November 19, 2010 Conference Call Summary
Investor Awareness, Inc. is a Chicago based area full service investor media relations agency that was recently retained to provide strategic investor and media relations council for MMR Global.
Tony Shore is President and Founder of Investor Awareness, Inc. We have been looking for the better half of the last year looking for a company we can align ourselves with that is interested in the long term future of the business and not just sending out a bunch of emails an focusing on stock price promotion of the company. We have tried to identify an investor relations partner and firm that can combine good, solid investor relations – the kind you would want to see in a Nasdaq or NYSE type of company through the OTC world we live in and in a very responsible manner and that has a long term stake in the company’s future and to the outcome to our investors. Investor Awareness has been in business since 1994. We have identified them after close to a year’s process of interviews and working with a variety of firms and this is the first time we have entered into what we believe to be a long-term business relationship. Investor Awareness and Tony, in particular, will be traveling with me to a number of major markets to present MMR to larger private investors and institutional investors to broaden visibility of our stock in the investment community. They will not only work in typical investor relations promotion, but we’re going to expand what is normally an investor relations activity into an investor relations and public relations activity to expose not only the investment community to the company as an investment, but to the company in something that really makes a difference in someone’s life. Tony and his company will play a key role in introducing us to media and investors and we look forward to sharing future news and event developments through this company as well as continuing to do it directly through the company’s existing public relations, media, and blogging activities. Over the course of the past month Tony and his crew have already been working with us to secure meetings to introduce the MMR Global story to the financial community across the country. Over the next couple of months we will conduct aggressive financial roadshow visit markets including New York, Boston, Philadelphia, Atlanta, St. Louis, and more. If you are an investment professional and would like to attend any of our investor presentations please let us know through investor relations and Investor Awareness will be sure to include you on where we will be and you can join us.
Ingrid, CFO:
3rd Q Numbers Highlights
Balance Sheet has been cleaned up significantly. We were able to reduce our liabilities by about $2.3M. Most of that has been due through equity transactions. We have issued equity payable for services and have been able to reduce the balances in our balance sheet. For the people who believe in this company they know what we are doing and are happy to take the equity in the company.
We had a really good quarter compared to all of the previous ones. We had revenues of $550K – the highest we have ever seen, but when we had done our forecasting we had mentioned sales. The sales figure excludes deferred revenue. When we make a sale, a portion of that sale has to be deferred because we are providing services over a period of time. Had we taken into account the sales for the quarter were $350K. That’s about $607 shy of what we did in sales for the first 6 months. So in 1 quarter, we pretty much matched what we did in the first 6 months.
Total Sales for the year we did about $100K. It is not a number that is very visible in our financials, but I did want to point it out as revenue plus deferred revenue. Our net loss is $16M. $12.5 of that loss is non-cash and $3.8M is cash use for operating activity. We’re lucky enough to have all of that belief in our company and like to take stock in lieu of payment, but a big chunk of that (almost $6M) was due to a change in derivative liability due to the fact that the convertible notes we were selling at one point didn’t have a fixed conversion price. We were forced to book this derivative liability in order to compensate for that. We have since changed this and all of our convertible notes have a fixed price. Even though that $16M loss looks big, a lot of that is non-cash transactions.
R&D – We don’t have this in our books right now b/c all of our products are already in market. R&D is usually done when you are bringing a product to market. We have spent about $2M on development – so that’s not a number easily found in the financials.
Lorsch:
I want to apologize for the raspyness in my voice but it is due to the construction. We have expanded the size of our operations by another 3,000 ft. and they are actually knocking holes in the walls which is creating dust in the office. So we are fighting with the breathing through expansion over here. We are actually building an international sales center so that we can do webinar broadcasts to China, India, and Europe from a facility in the corporate office as well as moving some of the outbound sales and service individuals that we have been using through 3rd party vendors. So we’re excited about that except for the dust at the time of this call.
