19 of the Washington Business
Corporations Act prohibits a target corporation, with certain exceptions, from
engaging in certain significant business transactions (such as a merger or sale
of assets) with a person or group of persons which beneficially acquires 10% or
more of the corporation's voting securities (an "Acquiring Entity") for a
period of five years after such acquisition, unless the transaction is approved
by a majority of the members of the target corporation's board of directors
prior to the date of the transaction. An Acquiring Entity is further prohibited
from engaging in significant business transactions with the target corporation
unless the per share consideration paid to holders of outstanding shares of
common stock and other classes of stock of the target corporation meet certain
minimum criteria. These provisions may have the effect of delaying, deterring
or preventing a change in control of the Company.

41
<PAGE>

Director and Officer Indemnification

The Washington Business Corporations Act provides that a Washington
corporation may include provisions in its articles of incorporation relieving
each of its directors of monetary liability arising out of his or her conduct
as a director for breach of his or her fiduciary duty, except liability for:
(i) acts or omissions of a director finally adjudged to be intentional
misconduct or a knowing violation of law, (ii) conduct in violation of Section
23B.08.310 of the Washington Business Act (which section relates to unlawful
distributions), or (iii) any transaction with respect to which it is finally
adjudged that a director personally received benefit in money, property or
services to which the director was not legally entitled. Our Articles of
Incorporation include such provisions. Our Articles of Incorporation and Bylaws
provide that we are obligated, to the fullest extent permitted by law, to
indemnify and advance expenses to each of our currently acting and former
directors and officers, and may so indemnify and advance expenses to each of
our current and former employees and agents. We believe that the foregoing
provisions are necessary to attract and retain qualified persons as directors
and officers.

42
<PAGE>

Principal Shareholders

The following table sets forth the number of shares of our common stock
beneficially owned by (i) each director; (ii) each of our named executive
officers; (iii) all directors and executive officers as a group; and (iv) to
the best of our knowledge, all beneficial owners of more than 5% of the
outstanding shares of our common stock as of June 16, 1999. Unless otherwise
indicated, the shareholders listed in the table have sole voting and investment
power with respect to the shares indicated.

<TABLE>
<CAPTION>
Common Shares
Beneficially Percent of
Name(1) Owned(2) Class(2)
- ------- ------------- ----------
<S> <C> <C>
Robert N. Goodman.................................... 365,625(3) 2.2%
Rebecca J. Farwell................................... 41,875(4) *
Michael D. Conway.................................... 78,646(5) *
Michael A. Brochu.................................... 183,750(6) 1.1%
Ann Kirschner........................................ 21,250(7) *
Ram Shriram.......................................... 21,250(8) *
Rick R. Thompson..................................... 21,250(9) *
Van Wagoner Capital Management, Inc.................. 5,439,200(10) 33.5%
Nevis Capital Management, Inc........................ 1,294,000(11) 8.0%
Perkins Capital Management........................... 896,850(12) 5.5%
All Directors and Executive
Officers as a Group (7 persons)..................... 733,646(13) 4.3%
</TABLE>
- -----------------
* Less than 1% of the outstanding shares of common stock.

(1) The addresses of the more than 5% holders are: Van Wagoner Group (Van
Wagoner Capital Management, Inc. and Van Wagoner Funds, Inc.) 207 East
Buffalo Street, Suite 400, Milwaukee, WI, 53202; Perkins Capital
Management, Inc. -- 730 East Lake Street, Wayzata, MN 55391; Nevis Capital
Management, Inc. -- 1119 St. Paul Street, Baltimore, MD 21202.

(2) Based on 16,212,420 shares of outstanding stock as of June 16, 1999. Under
the rules of the SEC, shares not actually outstanding are nevertheless
deemed to be beneficially owned by a person if such person has the right to
acquire the shares within 60 days. Pursuant to such SEC rules, shares
deemed beneficially owned by virtue of a person's right to acquire them are
also treated as outstanding when calculating the percent of class owned by
such person and when determining the percentage owned by a group.

(3) Includes 365,625 shares which may be purchased by Mr. Goodman upon exercise
of currently exercisable options.

(4) Includes 41,875 shares which may be purchased by Ms. Farwell upon exercise
of currently exercisable options.

(5) Includes 78,646 shares which may be purchased by Mr. Conway upon exercise
of currently exercisable options.

(6) Includes 183,750 shares which may be purchased by Mr. Brochu upon exercise
of currently exercisable options.

(7) Includes 21,250 shares which may be purchased by Ms. Kirschner upon
exercise of currently exercisable options.

(8) Includes 21,250 shares which may be purchased by Mr. Shriram upon exercise
of currently exercisable options.

(9) Includes 21,250 shares which may be purchased by Mr. Thompson upon exercise
of currently exercisable options.

43
<PAGE>

(10) Of the shares, 5,439,200 shares are owned by Van Wagoner Funds, Inc. ("Van
Wagoner Funds") and 411,000 shares are owned by clients of Van Wagoner
Capital Management, Inc. ("Van Wagoner Capital"). Van Wagoner Funds has
the sole power to vote 5,028,200 shares. Van Wagoner Capital has no power
to vote 411,000 shares and has sole investment power over all of the
shares, including the shares held by Van Wagoner Funds. The Company has
relied on information contained in a Schedule 13G/A filed with the SEC on
May 10, 1999 by Van Wagoner Funds and Van Wagoner Capital as a group.

(11) Based on information provided to the Company by two members of Nevis
Capital Management, Inc. in April 1999.

(12) Of the shares owned by clients of Perkins Capital Management, Inc.,
Perkins Capital has sole power to vote 660,000 shares and no power to vote
236,850 shares. Perkins Capital has the sole investment power for all of
the shares. The Company has relied on information contained in a Schedule
13G/A filed with the SEC on June 7, 1999 by Perkins Capital.

(13) Includes 733,646 shares which may be purchased upon exercise of currently
exercisable options.

44
<PAGE>

Underwriting

OnHealth and the underwriters for the offering named below, for whom Warburg
Dillon Read LLC, SG Cowen Securities Corporation and CIBC World Markets Corp.
are acting as representatives, have entered into an underwriting agreement with
respect to the shares being offered. Subject to certain conditions, each
underwriter has severally agreed to purchase the number of shares indicated in
the following table.

<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Warburg Dillon Read LLC.....................................
SG Cowen Securities Corporation.............................
CIBC World Markets Corp.....................................
---------
Total...................................................... 6,000,000
=========
</TABLE>

If the underwriters sell more than the total number set forth in the table
above, the underwriters have an option to buy up to an additional 900,000
shares from OnHealth to cover such sales. They may exercise that option for 30
days. If any shares are purchased pursuant to this option, the underwriters
will severally purchase shares in approximately the same proportion as set
forth in the table above.

The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by OnHealth. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.

<TABLE>
<CAPTION>
Paid by OnHealth
-------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total............................................. $ $
</TABLE>

Shares sold by the underwriters to the public will initially be offered at
the public offering price set forth on the cover of this prospectus. Any shares
sold by the underwriters to securities dealers may be sold at a discount of up
to per share from the public offering price. Any such securities dealers
may resell any shares purchased from the underwriters to certain other brokers
or dealers at a discount of up to per share from the public offering
price. If all the shares are not sold at the offering price, the
representatives may change the offering price and the other selling terms.

OnHealth, its directors, executive officers and certain other employees and
shareholders have agreed with the underwriters not to dispose of or hedge any
of their common stock or securities convertible into or exchangeable for shares
of common stock during the period from the date of this prospectus continuing
through the date days after the date of this prospectus, except with the
prior written consent of Warburg Dillon Read LLC. This agreement does not apply
to issuances or sales by OnHealth pursuant to any existing employee benefit
plans or upon conversion or exchange of any currently outstanding convertible
or exchangeable securities.

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.

45
<PAGE>

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
SmallCap Market, in the over-the-counter market or otherwise.

In connection with this offering, certain underwriters and selling group
members (if any) who are qualified market makers on the Nasdaq SmallCap Market
may engage in passive market making transactions in the common stock on the
Nasdaq SmallCap Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934, during the business day prior to the pricing
of the offering before the commencement of offers or sales of the common stock.
Passive market makers must comply with applicable volume and price limitations
and must be identified as such. In general, a passive market maker must display
its bid at a price not in excess of the highest independent bid of such
security; if all independent bids are lowered below the passive market makers'
bid, however, such bid must then be lowered when certain purchase limits are
exceeded.

OnHealth estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $1.0 million.

OnHealth has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

Legal Matters

For purposes of this offering, Preston Gates & Ellis LLP, Seattle,
Washington, is giving its opinion on the validity of the shares of common stock
offered by this prospectus. Members of Preston Gates & Ellis LLP and attorneys
and staff who have participated in this manner own collectively 2,200 shares of
common stock. Certain legal matters will be passed upon for the underwriters by
Gibson, Dunn & Crutcher LLP, New York, New York.

Experts

The financial statements, including the financial statement schedule
incorporated by reference, of OnHealth Network Company at December 31, 1997 and
1998, and for each of the three years in the period ended December 31, 1998,
appearing in and incorporated by reference in this prospectus and registration
statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing and incorporated by reference
elsewhere herein, and are included in reliance upon such reports given the
authority of such firm as experts in accounting and auditing.

46
<PAGE>

Where You Can Find More Information

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy the documents 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 from the SEC's website at http://www.sec.gov.

