Our condensed consolidated financial statements included in
this Form 10-Q are as follows:
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2019
NOTE 1 – NATURE OF BUSINESS AND BASIS
OF PRESENTATION
The accompanying condensed consolidated financial statements
include OptimizeRx Corporation and its wholly owned subsidiaries (collectively, the “Company”, “we”, “our”,
or “us”).
We are a leading provider of digital health messaging via electronic
health records (EHRs), providing a direct channel for pharmaceutical companies to communicate with healthcare providers. Our cloud-based
solution supports patient adherence to medications by providing real-time access to financial assistance, prior authorization,
education and critical clinical information. Our network is comprised of leading EHR platforms and provides more than half a million
healthcare providers access to these services within their workflow at the point of care.
The condensed consolidated financial statements for the three
and six months ended June 30, 2019 and 2018 are unaudited and have been prepared pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments necessary to present fairly
our consolidated financial position as of June 30, 2019, and our results of operations and changes in stockholders’ equity
for the three and six months ended June 30, 2019 and 2018 and the statements of cash flows for the six months ended June 30, 2019
and 2018 have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated balance sheet
as of December 31, 2018 has been derived from the audited consolidated balance sheet as of that date.
Certain information and note disclosures, including a detailed
discussion about the Company’s significant accounting policies, normally included in our annual financial statements prepared
in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. These consolidated
condensed 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, 2018, as filed with the U.S. Securities and Exchange Commission
on March 12, 2019.
The results of operations for the three and six months ended
June 30, 2019 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been
made in the prior period’s condensed consolidated financial statements to conform to the current period’s presentation.
NOTE 2 – NEW ACCOUNTING STANDARDS
In February 2016, the Financial Accounting Standards Board (“FASB”)
issued new accounting guidance on leases. The accounting standard, effective January 1, 2019, requires virtually all leases to
be recognized on the balance sheet. Effective January 1, 2019, we adopted the standard using the modified retrospective method,
under which we elected the package of practical expedients and transition provisions allowing us to bring our existing operating
leases onto the consolidated balance sheet without adjusting comparative periods, but recognizing a cumulative-effect adjustment
to the opening balance of accumulated deficit on January 1, 2019. Under the guidance, we have also elected not to separate lease
and non-lease components in recognition of the lease-related assets and liabilities, as well as the related lease expense.
We have operating leases with terms greater than 12 months for
office space in three multitenant facilities, which are recorded as assets and liabilities. The lease on our headquarters space
in Rochester, Michigan expires November 30, 2022, with a three-year renewal option through 2025, with monthly rent payable at rates
ranging from $6,384 to $6,688. We have assumed renewal of the lease. We also have a lease on office space in Cranberry, New Jersey,
expiring in 2022 with monthly payments ranging from $2,707 to $2,808, as well as a small lease in Zagreb, Croatia expiring in 2022.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2019
NOTE 2 – NEW ACCOUNTING STANDARDS (continued)
Lease-related assets, or right-of-use assets, are recognized
at the lease commencement date at amounts equal to the respective lease liabilities, adjusted for prepaid lease payments, initial
direct costs, and lease incentives received. Lease-related liabilities are recognized at the present value of the remaining contractual
fixed lease payments, discounted using our incremental borrowing rate. Operating lease expense is recognized on a straight-line
basis over the lease term, while variable lease payments are expensed as incurred.
Upon adoption of the standard on January 1, 2019, we recorded
approximately $462,000 of right of use assets and $465,000 of lease-related liabilities, with the difference recorded in accumulated
deficit as the cumulative effect of change in accounting principle at that date.
For the three and six months ended June 30, 2019, the Company’s
lease cost consisted of the following components, each of which is included in operating expenses within the Company’s consolidated
statements of operations:
|
|
Three Months Ended
June 30,
2019
|
|
|
Six Months Ended
June 30,
2019
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
32,591
|
|
|
$
|
64,175
|
|
Short-term lease cost (1)
|
|
|
9,951
|
|
|
|
18,892
|
|
Total lease cost
|
|
$
|
42,542
|
|
|
$
|
83,067
|
|
(1) Short-term lease cost includes any
lease with a term of less than 12 months.
The table below presents the future minimum lease payments to
be made under operating leases as of June 30, 2019:
For the year ending December 31,
|
|
|
|
2019(a)
|
|
$
|
66,672
|
|
2020
|
|
|
135,759
|
|
2021
|
|
|
138,107
|
|
2022
|
|
|
100,107
|
|
2023
|
|
|
96,949
|
|
Thereafter
|
|
|
150,222
|
|
Total
|
|
|
687,816
|
|
Less: present value discount
|
|
|
66,944
|
|
Total lease liabilities
|
|
$
|
620,872
|
|
(a) For the remaining six-month period
beginning July 1, 2019.
