OptimizeRx Corporation — Q2 2012 Form 10-Q
Business and period: The company provides healthcare technology and promotional services, including SampleMD, which enables physicians to offer patients drug sample vouchers and co-pay coupons through e-prescribing and electronic medical record platforms. This unaudited report covers the quarter and six months ended June 30, 2012. Prior-year comparative results were restated.
Financial performance
| Metric | Q2 2012 | Q2 2011, restated | Six months 2012 | Six months 2011, restated |
|---|---|---|---|---|
| Revenue | $515,423 | $200,174 | $844,826 | $594,017 |
| Operating expenses | $591,628 | $620,654 | $1,221,952 | $1,254,935 |
| Operating loss | $(76,205) | $(420,480) | $(377,126) | $(660,918) |
| Net loss | $(76,059) | $(560,183) | $(376,795) | $(940,115) |
| Basic and diluted loss per share | $(0.01) | $(0.04) | $(0.03) | $(0.07) |
- Revenue increased 157% year over year in Q2 and 42% for the six-month period; management attributed growth to increased SampleMD promotional programs and transactions.
- Calculated operating margins were approximately -15% in Q2 2012 versus -210% in Q2 2011, and -45% versus -111% for the six-month periods. The filing does not separately report gross profit or gross margin.
- Six-month operating cash flow was negative $375,700; investing cash flow was negative $55,955, mainly from website development. Cash declined by $431,655 to $527,511.
- At June 30, current assets were $1,110,244 and current liabilities $1,024,587, giving working capital of $85,657. Total assets were $2,415,266 and stockholders’ equity was $1,390,679.
- Current liabilities included $570,000 payable to a related party for SampleMD patent rights and $277,076 of deferred revenue. No interest expense was reported for 2012; the filing does not clearly present a conventional interest-bearing debt balance at quarter-end.
Changes, outlook, and risks
- Management reported completed SampleMD integrations with NewCrop and DrFirst and said Allscripts had committed to further integration, targeting access to an additional 25,000 clinicians by Q4 2012. The company projected these initiatives could expand reach to more than 100,000 clinicians across over 200 EMR providers; these are forward-looking targets, not achieved results.
- The company piloted an electronic pharmaceutical-representative scheduling tool and was developing clinician access to manufacturer experts, with further evaluation and a targeted Q4 launch for one initiative.
- Management stated cash on hand and current financing were sufficient to operate at the current level for the next 12 months, but not to achieve business goals without cash revenue growth and/or additional Series B financing from Vicis. The filing also identifies substantial accumulated losses and dependence on revenue growth and additional capital as going-concern risks.
- Two customers accounted for 53% of six-month 2012 revenue, compared with one customer accounting for 50% in the comparable 2011 period, creating customer-concentration exposure.
- Vicis financing included optional additional preferred-stock sales. Series B preferred shares carry a 10% cumulative dividend and are convertible; associated warrants and conversion terms may create dilution. The company had 14,192,496 common shares outstanding at June 30, 2012.
- The 2011 comparative statements were restated because advertising, marketing, and employee bonus expenses had not been accrued. The restatement increased six-month 2011 operating expenses from $962,435 to $1,254,935 and net loss from $647,615 to $940,115; Q2 2011 net loss increased from $432,683 to $560,183.
- Management presented adjusted results excluding noncash expenses, including a stated Q2 2012 net income of $72,105 and six-month net income of $55,060. These are not GAAP results; reported GAAP net losses were $76,059 and $376,795, respectively.
- The filing reports no legal proceedings or material subsequent events. Management concluded disclosure controls were effective as of June 30, 2012; it cautioned that controls provide reasonable, not absolute, assurance.
Investor verification points
- Verify progress and commercial results from the NewCrop, DrFirst, and planned Allscripts integrations, and whether clinician reach and revenue targets were realized.
- Assess the customer concentration and sustainability of SampleMD revenue, including deferred revenue and redemption timing.
- Confirm whether additional Vicis financing was completed and review the preferred-stock dividend, conversion, warrant, and potential dilution terms.
- Evaluate cash burn, the related-party patent payable, and the company’s ability to fund operations and growth given the stated going-concern dependence.
- Review the 2011 restatement and distinguish GAAP results from management’s non-GAAP adjustments; also note the Q2 statement heading contains an apparent “June 31” date typo, while the report period and other statements identify June 30.