Item 1. Financial Statements
Our condensed consolidated financial statements included in
this Form 10-Q are as follows:
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,114,294
|
|
|
$
|
18,852,680
|
|
Accounts receivable, net
|
|
|
10,805,191
|
|
|
|
7,418,025
|
|
Prepaid expenses
|
|
|
2,701,249
|
|
|
|
871,043
|
|
Total Current Assets
|
|
|
27,620,734
|
|
|
|
27,141,748
|
|
Property and equipment, net
|
|
|
156,550
|
|
|
|
176,014
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
14,740,031
|
|
|
|
14,740,031
|
|
Technology assets, net
|
|
|
5,722,762
|
|
|
|
6,238,453
|
|
Patent rights, net
|
|
|
2,442,409
|
|
|
|
2,550,587
|
|
Other intangible assets, net
|
|
|
4,835,327
|
|
|
|
5,151,102
|
|
Right of use assets, net
|
|
|
503,506
|
|
|
|
559,863
|
|
Other assets and deposits
|
|
|
35,943
|
|
|
|
80,727
|
|
Total Other Assets
|
|
|
28,279,978
|
|
|
|
29,320,763
|
|
TOTAL ASSETS
|
|
$
|
56,057,262
|
|
|
$
|
56,638,525
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable – trade
|
|
$
|
496,742
|
|
|
$
|
492,995
|
|
Accrued expenses
|
|
|
2,044,335
|
|
|
|
1,800,635
|
|
Revenue share payable
|
|
|
3,496,489
|
|
|
|
1,618,438
|
|
Current portion of lease obligations
|
|
|
119,512
|
|
|
|
115.431
|
|
Current portion of contingent purchase price payable
|
|
|
5,360,812
|
|
|
|
1,500,000
|
|
Deferred revenue
|
|
|
648,692
|
|
|
|
580,014
|
|
Total Current Liabilities
|
|
|
12,166,582
|
|
|
|
6,107,513
|
|
Non-current Liabilities
|
|
|
|
|
|
|
|
|
Lease obligations, net of current portion
|
|
|
387,654
|
|
|
|
448,753
|
|
Contingent purchase price payable, net of current portion
|
|
|
-
|
|
|
|
5,220,000
|
|
Total Non-current Liabilities
|
|
|
387,654
|
|
|
|
5,668,753
|
|
Total Liabilities
|
|
|
12,554,236
|
|
|
|
11,776,266
|
|
Commitments and contingencies (See Note 6)
|
|
|
-
|
|
|
|
-
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no issued and outstanding at June 30, 2020 or December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value, 500,000,000 shares authorized, 14,752,600 and 14,600,579 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
|
|
|
14,753
|
|
|
|
14,601
|
|
Additional paid-in-capital
|
|
|
80,194,282
|
|
|
|
78,272,268
|
|
Accumulated deficit
|
|
|
(36,706,009
|
)
|
|
|
(33,424,610
|
)
|
Total Stockholders’ Equity
|
|
|
43,503,026
|
|
|
|
44,862,259
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
56,057,262
|
|
|
$
|
56,638,525
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUE
|
|
$
|
8,783,230
|
|
|
$
|
7,006,291
|
|
|
$
|
16,367,832
|
|
|
$
|
12,215,725
|
|
COST OF REVENUES
|
|
|
3,639,016
|
|
|
|
2,687,143
|
|
|
|
6,880,779
|
|
|
|
4,270,623
|
|
GROSS MARGIN
|
|
|
5,144,214
|
|
|
|
4,319,148
|
|
|
|
9,487,053
|
|
|
|
7,945,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
6,200,027
|
|
|
|
3,839,105
|
|
|
|
12,802,118
|
|
|
|
7,332,894
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(1,055,813
|
)
|
|
|
480,043
|
|
|
|
(3,315,065
|
)
|
|
|
612,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
8,345
|
|
|
|
33,574
|
|
|
|
63,666
|
|
|
|
55,938
|
|
Change in Fair Value of Contingent Consideration
|
|
|
(30,000
|
)
|
|
|
(107,000
|
)
|
|
|
(30,000
|
)
|
|
|
(255,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSE)
|
|
|
(21,655
|
)
|
|
|
(73,426
|
)
|
|
|
33,666
|
|
|
|
(199,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME(LOSS) BEFORE PROVISION FOR INCOME TAXES
|
|
|
(1,077,468
|
)
|
|
|
406,617
|
|
|
|
(3,281,399
|
)
|
|
|
413,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NET INCOME (LOSS)
|
|
$
|
(1,077,468
|
)
|
|
$
|
406,617
|
|
|
$
|
(3,281,399
|
)
|
|
$
|
413,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
14,667,216
|
|
|
|
12,743,379
|
|
|
|
14,638,359
|
|
|
|
12,412,442
|
|
DILUTED
|
|
|
14,667,216
|
|
|
|
13,806,761
|
|
|
|