I want to comment on what Ingrid just said. There are numerous people on bulletin board sites who have contacted us in regards to the R&D suggesting that because they do not see R&D that there really is no activity and therefore how do we have a real product in the market. Everyone should be clear that the reason you don’t see R&D is because we have real products in the market. Having said that we have spent millions of dollars in development of our personal health record, our MMR Pro product, our patent portfolio, and our patient view products. For example, when you take our personal health record, which just had a complete face-lift, and you spend $200-$400K modifying and updating that product or add new features and benefits – those expenses get expensed because the product is already out there. Unlike development expenses that we may incur for a brand new website like the Chartis website we brought online, the expenses jut go to operations. They don’t go to an R&D or development. If you are interested in the specific details of the amount of monies that we spend on ongoing development with our products and ongoing R&D to keep them in the marketplace and keep them competitive by adding new features – we will be more than happy to return a call through investor relations to give you additional details. I can tell you that with our partners in India we will easily spend $500-$600K/year maintaining, building, and re-enforcing existing websites, not including the launching of new websites and that’s in addition to telecommunications partners, outside independent designers, changes to graphics and new features, etc.
Ingrid:
The reason our costs to goods sold was so high this time around was that we rebuilt our e-safe site. www.MyEsafeDepositBox.com
We also have our new Chartis Domestic site too. A lot of that has landed in our cost to goods sold and that is the reason why our first profit was lower than normal.
Lorsch:
Question and Answer Portion
Many people confuse GE, Allscripts, and others as direct competition. Why waste money on MMR Pro when everything will be digital anyway? Please compare MMR Global to companies like Allscripts. What are the advantages and disadvantages of the companies and being a shareholder of each?
MMR Pro is an entry level EMR. The good news about MMR Pro is that in order to get to an EMR you have to digitize all of your documents. Otherwise, you have a paper-based system and an EMR system and next time a patient walks into the office you are dealing with their old paper files vs. the electronic file you are trying to exploit by pushing to a full blown EMR. MMR Pro is the shortest distance between two points. MMR Pro is the first step to integration towards any GE, Allscripts, or other competitor. MMR Pro is a tool that not only allows you to go to a full blown EMR, but it also allows you to continue to operate the full blown EMR because patients will continue to walk into your office with paper files from other hospitals, doctors, professions, vaccination records, copies of certificates where someone may have a health emergency on the road or traveling. MMR Pro is a gateway to any EMR. Conversely MMR as a Personal Health Record is the only personal health record that I know of that talks to every EMR out there in the world. A company can have Allscripts, Cerner, GE, or any existing EMR and as long as they have the ability to export to fax or export an image they have the ability to interface with our personal health record regardless of the format of the information that is coming out of the EMR. That’s unlike just about any product in the Health It space today. Most EMR’s talk to a specific PHR. If you are a patient and you get sick in New York and you go to Sloan Kettering and then you visit Los Angeles and you go to UCLA, you have to have your Sloan Kettering medical record converted to paper and handed to a physician at UCLA. If you have your records in your MMR account or you use a doctor who is scanning records through an MMR Pro account – those records through patient view or our PHR can be made available to anyone anywhere in the world at pretty much two mouse clicks through your lifeline #. We do not compete with GE, we do not compete with Allscripts, we do not compete with EMR companies. We are additive to EMR companies and we are also the first step to an installation of any EMR company. If you assume that paper is not going to go away within the next 5-10 years than we have along time ahead of us from which to integrate our product into full blown EMRs and as long as there is full blown EMRs there are patients that are still going to need copies of their medical records to take for second opinions, take to schools to prove vaccinations, take to passport offices in order to get visas. As long as there is that need to get paper into an EMR or to get information out of an EMR – MMR has it covered on both ends of the spectrum.
Is it possible that the new House of Representatives will continue the health reform bill?
Nobody really knows? The house is going to “flex their muscles” and try to make changes to healthcare reform. This company has a set of very unique relationships and good relationships on both the democratic side and the republican side. Our director Hector Barreto was head of the SBA in the Bush administration for 5 years and made a lot of friends in Congress presiding over both 9/11 and Katrina as head of the SBA and disaster relief. Richard Gephardt is on our board of advisors and has actively supported this company in terms of making sure that colleagues in the house and senate of the democratic side understand what we do, opening doors to meet people that need to know about the different types of services that are available for managing personal health records. As a result of these kinds of relationships and many, many more that would just take the entire hour if I were to discuss them on this call – we think that the company is positioned to take advantage of healthcare reform whichever way it goes and whichever party is initiating what its going to look like. We have unique access to talk to people when we need to talk to them and their staff on both the democratic and republican side of the house. We have a very simple, user friendly product, and I am optimistic that the change in house is going to be good for MMR. It will give us more of an opportunity to penetrate the market than we have in the past when people were fighting rather than doing.
