NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2017
NOTE
1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION
We
are a leading digital health aggregator of pharmaceutical sponsored services in the Electronic Health Records (EHR) space. Our
objective is to leverage our proprietary technology to provide on demand savings and clinical messaging within physician and patient
web based platforms, including EHR, e-prescribing platforms, pharmacies and Patient Portals. We have matured as a technology solutions
provider through our direct to physician solutions, which allow physicians to automatically display and distribute sample vouchers
and/or co-pay coupons electronically within the ePrescription platform to pharmacies on behalf of their patients. The OptimizeRx
solution is integrated into the ePrescribing or EHR applications, but can also be accessed on a mobile device as well as an application
on a prescriber’s desktop.
The
consolidated financial statements for the three and nine months ended September 30, 2017 and 2016, have been prepared by us without
audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management,
all adjustments necessary to present fairly our financial position, results of operations, and cash flows as of September 30,
2017 and 2016, and for the periods then ended, have been made. Those adjustments consist of normal and recurring adjustments.
The consolidated balance sheet as of December 31, 2016, has been derived from the audited consolidated balance sheet as of that
date.
Certain
information and note disclosures normally included in our annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with
a reading of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December
31, 2016, as filed with the SEC.
The
results of operations for the three and nine months ended September 30, 2017, are not necessarily indicative of the results to
be expected for the full year. Certain reclassifications have been made in our consolidated financial statements for the prior
periods to conform to the presentation of our consolidated financial statements for the current periods.
NOTE
2 – STOCKHOLDERS’ EQUITY
Our
Director Compensation plan calls for the issuance of 6,250 shares of common stock per quarter to each Independent Director. In
connection with this plan, we issued 18,750 shares in each of the quarters ended March 31, 2017, June 30, 2017 and September 30,
2017, valued at $15,375, $19,312, and $23,250, respectively. In connection with the same plan, we issued 12,500 shares in each
of the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016, valued at $13,125, $14,375, and $13,750, respectively.
As
described in greater detail in Note 4, related party transactions, in the quarter ended March 31, 2016, we made a one-time payment
of $720,415 to our previous CEO in lieu of issuing shares owed to him from prior years. A portion of this payment, $357,415, was
for 295,384 shares of common stock reflected in stock payable at December 31, 2015. We also redeemed 500,000 shares of common
stock held by this same previous CEO in the quarter ended June 30, 2017 at a price of $0.78 per share for a total payment of $390,000.
We
issued 50,000 shares of common stock in the quarter ended June 30, 2016 related to shares that were previously reflected in common
stock payable. In addition, we issued 69,519 shares of common stock during the nine months ended September 30, 2016 in connection
with the cashless exercise of previous option grants that were approaching expiration.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2017
NOTE
2 – STOCKHOLDERS’ EQUITY (continued)
We
issued 100,000 shares of common stock in connection with the settlement of litigation in the quarter ended June 30, 2016.
In
the quarter ended September 30, 2016, we issued 384,118 shares of common stock to an unrelated party in a private transaction
and received proceeds of $449,500. These proceeds were used to redeem 384,118 shares of common stock payable owed to our Senior
Vice President of Sales for $449,500 in lieu of issuing the shares, which were previously reflected in stock payable.
NOTE
3 – SHARE BASED PAYMENTS – OPTIONS
We
use the fair value method to account for stock-based compensation. We recorded $439,095 and $270,117 in compensation expense in
the nine months ended September 30, 2017 and 2016, respectively, related to options issued under our stock-based incentive compensation
plan. This includes expense related to options issued in prior years for which the requisite service period for those options
includes the current year, options granted in the current year and options repriced in the current year. The fair value of these
instruments was calculated using the Black-Scholes option pricing model. Information related to the assumptions used in this model
is set forth in the table below as well as in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. As of
September 30, 2017, there is $1,447,842 of unearned compensation expense through 2022.
|
|
2017
|
|
2016
|
|
|
|
|
|
Expected dividend yield
|
|
0%
|
|
0%
|
Risk free interest rate
|
|
1.47% - 1.49%
|
|
0.86% - 1.15 %
|
Expected option term
|
|
3.5 - 5.0 years
|
|
4.5 years
|
Turnover/forfeiture rate
|
|
0%
|
|
0%
|
Expected volatility
|
|
67% - 78%
|
|
91% - 99 %
|
NOTE
4 – RELATED PARTY TRANSACTIONS
In
the quarter ended March 31, 2016, after hiring a new CEO, we paid our previous CEO $720,415 in lieu of issuing him 595,384 shares
of common stock based on the 50-day average price of $1.21 per share. A total of 295,384 of these shares were due as a result
of previously granted stock awards in 2014 and 2015, for which shares had not yet been issued. These shares were recorded as stock
payable on the balance sheet at December 31, 2015. The remaining 300,000 shares were due in connection with the purchase of a
patent from the previous CEO in 2010. These shares were recorded as accounts payable – related party on the balance sheet
at December 31, 2015. The difference between the value the shares were initially recorded at in 2010 and the amount they were
redeemed at in 2016 was recorded as additional paid in capital.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER
30, 2017
NOTE
4 – RELATED PARTY TRANSACTIONS (continued)
Also,
in the quarter ended June 30, 2016, we entered into a separation agreement and an 18-month consulting agreement with our previous
CEO. The consulting agreement set forth the terms of the previous CEO’s continued relationship with our company. The consulting
agreement began on April 1, 2016. Under the terms of the consulting agreement, he received a monthly payment of $15,000, with
the potential for up to $54,000 in additional bonus payments during the term of the agreement. This agreement also called for
total payments of $12,425 related to insurance benefits. The separation agreement and consulting agreement replaced and superseded
all previously disclosed payments related to his severance and board fees.
In
the quarter ended June 30, 2017, we redeemed 500,000 shares of common stock owned by the previous CEO at a price of $0.78 per
share for a total of $390,000 and amended the consulting agreement to terminate on July 31, 2017 instead of the original end date
of September 30, 2017.
In
July 2016, we redeemed 384,118 shares of common stock owed to our Senior Vice President of Sales from stock grants awarded in
2014 and 2015, but not issued at the time of the grant. We redeemed these shares for a payment of $449,500.
NOTE
5 – COMMITMENTS AND CONTINGENCIES
Litigation
The
company is currently involved in no legal proceeding.
In
the quarter ended September 30, 2017, we dismissed, without prejudice, litigation that we had initiated that was pending in Missouri
state court against LDM Group, LLC and PDR Network, LLC.
NOTE
6 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10, we have analyzed our operations subsequent to September 30, 2017 through the date these financial
statements were issued and have determined that we do not have any material subsequent events to disclose in these financial statements.