The weighted average remaining lease term for operating leases
is 5.5 years and the weighted average discount rate used in calculating the operating lease asset and liability is 4.5%. Cash paid
for amounts included in the measurement of lease liabilities is $64,175. For the six months ended June 30, 2019, payments on lease
obligations were $51,937 and amortization on the right of use assets was $52,592.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2019
NOTE 2 – NEW ACCOUNTING STANDARDS (continued)
Recent Accounting Pronouncements
In June 2016, the FASB issued Accounting Standards Update (“ASU”)
2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides
for a new impairment model, which requires measurement and recognition of expected credit losses for most financial assets and
certain other instruments, including but not limited to accounts receivable and available for sale debt securities. ASU 2016-13
will become effective for the Company on January 1, 2020 and early adoption is permitted. The Company is currently evaluating the
impact of this guidance on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill
by eliminating the second step of the goodwill impairment test. The second step measures a goodwill impairment loss by comparing
the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, a company
will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04
will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after
December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after
January 1, 2017. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement
(Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure
requirements on fair value measurements and will become effective for the Company on January 1, 2020 and early adoption is permitted.
The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
NOTE 3 – STOCKHOLDERS’ EQUITY
During the quarter ended June 30, 2019, in an underwritten primary
offering, we issued 1,769,275 shares of our common stock for gross proceeds of $23,000,575. In connection with this transaction,
we incurred equity issuance costs of $1,696,749 related to payments to the underwriter, advisors and legal fees associated with
the transaction, resulting in net proceeds to the Company of $21,303,826.
During the quarter ended June 30, 2018, in a private transaction,
we issued 1,666,669 shares of our common stock for gross proceeds of $9,000,000. In connection with this transaction, we incurred
equity issuance costs of $835,526 related to payments to advisors and legal fees associated with the transaction, resulting in
net proceeds to the Company of $8,164,474.
During the quarters ended June 30, 2019, and March 31, 2019,
respectively, we issued 60,295 shares and 89,826 shares of our common stock and received proceeds of $214,314 and $343,785 in connection
with the exercise of stock options under our 2013 equity compensation plan. We issued an additional 12,052 shares of our common
stock in the quarter ended March 31, 2019 in connection with the exercise of options using the net-settled method, whereby no cash
was received, but rather the exercise price was paid by the surrender of shares underlying the options. We also issued 130,001
shares of our common stock in the quarter ended March 31, 2019 in connection with restricted stock awards awarded in 2018. We issued
2,002 shares of our common stock and received proceeds of $4,920 in connection with the exercise of options in the quarter ended
June 30, 2018.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2019
NOTE 3 – STOCKHOLDERS’ EQUITY (continued)
Our Director Compensation Plan calls for issuance of 2,084 shares
per quarter to each independent director. In 2019, we issued 8,336 shares each quarter, valued at $106,834 and $135,043 for the
quarters ended March 31, and June 30, respectively. In 2018, we issued 6,249 shares valued at $28,875 and 8,336 shares valued at
$89,945 or the quarters ended March 31, and June 30, respectively.
Effective May 14, 2018, in connection with our listing on the
Nasdaq Capital Market, we implemented a reverse split of our common stock by exchanging each three shares of our common stock for
one share. The effect of this reverse split is presented in the accompanying condensed consolidated financial statements as if
it had been effective as of the beginning of the earliest period presented. We elected to round fractional shares up to the nearest
whole number rather than redeem them for cash, and as a result we issued 908 additional shares.
In March 2018, we issued 100,000 shares of common stock to a
subsidiary of WPP, plc, a shareholder at the time, in full payment of all amounts due under a co-marketing agreement that covered
certain WPP, plc agencies, whereby we shared a portion of our revenue with those agencies related to programs awarded to us by
those agencies. The shares were valued at $447,000, the market value of the stock on the date of issuance. The amount due was recorded
as a liability in revenue share payable at December 31, 2017.
NOTE 4 – STOCK BASED COMPENSATION
We use the fair value method to account for stock-based compensation.
We recorded $907,109 and $712,998 in compensation expense in the six months ended June 30, 2019 and 2018, 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 period as well as options issued in the current period.
The fair value of these instruments was calculated using the Black-Scholes option pricing model. There is $1,598,019 of remaining
expense related to unvested options to be recognized in the future over a weighted average remaining period of less than one year..
The total intrinsic value of outstanding options at June 30, 2019 is $16,328,517.
The company also recorded expense related to restricted stock
awards of $31,290 and $182,004 for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, there is $1,513,475
of remaining expense related to unvested restricted stock awards to be recognized in the future related to 140,000 shares of restricted
stock awards that are unvested at June 30, 2019.
NOTE 5 – CONTINGENCIES
Litigation
The Company is not currently involved in any legal proceedings.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2019
NOTE 6 – EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share.
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
406,617
|
|
|
$
|
280,509
|
|
|
$
|
413,146
|
|
|
$
|
91,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding used in computing earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,743,379
|
|
|
|
10,979,086
|
|
|
|
12,412,442
|
|
|
|
10,373,326
|
|
Effect of dilutive stock options, warrants, and unvested restricted stock awards
|
|
|
1,063,382
|
|
|
|
970,507
|
|
|
|
1,055,120
|
|
|
|
1,144,278
|
|
Diluted
|
|
|
13,806,761
|
|
|
|
11,949,593
|
|
|
|
13,467,562
|
|
|
|
11,517,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
0.01
|
|
NOTE 7 – SUBSEQUENT EVENTS
In July, 2019, we received proceeds of $86,621 and issued 20,164
shares of common stock in conjunction with the exercise of stock options. In accordance with ASC 855-10, we have analyzed events
and transactions that occurred subsequent to June 30, 2019 through the date these financial statements were issued and have
determined that we do not have any material subsequent events to disclose or recognize in these financial statements.