OptimizeRx Corporation — FY 2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing also reports fourth-quarter revenue for comparison. OptimizeRx provides healthcare technology and patient savings services, including SampleMD, which distributes prescription savings offers through physician desktop, e-prescribing, and electronic medical record channels.
Financial performance and liquidity
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $1,111,520 | $71,065 |
| Operating expenses | $2,565,497 | $1,917,297 |
| Loss from operations | $(1,453,977) | $(1,846,232) |
| Interest expense | $958,641 | $106,551 |
| Net loss | $(2,120,762) | $(2,009,025) |
| Basic and diluted loss per share | $(0.15) | $(0.15) |
| Cash from operating activities | $(521,509) | $(1,311,413) |
- Revenue increased substantially, driven by SampleMD activity and setup and integration fees. Fourth-quarter revenue was $325,910, compared with $12,386 in fourth-quarter 2010.
- Operating loss narrowed, but net loss increased, principally as interest expense rose; 2011 also included $290,566 of lawsuit-settlement income.
- Operating expenses included $544,071 advertising, $864,655 salaries, wages and benefits, and $342,503 professional fees. The filing does not provide a clear gross-margin measure.
- At year-end, cash was $959,166, current assets $1,550,068, current liabilities $1,303,317, and working capital $246,751. Total assets were $2,892,487 and total liabilities $1,303,317.
- Operating activities used $521,509; investing activities used $239,919, including $221,770 in website development; financing activities provided $442,500. Cash declined by $318,928 during the year.
Material changes and financing
- The company repaid its $1 million investor note in September 2011 using proceeds from a $1.5 million Series B preferred-stock financing. The balance sheet reports no note payable at year-end.
- The financing issued 15 Series B preferred shares, convertible into common stock at $1.50 per share, with a 10% cumulative dividend, and warrants to buy 1 million common shares at $3 per share. The agreement allowed for additional optional closings; availability and completion are not established by the year-end figures.
- Preferred dividends were paid in common shares: $500,000 in 2011. Common shares outstanding increased from 13,606,676 to 14,192,496 during the year, with additional potential dilution from preferred conversions, warrants, and options.
- Three customers accounted for 47% of 2011 revenue, compared with 60% in 2010. The company reported 13 pharmaceutical manufacturer agreements, 46 brands, and 60 offers.
Outlook, risks, and unusual items
- Management anticipated significant revenue acceleration in the second half of 2012, citing a growing sales pipeline, new platform integrations, and contracts it said could expand reach to more than 100,000 physicians. These are forward-looking expectations, not reported results.
- Management said year-end cash could fund operations at the then-current level for the next 12 months, but would not be sufficient to achieve business goals without cash revenue, additional preferred-stock sales, or other financing. The auditor and management identified substantial doubt about the company’s ability to continue as a going concern, dependent on revenue growth and raising capital.
- Management cited longer-than-anticipated pharmaceutical sales and medical/legal review cycles. Other risks include competition, regulatory requirements affecting healthcare marketing and patient information, customer concentration, limited trading liquidity, and dependence on additional capital. The filing states that relevant patent applications were pending.
- The Beringea arbitration resulted in a $290,500 gross award, recorded as other income; the company received $233,715 after fees and expenses. A separate Midtown Partners dispute was settled for $57,500 and 100,000 common shares.
- The financial statements received an unqualified audit opinion, accompanied by a going-concern emphasis. The auditor did not attest to internal-control effectiveness; management reported controls effective.
Investor verification priorities
- Check subsequent filings for actual 2012 revenue growth, customer renewals, and conversion of the stated sales pipeline and physician-platform reach into paid activity.
- Verify cash runway, cash collections, deferred revenue, and whether additional Vicis financing closings or other funding occurred.
- Review the full preferred-stock and warrant terms, cumulative dividend obligations, anti-dilution provisions, and potential dilution.
- Assess the durability of customer relationships and concentration, and compare revenue growth with operating costs and cash burn.
- Review the going-concern disclosure and any developments in legal matters, regulatory compliance, or patent applications.