Thursday, August 18, 2011 5:29:49 PM
Conference Call Summary 8/15/2011
The Company reported revenues for the six-month period ended June 30, 2011 of $737,618, or 158% of the previously reported revenue for the same period in 2010. Although revenues were impacted by the delay in the signing of the Private Label agreement with Kodak, they were still $451,357 or 158% higher as compared to the first six months of 2010.
The Company also reported decreases in operating losses. G&A decreased from $2,374,313 to $2,061,847 or 13.2%. Related party payables decreased by more than $750,000 through the issuance of equity at no less than $0.06 per share to as much as $0.105 per share. Operating losses also decreased from $4,036,691 to $2,973,058, or 26%. Net Loss decreased from $14,327,996 to $4,107,358, or 71%, of which $2,376,152 was non-cash losses attributable to expenditures which stem mainly from the application of accounting principles to value equity, imputed interest in the sale of convertible notes, and stock options, warrants and common stock issued for services, among other similar types of expenses. Cash operating losses also decreased by 28.5% from $2,423,079 in 2010 to $1,731,386 in 2011.
Since its last quarterly filing the Company reported an additional 36 million shares outstanding. Those shares were issued in exchange for more than $2,462,000 in value as follows: (i) a reduction in payables of $435,000, (ii) a conservative estimate of $1.1 million in television and sponsorship advertising (360+ spots on television), and (iii) $927,000 in cash; an average of $0.068 per share at a premium of 48% to market based on the average daily closing price of our stock during the quarter of $0.046.
The Company also increased its outstanding balance under The RHL Group, Inc. credit line from $1,218,947 at the end of the first quarter to $1,391,587 at the end of second quarter, an increase of 14.2% even though the balance was reduced during the quarter by $200,000 through an exercise of 1,600,000 warrants at $0.12 cents per share representing a premium-to-market on the conversion date of 198%.
Also not included in the Company's balance sheet are any values attributed to its legacy biotech assets, anti- CD20 antibodies and other biological patient samples, or any current license agreement, which include milestone payments that could have a value of up to $13 million.
On the biotech side many of you know we have a licensing agreement with Celegene which we have been paid 3 quarters of a million dollars under the terms of that agreement. That agreement is doing exactly what it is supposed to be doing. We have a good working relationship with them and there is no reason to believe at this point that we shouldn’t be able to meet our responsibilities under the terms of that agreement. When we talk about that agreement it is important for everyone to realize that this is a non-exclusive licensing agreement for vaccine related assets in conjunction with a completely separate project Celgene is working on. During the time we have been working with Celgene we have also been able to recover what we believe will turn out to be 1,000’s of human tissue samples, vaccine samples, blood samples, and oter antibody samples which on a conservative basis, the first block of 400 samples through resale of commercial market has a value of close to $2M, but when this is combined with the underlying scientific data it is impossible to put a reliable specific number on it because the number goes up so significantly. Since that period of time we have added to that another 1,000 additional samples as a result of a settlement agreement that was reached several weeks ago and it is believed the number could be as much as 2,000 additional samples. There are just so many of them that we have not yet had the chance to actually inventory and catalog what we have. While we were going through those samples we found another collection of insect related research samples which we will receive and have not yet factored in. All of these additional samples are not factored into existing licensing agreements and have just been received so they do all have the opportunity for substantial upside revenue none of which is factored anywhere on our balance sheet. In addition, what makes the biotech an attractive part of the company are the significant tax loss carry forwards that if we can restructure could be worth substantially more than $100M.
In addition to that during the Q we completed a branding agreement with Kodak that we originally started in the 3rd Q of last year and we thought we would sign in the 4th Q for a new machine that would have Capture Pro software and MMR software integrated into one machine. From a variety of reasons that range from testing and manufacturing limitations to the earthquake in Japan we have had some tremendous delays in getting this agreement done. It was signed about a month ago, the product is being manufactured, we have a significant pipeline of customers which has come from existing customers, so for example our first MMR Pro surgery center installation (Spalding Surgery Center) has an affiliation with an additional 17 surgery centers on the East Coast that have all prepared to receive MMR Pro when it is available.
Internationally, we were notified about a month ago that the Chinese Govm’t approved the formal formation of the MMR-UNIS license agreement which means besides just spending money in China we can actually be working with them and doing business with them soon. We are very optimistic as to what that will bring.
Australia passed a pile of legislation calling for personal health records for their people starting in 2012. Ironically, when you read the legislation the requirements for those PHR’s – I don’t want to say are lifted from our patent, but we have a patent issued in Australia where it is required that anyone who would comply with the Australian govm’t’s requirement for a PHR would have to work with MMR or it’s licensee VisLinc whom we’ve entered into an agreement with. The VisiLinc agreement contains significant milestone payments and minimum performance guarantee payments so we are very optimistic about Australia and the effect that those patents will have on our business.