14,638,359
|
|
|
|
13,467,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
$
|
(0.07
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.22
|
)
|
|
$
|
0.03
|
|
DILUTED
|
|
$
|
(0.07
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.22
|
)
|
|
$
|
0.03
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2020
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2020
|
|
|
14,600,579
|
|
|
$
|
14,601
|
|
|
$
|
78,272,268
|
|
|
$
|
(33,424,610
|
)
|
|
$
|
44,862,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as board compensation
|
|
|
11,136
|
|
|
|
11
|
|
|
|
99,989
|
|
|
|
-
|
|
|
|
100,000
|
|
Shares issued for stock options exercised
|
|
|
35,032
|
|
|
|
35
|
|
|
|
112,117
|
|
|
|
-
|
|
|
|
112,152
|
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
754,512
|
|
|
|
-
|
|
|
|
754,512
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,203,931
|
)
|
|
|
(2,203,931
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2020
|
|
|
14,646,747
|
|
|
|
14,647
|
|
|
|
79,238,886
|
|
|
|
(35,628,541
|
)
|
|
|
43,624,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued as board compensation
|
|
|
7,748
|
|
|
|
8
|
|
|
|
100,019
|
|
|
|
-
|
|
|
|
100,027
|
|
Shares issued for stock options exercised
|
|
|
55,731
|
|
|
|
56
|
|
|
|
174,775
|
|
|
|
-
|
|
|
|
174,831
|
|
Stock-based compensation expense
|
|
|
42,374
|
|
|
|
42
|
|
|
|
680,602
|
|
|
|
-
|
|
|
|
680,644
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,077,468
|
)
|
|
|
(1,077,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2020
|
|
|
14,752,600
|
|
|
$
|
14,753
|
|
|
$
|
80,194,282
|
|
|
$
|
(36,706,009
|
)
|
|
$
|
43,503,026
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2019
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2019
|
|
|
12,038,618
|
|
|
$
|
12,039
|
|
|
$
|
48,725,211
|
|
|
$
|
(30,278,805
|
)
|
|
$
|
18,458,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of change in accounting principle related to lease accounting
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,229
|
)
|
|
|
(3,229
|
)
|
Shares issued for restricted stock awards
|
|
|
130,001
|
|
|
|
130
|
|
|
|
(130
|
)
|
|
|
-
|
|
|
|
-
|
|
Shares issued for stock options exercised
|
|
|
101,878
|
|
|
|
102
|
|
|
|
343,683
|
|
|
|
-
|
|
|
|
343,785
|
|
Shares issued as board compensation
|
|
|
8,336
|
|
|
|
8
|
|
|
|
106,026
|
|
|
|
-
|
|
|
|
106,034
|
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
530,312
|
|
|
|
-
|
|
|
|
530,312
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,529
|
|
|
|
6,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2019
|
|
|
12,278,833
|
|
|
|
12,279
|
|
|
|
49,705,102
|
|
|
|
(30,275,505
|
)
|
|
|
19,441,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public offering of common shares for cash, net of offering costs
|
|
|
1,769,275
|
|
|
|
1,769
|
|
|
|
21,302,057
|
|
|
|
-
|
|
|
|
21,303,826
|
|
Shares issued for stock options exercised
|
|
|
60,295
|
|
|
|
61
|
|
|
|
214,253
|
|
|
|
-
|
|
|
|
214,314
|
|
Shares issued as board compensation
|
|
|
8,336
|
|
|
|
8
|
|
|
|
135,035
|
|
|
|
-
|
|
|
|
135,043
|
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
408,087
|
|
|
|
-
|
|
|
|
408,087
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
406,617
|
|
|
|
406,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2019
|
|
|
14,116,739
|
|
|
$
|
14,117
|
|
|
$
|
71,764,534
|
|
|
$
|
(29,868,888
|
)
|
|
$
|
41,909,763
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
|
|
For the Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(3,281,399
|
)
|
|
$
|
413,146
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation, amortization, and non-cash lease expense
|
|
|
1,040,463
|
|
|
|
425,873
|
|
Stock-based compensation
|
|
|
1,435,156
|
|
|
|
938,399
|
|
Stock issued for board services
|
|
|
200,027
