OptimizeRx Corporation — Q3 2012 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2012; unaudited consolidated results. OptimizeRx provides healthcare technology solutions, including SampleMD, which delivers pharmaceutical coupons and patient-support offers through physician and electronic health-record workflows.
Financial performance and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $453,154 | $191,593 | $1,297,980 | $785,610 |
| Operating expenses | $559,305 | $600,760 | $1,781,257 | $1,855,695 |
| Operating loss | $(106,151) | $(409,167) | $(483,277) | $(1,070,085) |
| Net loss | $(106,174) | $(1,087,504) | $(482,969) | $(2,027,619) |
| Basic and diluted loss per share | $(0.01) | $(0.08) | $(0.03) | $(0.15) |
- Revenue increased approximately 137% year over year in Q3 and 65% for the nine-month period, which management attributed to more SampleMD promotional programs and transactions.
- Operating expenses declined about 7% in Q3 and 4% year to date. For the nine months, higher payroll, benefits, and stock-based compensation were offset in part by lower advertising, professional fees, and consulting costs.
- Gross margin is not separately reported. The filing reports operating expenses but does not provide a clear cost-of-revenue figure.
- Cash and cash equivalents were $282,630 at September 30, versus $959,166 at December 31, 2011. Nine-month operating cash use was $625,666; investing cash use was $50,870; there was no financing cash flow.
- Current assets were $971,171 and current liabilities $890,250, giving working capital of $80,921. Total assets were $2,224,373 and stockholders’ equity was $1,334,123.
- The balance sheet shows no note payable at quarter-end. Current liabilities include a $570,000 related-party payable for shares associated with the SampleMD patent. The company also disclosed $500,000 in undeclared cumulative preferred dividends due in 2012.
Material changes, outlook, and risks
- The 2011 comparative statements were restated because the company had not accrued advertising, marketing, and employee bonus expenses. Restated nine-month 2011 net loss was $2,027,619, compared with $1,616,994 previously reported; restated Q3 2011 net loss was $1,087,504, compared with $969,379 previously reported.
- Management described business growth and reported SampleMD-generated eRx-with-coupon utilization of 89,324 for Q3, three times the 2011 sample-period level. It also cited the SampleMD launch in the Allscripts PRO EMR application and planned a client dashboard launch for Q4 2012. These are management statements, not quantified financial guidance.
- No formal numerical revenue, earnings, or cash-flow guidance is provided. Management said cash on hand was sufficient to operate at the current level for the next 12 months, but not to achieve business goals without cash revenues and/or additional financing.
- The company’s prior financing arrangement with Vicis had lapsed. Management reported discussions with Vicis but no written financing agreement, making additional capital uncertain. The filing identifies revenue growth and raising capital as important to the company’s ability to continue as a going concern.
- Customer concentration is material: the filing says two major customers accounted for 50% of nine-month 2012 revenue; one major customer accounted for 50% in 2011. The wording does not clarify whether the 2012 figure is combined or attributable to each customer.
- Management reported disclosure controls were effective as of September 30, 2012, with no significant changes in internal control over financial reporting during the quarter. The company reported no material subsequent events and no legal proceedings.
- Management also presented an adjusted, non-GAAP view excluding selected noncash items, stating Q3 net income would have been $285 and nine-month net loss $54,775. These figures are not GAAP results and depend on the exclusions used.
Important facts for investors to verify
- Whether SampleMD revenue growth converts into positive operating cash flow, given nine-month operating cash use of $625,666 and cash of $282,630 at quarter-end.
- Availability, timing, and terms of any new financing, including whether discussions with Vicis resulted in a binding agreement.
- The nature, collectability, and expected settlement timing of the $570,000 related-party payable, and the treatment of the $500,000 in undeclared preferred dividends.
- The identity and revenue contribution of major customers, contract durability, and the company’s exposure to losing a concentrated customer.
- The effects of the 2011 restatement and the assumptions behind management’s non-GAAP adjustments.