In terms of Direct to Consumer (although it has taken much longer than we wanted to), we think that the gift with purchase solution to launching our PHR products as more and more people realize they are required to get a health record is going to significantly increase subscribers directly to the company. What happens is we have programs like the eat on us campaign which enables a consumer to get $50 worth of instant restaurant dining coupons just for taking a free trial at a cost for those coupons of substantially less than 10% of the retail value if the coupon is redeemed. One of the things we are going to do is force the consumers to redeem the coupons on the inside of a MMR account so they cant just go to a website, print a coupon, go eat, and not sign up. They have to go to the website and put in their credit card info, go into a file folder in the account in order to redeem the offer. So we are very excited about that as a result of our relationships in direct marketing and our access to substantial opt-in mailing lists we thik we can reach literally hundreds of millions of people especially when we combine it with areas like FaceBook, Twitter, and other social media marketing Groupon-style sites.
It is very exciting the amount of prospects we have going from the next 6-8 months. Locally here in Southern California we expect to be installing a Pro system in the first of about 15 surgery centers which are connected with the 1-800 GET THIN program. On a Direct to Consumer basis we also expect to begin to connect those people who are calling in to 1-800 GET THIN to a PHR for a free offer for 15-30 days. That’s over 100,000 patients. On the East Coast we are moving into the first of about 18 surgical centers. These surgery centers are associated with the management of Spalding Surgery Center. They are located throughout the nation. These will give us the ability to really have a complete nationwide footprint with Pro really giving us what we expect to be is a good head start over some of our competition.
Internationally we have entered into an agreement with a group in Southern California which also operates in Guatemala and Central America and we expect to be sending the first shipment to them sometime during the end of this quarter. That will give us what we believe is an unimpeded foot hole in Guatemala where there are approximately 3,500 physicians that are looking and really needing to find someway to get their technology up to speed.
Our major corporate clients: you don’t realize how long something takes when your inside the corporation as much as you do when your on the outside. It took us two plus years to get the Chartis agreement signed. We’ve been talking with and have agreements with both Chartis and Verizon. The Chartis agreement is finally started to make some good moves. We are talking with several different groups and divisions within Chartis itself that can really help us move this on a consumer basis. It has been paired with another offering through Global Marine and Energy which will get it out to 900 clients within the next two to three months. That’s going to be a good movement for us. These are many major employers of tens of hundereds of thousands of lives. The first phase of Chartis is to offer it as a casualty program to commercial clients as an employee benefit. Since the CES 2011 in Vegas we have been in talks on and off with Verizon on products they have been working on. They pair very nicely with our PHR. They are committed and aggressively moving into the healthcare field. They really want to work with us on matching our PHR to their products and we expect by earliest the end of the 4th Q or early 1st Q next year to be really moving forward with it. We are dealing with a very large corporation which takes a long time to move on anything: whether its agreements or documents. On the Verizon side they have been in an advertising side of mind since they the beginning and the people who are running this project for us in Healthcare are all people I have been working with for 30+ years and they are at the highest levels of the company. Whether all of a sudden AT&T buys Tmobile and you think you are going to go from number one to number two or whether it is a situation where they are concerned on how to integrate a PHR with a regional health system – things change everyday. In a program we really believe was going to be launched by the beginning of the 3rd Q we’re now being told will be launched by the end of the 4th Q and candidly that program would put MMR as a feature and a benefit in an upsell throughout their entire retail organization. They’re very committed to healthcare, the regional health care space, the consumer health care space, and kind of do what I (Robert Lorsch) want it to do and make the phone a “lo-jack” for health. Unfortunately we do not have the ability to move timetables, but it is a great relationship and we are very optimistic about it.
We also have a great relationship with Qualcomm, we have a phenomenal relationship with Lucent, and Lucent has tremendous relations with Verizon. All of these things, especially because our product is telecommunications based and uses wireless infrastructure and plain old ordinary telephone service and landline infrastructure and fax – that has turned out to be one of the best things we have going for us because the only way a doctor can send a document to another doctor or a patient that is not going EMR to EMR is by secure fax. Candidly in at least 6 countries around the world we have the patent on that and we are very optimistic that those patents will continue to get issued in other parts of the world meaning that if you go to the doctor and you want a copy of your medical records you would have to fax it to a Personal Health Record which would somehow implicate a patent that we own.
We have entered into an agreement with a large wireless franchisee in the Houston area and we’ve conducted training of over 12 people and expect training of at least 20 by the end of next week which will complete the sales force for that area. Interesting to note that in the Houston area that they have the most heavily populated physician population in any one zip code in the United States. There’s about 2,200 physicians there in about 385 medical offices in a space of about 6 miles. These are huge medical facilities. We have a huge pipeline. It takes time and it takes patience. As much as we want to move things forward as quick as we can we have got to go through the steps. Everyone needs to understand that there are time lengths and time delays even though we have an amazing pipeline.
Chartis has restructured 3 times in the past 2 ½ years. People need to be retrained or don’t even work their anymore. This s completely out of our control and it is a time consuming process. The terms that we set forth, though, don’t set in until we receive a certain amount of revenue. They don’t get around it, we’re still there. Through Chartis we’ve added hundreds of thousands of lives to our database. We have to get to a certain amount lives that is in well excess of that before the term of our agreement even begins to go into play.