|
|
|
|
241,077
|
|
Provision for loss on accounts receivable
|
|
|
40,000
|
|
|
|
-
|
|
Change in fair value of contingent consideration
|
|
|
30,000
|
|
|
|
255,000
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(3.427,166
|
)
|
|
|
(966,658
|
)
|
Prepaid expenses and other assets
|
|
|
(1,785,422
|
)
|
|
|
(202,036
|
)
|
Accounts payable
|
|
|
3,747
|
|
|
|
785
|
|
Revenue share payable
|
|
|
1,878,051
|
|
|
|
55,824
|
|
Accrued expenses and other liabilities
|
|
|
186,682
|
|
|
|
(511,976
|
)
|
Deferred revenue
|
|
|
68,678
|
|
|
|
158,766
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
(3,611,183
|
)
|
|
|
808,200
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(24,998
|
)
|
|
|
(47,739
|
)
|
Purchase of intangible assets
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(24,998
|
)
|
|
|
(1,047,739
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, net of commission costs
|
|
|
286,983
|
|
|
|
22,163,636
|
|
Expenses related to issuance cost of common stock
|
|
|
-
|
|
|
|
(301,711
|
)
|
Payment of contingent consideration
|
|
|
(1,389,188
|
)
|
|
|
-
|
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
(1,102,205
|
)
|
|
|
21,861,925
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(4,738,386
|
)
|
|
|
21,622,386
|
|
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
|
18,852,680
|
|
|
|
8,914,034
|
|
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
|
$
|
14,114,294
|
|
|
$
|
30,536,420
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Intangible asset additions included in accounts payable
|
|
$
|
-
|
|
|
$
|
500,000
|
|
Non-cash effect of cumulative adjustments to accumulated deficit
|
|
$
|
-
|
|
|
$
|
3,229
|
|
Lease liabilities arising from right of use assets
|
|
$
|
-
|
|
|
$
|
672,809
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2020
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, 2020 and 2019 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, 2020, and our results of operations, changes in stockholders’ equity for
the three and six months ended June 30, 2020 and 2019 and the statements of cash flows for the six months ended June 30, 2020 and
2019 have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated balance sheet as
of December 31, 2019 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, 2019, as filed with the U.S. Securities and Exchange Commission
on March 26, 2020.
We operate in one reportable segment. The results of operations
for the three and six months ended June 30, 2020 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
Recently adopted
In June 2016, the Financial Accounting Standards Board (the
“FASB”) issued 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 that 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 was effective for the Company on January 1, 2020. The adoption of this standard did not have a material
effect on our financial position, results of operations, or cash flows.
In August 2019, 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 became effective for the Company on January 1, 2020. The adoption of this standard
did not have a material effect on our financial position, results of operations, or cash flows.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2020
NOTE 2 – NEW ACCOUNTING STANDARDS (continued)
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 adoption of this standard did not have a material effect on our financial position, results of operations,
or cash flows.
Not yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to improve consistent application and
simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies
and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 12, 2020,
with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position,
results of operations, or cash flows.
