DRKOOP.COM: Time Running Out for Critical Bailout
Alluding to a potential shutdown, financially ailing drkoop.com Inc. said that it needs as much as $27.5 million to remain operational, the Wall Street Journal reports. In a Securities and Exchange Commission filing yesterday, Austin-based drkoop.com said it has "largely expended" the $2 million in cash it had available on June 30 and will require "significant additional financing in the very near future to fund operations." Hoping to raise $5 million, the company said it is "scrambling" to place a "newly established series of convertible preferred stock," although the deal would "sharply dilute" the stake held by current shareholders. The plan would grant potential "financial saviors" the power to replace top management and establish their own controlling slate of directors, but drkoop.com has not indicated when it might complete such a deal. In its second-quarter earnings statement, the company reported a loss of $40.6 million, or $1.18 a share, while revenue more than doubled to $2.5 million (Brooks, 8/22).
Meanwhile, drkoop.com also reported yesterday that the SEC has launched a probe to determine whether the company violated federal securities laws. The agency has asked drkoop.com to provide information regarding several lawsuits filed against the company. Drkoop.com stock has dropped about 95% in value since June 1999, leading at least 10 law firms to file or threaten lawsuits against the company in the past five weeks. According to the company, the suits have no merit. The SEC declined to comment about its investigation (Bloomberg News/New York Times, 8/22).