Financial Institution Beta Testing Update
We started the Bank of America project in 2006 and originally it was Countrywide. We spent a lot of time, a lot of money, and a lot of energy on an electronic safe deposit box that will process mortgage applications. Can I look at the crystal ball and say when? No, but I can say we’re taking the work product which is now transferred over to us and we are talking to a lot of other banks in Savings and Loans about using an Esafe dseposit box as a virtual safe deposit box and on of the things that has happened is Chartis is more involved with financial institutions and I think there’s a possibility there that they could be opening some doors for us internationally for that product as well. The timing is unpredictable, but the opportunity is tremendous and it uses our core product.
Celgene Deal Timeline
The only thing we publicized is an 8K. This is not a long term situation. We are not looking at even 2 years. Everything is fast tracked. The fist two milestones were met within two months. The great thing about the biotech situation is the time we reach the agreements that we have, we didn’t even have ownership of the other biotech assets that we knew of. If anyone has ever looked at the complaint that the RHL Group filed against former Favrille science officer and institutions it was because there were representations made against the company that these assets had been destroyed and instead they had really been parked. When we found out where they were we went after them. We’ve been peeling away the onion every single month and finding more and more assets. One of the things I can say is that we are starting to talk to Celgene and others about the possibility of how they can help us monetize those assets and getting samples of a set of 400 Stage 3 lymphoma patients with their blood, with their complete medical histories, and the ability to use because you have their consent could be quite valuable.
CD-20 Update
We have non-disclosure agreements with 3 or 4 companies that have looked at it. The anti-cd20 is a product that is a first cousin to Rituximab. It’s going to require somebody to spend a couple of million dollars on a first phase of development so what we are looking for is somebody willing to monetize that next stage of research. It’s not part of anything we’ve generated revenue on up to this point, so there is nothing to report on it yet – we have it, control it, have the patents on it, but the one thing we could report is we continue to be successful with our patent rights around it on global basis. We just need the right partner right now. Our core business is not this. I work on this in the 20 hours a week I should be sleeping. This does have a lot of value to someone, though. We will continue to explore it, but there are no major agreements we can bring up front yet.
Interbit Update
Interbit has 600 clients/hospitals and they move the paper around in all of these hospitals. It was a natural fit. We met them at HIMSS and heres na example of a smaller company that I was able to meet with in Boston immediately after HIMSS who have found 3 customers – 1 of which is in the final agreement phase where that customer will be the first beta site of using the PHR in their hospital under an Interbit brand and then based on the success of that program they will begin to offer it to their other hospital clients. They want to start with one and there is a waiting list of 2 more. Once the first one is completely implemented they will move very quickly. Even in that situation it has been the better part of a year to get our software integrated with their software, their program so they can get it to sell to their customers and then based on the integration of our software to their software we actually signed a formal agreement which spelled out the complete workflow from end to end about a month ago. So we spent the better part of the year getting it launched. It is a good relationship and they are great people. An EMR may take six months to integrate, ours may take shorter, but figuring out the plan for it with the partner and shaking hands is not an overnight type of process. We have significant pipeline things just do take time. Once we deliver 30 MMR Pro machines things do start to go a lot faster. We spent the last 3 years getting MMR Pro to work the way it does right now and it really works well. I mean it really really works well. Now every time we deliver one of these units at $20K+ a clip + some other benefits that can go with it that you will begin to see traction in those buckets of revenue and then once the Interbit program gets going you’ll see traction in that bucket of revenue. Interbit also wants to sell MMR Pro. We have this thing developing with 4Medica now – they deliver 30M lab tests a month to physicians around the US, they can only do it through their 4Medica system, but now we are figuring out a way for them to integrate their lab tests into our PHR into doctors offices into some type of image format. That’s another effort and all of these efforts once they start begin to generate revenue on an accelerated basis.
Cornell Update
I was in the Midwest with them awhile ago and the problem with them is that Cornell sells to 600 pound gorillas. They do not sell 20,30,40K systems. They sell multi million dollar applications. While Cornell is someone who could possibly sell MMR Pro into an institutional environment, Cornell is not the short-term immediate future of MMR Pro for this company. Its surgery centers, doctors offices, not university institutional centers.
International Update
There is a lot of interest in India in EMR and document imaging and I would say more exciting in the short term would be Australia and China. In those places there is a lot of stuff happening. We should mention the Philippines as well. In China we already have the Henan Province working, going, specking and in Australia we have 3 or 4 insurance carriers that are looking for us to actually launch products for them with very specific details. In the Phillipines we are actually shipping machines and ironically its like even though Nihilent is in India there is nothing we can point to in India as of yet other than the high degree of interest expressed by the Indian government.