NOTE 3 – LEASES
We have operating leases for office space in three multitenant
facilities with lease terms greater than 12 months, which are recorded as assets and liabilities on our balance sheet. These leases
include our corporate headquarters, located in Rochester, Michigan, a customer service facility in Cranbury, New Jersey, and a
technical facility in Zagreb, Croatia. Certain leases contain renewal options and, for the headquarters lease, we have assumed
renewal. 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. Amortization of the right of use assets is recognized as non-cash lease expense on a straight-line basis over the lease term,
while variable lease payments are expensed as incurred. Short term lease costs include month to month leases in shared office space
facilities, such as WeWork, or similar locations.
For the three and six months ended June 30, 2020, the Company’s
lease cost consisted of the following components, each of which is included in operating expenses within the Company’s condensed
consolidated statements of operations:
|
|
Three Months
Ended
June 30,
2020
|
|
|
Six Months
Ended
June 30,
2020
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
32,814
|
|
|
$
|
65,627
|
|
Short-term lease cost (1)
|
|
|
36,186
|
|
|
|
80,815
|
|
Total lease cost
|
|
$
|
69,000
|
|
|
$
|
146,442
|
|
|
(1)
|
Short-term lease cost includes any lease with a term
of less than 12 months.
|
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2020
NOTE 3 – LEASES (continued)
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 condensed
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, 2020:
As of June 30, 2020
|
|
|
|
|
|
|
|
2020(a)
|
|
$
|
69,119
|
|
2021
|
|
|
140,367
|
|
2022
|
|
|
102,367
|
|
2023
|
|
|
99,209
|
|
2024
|
|
|
80,375
|
|
Thereafter
|
|
|
70,224
|
|
Total
|
|
|
561,661
|
|
Less: imputed interest
|
|
|
54,495
|
|
Total lease liabilities
|
|
$
|
507,166
|
|
(a) For the six-month period beginning
July 1, 2020.
The weighted average remaining lease term at June 30, 2020 for
operating leases is 4.7 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 was $57,019 and $64,175 for the six months ending
June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020 and 2019, payments on lease obligations were $68,900
and $51,937, respectively, and amortization on the right of use assets was $56,357 and $52,592, respectively.
NOTE 4 – STOCKHOLDERS’ EQUITY
During the quarters ended June 30, 2020, and March 31, 2020
we issued 55,731 shares and 35,032 shares of our common stock, respectively, and received proceeds of $174,775 and $112,117, respectively,
in connection with the exercise of stock options under our 2013 equity compensation plan.
During the quarters ended June 30, 2019 and March 31, 2019,
we issued 60,295 shares and 101,878 shares of our common stock, respectively, and received proceeds of $214,314 and $343,785, respectively,
in connection with the exercise of stock options under our 2013 equity compensation plan. 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.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2020
NOTE 4 – STOCKHOLDERS’ EQUITY (continued)
We also issued 42,374 shares in the six months ended June 30,
2020 in connection with restricted stock awards as described in more detail in Note 5 – Stock Based Compensation.
Our Director Compensation Plan calls for issuance of shares
of common stock each quarter to each independent director. In 2020, we issued 11,136 shares valued at $100,000 in the quarter ended
March 31, 2020 and 7,748 shares valued at $100,027 in the quarter ended June 30, 2020. 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.
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.
NOTE 5 – STOCK BASED COMPENSATION
We use the fair value method to account for stock-based compensation.
We recorded $1,021,787 and $907,109 in compensation expense in the six months ended June 30, 2020 and 2019, 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 $1,867,549 of remaining
expense related to unvested options to be recognized in the future over a weighted average remaining period of approximately 1.3
years. The total intrinsic value of outstanding options at June 30, 2020 was $12,281,047.
The company also recorded expense related to restricted stock
awards of $413,369 and $31,290 for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, there was $1,039,157
of remaining expense related to unvested restricted stock awards to be recognized in the future related to 132,374 shares of restricted
stock awards that were unvested at June 30, 2020. A total of 42,374 shares related to these restricted stock awards vested in 2020
and were issued during the six months ended June 30, 2020.
NOTE 6 – CONTINGENCIES
Litigation
The Company is not currently involved in any legal proceedings.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2020
NOTE 7 – EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and
diluted earnings (loss) per share.