When will Kodak complete their new equipment for MMR?
We expect to see the new machines in the 1st quarter, Kodak people have been here almost everyday this week, and we actually have new prototypes of the new machines running in our offices and it is going to streamline and simplify the way MMR Pro works for any healthcare professional and we think it is going to make MMR Pro a lot easier to be that gateway to an EMR in order to enable people to use it for a transition to a full blown EMR.
When will Kodak conduct its business in other countries?
At this point in time I would characterize our relationship with Kodak as excellent. And pretty much if I want to make a presentation to a particular Kodak market outside the USA the doors have been opened to me. I have met with the people in China because we are very active in China and China encompasses all of the Asia Pacific including Australia, Singapore, and a lot of markets that we have patents granted in and there is a lot of excitement about selling and distributing our products in those parts of the world. Everything takes time. Right now we are focused on hitting the cover off the ball in the US, we are focused on taking advantages of the opportunities that have been presented to us in China, and as we move into other major markets such as India and Europe, I think we will be able to pick up the phone and take advantage of the relationship with Kodak. Clearly they are in business in making money, they want to sell products, our system uses their products, and they are interested in doing anything they can to help us.
Is Kodak interested enough in buying into our company?
We meet regularly with very Senior people at Kodak. Over the course of the next 12-18 months this company could sell more of a particular category of products in document imaging than Kodak’s entire reseller group. We are definitely on their radar. Whether or not they would buy into the company or purchase the company is anybody’s guess. I can tell you that should MMR execute on its numbers with Kodak than everybody in Rochester will definitely know that we exist and we also represent a meaningful chunk of business to the company.
What are the countries we are headed for after India?
We are actively talking in Australia, Japan, India, and to some lesser degree in Europe. There is an interesting phenomenon going on in England right now with regards to Personal Health Records becoming mandated and we are part of that dialogue and have been approached by a variety of licensees who would be interested in actually representing our product to the European government.
Ingrid:
I wanted to go back to discuss the question that deals with competition.
I want to remind everybody that we are not just MMR. We have the EsafeDepositBox and this is a BIG untapped market as well where it can lend itself to many many other applications like loan processing, safe deposit boxes, and MMR like these other companies is not just Personal Health Records. We have other avenues which will bring in a lot of revenues for us and so that is another benefit of being a shareholder or stockholder in MMRF. You are not just putting your eggs all in one basket. We have our hands and fingers in many many different places at this point and we are trying to tap all of the tremendously big untapped markets.
Lorsch
In fact as recently as yesterday I was contacted by a network of law firms and legal consortium who basically has modified their personal injury practice into credit restructuring and we are talking about establishing an EsafeDepositBox for any individual who becomes a client of this law firm where they would be able to use the EsafeDepositBox as their primary contact telephone number, they would be able to take all the calls from creditors, they would be able to confirm any papers that go back and forth with creditors and credit restructuring and this particular firm sees thousands of new clients on a quarterly basis and this would be a major step into the legal profession which is a logical place to go with MyEsafeDepositBox.
Can you comment on the prospects for incorporation of an EMR offering and does Dr. Chrono look promising?