The SEC allows us to "incorporate by reference" the information in documents
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 considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934:

1. Annual Report of OnHealth Network Company on Form 10-K, as amended,
for the fiscal year ended December 31, 1998;

2. Quarterly Report of OnHealth Network Company on Form 10-Q for the
three months ended March 31, 1999; and

3. Proxy Statement of OnHealth Network Company for the annual meeting of
shareholders held June 15, 1999.

You may request a copy of these filings or a copy of any or all of the
documents referred to above which have been or may be incorporated in this
prospectus by reference, at no cost, by writing us at the following address:
Corporate Secretary, 808 Howell Street, Suite 400, Seattle, Washington 98101.
Our telephone number is (206) 583-0100.

47
<PAGE>

Index to Financial Statements

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2

Balance Sheets............................................................. F-3

Statements of Operations................................................... F-4

Statements of Shareholders' Equity......................................... F-5

Statements of Cash Flows................................................... F-6

Notes to Financial Statements.............................................. F-7
</TABLE>

F-1
<PAGE>

Report of Ernst & Young LLP, Independent Auditors

The Board of Directors and Shareholders
OnHealth Network Company

We have audited the accompanying balance sheets of OnHealth Network Company
as of December 31, 1997 and 1998 and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of OnHealth Network Company at
December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

Ernst & Young LLP

Seattle, Washington
March 15, 1999

F-2
<PAGE>

OnHealth Network Company
Balance Sheets

<TABLE>
<CAPTION>
December 31,
------------------ March 31,
1997 1998 1999
-------- -------- -----------
(unaudited)
(In thousands)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents..................... $ 2,488 $ 2,119 $ 13,751
Accounts receivable, net of allowances of
$1,011 (1997), $256 (1998) and $275 (1999)... 337 509 231
Inventories................................... 150 -- --
Other current assets.......................... 332 409 2,284
-------- -------- --------
Total current assets......................... 3,307 3,037 16,266
Furniture and equipment:
Computers and software........................ 2,856 1,218 1,282
Office equipment.............................. 1,403 291 291
-------- -------- --------
4,259 1,509 1,573
Accumulated depreciation...................... (2,989) (774) (843)
-------- -------- --------
Furniture and equipment, net................. 1,270 735 730
Other non-current assets....................... -- 122 41
-------- -------- --------
Total assets................................. $ 4,577 $ 3,894 $ 17,037
======== ======== ========

Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable.............................. $ 1,919 $ 1,526 1,984
Other accrued expenses........................ 2,640 2,669 1,740
-------- -------- --------
Total current liabilities.................... 4,559 4,195 3,724
Other noncurrent liabilities................... -- -- 31
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $.01 par value: authorized,
1,000; issued and outstanding, none.......... -- -- --
Common stock, $0.01 par value; authorized,
29,000; issued and outstanding, 10,106 (1997)
12,800 (1998) and 16,050 (1999).............. 101 128 160
Additional paid-in-capital.................... 78,493 89,086 106,797
Accumulated deficit........................... (78,576) (89,515) (93,675)
-------- -------- --------
Total shareholders' equity (deficit)......... 18 (301) 13,282
-------- -------- --------
Total liabilities and shareholders' equity... $ 4,577 $ 3,894 $ 17,037
======== ======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements

F-3
<PAGE>

OnHealth Network Company
Statements of Operations

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net revenue................... $ 9,470 $ 3,761 $ 1,522 $ 330 $ 200
Cost of revenue............... 5,076 2,541 767 407 30
-------- -------- -------- ------- -------
Gross margin.................. 4,394 1,220 755 (77) 170
Operating expenses:
Product development,
editorial and design........ 5,651 4,243 3,744 728 1,185
Sales and marketing.......... 2,705 1,347 5,626 436 2,366
General and administrative... 6,364 6,892 2,404 743 886
-------- -------- -------- ------- -------
Total operating expenses.... 14,720 12,482 11,774 1,907 4,437
-------- -------- -------- ------- -------
Loss from operations.......... (10,326) (11,262) (11,019) (1,984) (4,267)
Interest income (expense)..... 169 (158) 84 12 107
Other income (expense)........ -- 473 (4) (281) --
-------- -------- -------- ------- -------
Total interest and other
income and expense........... 169 315 80 (269) 107
-------- -------- -------- ------- -------
Net loss...................... (10,157) (10,947) (10,939) (2,253) (4,160)
Preferred stock dividends..... (119) (100) (103) -- --
Preferred stock accretion..... (60) (43) (702) -- --
Preferred stock deemed
dividend..................... -- (2,875) (220) -- --
-------- -------- -------- ------- -------
Net loss applicable to common
shareholders................. $(10,336) $(13,965) $(11,964) $(2,253) $(4,160)
======== ======== ======== ======= =======
Net loss per common share--
Basic and diluted............ $ (1.36) $ (1.73) $ (1.12) $ (0.22) $ (0.28)
======== ======== ======== ======= =======
Weighted average number of
common shares outstanding.... 7,580 8,056 10,680 10,150 14,930
======== ======== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements

F-4
<PAGE>

OnHealth Network Company
Statements of Shareholders' Equity

<TABLE>
<CAPTION>
Common Stock Additional Total
------------------ Paid-In Accumulated Shareholders'
Shares Par Value Capital Deficit Equity (Deficit)
------- --------- ---------- ----------- ----------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 7,524 $ 75 $ 70,277 $(57,472) $ 12,880
Issuance of common
stock:
Exercise of options.... 88 1 355 -- 356
Dividends on convertible
redeemable preferred
stock ($0.06 per
share)................. -- -- (119) -- (119)
Preferred stock
accretion.............. -- -- (60) (60)
Net loss................ -- -- -- (10,157) (10,157)
------- ---- -------- -------- --------
Balance at December 31,
1996................... 7,612 76 70,453 (67,629) 2,900
Issuance of common
stock:
Exercise of options.... 59 1 97 -- 98
Lawsuit settlement..... 175 2 431 -- 433
Return of common stock
per Mayo agreement.... (490) (5) 5 -- --
Preferred stock
conversion to common.. 1,000 10 1,938 -- 1,948
Dividends on convertible
redeemable preferred
stock ($0.05 per
share)................. -- -- (100) -- (100)
Preferred stock
accretion.............. -- -- (43) -- (43)
Convertible subordinated
debenture conversion to
common................. 1,750 17 5,712 -- 5,729
Net loss................ (10,947) (10,947)
------- ---- -------- -------- --------
Balance at December 31,
1997................... 10,106 101 78,493 (78,576) 18
Issuance of common
stock:
Private placements..... 1,543 15 5,675 -- 5,690
Exercise of options.... 371 4 1,064 -- 1,068
Preferred stock
conversion to common
stock................. 733 8 3,622 -- 3,630
Services................ 47 -- 365 -- 365
Discount on sale of
convertible redeemable
preferred stock........ -- -- 702 -- 702
Cash dividends on
convertible redeemable
preferred stock ($0.06
per share)............. -- -- (3) -- (3)
Non-cash dividends -
preferred stock........ -- -- (100) -- (100)
Accretion of discount on
preferred stock........ -- -- (702) -- (702)
Preferred stock deemed
dividend............... -- -- (220) -- (220)
Issuance of stock
options and warrants
for services........... -- -- 190 -- 190
Net loss................ -- -- -- (10,939) (10,939)
------- ---- -------- -------- --------
Balance at December 31,
1998................... 12,800 128 89,086 (89,515) (301)
------- ---- -------- -------- --------
Issuance of common
stock:
Private placements*.... 2,596 26 14,252 -- 14,278
Exercise of options*... 223 2 858 -- 860
Exercise of warrants*.. 239 2 622 -- 624
Services*.............. 192 2 1,967 -- 1,969
Amortization of deferred
compensation*.......... -- -- 12 -- 12
Net loss*............... -- -- -- (4,160) (4,160)
------- ---- -------- -------- --------
Balance at March 31,
1999*.................. $16,050 $160 $106,797 $(93,675) $ 13,282
======= ==== ======== ======== ========
</TABLE>
- -----------------
* Unaudited

