Drkoop.com's condition deteriorates

Drkoop.com (Nasdaq: KOOP) has been admitted to the financial intensive care unit. The company said Tuesday that it will report a much larger-than-expected first quarter loss on weak revenue. The company also has about five months of cash left.

Drkoop.com said it will report a loss between 80 cents a share and 82 cents a share. A First Call Corp. poll of 6 analysts predicted a loss of 52 cents a share. In addition, revenue will be much lower than expected at $4.5 million to $4.7 million.

The company, which will report earnings in early May, cited "increased overall expenditures, due to an accelerated business plan" as the main reason for the losses.

Shares of online health information provider have been decimated on concerns about its cash position. An auditor recently diagnosed Drkoop.com as critical. The company said it had $24 million in cash as of March 31, not including outstanding trade payables and accrued liabilities payable of approximately $16 million and approximately $3 million in trade receivables.

All that means is Drkoop.com is broke in five months if it doesn't get funding.

But there is good news -- sort of. The company said it has retained Bear Stearns to pursue "strategic alternatives." The company also restructured a marketing agreement with America Online (NYSE: AOL). Much of Drkoop.com's IPO money went to AOL in return for promotion and traffic.

Under the new AOL deal, the online service powerhouse will convert its previous agreement, including all future cash commitments as well as warrants, into Drkoop.com common stock. AOL now has owns 10 percent of Drkoop.com. The term of the agreement and Drkoop.com's level of promotion across the AOL properties has been modified.

Drkoop.com said separately that it restructured its distribution pact with Go.com (NYSE: GO). Under the restructuring, Go.com will receive an undisclosed amount of cash and additional warrants to purchase shares of Drkoop.com common stock.

Drkoop.com said it intends to reevaluate all other portal agreements to address the cash crunch issue.

The company said its first quarter expenses surged after it decided to bring its ad serving and sales in-house and boost its infrastructure.

Drkoop.com also said it's putting itself on a diet. The company said it will burn through about $6 million in upcoming quarters, compared with $14 million in the first quarter. "We have now completed much of this groundwork and have reduced on-going expenditures on these initiatives," said CEO Donald Hackett, in a statement. "We have reduced expenses related to contractors, marketing expenditures, and professional fees."

Remarkably, three of the six analysts covering Drkoop.com rate it a "buy."