TXMD

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2010, for AMHN, Inc. (formerly Croff Enterprises, Inc.). The Company is a smaller reporting company incorporated in Nevada. During the reporting period, the Company underwent significant structural changes, including a reverse merger with America's Minority Health Network, Inc. (AMHN) in 2009 and the acquisition of Spectrum Health Network, Inc. in June 2010. The Company's current business model involves promoting and distributing digital signage products and services developed by Spectrum to multispecialty group practices and independent physician associations (IPAs).

Key Financial Metrics

Material Changes Versus Prior Period

• Revenue Generation: The Company recorded $48,217 in revenue in 2010, compared to zero in 2009, driven by advertising contracts and the acquisition of Spectrum Health Network.
• Discontinued Operations: The Company reclassified the operations of America's Minority Health Network as discontinued following a default on a secured note. The loss from discontinued operations decreased significantly from approximately $1.03 million in 2009 to $185,468 in 2010, partially offset by a $259,693 gain on disposal.
• Debt and Defaults: The Company defaulted on a $981,438 secured note to Seatac Digital Resources, Inc. in July 2010, resulting in the transfer of America's Minority Health Network assets to the lender. A subsequent note of $543,531 secured by Spectrum Health Network was also defaulted upon in early 2011 (subsequent event), leading to the transfer of Spectrum assets.
• Change in Control: In December 2010, a change in control occurred when a shareholder sold 53.7% of the outstanding shares to an unaffiliated entity. Jeffrey D. Howes was elected as the sole officer and director in February 2011.

Guidance, Outlook, Risks, and Contingencies

• Going Concern: The Company's independent auditors have issued a report expressing substantial doubt about the Company's ability to continue as a going concern. The Company has sustained operating losses, has minimal cash ($1,497), and relies on additional financing to fund operations.
• Loss of Core Assets: As a result of defaults on secured promissory notes to Seatac Digital Resources, Inc., the Company lost ownership of both its former subsidiary (America's Minority Health Network) and its current operating subsidiary (Spectrum Health Network). The Company now operates under a licensing agreement to sell Spectrum products but does not own the underlying network.
• Liquidity: The Company has a working capital deficit of approximately $1.37 million. It has no major customers and relies on a single supplier for content and installation services. Management states it will need to raise additional capital to achieve profitability.
• Internal Controls: Management concluded that internal controls over financial reporting were not effective as of December 31, 2010, citing a lack of personnel with expertise in SEC reporting and GAAP, and an inability to segregate duties.

Investor Verification Checklist

• Asset Ownership: Verify the current status of the "Exclusive Licensing, Distribution and Advertising Sales Agreement" with Seatac/Spectrum, as the Company no longer owns the Spectrum network assets.
• Debt Obligations: Confirm the status of the $543,531 secured note to Seatac and the $210,000 demand promissory note, both of which remain unpaid and secured by assets the Company may no longer control.
• Capital Needs: Assess the Company's ability to raise the necessary capital to fund operations given the substantial doubt expressed by auditors and the loss of primary revenue-generating assets.
• Management Stability: Note the recent resignation of the previous sole officer/director and the appointment of Jeffrey D. Howes in February 2011.
• Revenue Concentration: Verify the sustainability of revenue streams given that 2010 revenue was derived from a single customer and the Company currently has no major customers.