The accompanying notes are an integral part of the financial statements

F-5
<PAGE>

OnHealth Network Company
Statements of Cash Flows

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss...................... $(10,157) $(10,947) $(10,939) $(2,253) $(4,160)
Adjustments to reconcile net
loss to cash used in
operating activities:
Depreciation and
amortization................. 1,409 1,252 722 195 69
Interest expense associated
with debenture conversion.... -- 2,229 -- -- --
(Gain) loss on disposition of
furniture and equipment...... (3) 711 285 -- --
Provision for (recoveries of)
doubtful accounts and
returns...................... 1,675 2,336 (755) (20) 19
Other......................... -- -- 8 -- 5
Compensation from stock
grants....................... -- -- 130 -- 12
Common stock issued as
litigation settlement........ -- 433 -- -- --
Common stock issued for
services..................... -- -- 365 164
Changes in assets and
liabilities:
(Increase) decrease in
accounts receivable......... (2,601) 1,461 583 292 259
Decrease in inventories...... 666 5 150 104 --
(Increase) decrease in other
current assets.............. (139) 253 (25) 69 (73)
(Increase) decrease in other
non-current assets.......... (585) 1,885 (122) -- 81
Increase (decrease) in
accounts payable............ 843 (1,287) (393) (194) 458
Increase (decrease) in other
accrued expenses............ 636 760 29 (176) (900)
-------- -------- -------- ------- -------
Net cash used in operating
activities................. (8,256) (909) (9,962) (1,983) (4,066)
Cash flows from investing
activities:
Proceeds from disposition of
furniture and fixtures....... 510 61 217 -- --
Capital expenditures.......... (288) (104) (689) (18) (64)
-------- -------- -------- ------- -------
Net cash provided by (used in)
investing activities.......... 222 (43) (472) (18) (64)
Cash flows from financing
activities:
Proceeds from issuance of
convertible redeemable
preferred stock.............. -- -- 5,000 -- --
Proceeds from issuance of
convertible subordinated
debentures................... 3,500 -- -- -- --
Proceeds from issuance of
common stock:
Private placements............ -- -- 5,690 -- 14,278
Exercise of options........... 356 98 1,068 84 860
Exercise of warrants.......... -- -- -- -- 624
Redemption of preferred
stock........................ -- -- (1,690) -- --
Preferred stock dividends
paid......................... (119) (120) (3) -- --
-------- -------- -------- ------- -------
Net cash provided by (used
in) financing activities... 3,737 (22) 10,065 84 15,762
-------- -------- -------- ------- -------
Net decrease in cash and cash
equivalents................... (4,297) (974) (369) (1,917) 11,632
Cash and cash equivalents at
beginning of year............. 7,759 3,462 2,488 2,488 2,119
-------- -------- -------- ------- -------
Cash and cash equivalents at
end of year................... $ 3,462 $ 2,488 $ 2,119 $ 571 $13,751
======== ======== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements

F-6
<PAGE>

OnHealth Network Company
Notes to Financial Statements
(Information as of and for the three months ended March 31, 1999 is unaudited)

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of the Business

OnHealth Network Company, formerly known as IVI Publishing, Inc. (the
"Company"), is engaged in a single business consisting of electronic publishing
of health and medical information in interactive multimedia formats.

Interim Financial Information

The unaudited interim financial information as of March 31, 1999 and for the
three months ended March 31, 1998 and 1999 includes all adjustments (consisting
only of normal recurring adjustments), which, in the opinion of management, are
necessary for a fair presentation of the interim information. Operating results
for the three months ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.

Use of Estimates

The financial statements have been prepared in conformity with generally
accepted accounting principles, which require management to make estimates and
assumptions that affect the amounts and disclosures reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Fair Value of Financial Instruments

Financial instruments of the Company consist of cash and cash equivalents,
accounts receivable, other current assets, accounts payable and other accrued
expenses. The Company's other financial instruments generally approximate their
fair values for all periods presented based on the short-term nature of these
instruments.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents. For all periods
presented, cash and cash equivalents consisted principally of United States
Government obligations for which the carrying amount approximates fair value.

Inventories

All inventories are stated at the lower of cost (first-in, first-out method)
or market and consist of packaging supplies and finished goods.

Furniture and Equipment

Furniture and equipment are stated at cost and are depreciated using the
straight-line method over the shorter of the estimated useful lives of the
respective assets, generally five to seven years.

Concentration of Credit Risk and Significant Customers

The Company is potentially subject to a concentration of credit risk from
its trade accounts, which are not collateralized. The Company performs periodic
credit reviews of its customers and maintains reserves for potential losses for
uncollectible accounts. Such losses have historically been within management's
expectations.

F-7
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

Three customers represent 15%, 21%, and 11% of net revenue in 1996; one
customer represents 12% of net revenue for the year ended December 31, 1997;
and three customers represent 40%, 16% and 13% of net revenue for the year
ended December 31, 1998. The revenue recorded from the customer which
represents 40% of the net revenue in 1998 was the result of a $603,000 payment
received from the customer related to minimum sales requirements from a
terminated CD-ROM distribution agreement. Two customers represented 77% and 27%
of accounts receivable at December 31, 1997. At December 31, 1998, two
customers comprised 36% and 20% of outstanding accounts receivable.

Revenue Recognition

The Company's revenue consists of fees for online services, product sales
and licensing revenue, contract development revenue, and fees relating to the
licensing of its content for use on cable television.

Online revenue is generated through the sale of advertising and sponsorship
of the Company's onhealth.com website. Advertising and sponsorship revenue is
earned based upon the number of impressions delivered.

Product sales and licensing revenue consists of retail distribution sales,
direct mail sales, and product sales and royalties on licenses to original
equipment manufacturers (OEM's). The revenue is recognized upon shipment of the
product or in accordance with the licensing agreements. An allowance for return
is recorded at the time revenue is recognized.

Contract development revenue is generated through the use of the Company's
personnel and facilities for the creation of custom multimedia products. The
contract revenue is recognized on a percentage-of-completion basis or at a
specific hourly rate, depending on the terms of the contract.

Revenue relating to the licensing of the Company's health and medical
content for use on cable television channels is recognized when payments are
received. The Company recognized revenue under its cable television agreement
with America's Health Network ("AHN") during 1996 and 1997. (See Note 12).

Revenue for 1996, 1997 and 1998 and for the three months ended March 31,
1998 and 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
Three Months
Ended
March 31,
-------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Online................................... $1,000 $ 58 $ 388 $ 89 $ 146
Contract development and other........... 1,346 1,220 380 197 35
Product sales and licensing.............. 5,152 1,990 754 44 19
Cable television licensing............... 1,972 493 -- -- --
------ ------ ------ ------ ------
Net revenue............................ $9,470 $3,761 $1,522 $330 $200
====== ====== ====== ====== ======
</TABLE>

Product Development, Editorial and Design Costs

Product development, editorial and design costs consist principally of
payroll and related expenses for development, editorial, systems and
telecommunications operations personnel and consultants, systems and

F-8
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

telecommunications infrastructure and costs of acquired content. To date, all
product development, editorial and design costs have been expensed as incurred.

Advertising Costs

Advertising costs are expensed as they are incurred. Advertising costs in
1996, 1997, and 1998 were $556,000, $190,000 and $3,409,000, respectively.

Income Taxes

Income taxes are provided based on earnings reported for financial statement
purposes. Deferred income taxes are provided for temporary differences between
financial reporting and income tax basis of assets and liabilities under the
liability method.

Stock Based Compensation

Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," the Company is required to disclose
the effects on the net loss and per share data as if the Company had elected to
use the fair value approach to account for all its employee stock-based
compensation plans. The Company follows the disclosure-only provisions of SFAS
No. 123 but applies Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees" (APB 25) and related interpretations in accounting
for its employee stock options. Under APB 25, when the exercise price of
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recorded.

Loss Per Common Share

Basic earnings per share ("EPS") excludes any dilutive effects of common
stock equivalents--options, warrants and convertible securities--and is
computed by dividing income available to common shareholders by the weighted-
average number of common shares outstanding during the period. Diluted EPS is
computed by dividing income available to common shareholders by the weighted-
average number of common stock equivalent shares outstanding.

The effects of common stock equivalents are excluded from the computation
for all periods presented as their effects are anti-dilutive.

Reclassifications

Certain reclassifications have been made for consistent financial statement
presentation.

Impact of Recently Issued or Adopted Accounting Standards

SFAS No. 130, "Reporting Comprehensive Income," was issued in June 1997.
This Statement, adopted by the Company on January 1, 1998, establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-purpose
financial statements. This statement requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement does not affect the
results of operations or financial position of the Company. For the years ended
December 31, 1996, 1997 and 1998, the Company had no items that would have been
classified as other comprehensive income.

SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," was issued in June 1997 and redefined how operating segments are
determined. SFAS No. 131 requires

F-9
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

disclosure of certain financial and descriptive information about a company's
operating segments. This statement was adopted by the Company on January 1,
1998. Provisions of this statement require annual disclosure in the year of
adoption and interim reporting for periods thereafter. This statement does not
affect the results of operations or financial position of the Company. The
Company operates in one principal business segment across domestic markets.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued in June 1998 and establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The statement is
effective for all fiscal years beginning after June 15, 2000. The impact of the
adoption of the provisions of this statement on the results of operations or
the financial position of the Company has not yet been determined.

In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 requires all costs related to
the development of internal use software other than those incurred during the
application development stage to be expensed as incurred. Costs incurred during
the application development stage are required to be capitalized and amortized
over the estimated useful life of the software. SOP 98-1 is effective for the
Company's fiscal year ending December 31, 1999. Adoption is not expected to
have a material effect on the Company's financial statements as the Company's
policies are substantially in compliance with SOP 98-1.

Note 2. Liquidity

The Company has experienced recurring losses from operations and has
generated an accumulated deficit from inception to December 31, 1998 of
approximately $89,515,000. At December 31, 1998, the Company had a working
capital deficiency of $1,158,000 and total shareholders' deficit of $301,000.
In January 1999, the Company completed a $14.3 million issuance of the
Company's common stock. The Company believes that its cash and cash
equivalents, including the $14.3 million received in January 1999 private
placement, will be sufficient to fund its operations through December 31, 1999.
Operations generated a negative cash flow during 1996, 1997 and 1998 and the
Company expects a significant use of cash in 1999 as it markets and expands its
website. Any material unforeseen increase in expenses or reductions in
projected revenue will likely require the Company to seek additional debt or
equity financing. If additional cash is required, the Company may need to
reduce its expenditures or curtail certain operations. There can be no
assurance that additional capital, on a debt or equity basis, will be found, or
if found that it will be on economically viable terms.