Short Selling Update
We have sent emails to almost every compliance officer that makes markets in our stock. We followed very closely, but there’s not that much information we can get from the compliance officers in regards to their own clients. They are not allowed to divulge that, but our efforts are aimed at bringing the issue to their attention and having them deal with it. We saw last August their was alot of abnormalities with the trading. The stock would be trading at a normal level and then all of a sudden there would be a share sell of about 200 shares that would bring the stock down 20% and then have that same person buy it back at a lower price. This was to get people scared so they could sell while they were on the other side buying. The one market maker who we saw was involved in that has actually stopped and they were one of the biggest market makers we would see on a day to day basis. We haven’t seen them in about two months. We asked them to file a report with the SEC, they did, and for whatever reason they are 100-200% over the market at all times. We also are part of a service called BUYINS.net who will send a report to the SEC every time they see abnormal activity. The shorting activity has dropped from 80% to less than 5% on a day to day basis. Its like having some one point something out to you with a lot of little red dots on it, I’m sure these people are still out there raising havoc with other peoples companies, but we will do our efforts to bring this up to chief compliance officers and we are certainly not going to give up on this. We have been very aggressive at it.
How soon can we see revenues from Australia?
The licensing agreement that we have with Australia actually would have minimum performance guarantees from them that would go into effect as soon as the first Q of this year. I’m optimistic that we will get there. The govm’t wants people to start deploying PHR’s throughout 2012, we’ve seen these things happen in the US and in other parts of the world. China is a great example – it took us two years for the Chinese govmt to actually grant us the business license to legally do business with our partner in China. The way the agreements are setup we are hoping we will see revenue from Australia early next year.
Advertising Update
The Eat-On-Us Campaign does not launch until the first of September because there is some integration with the platform where we have to be able to issue certificates, deposit them into a person’s PHR, make them go their into the account to get the information, but in similar programs where we watched with restaurant.com it seems to be a very popular program. People do want to take advantage of these certificates so I am very optimistic that we will have success in consumer sign-ups. When we were running the facebook campaigns without an offer we saw millions of people going to various different splash pages on a day to day basis and reading about and testing trials and we really didn’t even have a chance to give them anything but for them to put in their credit card info and then for us to follow up. We are also working with American Humane, it hasn’t been announced formally, but its one of the reasons we had Rin Tin Tin on MoneyTV with us. American Humane has a relationship with the weather channel and so American Humane is arranging for a lot of advertising to run in the Weather Channel and other media with the idea that the amount of money we would normally spend on restaurant.com coupons will go back to the charity which is kind of like charity related marketing program. The charity gets the media, we get the charity the spot, the customer signs up for a trial, and the charity gets a portion the of revenue of the trial. We’re also working with a group of people which we’ll be talking about in the next couple of months on health orientated television shows without mentioning the names of specific shows, shows like “The Doctors”, shows like “Doctor OZ” , shows like “The Biggest Loser” where these personalities are constantly talking about the importance of having a PHR and what we’re doing with them is we’re letting them create their own branded versions so we can get the benefit of their franchise to buy our product. As we generate more awareness we will get more market penetration.
Google Health went out of business because it cost so much money for a hospital to integrate with Google Health, so members were either part of that hospital or were not members at all. On a flip side of that coin, we have more members than Microsoft, Google Health, and more active users than any other Personal Health Record on the market by a significant percentage and the problem is even to the people who are on this call. Many of you may have an account or have paper accounts….its kind of like out of state, out of mind. You get an account when your house burns down, or when you need vaccination records. Our challenge is to give people reasons other reasons before it is too late and they already had a loss. By using our celebrity factor and people like doctors we can begin to incorporate recipes from Wolfgang Puck, Bobby Flay, exercise tips from Biggest Loser type physicians, and JJ Virgin who is on the BOA has a great show which is in its 3rd season called Freaky Eaters – we’ve never leveraged those sort of things. We’ve never gone to Sugar Ray Leonard who is on the BOA, and said “Ray do something for us. Come up with exercises, come up with tips, come up with things like that and we think that by making this more of a social site with other reasons to go other than having your house burn down we will deal with that. The one portal that has been very successful has been Microsoft and we mentioned it in a release and we haven’t given all the details, but we have signed an agreement with Microsoft and we will be announcing massive integration w/ the Microsoft HealthVault which will replace the positioning on our website where Google Health was. The exciting thing is that this is the most robust personal health record in existence today where we could even do something like this. Richard Lagani: The whole reason when I was in Chartis we did this was having a doctor see a snapshot of your medical history and being able to see prescriptions, allergies, etc – the care that is given is going to be exponentially greater. People can also just use it as a fax machine if that’s all they want to use it for – it is cheaper than using Efax and Efax charges almost $30/month for 1/3 of the services you will get with an MMR PHR or a MyEsafeDepositBox. If you don’t have an account you have to try it.
The board of this company, the management of this company, the advisors in this company, the RHL Group, we are supporting this thing and I can’t tell you the enthusiasm on a day to day basis and the belief in the future of this company. Its been longer than it took for Amazon to become what Amazon became and we’ve got the wind to our backs – govmt’s around the world telling people they need to get a PHR and we have the only PHR that works anywhere in the world, the only PHR that will take a document from anywhere in the world, and we have the underlying patents to keep that PHR to make it very difficult for anyone to compete with us.
