OptimizeRx Corporation — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2013; comparisons are with the corresponding 2012 periods. The company provides healthcare technology solutions, including SampleMD, which distributes prescription coupons and sample vouchers through electronic health platforms.
Financial performance and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $1,104,087 | $515,423 | $1,773,377 | $844,826 |
| Operating income (loss) | $354,121 | $(76,205) | $249,239 | $(377,126) |
| Net income (loss) | $354,159 | $(76,059) | $249,333 | $(376,795) |
| Basic EPS | $0.02 | $(0.01) | $0.02 | $(0.03) |
Revenue rose approximately 114% in Q2 and 110% for the first half. Operating expenses increased approximately 27% in Q2 and 25% for the first half. Operating margin was approximately 32% for Q2 and 14% for the first half of 2013; the filing does not present gross profit or gross margin separately.
For the first six months, operating activities provided $106,447 of cash, versus $375,700 used in 2012. Investing activities used $38,278, primarily for patent rights; there were no financing activities. Cash increased $68,169 to $352,432. Accounts receivable rose to $939,685 from $616,798, a significant use of operating cash.
At June 30, current assets were $1,347,836 and current liabilities were $712,270, giving working capital of $635,566 and a current ratio of approximately 1.9. Total assets were $2,495,962; total liabilities were $712,270. The balance sheet reports no interest-bearing debt. A $570,000 related-party payable associated with the SampleMD patent remained outstanding.
Changes, outlook, and key risks
- Growth and operations: Management attributed higher revenue to SampleMD activity and pharmaceutical customer setup and integration fees. SampleMD generated approximately 265,628 coupon or voucher distributions through new e-prescriptions in Q2, compared with 177,000 in Q1 2013 and 49,400 in Q2 2012. The company completed integration with HealthTronics, serving more than 2,200 doctors, and continued its PDR partnership; further integrations were anticipated by year-end.
- Expenses and liquidity outlook: Management expects operating expenses to increase as it expands. It stated existing cash was sufficient for the next 12 months at the current operating level, but not to achieve business goals without cash revenue growth and/or financing. No quantified earnings or revenue guidance was provided.
- Customer concentration: Two major customers accounted for 63% of first-half 2013 revenue, compared with 53% in first-half 2012, creating customer-retention and concentration exposure.
- Preferred stock: Series A and B preferred shares carry cumulative 10% dividends. The company reported $750,000 of undeclared dividends as of June 30, 2013; verify whether and how these obligations may be paid or converted.
- Legal matters: LDM Group reinstated a patent-infringement action, alleging breach of a settlement and patent-license agreement; OptimizeRx said it would enforce the agreement and defend the action. The company also had a separate patent-infringement complaint pending against Physicians Interactive-related entities.
- Management compensation: The CEO’s $175,000 annual salary was deferred until at least January 1, 2014, with $87,500 accrued at quarter-end. A 2,000,000-option award was subject to exercise restrictions and financial conditions; no accrual was recorded for it.
- Accounting and disclosure: Management judged disclosure controls effective and reported no material control changes. The filing states there were no material subsequent events or off-balance-sheet arrangements. Interim results are not necessarily indicative of full-year results.
Important facts for investors to verify
- Reconcile cash-flow disclosures: the cash-flow statement reports no stock-based compensation and $38,900 of stock issued for services, while MD&A attributes $87,500 to “stock based compensation.”
- Reconcile the MD&A’s Q2 2012 revenue figure of $591,628 with the financial statements, which report $515,423; the $591,628 amount appears as operating expenses in the statements.
- Assess collectability and timing of the $939,685 accounts receivable balance and dependence on a small number of customers.
- Review the status, potential financial exposure, and effect on SampleMD operations of the LDM litigation and the company’s patent-enforcement case.
- Confirm the treatment and potential cash or dilution impact of the $750,000 cumulative undeclared preferred dividends, related-party payable, and outstanding warrants.