F-10
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

Note 3. Composition of Certain Balance Sheet Accounts

<TABLE>
<CAPTION>
December 31,
--------------- March 31.
1997 1998 1999
------- ------ -----------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Other current assets:
Prepaid advertising.......................... $ -- $ 197 $1,960
Other........................................ 332 212 324
------- ------ ------
Total....................................... $ 332 $ 409 $2,284
======= ====== ======
Furniture and equipment:
Computer hardware............................ $ 2,160 $1,032 $1,095
Software..................................... 455 186 187
Furniture & fixtures......................... 1,403 220 220
Equipment.................................... 241 -- --
Leasehold improvements....................... -- 71 71
------- ------ ------
4,259 1,509 1,573
Less accumulated depreciation................ (2,989) (774) (843)
------- ------ ------
Total....................................... $ 1,270 $ 735 $ 730
======= ====== ======
Other accrued expenses:
Litigation loss.............................. $ 961 $ 677 $ 677
Advertising.................................. -- 609 --
Severance.................................... 610 90 45
Royalties.................................... 501 338 200
Rent obligation.............................. 252 53 25
Accrued wages and benefits................... 4 175 146
Payroll taxes................................ 2 358 55
Deferred revenue............................. -- 95 255
Other........................................ 310 274 337
------- ------ ------
Total....................................... $ 2,640 $2,669 $1,740
======= ====== ======
</TABLE>

Note 4. Common Stock

On October 30, 1998, the Company completed a $3,690,000 private placement
involving the issuance of 1,000,898 shares of common stock at $3.69 per share.
On December 14, 1998, the Company completed a $2,000,000 private placement
involving the issuance of 542,419 shares of common stock at $3.69 per share.
The shares of common stock issued on October 30, 1998 and December 14, 1998
were issued to two accredited investors. The terms of these issuances
potentially obligated the Company to issue additional shares of common stock
(depending on the future performance of the Company's common stock (the "Reset
Provisions")). Such Reset Provisions only relate to those shares purchased by
the two investors on October 30, 1998 and December 14, 1998. As of March 12,
1999, all of the shares of common stock subject to the Reset Provisions have
been sold and no such Reset Provisions apply to any of the Company's
outstanding common stock.

In January 1999, the Company completed a $14.3 million private placement
which resulted in the issuance of 2,596,000 shares of the Company's common
stock at $5.50 per share.

Note 5. Convertible Subordinated Debentures

In November 1996, the Company issued $3,500,000 of 9% Convertible
Subordinated Debentures ($3,325,000 net of debt issue costs). These debentures
were converted into common stock on

F-11
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

October 28, 1997 at a rate of $2.00 per share, resulting in the issuance of
1,750,000 shares of Common Stock. The original conversion price was $3.25 per
share. The excess of the fair value of the Common Stock issued over the fair
value of the shares issuable pursuant to the original conversion terms was
$2,229,000 and was recorded as an other expense at the date of conversion.

Note 6. Convertible Redeemable Preferred Stock

In 1995, the Company issued 2,000 shares of 6% Series A Convertible
Redeemable Preferred Stock (the "6% Series A Preferred Stock") for $2,000,000
($1,845,000 net of brokerage expenses) to Davidson & Associates, Inc.
("Davidson"), a distributor of multimedia educational and entertainment
software. The 6% Series A Preferred Stock was converted into 1,000,000 shares
of the Company's common stock on October 30, 1997, at a rate of $2.00 per
share. The original conversion price was $11.21 per share. The excess of the
fair value of the Common Stock issued over the fair value of the shares
issuable pursuant to the original conversion terms was $2,875,000 and was
recorded as a deemed preferred dividend at the date of conversion. This deemed
dividend increased the net loss applicable to common shareholders in the
calculation of the 1997 net loss per share as shown in the statements of
operations.

In April 1998, the Company issued 5,000 shares of the Company's 5% Series B
Convertible Redeemable Preferred Stock (the "Series B Preferred Stock") for
$5,000,000. The Series B Preferred Stock was convertible at various increasing
discount rates to the market value of the common stock. This discount
aggregated $702,000 and was recorded as preferred stock accretion over the
various periods of conversion. During 1998, 3,630 shares of the Series B
Preferred Stock were converted into 732,605 shares of the Company's common
stock and 1,470 of such preferred shares were redeemed. The excess of the
redemption price over the carrying value of the preferred shares redeemed was
$220,000 and was recorded as a preferred stock deemed dividend. The preferred
stock accretion and deemed dividend increased the net loss applicable to common
shareholders in the calculation of the 1998 net loss per share as shown in the
statements of operations.

Note 7. Stock Options and Warrants

In December 1997, the Company's Board of Directors adopted the 1997 Stock
Option Plan ("1997 Plan") for its employees, directors and consultants. The
1997 Plan, which is administered by the Board of Directors, permits the Company
to grant stock options for the purchase of Common Stock. The purpose of the
1997 Stock Option Plan is to promote the success of the Company by facilitating
the employment and retention of competent personnel and by furnishing incentive
to directors, officers and employees of the Company and consultants and
advisors to the Company, upon whose efforts the success of the Company will
depend to a large degree. Incentive stock options ("ISOs") and non-qualified
stock options may be granted pursuant to the 1997 Plan.

The Company also has a 1991 Stock Option Plan (the "1991 Plan") for its
employees. The 1991 Plan, which is administered by the Board of Directors,
permits the Company to grant stock options for the purchase of Common Stock.
The 1991 Plan provides for the granting of ISOs and non-qualified stock
options. In the case of ISOs, the exercise price must be at least equal to the
fair market value per share of the Common Stock on the date of grant. In the
case of non-qualified stock options, the exercise price must be at least 85% of
the fair market value per share on the date of grant. Options generally expire
nine to ten years from the date of grant.

In addition, the Company has a Director Stock Option Plan pursuant to which
current non-employee directors are eligible to receive options to purchase
shares of the Company's common stock at the market price on the date of grant.

F-12
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

The number of shares of the Company's common stock that have been reserved
for issuance for such plans total 2,378,000.

Activity in the 1991 Plan, 1997 Plan and Director Stock Option Plan is as
follows:

<TABLE>
<CAPTION>
Remaining
Number of
Shares Number of Weighted-Average
Reserved Shares Price Per Share
--------- --------- ----------------
<S> <C> <C> <C>
Total Outstanding at De-
cember 31, 1995........ 489,000 907,000 $11.53
Options Reserved........ 200,000 --
Options Granted......... (582,000) 582,000 4.98
Options Exercised....... -- (88,000) 4.06
Options Canceled........ 461,000 (461,000) 13.24
--------- ---------
Total Outstanding at De-
cember 31, 1996........ 568,000 940,000 7.10
Options Reserved........ 1,750,000 -- --
Options Granted......... (684,000) 684,000 2.85
Options Exercised....... -- (59,000) 1.64
Options Canceled........ 474,000 (474,000) 9.86
--------- ---------
Total Outstanding at De-
cember 31, 1997........ 2,108,000 1,091,000 3.53
Options Granted......... (889,000) 889,000 5.05
Options Exercised....... -- (371,000) 2.88
Options Canceled........ 393,000 (393,000) 3.84
--------- ---------
Total Outstanding at De-
cember 31, 1998........ 1,162,000 1,216,000 $ 4.74
========= =========
</TABLE>

At December 31, 1998, 1997 and 1996, options to purchase 237,000, 325,000,
and 602,000 shares were exercisable, respectively.

The following table summarizes information about the stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
EercisexPrices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$2.31- 2.50............... 150,000 9 years $ 2.31 50,000 $ 2.31
2.51- 3.00............... 75,000 8 years 2.82 46,000 2.85
3.01- 3.50............... 190,000 8 years 3.32 71,000 3.36
3.51- 4.00............... 205,000 10 years 3.75 -- --
4.01- 5.50............... 77,000 10 years 4.36 -- --
5.51- 6.00............... 30,000 4 years 5.75 30,000 5.75
6.01- 6.50............... 429,000 9 years 6.25 -- --
6.51-26.00............... 60,000 7 years 10.29 40,000 11.75
$2.31-26.00............... 1,216,000 9 years $ 3.25 237,000 $ 4.76
</TABLE>

From time to time, the Company's Board of Directors may grant stock options
outside of the existing stock option plans. In 1997, the Board of Directors
adopted the 1997-1998 New Hire Stock Option Plan. This plan provides for the
granting of 1,213,500 non-qualified stock options to newly hired employees in
late 1997 through early 1998. In 1997, the Company granted options to purchase
522,500 shares at prices ranging from $2.31 to $2.50 per share. These options
expire in 2007. In

F-13
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

1998, the Company granted options to purchase 996,000 shares at prices ranging
from $2.75 to $7.88 per share. These options expire in 2008. The options
granted under this plan had a weighted average price per share of $3.33. Of the
options granted in 1997 and 1998, 40,000 and 265,000 stock options,
respectively, were canceled in 1998 and none were exercised.