The Company reported revenues for the six-month period ended June 30, 2011 of $737,618, or 158% of the previously reported revenue for the same period in 2010. Although revenues were impacted by the delay in the signing of the Private Label agreement with Kodak, they were still $451,357 or 158% higher as compared to the first six months of 2010.
The Company also reported decreases in operating losses. G&A decreased from $2,374,313 to $2,061,847 or 13.2%. Related party payables decreased by more than $750,000 through the issuance of equity at no less than $0.06 per share to as much as $0.105 per share. Operating losses also decreased from $4,036,691 to $2,973,058, or 26%. Net Loss decreased from $14,327,996 to $4,107,358, or 71%, of which $2,376,152 was non-cash losses attributable to expenditures which stem mainly from the application of accounting principles to value equity, imputed interest in the sale of convertible notes, and stock options, warrants and common stock issued for services, among other similar types of expenses. Cash operating losses also decreased by 28.5% from $2,423,079 in 2010 to $1,731,386 in 2011.
Since its last quarterly filing the Company reported an additional 36 million shares outstanding. Those shares were issued in exchange for more than $2,462,000 in value as follows: (i) a reduction in payables of $435,000, (ii) a conservative estimate of $1.1 million in television and sponsorship advertising (360+ spots on television), and (iii) $927,000 in cash; an average of $0.068 per share at a premium of 48% to market based on the average daily closing price of our stock during the quarter of $0.046.
The Company also increased its outstanding balance under The RHL Group, Inc. credit line from $1,218,947 at the end of the first quarter to $1,391,587 at the end of second quarter, an increase of 14.2% even though the balance was reduced during the quarter by $200,000 through an exercise of 1,600,000 warrants at $0.12 cents per share representing a premium-to-market on the conversion date of 198%.
Also not included in the Company's balance sheet are any values attributed to its legacy biotech assets, anti- CD20 antibodies and other biological patient samples, or any current license agreement, which include milestone payments that could have a value of up to $13 million.
On the biotech side many of you know we have a licensing agreement with Celegene which we have been paid 3 quarters of a million dollars under the terms of that agreement. That agreement is doing exactly what it is supposed to be doing. We have a good working relationship with them and there is no reason to believe at this point that we shouldn’t be able to meet our responsibilities under the terms of that agreement. When we talk about that agreement it is important for everyone to realize that this is a non-exclusive licensing agreement for vaccine related assets in conjunction with a completely separate project Celgene is working on. During the time we have been working with Celgene we have also been able to recover what we believe will turn out to be 1,000’s of human tissue samples, vaccine samples, blood samples, and oter antibody samples which on a conservative basis, the first block of 400 samples through resale of commercial market has a value of close to $2M, but when this is combined with the underlying scientific data it is impossible to put a reliable specific number on it because the number goes up so significantly. Since that period of time we have added to that another 1,000 additional samples as a result of a settlement agreement that was reached several weeks ago and it is believed the number could be as much as 2,000 additional samples. There are just so many of them that we have not yet had the chance to actually inventory and catalog what we have. While we were going through those samples we found another collection of insect related research samples which we will receive and have not yet factored in. All of these additional samples are not factored into existing licensing agreements and have just been received so they do all have the opportunity for substantial upside revenue none of which is factored anywhere on our balance sheet. In addition, what makes the biotech an attractive part of the company are the significant tax loss carry forwards that if we can restructure could be worth substantially more than $100M.
In addition to that during the Q we completed a branding agreement with Kodak that we originally started in the 3rd Q of last year and we thought we would sign in the 4th Q for a new machine that would have Capture Pro software and MMR software integrated into one machine. From a variety of reasons that range from testing and manufacturing limitations to the earthquake in Japan we have had some tremendous delays in getting this agreement done. It was signed about a month ago, the product is being manufactured, we have a significant pipeline of customers which has come from existing customers, so for example our first MMR Pro surgery center installation (Spalding Surgery Center) has an affiliation with an additional 17 surgery centers on the East Coast that have all prepared to receive MMR Pro when it is available.
Internationally, we were notified about a month ago that the Chinese Govm’t approved the formal formation of the MMR-UNIS license agreement which means besides just spending money in China we can actually be working with them and doing business with them soon. We are very optimistic as to what that will bring.
Australia passed a pile of legislation calling for personal health records for their people starting in 2012. Ironically, when you read the legislation the requirements for those PHR’s – I don’t want to say are lifted from our patent, but we have a patent issued in Australia where it is required that anyone who would comply with the Australian govm’t’s requirement for a PHR would have to work with MMR or it’s licensee VisLinc whom we’ve entered into an agreement with. The VisiLinc agreement contains significant milestone payments and minimum performance guarantee payments so we are very optimistic about Australia and the effect that those patents will have on our business.
