OptimizeRx Corporation — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012. OptimizeRx provides healthcare technology connecting patients, physicians and pharmaceutical manufacturers. Its SampleMD platform supports electronic distribution of savings offers and patient support through physician and e-prescribing workflows.
Financial results
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Revenue | $329,403 | $393,843 |
| Operating expenses | $630,322 | $634,281 |
| Operating loss | $(300,919) | $(240,438) |
| Net loss | $(300,734) | $(379,932) |
| Basic and diluted loss per share | $(0.02) | $(0.03) |
| Operating cash flow | $(128,004) | $(91,561) |
| Investing cash flow | $(33,659) | $(37,610) |
Revenue declined about 16% year over year. Operating expenses were nearly flat, but the operating loss widened as revenue fell. Net loss improved mainly because Q1 2011 included $140,000 of interest expense; Q1 2012 reported no interest expense. The filing does not provide a gross-profit or gross-margin figure.
Cash and cash equivalents were $797,503 at quarter-end, down from $959,166 at December 31, 2011. Current assets were $1,027,961 and current liabilities $949,526, leaving working capital of $78,435. Total assets were $2,358,016. The balance sheet reported $570,000 payable to a related party, associated with the SampleMD patent rights, and no note payable at quarter-end; the prior $1 million secured note had been repaid in September 2011. Cash used in operations included a $355,412 reduction in accounts receivable, partially offsetting the loss and other working-capital movements.
Changes, outlook and risks
- Management attributed lower revenue to delayed customer contract renewals and programs ending as products became generic, while seeking replacement programs and new brand participation.
- Management reported ongoing SampleMD integrations and development, including work with NewCrop and DrFirst, and said signed e-prescribing platform contracts could potentially extend reach to more than 100,000 physicians. These are forward-looking expectations, not guaranteed results. No quantified revenue or earnings guidance was provided.
- The company stated that available cash was sufficient to operate at the current level for the next 12 months, but insufficient to achieve its business goals without revenue growth, further Series B sales to Vicis, and/or additional financing. Management cited revenue growth and capital raising as necessary to continue as a going concern; financing availability and terms are uncertain.
- Revenue concentration is significant: four customers represented 74% of Q1 2012 revenue, compared with two customers representing 76% in Q1 2011. Delayed renewals or loss of major customers could materially affect results.
- The Vicis financing permits additional Series B preferred stock sales at the company’s option. Preferred shares carry cumulative 10% dividends and conversion rights; related warrants and anti-dilution terms could contribute to dilution. The filing describes possible further closings but does not report that they had occurred by March 31, 2012.
- Q1 2011 results were restated for previously unaccrued advertising, marketing and bonus expenses. Restated operating expenses were $634,281, versus $469,281 previously reported; net loss was $379,932, versus $214,932 previously reported.
- Four-year cashless warrants for 50,000 common shares were issued during the quarter to an investor-relations company, at an exercise price set at 120% of the closing price on issuance.
- Management said disclosure controls were effective as of March 31, 2012, with no significant changes to internal controls during the quarter. The filing reported no legal proceedings or off-balance-sheet arrangements and no material subsequent events.
Key facts for investors to verify
- Whether delayed renewals have been completed and new programs are replacing revenue from discontinued brands.
- Actual adoption, revenue contribution and integration progress for SampleMD and the named e-prescribing partners.
- Cash burn, collections, customer concentration, and the assumptions behind the stated 12-month operating runway.
- Whether additional Vicis financing or other capital is available, and the resulting preferred-stock, dividend and warrant dilution.
- The terms and settlement status of the $570,000 related-party payable and the company’s ability to fund operations while pursuing its growth plans.