OptimizeRx Corporation — Q2 2011 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2011. The company described itself as a development-stage technology solutions provider focused on healthcare, including SampleMD, which enables clinicians to access and provide patients with sample vouchers and co-pay coupons. Interim results are not necessarily indicative of full-year results.
Financial results
| Metric | Three months ended June 30, 2011 | Six months ended June 30, 2011 | Comparable 2010 period |
|---|---|---|---|
| Revenue | $200,174 | $594,017 | $16,720 quarter; $18,003 half-year |
| Operating expenses | $493,154 | $962,435 | $892,083 quarter; $1,155,177 half-year |
| Operating loss | $292,980 | $368,418 | $875,363 quarter; $1,137,174 half-year |
| Net loss | $432,683 | $647,615 | $874,903 quarter; $1,135,870 half-year |
| Basic and diluted loss per share | $0.03 | $0.05 | $0.07 quarter; $0.09 half-year |
Gross profit and gross margin are not separately reported. Q2 operating loss and net loss are shown as positive amounts in the table for readability; both were losses.
At June 30, cash and cash equivalents were $969,765, total assets $3,161,960, current liabilities $862,570, and working capital $862,158. The current ratio was approximately 2.0x. Total liabilities were $1,862,570, including a $1 million secured investor note and $45,000 of accrued interest. The note bears 6% interest, with principal and interest payable at the earliest of September 12, 2012 or earlier repayment by the company; no interim payments are required.
For the first half, operating activities used $225,479 in cash, investing activities used $82,850, and financing activities provided no cash. Cash declined by $308,329, from $1,278,094 at year-end 2010 to $969,765. The filing reports no off-balance-sheet arrangements.
Changes versus 2010
- Revenue rose sharply, primarily from SampleMD setup and integration fees and activity. Management reported nine pharmaceutical manufacturers, 40 brands, and more than 53 offerings at the half-year mark.
- Operating expenses declined 45% for Q2 and 17% for the first half. Management attributed the reductions largely to lower stock-based compensation within consulting expenses; professional fees and salaries increased as the company ramped operations.
- Net losses narrowed for both periods, though first-half interest expense increased to $280,098, including $250,000 of debt-discount amortization.
Outlook, risks, and unusual items
- Management expected higher Q3 revenue as it renewed and extended contracts, secured new contracts, and expanded distribution, and expected higher Q3 expenses as it added account-management and sales staff. No quantified full-year guidance was provided.
- Management said existing cash was sufficient for operations at the then-current level for the next 12 months, but not to achieve business goals without cash revenue growth, additional financing, and/or meeting milestones to obtain a second financing tranche from Vicis. The filing cautions that additional financing may not be available on acceptable terms, or at all; it also identifies the company’s history of substantial losses and dependence on revenue growth and capital raising as going-concern concerns.
- Revenue concentration is material: one customer accounted for 50% of first-half 2011 revenue. Management said it expected to maintain customer relationships.
- Preferred shares carry 10% cumulative dividends. During Q2, the company issued 252,526 common shares to satisfy $250,000 of preferred dividends. The company also issued 285,000 employee options and agreed to issue 100,000 shares in a legal settlement.
- The company settled its Midtown Partners dispute on June 30, 2011, agreeing to pay $57,500 and issue 100,000 shares; the litigation was to be dismissed. A separate action against Beringea seeks $400,000 in damages over a capital-raising agreement.
- The company reported a $4.082 million deferred tax asset from net operating loss carryforwards, fully offset by a valuation allowance. The filing notes that ownership-change rules may limit use of the carryforwards.
- Management concluded disclosure controls and procedures were effective as of June 30, 2011 and reported no significant changes in internal control over financial reporting during the quarter.
Investor verification points
- Reconcile share counts: the cover reports 13,969,202 shares outstanding as of June 30, while the balance sheet and equity note report 13,869,202.
- Confirm the balance-sheet dates: the statement caption contains a June 31 date, while the filing otherwise identifies June 30, 2011; the financial-statement introduction also refers to December 31, 2009, while the balance sheet comparator is December 31, 2010.
- Assess customer concentration, contract renewals and redemptions, SampleMD adoption, and progress toward the Vicis financing milestones.
- Monitor cash use, financing availability, the secured note and accrued interest, preferred-dividend obligations, and the outcomes of the Beringea and Midtown matters.