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,077,468
|
)
|
|
$
|
406,617
|
|
|
$
|
(3,281,399
|
)
|
|
$
|
413,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding used in computing earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,667,216
|
|
|
|
12,743,379
|
|
|
|
14,638,359
|
|
|
|
12,412,442
|
|
Effect of dilutive stock options, warrants, and unvested restricted stock awards
|
|
|
-
|
|
|
|
1,063,382
|
|
|
|
-
|
|
|
|
1,055,120
|
|
Diluted
|
|
|
14,667,216
|
|
|
|
13,806,761
|
|
|
|
14,638,359
|
|
|
|
13,467,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.07
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.22
|
)
|
|
$
|
0.03
|
|
Diluted
|
|
$
|
(0.07
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.22
|
)
|
|
$
|
0.03
|
|
No calculation of diluted earnings per
share is included for 2020 as the effect of the calculation would be antidilutive. The number of common shares potentially issuable
upon the exercise of certain options that were excluded from the diluted loss per common share calculation in 2020 was 826,777
and 782,575 shares in the three and six months ended June 30, 2020, respectively, related to options, and 132,374 shares related
to restricted stock for the three and six months ended June 30, 2020. This results in total shares excluded from the calculation
of 959,151 and 914,949 for the three and six month periods ended June 30, 2020, respectively.
NOTE 8 – SUBSEQUENT EVENTS
In July 2020, we received proceeds of $193,768 and issued 64,261
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, 2020 through the date these financial statements were issued and have determined that
we do not have any other material subsequent events to disclose or recognize in these financial statements.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information,
including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the
assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,”
“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,”
“plan,” “may,” “will,” “would,” “will be,” “will continue,”
“will likely result,” and similar expressions. We intend such forward-looking statements to be covered by
the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and
are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based
on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially
from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated
basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital,
interest rates, competition, cybersecurity, and generally accepted accounting principles. These risks and uncertainties should
also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including additional factors that could materially
affect our financial results, is included herein and in our other filings with the SEC.
Overview
The full extent of the impact of the COVID-19 pandemic on our
business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict
at the present time. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures,
including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence,
and practice social distancing when engaging in essential activities. We anticipate that these actions and the global health crisis
caused by COVID-19 will negatively impact business activity across the globe. While we have not observed any noticeable impact
on our revenue related to these conditions in the recently completed fiscal quarter, or through the date of this filing, we cannot
estimate the impact COVID-19 will have in the future as business and consumer activity decelerates across the globe.
In March 2020, we enacted precautionary measures to protect
the health and safety of our employees and partners. These measures include closing all offices, having employees work from home,
and eliminating all travel. While having employees work from home may have a negative impact on efficiency and may result in negligible
increases in costs, it does not impact our ability to execute on our contracts or deliver our core services. Our offices remain
closed and we continue to prohibit travel through the date of this filing and expect to continue operating in this fashion for
the foreseeable future. Our customers provide essential services in the healthcare industry and we believe that our digital communication
technology is more important than ever in this environment. However, our revenue often comes from advertising or marketing budgets,
and in a sustained economic downturn, those categories of spending may be cut.
We will continue to actively monitor the situation and may take
further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that
we determine are in the best interests of our employees, customers, partners and stockholders. It is not clear what the potential
effects any such alterations or modifications may have on our business, including the effects on our customers, partners, or vendors,
or on our financial results.
Company Highlights through July 2020
1.
|
Revenue was a record $8.8 million in the second quarter of 2020, up 25% versus the same year-ago quarter.
|
|
|
2.
|
Revenues for the six months ended June 30, 2020 was $16.4 million, a 34% increase over the same period in 2019.
|
|
|
|
Gross profit was $5.1 million in the second quarter of 2020, up 19% as compared to the same year-ago quarter.
|
|
|
3.
|
Finalized an agreement with a partner with a large Epic and Cerner footprint, bringing access to additional healthcare providers in a hospital setting.
|
|
|
4.
