Business Context and Reporting Period
Company: AMHN, Inc. (formerly Croff Enterprises, Inc.)
Reporting Period: Quarter ended September 30, 2009 (Inception: April 2, 2009)
Business Model: Following a reverse merger in July 2009, the company operates as a place-based provider of digital video health education targeting African-American communities in medical office waiting rooms. The company currently has 135 subscribed locations, with 100 live and receiving programming.
Key Financial Metrics
| Metric | Period (Inception to Sep 30, 2009) | Three Months Ended Sep 30, 2009 |
|---|---|---|
| Operating Revenues | $0 | $0 |
| Total Operating Expenses | $1,019,897 | $488,344 |
| Net Loss | $(1,023,230) | $(491,260) |
| Cash and Cash Equivalents | $19,825 | N/A |
| Total Current Liabilities | $534,650 | N/A |
| Working Capital Deficit | $(453,325) | N/A |
| Accumulated Deficit | $(1,411,263) | N/A |
Debt Structure: Total current liabilities include $300,000 in promissory notes payable to related parties (Seatac Digital Resources, Inc.) and $233,950 in accounts payable and accrued expenses.
Material Changes and Operational Status
- Reverse Merger: On July 27, 2009, the company completed a reverse merger with America's Minority Health Network, Inc., changing its business focus from a shell company to a digital health media provider.
- Capital Expenditures: The company invested $700,000 in cash during the period for site equipment ($350,000) and segment library content ($350,000).
- Stock Issuances: Significant equity activity included the issuance of 13,693,689 shares to acquire the subsidiary and 450,000 shares for consulting services valued at $112,500.
- Expense Drivers: The majority of operating expenses ($797,421 for the period) were attributed to consulting services.
Guidance, Outlook, and Risks
Going Concern
The filing explicitly states that the company has not generated revenues since inception and has an accumulated deficit. The continuation of the company as a going concern is dependent upon the ability to obtain necessary equity financing and continued financial support from shareholders. These factors raise substantial doubt regarding the company's ability to continue operations.
Financing Plans
- Private Placement: The company engaged Global Arena Capital Corp. as an exclusive placement agent to raise up to $5,000,000. As of the filing date, no funds have been generated from this offering.
- Related Party Loans: The company relies heavily on loans from Seatac Digital Resources, Inc. A subsequent event noted a funding commitment for up to $500,000, with $400,000 already funded under a previous commitment.
Risks and Contingencies
- Unregistered Securities: Shares issued for services and the reverse merger were issued under exemptions and carry restrictive legends.
- Future Funding: There is no guarantee that the private placement will succeed or that related party loans will continue. Without additional capital, the company may be unable to sustain operations.
Investor Verification Checklist
- Cash Runway: Verify the current cash balance against the monthly burn rate (approx. $160k/month based on Q3 data) to assess immediate liquidity risk.
- Related Party Dependence: Confirm the status of the $300,000+ in related party loans and the enforceability of the $500,000 funding commitment from Seatac.
- Revenue Generation: Validate the timeline for converting the 135 subscribed locations into paying advertising revenue, as the company currently has $0 revenue.
- Stock Dilution: Review the impact of the pending issuance of 510,000 shares for accrued consulting fees and the potential dilution from the $5M private placement offering.
- Sublease Obligations: Confirm the terms of the new office sublease in Burbank, CA, which requires a co-sublessee guarantee from Seatac.