TXMD

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2010, for AMHN, Inc. (formerly Croff Enterprises, Inc.), a smaller reporting company. The company operates as a place-based provider of digital video education for medical practices, primarily targeting minority communities through its subsidiaries, America's Minority Health Network (AMHN) and Spectrum Health Network, Inc. (Spectrum). The filing reflects a reverse merger completed in July 2009 and the acquisition of Spectrum in June 2010.

Key Financial Metrics

Liquidity: The company reported a working capital deficit of approximately $999,255 for continuing operations. Cash flow from operating activities for continuing operations was negative $(380,930) for the six-month period, while discontinued operations provided net cash flows of $384,442.

Material Changes and Operational Updates

• Acquisition of Spectrum: On June 11, 2010, the company acquired 100% of Spectrum Health Network, Inc. in exchange for 500,000 shares of common stock. Spectrum operates a digital signage network for independent physician associations (IPAs) with 126 live sites.
• Discontinued Operations: Following a default on a related-party loan (detailed below), the company reclassified the operations of America's Minority Health Network as discontinued operations. This includes the transfer of AMHN stock and trademarks to the lender, Seatac Digital Resources, Inc.
• Capital Structure: As of June 30, 2010, there were 16,290,209 shares of common stock outstanding. The company has an accumulated deficit of over $2.5 million.

Guidance, Risks, and Subsequent Events

Going Concern and Liquidity Risk

Management has expressed substantial doubt about the company's ability to continue as a going concern. The company has generated minimal revenue ($5,734) from continuing operations since inception and relies entirely on loans from a strategic vendor/shareholder (Seatac) to fund operations. There is no assurance that additional funds will be available.

Default on Related-Party Loan (Subsequent Event)

On July 1, 2010, Seatac Digital Resources, Inc. demanded payment of $925,885 (principal and interest) under a 4% Secured Promissory Note. The company failed to pay by the June 30, 2010 maturity date. By July 11, 2010, late charges increased the debt to $981,438.

Settlement: On July 30, 2010, the company settled the debt by surrendering collateral to Seatac, which included:

• 100% of the outstanding shares of America's Minority Health Network.
• All rights to the "America's Minority Health Network, Inc." trademark and associated goodwill.
• All books and records of the subsidiary.

This settlement did not include the Spectrum subsidiary or a separate trade payable of $455,061 owed to Seatac.

Management Changes

Following the settlement, several officers and directors resigned, including the President of Spectrum and three board members. As of August 2010, Robert Cambridge served as the sole officer and director.

Investor Verification Checklist

• Viability of Remaining Operations: Verify the financial status and operational continuity of the Spectrum Health Network subsidiary, which remains the only continuing operating asset after the loss of AMHN.
• Outstanding Liabilities: Confirm the status of the $455,061 trade payable to Seatac that was not satisfied by the collateral settlement.
• Capital Requirements: Assess the immediate need for new financing to cover the working capital deficit and fund the rollout of Spectrum's subscription model.
• Legal Exposure: Review the terms of the settlement to ensure no further claims exist regarding the transferred AMHN assets or the remaining trade payable.
• Revenue Recognition: Validate the $5,734 in reported revenue and the timeline for Spectrum to convert its existing client base to the proposed subscription service model.