|
We launched a new technology solution aimed at increasing speed to therapy for patients by providing timely access to enrollment forms for specialty drugs within the provider workflow and we already have three active programs.
|
|
|
5.
|
Launched TelaRep™, a digital health tool that enables physicians to connect to pharmaceutical sales representatives via on-demand video consults within a physician’s existing EHR workflow.
|
|
|
6.
|
We focused on the process of converting our active clients to enterprise contracts covering multiple brands and products to further entrench our longstanding relationships.
|
|
|
7.
|
We expanded our Board of Directors, adding Greg Wasson, former President and CEO of Walgreens Boots Alliance, and a veteran of the retail pharmacy industry and a valuable and timely addition to our board as we look to enhance patient connectivity at the point-of-dispense.
|
Our success in acquiring, integrating and expanding into new
EHR/eRx platforms continues to grow as well. For the remainder of 2020, we expect to expand our reach to physicians, pharmacies
and patients, and also increase the utilization of our existing partners as they improve their workflow and provider reach. With
the growth of both our pharmaceutical products and our distribution network, we expect that our messaging solutions, as well as
our patient engagement activities, will continue to increase and show strong growth throughout the year.
Results of Operations for the Three and Six Months Ended
June 30, 2020 and 2019
Revenues
Our total revenue reported for the three months ended June 30,
2020 was approximately $8.8 million, an increase of 25% over the approximately $7.0 million from the same period in 2019. Our total
revenue for the six months ended June 30, 2020 was approximately $16.4 million, an increase of 34% over the approximately $12.2
million from the same period in 2019. The increased revenue in both periods resulted primarily from increases in sales in our messaging
products and patient engagement products, including from our acquisition of RMDY Health in 2019. We do not breakout revenue by
service at this stage, but as we achieve greater scale we plan to determine the best way to present the growth by service.
Cost of Revenues
Our cost of revenue percentage, comprised primarily of revenue
share expense, increased as a percentage of revenues in both the three and six month periods ended June 30, 2020, as compared to
the same periods in 2019, as set forth in the table below. This increase was a result of product mix. Both 2019 periods contained
an unusually high percentage of launch assistance services and other nonrecurring revenue that was not subject to revenue share
expense. As we have previously discussed, we expect our cost of revenues to normalize at 40.0% or lower for 2020.
|
|
Three Months Ended
June 30
|
|
|
Six Months Ended
June 30
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues %
|
|
|
41.4
|
%
|
|
|
38.4
|
%
|
|
|
42.0
|
%
|
|
|
35.0
|
%
|
Gross Margin %
|
|
|
58.6
|
%
|
|
|
61.6
|
%
|
|
|
58.0
|
%
|
|
|
65.0
|
%
|
Gross Margin
As reflected in the table above, our gross margin decreased
in both 2020 periods from the prior year periods. As discussed under cost of revenues above, we had an unusually favorable product
mix in the 2019 periods that had a positive impact our margin in 2019. Our gross margin for the full year of 2019 was 62.7%. Our
gross margin was 57.3% in the first quarter of 2020 and improved to 58.0% in the second quarter. We expect our gross margin to
improve on a quarter over quarter basis for the balance of the year, with a target of 63.0% for the year..
Operating Expenses
Operating expenses increased from approximately $3.8 million
for the three months ended June 30, 2019 to approximately $6.2 million for the same period in 2020. Operating expenses increased
from approximately $7.3 million for the six months ended June 30, 2019 to approximately $12.8 million for the same period in 2020.
Overall, the increase resulted from our efforts to expand our product line and build out our organization to establish a strong
base for current and future growth. The detail by major category is reflected in the table below.