In terms of Direct to Consumer (although it has taken much longer than we wanted to), we think that the gift with purchase solution to launching our PHR products as more and more people realize they are required to get a health record is going to significantly increase subscribers directly to the company. What happens is we have programs like the eat on us campaign which enables a consumer to get $50 worth of instant restaurant dining coupons just for taking a free trial at a cost for those coupons of substantially less than 10% of the retail value if the coupon is redeemed. One of the things we are going to do is force the consumers to redeem the coupons on the inside of a MMR account so they cant just go to a website, print a coupon, go eat, and not sign up. They have to go to the website and put in their credit card info, go into a file folder in the account in order to redeem the offer. So we are very excited about that as a result of our relationships in direct marketing and our access to substantial opt-in mailing lists we thik we can reach literally hundreds of millions of people especially when we combine it with areas like FaceBook, Twitter, and other social media marketing Groupon-style sites.
It is very exciting the amount of prospects we have going from the next 6-8 months. Locally here in Southern California we expect to be installing a Pro system in the first of about 15 surgery centers which are connected with the 1-800 GET THIN program. On a Direct to Consumer basis we also expect to begin to connect those people who are calling in to 1-800 GET THIN to a PHR for a free offer for 15-30 days. That’s over 100,000 patients. On the East Coast we are moving into the first of about 18 surgical centers. These surgery centers are associated with the management of Spalding Surgery Center. They are located throughout the nation. These will give us the ability to really have a complete nationwide footprint with Pro really giving us what we expect to be is a good head start over some of our competition.
Internationally we have entered into an agreement with a group in Southern California which also operates in Guatemala and Central America and we expect to be sending the first shipment to them sometime during the end of this quarter. That will give us what we believe is an unimpeded foot hole in Guatemala where there are approximately 3,500 physicians that are looking and really needing to find someway to get their technology up to speed.
Our major corporate clients: you don’t realize how long something takes when your inside the corporation as much as you do when your on the outside. It took us two plus years to get the Chartis agreement signed. We’ve been talking with and have agreements with both Chartis and Verizon. The Chartis agreement is finally started to make some good moves. We are talking with several different groups and divisions within Chartis itself that can really help us move this on a consumer basis. It has been paired with another offering through Global Marine and Energy which will get it out to 900 clients within the next two to three months. That’s going to be a good movement for us. These are many major employers of tens of hundereds of thousands of lives. The first phase of Chartis is to offer it as a casualty program to commercial clients as an employee benefit. Since the CES 2011 in Vegas we have been in talks on and off with Verizon on products they have been working on. They pair very nicely with our PHR. They are committed and aggressively moving into the healthcare field. They really want to work with us on matching our PHR to their products and we expect by earliest the end of the 4th Q or early 1st Q next year to be really moving forward with it. We are dealing with a very large corporation which takes a long time to move on anything: whether its agreements or documents. On the Verizon side they have been in an advertising side of mind since they the beginning and the people who are running this project for us in Healthcare are all people I have been working with for 30+ years and they are at the highest levels of the company. Whether all of a sudden AT&T buys Tmobile and you think you are going to go from number one to number two or whether it is a situation where they are concerned on how to integrate a PHR with a regional health system – things change everyday. In a program we really believe was going to be launched by the beginning of the 3rd Q we’re now being told will be launched by the end of the 4th Q and candidly that program would put MMR as a feature and a benefit in an upsell throughout their entire retail organization. They’re very committed to healthcare, the regional health care space, the consumer health care space, and kind of do what I (Robert Lorsch) want it to do and make the phone a “lo-jack” for health. Unfortunately we do not have the ability to move timetables, but it is a great relationship and we are very optimistic about it.
We also have a great relationship with Qualcomm, we have a phenomenal relationship with Lucent, and Lucent has tremendous relations with Verizon. All of these things, especially because our product is telecommunications based and uses wireless infrastructure and plain old ordinary telephone service and landline infrastructure and fax – that has turned out to be one of the best things we have going for us because the only way a doctor can send a document to another doctor or a patient that is not going EMR to EMR is by secure fax. Candidly in at least 6 countries around the world we have the patent on that and we are very optimistic that those patents will continue to get issued in other parts of the world meaning that if you go to the doctor and you want a copy of your medical records you would have to fax it to a Personal Health Record which would somehow implicate a patent that we own.
We have entered into an agreement with a large wireless franchisee in the Houston area and we’ve conducted training of over 12 people and expect training of at least 20 by the end of next week which will complete the sales force for that area. Interesting to note that in the Houston area that they have the most heavily populated physician population in any one zip code in the United States. There’s about 2,200 physicians there in about 385 medical offices in a space of about 6 miles. These are huge medical facilities. We have a huge pipeline. It takes time and it takes patience. As much as we want to move things forward as quick as we can we have got to go through the steps. Everyone needs to understand that there are time lengths and time delays even though we have an amazing pipeline.
Chartis has restructured 3 times in the past 2 ½ years. People need to be retrained or don’t even work their anymore. This s completely out of our control and it is a time consuming process. The terms that we set forth, though, don’t set in until we receive a certain amount of revenue. They don’t get around it, we’re still there. Through Chartis we’ve added hundreds of thousands of lives to our database. We have to get to a certain amount lives that is in well excess of that before the term of our agreement even begins to go into play.