The pro forma information regarding net loss and net loss per share required
by SFAS No. 123 has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS No. 123. The fair
value for these options has been estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for 1996, 1997 and 1998:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate................................. 6.21% 5.50% 5.00%
Dividend yield.......................................... 0% 0% 0%
Volatility factor....................................... .726 .760 .817
Weighted-average expected life.......................... 5 years 5 years 5 years
</TABLE>

The weighted-average fair value of options granted during 1996, 1997 and
1998 was $2.99, $1.74, and $2.97, respectively. The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
(In thousands, except per share
data)
<S> <C> <C> <C>
Net loss applicable to common
shareholders--as reported................ $ (10,336) $ (13,965) $ (11,964)
Net loss applicable to common
shareholders--pro forma.................. $(10,562) $(14,294) $(12,970)
Basic and diluted net loss per share--as
reported................................. $ (1.36) $ (1.73) $ (1.12)
Basic and diluted net loss per common
share pro forma.......................... $ (1.39) $ (1.77) $ (1.21)
</TABLE>

The pro forma effect on the net loss for 1996, 1997, and 1998 is not
representative of the pro forma effect on the net loss in future years because
it does not take into consideration pro forma compensation expense related to
grants made prior to 1995.

As of December 31, 1997 and 1998 the Company had warrants outstanding to
purchase 547,260 and 678,577 shares of Common Stock at prices ranging from
$3.25 per share to $30.94 per share. Warrants outstanding at December 31, 1998
expire from 1999 through 2003. The warrants were generally issued to
underwriters and investment bankers for services performed in connection with
several of the Company's financing transactions.

Common stock reserved for future issuance at December 31, 1998 is as
follows:

<TABLE>
<S> <C>
1991, 1997 and Director Stock Option Plans....................... 2,378,000
1997 - 1998 New Hire Plan........................................ 1,213,500
Warrants......................................................... 678,577
---------
4,270,077
=========
</TABLE>

F-14
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

Note 8. Loss Per Common Share

The components of basic and diluted loss per common share are as follows:

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
---------------------------- ----------------
1996 1997 1998 1998 1999
-------- -------- -------- ------- -------
(unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Net loss applicable to common
shareholders (numerator)..... $(10,366) $(13,965) $(11,964) $(2,253) $(4,160)
======== ======== ======== ======= =======
Weighted average common shares
outstanding (denominator).... 7,580 8,056 10,680 10,150 14,930
======== ======== ======== ======= =======
Loss per share:
Basic and diluted............ $ (1.36) $ (1.73) $ (1.12) $ (0.22) $ (0.28)
======== ======== ======== ======= =======
</TABLE>

Note 9. Commitments and Contingencies

The Company leases office space under agreements accounted for as operating
leases. The agreements expire at various times through 2003. Gross rent
expense, including charges for monthly operating costs, was $1,433,000,
$881,000 and $522,000 for 1996, 1997 and 1998, respectively. The Company has
subleased certain facilities to various tenants under non-cancelable operating
leases expiring in 1999. The Company also has several marketing agreements that
require minimum payments to be made. Scheduled minimum lease commitments and
annual marketing payments are as follows:

<TABLE>
<CAPTION>
Lease Marketing
Payments Payments
-------- ---------
(In thousands)
<S> <C> <C>
1999.................................................... $ 176 $1,885
2000.................................................... 134 100
2001.................................................... 142 50
2002.................................................... 151 --
2003.................................................... 52 --
----- ------
655 2,035
Less sublease rental income............................. (162) --
----- ------
Total................................................... $ 493 $2,035
===== ======
</TABLE>

F-15
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

Note 10. Supplemental Cash Flow Information

<TABLE>
<CAPTION>
Three
Months
Year Ended Ended
December 31, 1998 March 31,
-------------------- -----------
1996 1997 1998 1998 1999
---- ------ ------ ---- ------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C>
Cash paid during the periods for:
Interest.................................... $ -- $ 298 $ -- $-- $ --
Income taxes................................ 10 5 7 7 --
Non-cash investing and financing
transactions:
Conversion of preferred stock to common
stock...................................... -- 1,948 3,630 -- --
Conversion of convertible subordinated
debentures................................. -- 5,729 -- -- --
Preferred stock/warrant discount............ -- -- 702 -- --
Preferred stock/warrant discount accretion.. (60) (43) (702) -- --
Preferred stock dividends................... -- -- 100 -- --
Stock options and warrants issued for
services................................... -- -- 190 -- --
Preferred stock deemed dividend............. -- 2,875 -- -- --
Common stock issued as litigation
settlement................................. -- 433 -- -- --
Common stock issued for services............ -- -- -- -- 1,969
</TABLE>

Note 11. Income Taxes

At December 31, 1998, the Company has net operating loss carryforwards of
$81,910,000 for income tax purposes and unused research and development credits
of $339,000 that expire at various times through 2013. These carryforwards are
subject to the limitations of Internal Revenue Code Section 382. This section
provides limitations on the availability of net operating losses to offset
current taxable income if significant ownership changes have occurred for
federal tax purposes. For financial reporting purposes, a valuation allowance
has been recognized to completely reserve for the deferred tax assets related
to those carryforwards. The reserve has been established because of the
uncertainty of future taxable income, which is necessary to realize the
benefits of the net operating loss carryforwards.

Components of the Company's deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
December 31,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and allowances............... $ 2,788,000 $ 1,223,000
Research and development credits.............. 326,000 339,000
Net operating loss carryforwards.............. 25,880,000 28,669,000
------------ ------------
28,994,000 30,231,000
Deferred tax liabilities:
Depreciation.................................. 16,000 15,000
------------ ------------
16,000 15,000
------------ ------------
Net deferred tax assets before valuation
allowance..................................... 28,978,000 30,216,000
Less valuation allowance....................... (28,978,000) (30,216,000)
------------ ------------
Net deferred tax assets........................ $ -- $ --
============ ============
</TABLE>

F-16
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

Note 12. Investment in America's Health Network

In March 1994, the Company acquired an equity position in America's Health
Network ("AHN"), a health information cable television network that combines
live programming with medical consumer product sales. The network launched on
March 25, 1996.

In the first quarter of 1994, the Company expensed its entire investment of
$2,000,000 along with the related investment banking fees of approximately
$263,000. This approach to the investment was made on the basis that the
invested amounts are not assured of recoverability through future revenue
streams. As of December 31, 1998 and 1997, the Company's underlying equity in
its investment in AHN was approximately $100,000 and $500,000 based on
approximately 1% and 4% of AHN's net assets, respectively. However, because the
Company expensed its investment, its equity in AHN's net assets is not
recognized on the balance sheet.

In May 1995, the Company entered into a content and royalty agreement with
AHN. Under the agreement the Company licensed its multimedia content to AHN
starting in May 1995 and was to receive minimum licensing royalties over the
life of the agreement. This revenue was being recognized evenly over the
expected life of the contract. Due to the gradual increase in actual payments
versus the straight-line revenue recognition policy, a receivable was recorded
for the difference between the revenue recognized and the cash received during
the early years of the contract. In June 1997, as a result of the Company not
receiving its quarterly payment, the outstanding AHN receivable was fully
reserved. Due to the uncertainty of future payments, the Company began
recognizing revenue on a cash basis. In December 1997 and in early 1998, AHN
made payments which were applied against the receivable. At December 31, 1998,
the Company has a fully reserved receivable of $153,000 and AHN had failed to
make three scheduled payments totaling $1,688,000. The Company recorded $0,
$493,000 and $1,972,000 in license royalty revenue in 1998, 1997 and 1996,
respectively.

Note 13. Agreement with AT&T

In October 1995, the Company entered into a four year agreement with AT&T
whereby the Company agreed to provide content for AT&T's HealthSite, a division
of AT&T's Personal Online Service ("POS"), in exchange for guaranteed revenues.
In August 1996, AT&T discontinued the HealthSite, and subsequently discontinued
POS. The Company received the 1996 guaranteed revenue payment of $1,000,000
from AT&T.

Note 14. Benefit Plan

The Company has a defined contribution salary deferral plan covering
substantially all employees under Section 401(k) of the Internal Revenue Code.
The Plan allows eligible employees to make contributions up to the maximum
amount provided under the Code. The Company may also make a discretionary
contribution to the Plan. No such contributions have been made by the Company.

Note 15. Mayo Agreement

In September 1997, the Company entered into an agreement with Mayo
Foundation ("Mayo") which included a full transfer of ownership of the
Company's O@sis website to Mayo and a new arrangement for revenues and cost
sharing concerning O@sis. Under the terms of the agreement, the Company
received a $2,700,000 cash payment, an additional $300,000 cash payment for
hosting the website for a transition period, and the return of 490,000 shares
of the Company's common stock. Through the year 2001, the Company will receive
a royalty from Mayo on certain revenues generated by the Mayo Health O@sis site
and certain other non-O@sis Internet projects. In addition, Mayo was

F-17
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

released from the Company's "right of first offer" on Mayo health products
produced for electronic media, and Mayo assumed operating expenses incurred for
the website retroactive to January 1, 1997 which were recorded as a reduction
to product development expenses. The Company recorded the $2,700,000 payment as
other income and recorded the $300,000 payment as contract development revenue
during the third and fourth quarters, respectively, of 1997.

Note 16. Related Party Transactions

During 1996, 1997 and 1998, the Company subleased approximately 20,000
square feet of its Eden Prairie office space to Reality Interactive, Inc.
Reality Interactive, Inc. and the Company share a common Board member. The
lease was terminated in 1998.

