Optimizerx Corp 10-Q Summary: Period Ended June 30, 2009
Business Context and Reporting Period
Optimizerx Corp (OptimizeRx) is a development-stage company incorporated in Nevada, operating through a wholly-owned Michigan subsidiary. The company provides a website platform to help patients manage healthcare costs and offers advertising programs to the pharmaceutical industry. This Form 10-Q covers the quarterly period ended June 30, 2009, and the six-month period ended on the same date. The company is classified as a smaller reporting company.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2009 | Six Months Ended June 30, 2008 |
|---|---|---|
| Revenue | $4,720 | $67,206 |
| Operating Expenses | $1,731,766 | $485,036 |
| Net Loss | $(1,702,868) | $(750,820) |
| Net Loss Per Share | $(0.14) | $(0.07) |
| Cash and Cash Equivalents (End of Period) | $1,338,109 | $141,683 |
| Working Capital | $1,298,887 | Not explicitly stated |
| Total Liabilities | $48,343 | Not explicitly stated |
| Accumulated Deficit | $(16,194,907) | $(14,492,039) |
Cash Flow: Net cash used in operating activities was $1,160,550 for the six months ended June 30, 2009. There was no cash used in investing activities. Financing activities used $4,000, primarily for loan repayments.
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased significantly from $67,206 in the prior year period to $4,720. Management attributes the prior year's higher revenue to a one-time special fulfillment order.
- Expense Increase: Operating expenses surged to $1,731,766 from $485,036. This increase is largely driven by consulting fees ($890,993) and advertising expenses ($316,853), as well as $696,000 in stock issued for services.
- Net Loss Expansion: The net loss more than doubled to $1.7 million compared to $750,820 in the prior year, primarily due to the spike in operating expenses.
- Debt Reduction: The company repaid a $4,000 note payable to a related party during the period, reducing total liabilities to $48,343.
- Equity Activity: The company issued 160,000 shares for services and converted 265,908 warrants into common stock during the six-month period.
Outlook, Risks, and Management Commentary
Management Commentary: Management states that the company is focusing on building website functionality, brand recognition, and client relationships. They have acquired over one million members and have over 10 advertising proposals pending with major pharmaceutical companies. Management believes current cash reserves are sufficient to support growth plans for the next twelve months.
Subsequent Events:
- Entered a partnership with PARS MEDIA Group to drive additional members to the community, involving monthly fees and stock grants.
- Engaged Blake Whitney (co-founder of WebMD) as a consultant for a one-year term, compensated with 100,000 stock options.
Risks and Contingencies:
- Going Concern: The company has sustained substantial losses since inception. Continued operations depend on the ability to raise additional capital and grow revenues.
- Revenue Concentration: Revenue is currently minimal and dependent on securing advertising sponsorships.
- Preferred Stock Obligations: The company has 35 shares of Series A preferred stock outstanding, convertible to common stock, with cumulative dividends of $197,774 accrued but not declared as of June 30, 2009. These shares are required to be redeemed on September 5, 2010.
Investor Verification Checklist
- Cash Burn Rate: Verify if the $1.3 million cash balance is sufficient given the $1.16 million operating cash burn in just six months.
- Revenue Realization: Confirm the status of the "10 pending advertising proposals" and the timeline for monetizing the 1 million member database.
- Preferred Stock Redemption: Assess the company's ability to meet the September 5, 2010 redemption requirement for Series A preferred stock.
- Stock Dilution: Review the impact of recent stock issuances for services and the subsequent stock grants to PARS MEDIA and Blake Whitney on shareholder equity.
- Related Party Transactions: Monitor the $696,000 expense recorded for stock issued for services to ensure fair valuation.