Financial Institution Beta Testing Update
We started the Bank of America project in 2006 and originally it was Countrywide. We spent a lot of time, a lot of money, and a lot of energy on an electronic safe deposit box that will process mortgage applications. Can I look at the crystal ball and say when? No, but I can say we’re taking the work product which is now transferred over to us and we are talking to a lot of other banks in Savings and Loans about using an Esafe dseposit box as a virtual safe deposit box and on of the things that has happened is Chartis is more involved with financial institutions and I think there’s a possibility there that they could be opening some doors for us internationally for that product as well. The timing is unpredictable, but the opportunity is tremendous and it uses our core product.
Celgene Deal Timeline
The only thing we publicized is an 8K. This is not a long term situation. We are not looking at even 2 years. Everything is fast tracked. The fist two milestones were met within two months. The great thing about the biotech situation is the time we reach the agreements that we have, we didn’t even have ownership of the other biotech assets that we knew of. If anyone has ever looked at the complaint that the RHL Group filed against former Favrille science officer and institutions it was because there were representations made against the company that these assets had been destroyed and instead they had really been parked. When we found out where they were we went after them. We’ve been peeling away the onion every single month and finding more and more assets. One of the things I can say is that we are starting to talk to Celgene and others about the possibility of how they can help us monetize those assets and getting samples of a set of 400 Stage 3 lymphoma patients with their blood, with their complete medical histories, and the ability to use because you have their consent could be quite valuable.
CD-20 Update
We have non-disclosure agreements with 3 or 4 companies that have looked at it. The anti-cd20 is a product that is a first cousin to Rituximab. It’s going to require somebody to spend a couple of million dollars on a first phase of development so what we are looking for is somebody willing to monetize that next stage of research. It’s not part of anything we’ve generated revenue on up to this point, so there is nothing to report on it yet – we have it, control it, have the patents on it, but the one thing we could report is we continue to be successful with our patent rights around it on global basis. We just need the right partner right now. Our core business is not this. I work on this in the 20 hours a week I should be sleeping. This does have a lot of value to someone, though. We will continue to explore it, but there are no major agreements we can bring up front yet.
Interbit Update
Interbit has 600 clients/hospitals and they move the paper around in all of these hospitals. It was a natural fit. We met them at HIMSS and heres na example of a smaller company that I was able to meet with in Boston immediately after HIMSS who have found 3 customers – 1 of which is in the final agreement phase where that customer will be the first beta site of using the PHR in their hospital under an Interbit brand and then based on the success of that program they will begin to offer it to their other hospital clients. They want to start with one and there is a waiting list of 2 more. Once the first one is completely implemented they will move very quickly. Even in that situation it has been the better part of a year to get our software integrated with their software, their program so they can get it to sell to their customers and then based on the integration of our software to their software we actually signed a formal agreement which spelled out the complete workflow from end to end about a month ago. So we spent the better part of the year getting it launched. It is a good relationship and they are great people. An EMR may take six months to integrate, ours may take shorter, but figuring out the plan for it with the partner and shaking hands is not an overnight type of process. We have significant pipeline things just do take time. Once we deliver 30 MMR Pro machines things do start to go a lot faster. We spent the last 3 years getting MMR Pro to work the way it does right now and it really works well. I mean it really really works well. Now every time we deliver one of these units at $20K+ a clip + some other benefits that can go with it that you will begin to see traction in those buckets of revenue and then once the Interbit program gets going you’ll see traction in that bucket of revenue. Interbit also wants to sell MMR Pro. We have this thing developing with 4Medica now – they deliver 30M lab tests a month to physicians around the US, they can only do it through their 4Medica system, but now we are figuring out a way for them to integrate their lab tests into our PHR into doctors offices into some type of image format. That’s another effort and all of these efforts once they start begin to generate revenue on an accelerated basis.
Cornell Update
I was in the Midwest with them awhile ago and the problem with them is that Cornell sells to 600 pound gorillas. They do not sell 20,30,40K systems. They sell multi million dollar applications. While Cornell is someone who could possibly sell MMR Pro into an institutional environment, Cornell is not the short-term immediate future of MMR Pro for this company. Its surgery centers, doctors offices, not university institutional centers.
International Update
There is a lot of interest in India in EMR and document imaging and I would say more exciting in the short term would be Australia and China. In those places there is a lot of stuff happening. We should mention the Philippines as well. In China we already have the Henan Province working, going, specking and in Australia we have 3 or 4 insurance carriers that are looking for us to actually launch products for them with very specific details. In the Phillipines we are actually shipping machines and ironically its like even though Nihilent is in India there is nothing we can point to in India as of yet other than the high degree of interest expressed by the Indian government.