During 1996, two officers of the Company participated in the Company's debt
offering. The total amount of debt issued by the Company to these individuals
was $120,000. Additionally, three directors of the Company participated in the
debt offering, either individually or through affiliated organizations. The
total amount of debt issued by the Company to these individuals and
organizations was $550,000. On October 28, 1997, this debt was converted into
common stock at a rate of $2.00 per share (see "Note 5. Convertible
Subordinated Debentures").

Note 17. Legal Proceedings

In February 1996, an action in the District Court of Hennepin County
(Minnesota) was brought by T. Randal Productions et al. against the Company and
one current and two former employees. The plaintiffs made various allegations,
including misappropriation of corporate opportunities and trade secrets by the
Company and its employees and sought award of monetary damages, exemplary
damages and royalties substantially in excess of $10.0 million. In November
1997, a jury found that there was no joint venture between T. Randal and the
company and/or any of its employees but awarded T. Randal $480,000 plus
interest for damages sustained to its business. Plaintiffs moved for a new
trial, amended findings and for judgment notwithstanding the verdict. The jury
verdict was upheld by the trial court. The plaintiffs appealed this decision to
the Minnesota Court of Appeals. In March 1999, the Minnesota Court of Appeals
affirmed the decision of the trial court. The Company believes the plaintiffs
will petition for a rehearing which Company counsel believes will not be
successful. The plaintiffs also have an action pending against certain
affiliates of the Company on the same grounds on which the action against the
Company was based. The Company has indemnified these affiliates against any
damages arising out of these claims. Counsel has advised the Company that the
jury verdict in the action against the Company should be controlling in this
action against the affiliates. As of December 31, 1998, the Company has accrued
$480,000 plus estimated court costs.

Note 18. Relocation of Operations

During early 1998, the Company relocated its primary operating facilities
from Minneapolis, Minnesota to Seattle, Washington. As a result, certain of the
Company's Minnesota leasehold improvements and computer and software equipment
having a carrying value of $721,000 were not transferable or were not utilized
in the Company's Seattle operations. In 1997, the Company had estimated and
recorded the related relocation expense of $721,000 as a General and
Administrative expense. In addition, in 1997 the Company recorded $252,000 and
$610,000 in general and administrative expenses related to lease termination
costs and severance for former officers and employees, respectively.

Note 19. Subsequent Events (unaudited)

On June 1, 1999, the Company made a payment of $950,000 to T. Randal
Productions in full satisfaction of a judgment against the Company.

F-18
<PAGE>

OnHealth Network Company
Notes to Financial Statements (Continued)

In June 1999, Jon Fisse, the Company's newly named Chief Operating Officer,
resigned from the Company before the Company and Mr. Fisse were able to agree
on the terms of his employment agreement. The Company has filed a declaratory
judgement action in the United States District Court for the Western District
of Washington seeking to declare that Mr. Fisse terminated his employment and
that it owes him no future remuneration or stock option benefits. On the same
day Mr. Fisse filed a lawsuit in the United States District Court for the
Southern District of New York, asserting that the Company violated his rights
in connection with his separation from the Company, seeking damages which,
among other things, include severance compensation and stock option benefits.
We believe we have valid defenses against Mr. Fisse's claims and intend to
defend against such claims vigorously. However, the outcome of this lawsuit may
have a material adverse effect on the Company's financial position and results
of operations.

On June 15, 1999, the shareholders approved an increase in the number of
authorized shares of the Company's common stock to 100,000,000 from 29,000,000.

F-19
<PAGE>

- --------------------------------------------------------------------------------

----------------

PROSPECTUS

----------------

6,000,000 Shares

[LOGO OF ONHEALTH]

Warburg Dillon Read LLC

SG Cowen

CIBC World Markets

, 1999

- --------------------------------------------------------------------------------

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy shares of OnHealth common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of the OnHealth common stock.
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The expenses relating to the registration of the Shares will be borne by the
registrant. Such expenses are estimated to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 16,664
NASD filing fee............................................... $ 6,494
Nasdaq National Market listing fee............................ $ 95,000
Accountants' fees............................................. $ 150,000
Printing expenses............................................. $ 180,000
Blue Sky fees and expenses.................................... $ 5,000
Legal fees.................................................... $ 500,000
Miscellaneous................................................. $ 46,872
----------
Total....................................................... $1,000,000
==========
</TABLE>

Item 15. Indemnification of Directors and Officers.

Article XII of the Articles of Incorporation of the Company authorizes the
Company to indemnify any present or former director or officer to the fullest
extent not prohibited by the Washington Business Corporation Act, public policy
or other applicable law. Chapter 23B.8.510 and .570 of the Washington Business
Corporation Act authorizes a corporation to indemnify its directors, officers,
employees, or agents in terms sufficiently broad to permit such indemnification
under certain circumstances for liabilities (including provisions permitting
advances for expenses incurred) arising under the 1933 Act.

In addition, the Company maintains directors' and officers' liability
insurance under which its directors and officers are insured against loss (as
defined in the policy) as a result of claims brought against them for their
wrongful acts in such capacities.

Item 16. Exhibits and Financial Statement Schedules.

(a)
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1 Underwriting Agreement*
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company**
5 Opinion of Preston Gates & Ellis LLP regarding legality*
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Preston Gates & Ellis LLP (contained in Exhibit 5)*
24 Power of Attorney (see signature page)
</TABLE>
- -----------------

* To be filed by amendment
** Incorporated by reference to the Form S-3 of the Registrant filed December
31, 1998 (333-69989).

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and executive officers of the Registrant pursuant
to provisions described in Item 15 or

II-1
<PAGE>

otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities 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 or executive officer of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director or executive officer in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.

(2) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

(3) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Exchange Act; and where interim financial information
required to be presented by Article 3 of Regulation S-X are not set forth
in the prospectus, to deliver or caused to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.

(4) That, for the purposes of determining liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(5) 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.

(6) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(7) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-2
<PAGE>

SIGNATURES

Pursuant to 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 S-3 and has duly caused this its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on the 21st day of
June, 1999.

Onhealth Network Company

/s/ Robert N. Goodman
By: _________________________________
Robert N. Goodman
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert N. Goodman or Michael Brochu, his
attorney-in-fact, for him in any and all capacities, to sign any amendments to
this registration statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities indicated on June 21, 1999.

<TABLE>
<CAPTION>
Signature Title
--------- -----

<S> <C>
/s/ Robert N. Goodman President, Chief Executive Officer, Director
______________________________________ (Principal Executive Officer)
Robert N. Goodman

/s/ Michael D. Conway Controller, Vice President, Chief Financial
______________________________________ Officer (Principal Financial and Accounting
Michael D. Conway Officer)

/s/ Michael A. Brochu Chairman of the Board of Directors
______________________________________
Michael A. Brochu

/s/ Ann Kirschner Director
______________________________________
Ann Kirschner

/s/ Ram Shriram Director
______________________________________
Ram Shriram

/s/ Rick Thompson Director
______________________________________
Rick Thompson
</TABLE>

II-3
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1 Underwriting Agreement*
3.1 Articles of Incorporation of the Company
3.2 Bylaws of the Company**
5 Opinion of Preston Gates & Ellis LLP regarding legality*
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Preston Gates & Ellis LLP (contained in Exhibit 5)*
24 Power of Attorney (see signature page)
</TABLE>
- -----------------

* To be filed by amendment
** Incorporated by reference to the Form S-3 of the Registrant filed December
31, 1998 (333-69989).

<PAGE>

EXHIBIT 3.1

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

ONHEALTH NETWORK COMPANY

ARTICLE I

NAME

The name of the corporation is OnHealth Network Company.

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the registered office of the "Corporation" is 5000 Columbia
Center, 701 Fifth Avenue, Seattle, Washington 98104-7078, and the name of the
registered agent at such address is PTSGE Corp.

ARTICLE III

PURPOSE

The Corporation is organized for the purposes of transacting any and all
lawful business for which a corporation may be incorporated under the Washington
Business Corporation Act, Title 23B of the Revised Code of Washington, now or
hereafter in force (the "Act").

ARTICLE IV

CAPITAL SHARES

4.1 Authorized Shares. The authorized capital stock of the Company
consists of 100,000,000 shares of common stock $.01 par value per share ("Common
Stock") and 1,000,000 shares of Preferred Stock.

4.2 Filings and Effectiveness. Before the Company shall issue any
Preferred Shares of any series, Articles of Amendment or Restated Articles of
Incorporation, fixing the voting powers, designations, preferences, the
relative, participating, option, or other rights, if any, and the
<PAGE>

qualifications, limitations, and restrictions, if any, relating to the Preferred
Shares of such series, and the number of Preferred Shares of such series
authorized by the Board of Directors to be issued shall be filed with the
secretary of state in accordance with the Washington Business Corporation Act
("WBCA") and shall become effective without any shareholder action. The Board of
Directors is further authorized to increase or decrease (but not below the
number of such shares of such series then outstanding) the number of shares of
any series subsequent to the issuance of shares of that series.

ARTICLE V

NO PREEMPTIVE RIGHT'S

Shareholders of the Corporation have no preemptive rights to acquire
additional shares of stock or securities convertible into shares of stock issued
by the Corporation.

ARTICLE VI

DIRECTORS

6.1 Number. The number of directors of the Corporation shall be fixed in
the manner specified by the bylaws of the Corporation.

