Business Context and Reporting Period
Company: OptimizeRx Corporation (a development-stage company)
Reporting Period: Quarterly period ended September 30, 2010 (Form 10-Q)
Business Overview: The Company operates a direct-to-consumer website and a direct-to-physician solution called SampleMD to help patients manage healthcare costs and provide advertising programs to the pharmaceutical industry. Key platforms include OptimizeRx, OFFERx, and ADHERxE. The Company is classified as a smaller reporting company.
Key Financial Metrics
| Metric | Three Months Ended Sep 30, 2010 | Nine Months Ended Sep 30, 2010 | As of Sep 30, 2010 |
|---|---|---|---|
| Revenue | $40,676 | $58,679 | N/A |
| Net Loss | $(504,578) | $(1,640,449) | N/A |
| Operating Expenses | $545,889 | $1,701,067 | N/A |
| Cash and Cash Equivalents | N/A | N/A | $674,375 |
| Total Assets | N/A | N/A | $2,052,864 |
| Total Liabilities | N/A | N/A | $627,414 |
| Working Capital | N/A | N/A | $93,224 |
| Shares Outstanding | N/A | N/A | 13,233,754 |
Capital Structure: Includes Series A and Series B Convertible Preferred Stock. A significant portion of liabilities ($570,000) is related-party accounts payable.
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased significantly to $40,676 for the three months ended September 30, 2010, compared to $6,908 in the same period in 2009. This is attributed to the launch of the SampleMD solution and integration fees.
- Expense Reduction: Operating expenses decreased to $545,889 (Q3 2010) from $625,953 (Q3 2009), primarily due to a reduction in advertising spend ($32,146 vs. $317,670).
- Loss Narrowing: Net loss improved to $(504,578) for Q3 2010 compared to $(614,095) in Q3 2009.
- Asset Acquisition: The Company capitalized $974,762 in patent rights and $328,950 in website development costs, significantly increasing total assets compared to the prior year-end.
Outlook, Risks, and Management Commentary
- Strategic Partnerships: Entered into agreements with Walgreens Health Initiatives, Advocate Health Partners, NuHealth System, and Physicians Interactive Holding, LLC to expand the SampleMD platform.
- Financing Activity: Issued Series B Preferred Stock for $1,500,000 during the nine-month period. Subsequent to the reporting period (October 5, 2010), the Company issued a $1,000,000 secured promissory note to Physicians Interactive, Inc., accompanied by warrants.
- Going Concern: Management states the ability to continue as a going concern is dependent on revenue growth and the ability to raise additional capital. The Company currently has insufficient cash to operate for the next twelve months without additional financing or revenue realization.
- Risks: Includes reliance on capital raising, competition, and the success of the SampleMD launch. There is pending litigation against Midtown Partners & Co., LLC regarding a placement agent agreement.
- Executive Compensation: A new executive bonus program approved in July 2010 may increase operating expenses in Q4 2010.
Investor Verification Checklist
- Liquidity Position: Verify the sufficiency of the $674,375 cash balance against the $1,320,079 cash burn from operating activities over the last nine months.
- Debt Obligations: Review the terms of the $1,000,000 secured promissory note issued in October 2010 and the $570,000 related-party payable.
- Revenue Sustainability: Assess whether the revenue increase from SampleMD is recurring or one-time setup fees.
- Dilution Risk: Monitor the impact of outstanding warrants (valued at over $23 million) and convertible preferred stock on future share count.
- Legal Proceedings: Track the status of the lawsuit against Midtown Partners & Co., LLC.