Short Selling Update
We have sent emails to almost every compliance officer that makes markets in our stock. We followed very closely, but there’s not that much information we can get from the compliance officers in regards to their own clients. They are not allowed to divulge that, but our efforts are aimed at bringing the issue to their attention and having them deal with it. We saw last August their was alot of abnormalities with the trading. The stock would be trading at a normal level and then all of a sudden there would be a share sell of about 200 shares that would bring the stock down 20% and then have that same person buy it back at a lower price. This was to get people scared so they could sell while they were on the other side buying. The one market maker who we saw was involved in that has actually stopped and they were one of the biggest market makers we would see on a day to day basis. We haven’t seen them in about two months. We asked them to file a report with the SEC, they did, and for whatever reason they are 100-200% over the market at all times. We also are part of a service called BUYINS.net who will send a report to the SEC every time they see abnormal activity. The shorting activity has dropped from 80% to less than 5% on a day to day basis. Its like having some one point something out to you with a lot of little red dots on it, I’m sure these people are still out there raising havoc with other peoples companies, but we will do our efforts to bring this up to chief compliance officers and we are certainly not going to give up on this. We have been very aggressive at it.
How soon can we see revenues from Australia?
The licensing agreement that we have with Australia actually would have minimum performance guarantees from them that would go into effect as soon as the first Q of this year. I’m optimistic that we will get there. The govm’t wants people to start deploying PHR’s throughout 2012, we’ve seen these things happen in the US and in other parts of the world. China is a great example – it took us two years for the Chinese govmt to actually grant us the business license to legally do business with our partner in China. The way the agreements are setup we are hoping we will see revenue from Australia early next year.
Advertising Update
The Eat-On-Us Campaign does not launch until the first of September because there is some integration with the platform where we have to be able to issue certificates, deposit them into a person’s PHR, make them go their into the account to get the information, but in similar programs where we watched with restaurant.com it seems to be a very popular program. People do want to take advantage of these certificates so I am very optimistic that we will have success in consumer sign-ups. When we were running the facebook campaigns without an offer we saw millions of people going to various different splash pages on a day to day basis and reading about and testing trials and we really didn’t even have a chance to give them anything but for them to put in their credit card info and then for us to follow up. We are also working with American Humane, it hasn’t been announced formally, but its one of the reasons we had Rin Tin Tin on MoneyTV with us. American Humane has a relationship with the weather channel and so American Humane is arranging for a lot of advertising to run in the Weather Channel and other media with the idea that the amount of money we would normally spend on restaurant.com coupons will go back to the charity which is kind of like charity related marketing program. The charity gets the media, we get the charity the spot, the customer signs up for a trial, and the charity gets a portion the of revenue of the trial. We’re also working with a group of people which we’ll be talking about in the next couple of months on health orientated television shows without mentioning the names of specific shows, shows like “The Doctors”, shows like “Doctor OZ” , shows like “The Biggest Loser” where these personalities are constantly talking about the importance of having a PHR and what we’re doing with them is we’re letting them create their own branded versions so we can get the benefit of their franchise to buy our product. As we generate more awareness we will get more market penetration.
Google Health went out of business because it cost so much money for a hospital to integrate with Google Health, so members were either part of that hospital or were not members at all. On a flip side of that coin, we have more members than Microsoft, Google Health, and more active users than any other Personal Health Record on the market by a significant percentage and the problem is even to the people who are on this call. Many of you may have an account or have paper accounts….its kind of like out of state, out of mind. You get an account when your house burns down, or when you need vaccination records. Our challenge is to give people reasons other reasons before it is too late and they already had a loss. By using our celebrity factor and people like doctors we can begin to incorporate recipes from Wolfgang Puck, Bobby Flay, exercise tips from Biggest Loser type physicians, and JJ Virgin who is on the BOA has a great show which is in its 3rd season called Freaky Eaters – we’ve never leveraged those sort of things. We’ve never gone to Sugar Ray Leonard who is on the BOA, and said “Ray do something for us. Come up with exercises, come up with tips, come up with things like that and we think that by making this more of a social site with other reasons to go other than having your house burn down we will deal with that. The one portal that has been very successful has been Microsoft and we mentioned it in a release and we haven’t given all the details, but we have signed an agreement with Microsoft and we will be announcing massive integration w/ the Microsoft HealthVault which will replace the positioning on our website where Google Health was. The exciting thing is that this is the most robust personal health record in existence today where we could even do something like this. Richard Lagani: The whole reason when I was in Chartis we did this was having a doctor see a snapshot of your medical history and being able to see prescriptions, allergies, etc – the care that is given is going to be exponentially greater. People can also just use it as a fax machine if that’s all they want to use it for – it is cheaper than using Efax and Efax charges almost $30/month for 1/3 of the services you will get with an MMR PHR or a MyEsafeDepositBox. If you don’t have an account you have to try it.
The board of this company, the management of this company, the advisors in this company, the RHL Group, we are supporting this thing and I can’t tell you the enthusiasm on a day to day basis and the belief in the future of this company. Its been longer than it took for Amazon to become what Amazon became and we’ve got the wind to our backs – govmt’s around the world telling people they need to get a PHR and we have the only PHR that works anywhere in the world, the only PHR that will take a document from anywhere in the world, and we have the underlying patents to keep that PHR to make it very difficult for anyone to compete with us.
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