OptimizeRx CEO Resignation A Non-Event

| About: OptimizeRx Corp. (OPRX)

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OptimizeRx (OTCQB:OPRX) explained in a conference call last week that the resignation of the company's Chairman and CEO, Shad Stastney, was related to the revelation of a settlement between the SEC and Stastney in a matter unrelated to OptimizeRx.

The settlement relates to accusations by the SEC that Stastney breached his fiduciary duties when he was a principal at Vicis Capital LLC, which occurred years prior to him becoming OPRX's CEO. OptimizeRx noted on the call that after consulting with its attorneys that it was in the best interest of the company for Shad to step down as CEO -- although clearly there is no liability risk to OPRX. Similarly, Stastney also resigned from other companies in which he held a board seat, including from Ambient Corp (NASDAQ:AMBT) and Deer Valley (OTCPK:DVLY).

While OPRX's share price has languished since the resignation announcement, we do not view this as an overly material event. Stastney, a founding partner of Vicis Capital, which has been a significant financier of OPRX, had been on OptimizeRx's board of directors since 2009 and was named CEO in January of this year. As management explained on the call, he was not entrenched in the day-to-day operations of the business. And coupled with the fact that David Harrell (the founder of OPRX and prior CEO who will re-assume the Chairman role), David Lester (the prior CEO) and Terry Hamilton (V.P. of Sales since 2008), which have all played significantly into the success of OPRX over the last few years and remain with the company, we think OptimizeRx remains in good hands and expect Stastney's departure to create little disruption. OPRX is now undergoing a search for a qualified replacement. Stastney will serve in a consulting capacity through the end of the current year.

The conference call cleared up any ambiguity surrounding the September 20th departure announcement. Management also provided a general business update including a little more insight into its recently announced strategy to offer additional services to its client base (through "OptimizEHR") and offered positive comments about the continued growth of its base e-couponing business.

Over the last few years OPRX has done the heavy lifting to establish substantial distribution of the e-couponing business. With OptimizEHR it will look to leverage this distribution by offering additional services and functionality to its pharma clients, presumably providing another high margin revenue stream. OPRX has alluded to this in the past but with the recently consummated relationships with the likes of PDR and Krames-Staywell, prescribing and patient education information sources that will likely be part of the additional service offerings, and the advent of the OptimizEHR moniker, this business line is now functional. Management noted on the call that they recently had productive discussions with a "$22 billion pharmaceutical company," which included strategies around its EHR programs.

Management has not disclosed the revenue model of the OptimizEHR business, other than noting it is consulting-based and also that they believe they can generate significant fees from it. We also thinks it's clear that this business, which is still in its early stages, has real potential to evolve and expand, particularly as the company has the opportunity to meet with and receive feedback from its pharma partners on specific services and functionality which it may have a need for.

Management also provided some general comments on the base e-couponing business, noting that they expect another record quarter in Q3 and continue to be cash flow positive. This follows an announcement in mid-September that coupon/voucher distributions were over 212k in the first two months of Q3. This compares to 266k (+19% sequential run-rate) in all of Q2 2013 and just 55k (+285%) over the same period in 2012. We model ~341k distributions in Q3, which is unchanged since our last update. We continue to look for approximately $4.3 million and $0.04 in current-year revenue and EPS.

We view the resignation of Shad Stastney as a relatively insignificant event. OPRX continues to post impressive revenue growth with sales up 84% in 2012, up 114% in Q2 2013 and up 110% through the first half of 2013, which were all-time records for each respective period. Distributions (the driver of the e-couponing business) have shown relatively consistent sequential growth over the last several quarters, which we think is setting the stage for revenue to ramp fairly substantially over the near to mid term. The new OptimizEHR business potentially bolts on another high-margin, near-term revenue stream. OPRX generated positive cash flow in Q2 and management indicated that they expect this to continue. We continue to value the stock at $3.50/share. The recent sell-off from $1.85/share in mid-August to $1.25/share today offers investors a very attractive entry point.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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