We have been very clear and very vocal in the fact that we want to leverage our relationships in the doctor’s offices into something that we can expand and introduce new products. Clearly we recognize that times change, technologies change, and opportunities in Health It are at a very beginning basis. This company has in its sights the objective of expanding our footprint in a doctor’s office and not only sell a full blown EMR, but to sell just about any Health Information technology product or service that we can logically bring into a physicians office. We don’t necessarily think that way we do that is by building it, but our strategy is to acquire it. We are actively talking with a number of companies in the EMR business, in the transcription business, in other information technology companies that service the healthcare community about rolling up their products and services through outright acquisition, investment or licensing of those products and services through our network as MMR offerings. The prospect of incorporation of an EMR offering is very very very good. The prospect of other offerings that many of you never even thought of yet and are whole new concepts for this industry are very very very good. With regard to Dr. Chrono – they have an excellent product, we think that there is an opportunity. Unfortunately when you start talking to companies about anything, everyone has an idea of what there valuation is and because of the pressure that has been on the company’s stock over the past couple of months, we do not want to be anything but extremely responsible about how we use those shares and available cash to do acquisitions. Having said that, I would say that there is a possibility that you would see a Dr. Chrono MMR PHR working on their platform in the near future. I am not suggesting there are any formalized agreements at this time, but they are an excellent company, excellent product, excellent group of guys, but they do not have a PHR. Where that could lead could be small investment. There are a lot of companies interested in Dr. Chrono. From our standpoint, the possibility of having a PHR interface with them is good. I am optimistic about it. Having said that, I am optimistic about building MMR’s PHR into just about everyone’s EMR. The only PHR’s out there now are in conjunction with an EMR and are designed for that EMR only. Our PHR, again, will work with ANY EMR. Possibility of integration with Dr. Chrono is linking our PHR to their EMR in an Ipad type of offering and we are excited about that. I would be very very surprised if the company did not announce several relationships pertaining to EMR offerings within the relatively not too distant future. In fact, we are involved in other relationships that could involve investment and/or distribution with other high technology, hi-touch health information products that we would expect we would be sharing with you very soon. When we structure these relationships we are looking to structure them not only as investment or distribution for MMR, but one of the criteria is we want these companies to be selling our products and services. If the street doesn’t go North, South, East, and West then the burden of the success of that relationship is based on us picking the right horse. I don’t look at this as going to the track, I look at this as making responsible decisions that if we’re going to sell someone else’s product then I want their management team to be totally invested in what we have and to sell our product as well.
The stock has been under tremendous pressure. When things are good we get letters that are almost like love notes. When things are headed in the other direction a lot of that support turns into sarcasm and hostility towards the company and unfortunately we have to deal with it. I have made it this company’s policy to respond very very directly to every investor comment, call, and communication that comes in here.
What is the company doing to address the huge sales G&A expense?
We did not spend $16M in 9 months to generate $52K worth of revenue. $12.5M non-cash accounting impact that we have to deal with as a result of the company using its convertible notes and other forms of financing in order to avoid and not have to rely on toxic and controversial forms of financing such as the Duchess financing. We are going out of our way to do whatever we can do to generate cash and capital, generate money for operations in ways that are most favorable for shareholders. Unfortunately, not everyone agrees with everything that we have to do. Having said that, of that $16M, $12.5M is non-cash items that comes from managements work to finance this company the most responsible way we possibly can or to be able to provide the company with services that are necessary to grow this business without burning cash so that we can preserve cash.
Ingrid:
Our revenue was about $550K, but that doesn’t necessarily mean our sales were $700K.
Bob:
If we sell an account for $99.95 direct to a consumer we are recognizing 1/12 of that in the month that we made the sale and 1/12 of it every month throughout the year that we have to provide the service for that particular client. If an organization like NRA generates revenue to the company of $40K on a monthly basis, you as a shareholder will see a financial statement that shows $3K because we only get to recognize 1/12 of it. That’s the whole concept of deferred revenue. So in fact the amount that we have in a pipeline at any time can be looked at as not only pipeline or forecast but actually as deferred revenue where we may have actually even been paid for those services but cannot recognize them until we have exhausted the contractual period that we have to provide services to the consumers.
The R&D expense – we don’t get the luxury of putting it on our balance sheet as an R&D expense because these are real live products, not dreams of someone sitting in an office about a product that is going to come out in the future.
How much is charitable work costing shareholders? Why are expenses so high?
All charitable work and contributions come out of my pocket (Robert Lorsch). The company pays for nothing. However, the company gets the benefit of all the people I sit with on the various boards as either investors, strategic partners, or other relationships that will benefit the company, and those relationships are coming off my back. They are coming off Kira’s back. They are coming off my 40 years of relationships that I have built up in advertising, marketing, sales, telecommunications, and in philanthropy. They are not being paid for by MMR.
While rubbing elbows, how many jetsetters have actually become shareholders in the company? If these people can open their wallets for charity, why can’t you convince them to open their wallets to invest in this “next billion dollar company” by putting it into a charitable trust?