6.2 Vacancies. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors shall be filled only by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, unless for any reason there are no directors in office
in which case they shall be filled by a special election by shareholders.

ARTICLE VII

ELECTION OF DIRECTORS

Shareholders of the Corporation shall not have the right to cumulate votes
in the election of directors.

ARTICLE VIII

SPECIAL SHAREHOLDER MEETINGS

Special meetings of the shareholders of the Corporation for any purpose or
purposes may be called at any time by the Board of Directors, or by a committee
of the Board of Directors which has been duly designated by the Board of
Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in the bylaws of the Corporation, include the power to
call such meetings, but such special meetings may not be called by any other
person or persons.

-2-
<PAGE>

ARTICLE IX

AMENDMENT OF BYLAWS

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, adopt, repeal, alter,
amend, and rescind the bylaws of the Corporation by a resolution adopted by a
majority of the directors.

ARTICLE X

LIMITATION OF DIRECTOR LIABILITY

A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
except for:

(a) Acts or omissions involving intentional misconduct by the director or
a knowing violation of law by the director;

(b) Conduct violating Section 23B.08.310 of the Act (which involves
distributions by the Corporation);

(c) Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not
legally entitled.

If the Washington Business Corporation Act is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent not prohibited by the Washington Business Corporation Act, as
so amended. The provisions of this Article shall be deemed to be a contract
with each Director of the Corporation who serves as such at any time while such
provisions are in effect, and each such Directors shall be deemed to be serving
as such in reliance on the provisions of this Article. Any repeal or
modification of the foregoing paragraph by the shareholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.

ARTICLE XI

MERGERS, SHARE EXCHANGES, AND OTHER TRANSACTIONS

A merger, share exchange, sale of substantially all of the Corporation's
assets, or dissolution must be approved by the affirmative vote of a majority of
the Corporation's outstanding shares entitled to vote, or if separate voting by
voting groups is required then by not less than a majority of all the votes
entitled to be cast by that voting group.

-3-
<PAGE>

ARTICLE XII

INDEMNIFICATION

12.1 Definitions. As used in this Article:

a. "Agent" means an individual who is or was an agent of the
Corporation or an individual who, while an agent of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other
enterprise. "Agent" includes, unless the context requires otherwise, the
spouse, heirs, estate and personal representative of an agent.

b. "Corporation" means the Corporation, and any domestic or foreign
predecessor entity which, in a merger or other transaction, ceased to
exist.

c. "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is
or was serving at the Corporation's request as a director officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, limited liability company, limited liability
partnership, trust, employee benefit plan or other enterprise. "Director"
includes, unless the context requires otherwise, the spouse, heirs, estate
and personal representative of a director.

d. "Employee" means an individual who is or was an employee of the
Corporation or an individual, while an employee of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, limited liability company, limited liability
partnership, trust, employee benefit plan, or other enterprise- "Employee"
includes, unless the context requires otherwise, the spouse, heirs, estate
and personal representative of an employee.

e. "Expenses" include counsel fees.

f. "Indemnitee" means an individual made a party to a proceeding
because the individual is or was a Director, Officer, Employee, or Agent of
the Corporation, and who possesses indemnification rights pursuant to these
Articles or other corporate action. "Indemnitee" includes, unless the
context requires otherwise, the spouse, heirs, estate, and personal
representative of such individuals.

g. "Liability" means the obligation to pay a judgment, settlement,
penalty, fine, including an excise tax with respect to an employee benefit
plan, or reasonable Expenses incurred with respect to a proceeding.

-4-
<PAGE>

h. "Officer" means an individual who is or was an officer of the
Corporation (regardless of whether or not such individual was also a
Director) or an individual who, while an officer of the Corporation, is or
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, limited liability company, limited liability
partnership, trust, employee benefit plan, or other enterprise. "Officer"
includes, unless the context requires otherwise, the spouse, heirs, estate
and personal representative of an officer.

i. "Party" includes an individual who was, is, or is threatened to
be named a defendant, respondent or witness in a proceeding.

j. "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, derivative, criminal, administrative,
or investigative, and whether formal or informal.

12.2 Indemnification Rights of Directors and Officers. The Corporation
shall indemnify its Directors and Officers to the full extent not prohibited by
applicable law now or hereafter in force against liability arising out of a
Proceeding to which such individual was made a Party because the individual is
or was a Director or an Officer. However, such indemnity shall not apply on
account of:

(a) Acts or omissions of a Director or Officer finally adjudged to be
intentional misconduct or a knowing violation of law;

(b) Conduct of a Director or Officer finally adjudged to be in violation
of Section 23B.09.3 10 of the Act relating to distributions by the
Corporation; or

(c) Any transaction with respect to which it was finally adjudged that
such Director or Officer personally received a benefit in money,
property, or services to which the Director or Officer was not
legally entitled.

Subject to the foregoing, it is specifically intended that Proceedings covered
by indemnification shall include Proceedings brought by the Corporation
(including derivative actions), Proceedings by government entities and
governmental officials or other third party actions.

12.3 Indemnification of Employees and Agents of the Corporation. The
Corporation may, by action of its Board of Directors from time to time, provide
indemnification and pay Expenses in advance of the final disposition of a
Proceeding to Employees and Agents of the Corporation who are not also
Directors, in each case to the same extent as to a Director with respect to the
indemnification and advancement of Expenses pursuant to rights granted under, or
provided by, the Act or otherwise.

12.4 Partial Indemnification. If an Indemnitee is entitled to
indemnification by the Corporation for some or a portion of Expenses,
liabilities, or losses actually and reasonably incurred by Indemnitee in an
investigation, defense, appeal or settlement but not, however, for the total

-5-
<PAGE>

amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the
portion of such Expenses, liabilities or losses to which Indemnitee is entitled.

12.5 Procedure for Seeking Indemnification and/or Advancement of
Expenses. The following procedures shall apply in the absence of (or at the
option of the Indemnitee, in lieu thereof), specific procedures otherwise
applicable to an Indemnitee pursuant to a contract, trust agreement, or general
or specific action of the Board of Directors:

12.5.1 Notification and Defense of Claim. Indemnitee shall
promptly notify the Corporation in writing of any proceeding for which
indemnification could be sought under this Article. In addition, Indemnitee
shall give the Corporation such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.

With respect to any such proceeding as to which Indemnitee has notified the
Corporation:

(a) The Corporation will be entitled to participate therein at its
own expense; and

(b) Except as otherwise provided below, to the extent that it may
wish, the Corporation, jointly with any other indemnifying party
similarly notified, will be entitled to assume the defense
thereof, with counsel satisfactory to Indemnitee. Indemnitee's
consent to such counsel may not be unreasonably withheld.

After notice from the Corporation to Indemnitee of its election to
assume the defense, the Corporation will not be liable to Indemnitee under
this Article for any legal or other Expenses subsequently incurred by
Indemnitee in connection with such defense. However, Indemnitee shall
continue to have the right to employ its counsel in such proceeding, at
Indemnitee's expense; and if:

(i) The employment of counsel by Indemnitee has been
authorized by the Corporation;

(ii) Indemnitee shall have reasonably concluded that there may
be a conflict of interest between the Corporation and
Indemnitee in the conduct of such defense; or

(iii) The Corporation shall not in fact have employed counsel to
assume the defense of such proceeding,

the fees and Expenses of Indemnitee's counsel shall be at the expense of
the Corporation.

The Corporation shall not be entitled to assume the defense of any
proceeding brought by or on behalf of the Corporation or as to which
Indemnitee shall reasonably have made the conclusion that a conflict of
interest may exist between the Corporation and the Indemnitee in the
conduct of the defense.

-6-
<PAGE>

12.5.2 Information to be Submitted and Method of Determination and
Authorization of Indemnification. For the purpose of pursuing rights to
indemnification under this Article, the Indemnitee shall submit to the
Board a sworn statement requesting indemnification and reasonable evidence
of all amounts for which such indemnification is requested (together, the
sworn statement and the evidence constitute an "Indemnification
Statement").

Submission of an Indemnification Statement to the Board shall create a
presumption that the Indemnitee is entitled to indemnification hereunder,
and the Corporation shall, within sixty (60) calendar days thereafter, make
the payments requested in the Indemnification Statement to or for the
benefit of the Indemnitee, unless: (1) within such sixty (60) calendar day
period it shall be determined by the Corporation that the Indemnitee is not
entitled to indemnification under this Article; (2) such determination
shall be based upon clear and convincing evidence (sufficient to rebut the
foregoing presumption); and (3) the Indemnitee shall receive notice in
writing of such determination, which notice shall disclose with
particularity the evidence upon which the determination is based.

The foregoing determination may be made: (1) by the Board of Directors
by majority vote of a quorum of Directors who are not at the time parties
to the proceedings; (2) if a quorum cannot be obtained, by majority vote of
a committee duly designated by the Board of Directors (in which designation
Directors who are parties may participate) consisting solely of two (2) or
more Directors not at the time parties to the proceeding; (3) by special
legal counsel; or (4) by the shareholders as provided by Section 23B.08.550
of the Act.

Any determination that the Indemnitee is not entitled to
indemnification, and any failure to make the payments requested in the
Indemnification Statement, shall be subject to judicial review by any court
of competent jurisdiction.