Actually the concept of people form a charitable trust to make private investments that could return back to the charitable trust is something that’s a pretty good idea and I’ve been pitching it or advocating it to the philanthropic community for many many years. Having said that, those types of funds are usually not used in emerging growth companies. They are more institutional investment funds and the people that have those funds have money managers that manage that money in an institutional manner. Most of the founding shareholders of MyMedicalRecords pre-merger Favrille are people that could fall into the category of that “jetsetters”. Many of these people that I have met through philanthropy, through my personal life, through companies that I have run in the past, believed enough in me and this company to make an investment in MMR at very very early stages when there was no product. So we have done a pretty good job in getting a lot of people to become shareholders of the company. Many of those people are still shareholders of the company, to the best of my knowledge. And these people have supported the company pre-public, post-public, and continue to do what they can to tell friends, tell family, and participate in selling and marketing the company’s products, participating in some of the company’s convertible notes, and actively being involved in introducing the company to organizations and/or charitable groups, unions, or other types of companies that could sell or service the company’s products.
I understand we have delays in MMR Pro, but are those revenue projections still attainable? Are those possible to achieve?
Ingrid: Our projections are not on revenues, but are on sales.
Lorsch: Yes it is still possible. Having said that, this has been unlike any business that I have been in the past. Because there are so many changes that impact this company’s ability to generate sales. Let’s take the Chartis relationship – we anticipated Chartis launching with sales from International and Chartis is launching with sales from Domestic. We anticipated a certain amount of sales coming from MMR Pro and as a result in changes in product that Kodak has announced in changing their scanning equipment it impacts how fast we can get equipment to deliver into the field in order to generate MMR Pro accounts. We have a lot of activity right now surrounding our biotech assets. In fact, I would anticipate that over the next several weeks we will be able to discuss items that will not only represent revenue streams for the company over short term and long term, but may give the company the means to generate liquidity from leveraging of its biotech assets in ways we did not anticipate at all earlier this year. From a practical standpoint, yes these numbers are still possible to achieve. What is very difficult to predict is what buckets those monies are going to come from. Some of these things we anticipated were going to generate revenue as a 4th Q event or a 1st Q event have moved around and other items we did not anticipate seem to be coming to fruition on a much faster basis.
In the 10K we see NPP is doing very well. Give us an update on this, Coverdell, and others.
NPP in terms of MMR Pro has began to create a lot of activity and generate a lot of leads and also create sites for MMR Pro. We’re actually working with NPP on coming up with an MMR Pro Lite product that will enable small medical groups to sign up with the company without having to incur the expense of the higher end scanners. Kind of like an entry level scanner to MMR Pro.
Coverdell is continuing to grow and Alexian is in a transition to an in-house EMR system. We used to issue PHR’s to patients when they were coming out of the hospital, but now are working on implementing MMR Pro systems in doctors offices for Alexian. This is the thing I was talking about a few minutes ago – everything changes on a monthly and quarterly basis. A lot of the things we look at today are coming in ways that we could have never anticipated three months from now. It is all good news, but its very difficult to predict where revenue will be coming from.
What is the status of the deal with the large financial institution? Has any progress been made?
We’ve been working with a major financial institution for several years on an e-safe deposit box having to do with document delivery for refinancing of home mortgages. When people go into the bank or the savings and loan they will have an option to get their documents in plain paper or get their documents through our esafedepositbox and be offered this service on an ongoing basis. This project has been in development pretty much since the company went public and even prior to that date and I can say that there have been major developments with this and I am very positive on this as I have to spoke to these members as recent as this week. Additionally, as a result of what we are doing for this institution which has us shrouded in confidentiality agreements – it opens the door to building esafedeposit boxes for banks, and for other document delivery systems having to do with home mortgage.
It seems there are no more questions. I will comment going back to biotech:
The company is in possession of a lot of information as result of the Favrille trials that we believe is going to create a stream of licensing revenue and open the door to income from clinical trials revenue that 12 months ago we did not even conceive would exist. As a result of success with our patent portfolio and as a result of events I would hope to share with you in the next few weeks – I think that income from biotech could help mitigate the need for cash from other more controversial sources and I am not suggesting the company is going to abandon ways that it is currently generating liquidity from, but what I am saying is that there are some very very exciting things happening that could begin to bring cash into the company that would be licensing type income that could be deployed to grow the company’s core, primary business of Personal Health Records and Electronic Medical Records.
On behalf of Ingrid, Tony, and myself we thank you for participating in this call. If there are any additional questions, please contact Investor Relations. At this point everyone should know how to reach me about 24 hours a day. We work about 24 hours a day and this is one management team that is very committed and I appreciate the person who analogized our management team to the one of Apple and Steve Jobs earlier today. I wish everyone a very Happy Thanksgiving!