12.5.3 Special Procedure Regarding Advance for Expenses. An
Indemnitee seeking payment of Expenses in advance of a final disposition of
the proceeding must furnish the Corporation, as part of the Indemnification
Statement:

(a) A written affirmation of the Indemnitee's good faith
belief that the Indemnitee has met the standard of
conduct required to be eligible for indemnification; and

(b) A written undertaking, constituting an unlimited general
obligation of the Indemnitee, to repay the advance if it
is ultimately determined that the Indemnitee did not meet
the required standard of conduct.

Upon satisfaction of the foregoing the Indemnitee shall have a
contractual right to the payment of such Expenses.

12.5.4 Settlement. The Corporation is not liable to indemnify
Indemnitee for any amounts paid in settlement of any proceeding without the
Corporation's written consent. The

-7-
<PAGE>

Corporation shall not settle any proceeding in any manner which would
impose any penalty or limitation on Indemnitee without Indemnitee's written
consent. Neither the Corporation nor Indemnitee may unreasonably withhold
its consent to a proposed settlement.

12.6. Contract and Related Rights.

12.6.1 Contract Rights. The right of an Indemnitee to
indemnification and advancement of Expenses is a contract right upon which
the Indemnitee shall be presumed to have relied in determining to serve or
to continue to serve in his or her capacity with the Corporation. Such
right shall continue as long as the Indemnitee shall be subject to any
possible proceeding. Any amendment to or repeal of this Article shall not
adversely affect any right or protection of an Indemnitee with respect to
any acts or omissions of such Indemnitee occurring prior to such amendment
or repeal.

12.6.2 Optional Insurance, Contracts, and Funding. The Corporation
may:

(a) Maintain insurance, at its expense, to protect itself
and any Indemnitee against any liability, whether or
not the Corporation would have power to indemnify the
individual against the same liability under Section
23B.08.510 or .520 of the Act;

(b) Enter into contracts with any Indemnitee in
furtherance of this Article and consistent with the
Act; and

(c) Create a trust fund, grant a security interest, or use
other means (including without limitation a letter of
credit) to ensure the payment of such amounts as may
be necessary to effect indemnification as provided in
this Article.

12.6.3 Severability. If any provision or application of this
Article shall be invalid or unenforceable, the remainder of this Article
and its remaining applications shall not be affected thereby, and shall
continue in full force and effect.

12.6.4 Right of Indemnitee to Bring Suit. If (1) a claim under
this Article for indemnification is not paid in full by the Corporation
within sixty (60) days after a written claim has been received by the
Corporation; or (2) a claim under this Article for advancement of Expenses
is not paid in full by the Corporation within twenty (20) days after a
written claim has been received by the Corporation, then the Indemnitee
may, but need not, at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. To the extent
successful in whole or in part, the Indemnitee shall be entitled to also be
paid the expense (to be proportionately prorated if the Indemnitee is only
partially successful) of prosecuting such claim. Neither (1) the failure of
the Corporation (including its Board of Directors, its shareholders, or
independent legal counsel) to have made a determination prior to the
commencement of such proceeding that indemnification or reimbursement or
advancement of Expenses to the Indemnitee is proper in the

-8-
<PAGE>

circumstances; nor (2) an actual determination by the Corporation
(including its Board of Directors, its shareholders, or independent legal
counsel that the Indemnitee is not entitled to indemnification or to the
reimbursement or advancement of Expenses, shall be a defense to the
proceeding or create a presumption that the Indemnitee is not so entitled.

12.6.5 Nonexclusivity of Rights. The right to indemnification and
the payment of Expenses incurred in defending a Proceeding in advance of
its final disposition granted in this Article shall not be exclusive of any
other right which any Indemnitee may have or hereafter acquire under any
statute, provision of this Article or the Bylaws, agreement, vote of
shareholders or disinterested directors, or otherwise. The Corporation
shall have the express right to grant additional indemnity without seeking
further approval or satisfaction by the shareholders. All applicable
indemnity provisions and any applicable law shall be interpreted and
applied so as to provide an Indemnitee with the broadest but nonduplicative
indemnity to which he or she is entitled.

12.7 Contribution. If the indemnification provided in Section 12.2 of
this Article is not available to be paid to Indemnitee for any reason other than
those set forth in subparagraphs 12.2(a), 12.2(b), and 12.2(c) of Section 12.2
of this Article (for example, because indemnification is held to be against
public policy even though otherwise permitted under Section 12.2) then in
respect of any proceeding in which the Corporation is jointly liable with
Indemnitee (or would be if joined in such proceeding), the Corporation shall
contribute to the amount of loss paid or payable by Indemnitee in such
proportion as is appropriate to reflect:

The relative benefits received by the Corporation on the one hand and the
Indemnitee on the other hand from the transaction from which such
proceeding arose, and

The relative fault of the Corporation on the one hand and the Indemnitee on
the other hand in connection with the events which resulted in such loss,
as well as any other relevant equitable consideration.

The relative benefits received by and fault of the Corporation on the one
hand and the Indemnitee on the other shall be determined by a court of
appropriate jurisdiction (which may be the same court in which the proceeding
took place) with reference to, among other things, the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent the
circumstances resulting in such loss. The Corporation agrees that it would not
be just and equitable if a contribution pursuant to this Article was determined
by pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.

12.8 Exceptions. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
these Articles to indemnify or advance Expenses to Indemnitee with respect to
any proceeding.

12.8.1 Claims Initiated by Indemnitee. Initiated or brought
voluntarily by Indemnitee and not by way of defense, but such
indemnification or advancement of

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Expenses may be provided by the Corporation in specific cases if the Board
of Directors finds it to be appropriate. Notwithstanding the foregoing, the
Corporation shall provide indemnification including the advancement of
Expenses with respect to Proceedings brought to establish or enforce a
right to indemnification under these Articles or any other statute or law
or as otherwise required under the statute.

12.8.2 Lack of Good Faith. Instituted by Indemnitee to enforce
or interpret this Article, if a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee in such proceeding
was not made in good faith or was frivolous.

12.8.3 Insured Claims. For which any of the Expenses or
liabilities for indemnification is being sought have been paid directly to
Indemnitee by an insurance carrier under a policy of officers' and
directors' liability insurance maintained by the Corporation.

12.8.4 Prohibited by Law. If the Corporation is prohibited by
the Act or other applicable law as then in effect from paying such
indemnification and/or advancement of Expenses. For example, the
Corporation and Indemnitee acknowledge that the Securities and Exchange
Commission ("SEC") has taken the position that indemnification is not
possible for liabilities arising under certain federal securities laws.
Indemnitee understands and acknowledges that the Corporation has undertaken
or may be required in the future to undertake with the SEC to submit the
question of indemnification to a court in certain circumstances for a
determination of the Corporation's right to indemnify Indemnitee.

12.9 Successors and Assigns. All obligations of the Corporation to
indemnify any Director or Officer shall be binding upon all successors and
assigns of the Corporation (including any transferee of all or substantially all
of its assets and any successor by merger or otherwise by operation of law).
The Corporation shall not effect any sale of substantially all of its assets,
merger, consolidation, or other reorganization, in which it is not the surviving
entity, unless the surviving entity agrees in writing to assume all such
obligations of the Corporation.

ARTICLE XIII

CORPORATION'S ACQUISITION OF ITS OWN SHARES

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The Corporation may purchase, redeem, receive, take or otherwise acquire,
own and hold, sell, lend, exchange, transfer or otherwise dispose of, pledge,
use and otherwise deal with and in its own shares. As a specific modification
of Section 23B.06.310 of the Act, pursuant to the authority in Section
23B.02.020(5)(c) of the Act, to include provisions related to the management of
the business and the regulation of the affairs of the Corporation, shares of the
Corporation's stock acquired by it pursuant to this Article shall be considered
"Treasury Stock" and so held by the Corporation. The shares so acquired by the
Corporation shall not be considered as authorized and unissued but rather as
authorized, issued, and held by the Corporation. The shares, so acquired shall
not be regarded as cancelled or as a reduction to the authorized capital of the
Corporation unless specifically so designated by the Board of Directors in an
amendment to these Articles of Incorporation. The provisions of this Article do
not alter or effect the status of the Corporation's acquisition of its shares as
a "distribution" by the Corporation as defined in Section 23B.01.400(6) of the
Act, nor alter or effect the limitations on distributions by the Corporation as
set forth in Section 23B.06.400 of the Act. Any shares so acquired by the
Corporation, unless otherwise specifically designated by the Board of Directors,
at the time of acquisition, shall be considered on subsequent disposition, as
transferred rather than reissued. Nothing in this Article limits or restricts
the right of the Corporation to resell or otherwise dispose of any of its shares
previously acquired for such consideration and according to such procedures as
established by the Board of Directors.

The undersigned has signed these Restated Articles of Incorporation as of
June 15, 1999.

\s\ Michael D. Conway
---------------------
Michael D. Conway
Vice President

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Exhibit 23.1

Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 15, 1999 in the Registration Statement (Form
S-3) and related Prospectus of OnHealth Network Company for the registration
of 6,900,000 shares of its common stock.

We also consent to the incorporation by reference therein of our report
dated March 15, 1999, with respect to the financial statements and schedule of
OnHealth Network Company included in its Annual Report (Form 10-K), as
amended, for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.

/s/ Ernst & Young LLP

Ernst & Young LLP

Seattle, Washington
June 22, 1999