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, Wages, & Benefits
|
|
$
|
3,176,460
|
|
|
$
|
2,101,309
|
|
|
$
|
6,382,597
|
|
|
$
|
3,790,343
|
|
Stock-based Compensation
|
|
|
780,670
|
|
|
|
543,130
|
|
|
|
1,635,182
|
|
|
|
1,179,476
|
|
Professional Fees
|
|
|
186,834
|
|
|
|
131,690
|
|
|
|
672,304
|
|
|
|
359,088
|
|
Board Fees
|
|
|
51,375
|
|
|
|
34,250
|
|
|
|
102,750
|
|
|
|
68,500
|
|
Investor Relations
|
|
|
28,677
|
|
|
|
22,081
|
|
|
|
48,127
|
|
|
|
43,817
|
|
Consultants
|
|
|
168,263
|
|
|
|
51,640
|
|
|
|
259,678
|
|
|
|
95,500
|
|
Advertising and Promotion
|
|
|
230,911
|
|
|
|
163,903
|
|
|
|
410,310
|
|
|
|
354,713
|
|
Depreciation, Amortization, and Non-cash Lease Expense
|
|
|
520,794
|
|
|
|
235,571
|
|
|
|
1,040,463
|
|
|
|
425,872
|
|
Development and Maintenance
|
|
|
607,003
|
|
|
|
221,891
|
|
|
|
1,165,661
|
|
|
|
398,109
|
|
Integration Incentives
|
|
|
207,973
|
|
|
|
47,914
|
|
|
|
415,946
|
|
|
|
89,792
|
|
Office, Facility, and Other
|
|
|
227,956
|
|
|
|
127,459
|
|
|
|
381,477
|
|
|
|
246,511
|
|
Travel and Entertainment
|
|
|
13,111
|
|
|
|
158,267
|
|
|
|
287,623
|
|
|
|
281,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expense
|
|
$
|
6,200,027
|
|
|
$
|
3,839,105
|
|
|
$
|
12,802,118
|
|
|
$
|
7,332,894
|
|
The largest increases in operating expenses are related to salaries,
wages, and benefits and other human resource related costs. Since the beginning of the first quarter of 2019, we have significantly
expanded our sales force, made an acquisition to expand our product portfolio, and added to our product development, data, and
finance teams. These new hires have established a strong basis for significant future growth and have also resulted in increases
in benefits, payroll taxes, and related travel. The increased stock-based compensation results from the grant of new options and
the increased number of team members. We expect salaries, wages, & benefits, as well as stock-based compensation to remain
at similar levels, or only increase slightly, for the balance of the year. We expect travel expense to remain low for the balance
of the year as a result of the COVID-19 pandemic.
Professional fees increased in 2020 as a result of our change
in auditor to a larger firm and associated higher fees, as well as the acquisition we completed in late 2019. This increased the
complexity of our year-end audit and we were required to obtain third party valuations of the allocation of our purchase price
and the fair value of those assets and liabilities as of December 31, 2019, including the contingent purchase price payable. In
addition, our legal fees have increased related to the many new contracts we have signed.
Depreciation and amortization increased because of the amortizable
assets acquired in connection with our acquisition of RMDY in the fourth quarter of 2019. Office, facility, and other expenses
also increased as a result of the acquisition, which resulted in an additional office location for us, as well as the normal increased
costs associated with increased business activity.
Research, development, and maintenance costs increased primarily
because our efforts to expand and enhance our patient engagement platforms and products, as well as integration costs related to
the combination, improvement and optimization of IT systems.
Integration and exclusivity costs represent payment to partners
for access and/or exclusivity. These payments are usually made in lump sums and expensed over the term of the contracts. These
expenses are an important part of our ability to expand our network and increased in 2020 as a result of new agreements signed.
The purchase price allocations for both of our recent acquisitions
included potential additional consideration to be paid if certain revenue levels are achieved in 2019, 2020, and 2021. That liability
is required to be adjusted to fair value each quarter. The increase in the fair value of contingent consideration in 2019 related
to our acquisition of CareSpeak Communications in 2018. The maximum amount of potential contingent consideration related to CareSpeak
was recorded as of December 31, 2019 and we still expect the maximum amount to be paid. The increase in contingent consideration
in 2020 relates to our acquisition of RMDY Health, Inc. in 2019. We currently expect to pay $3.75 million of contingent consideration
related to the RMDY Health acquisition, up from the $3.72 million recorded at the time of acquisition.
All other variances in the table above are the result of normal
fluctuations in activity.
We expect our overall operating expenses to continue at the
second quarter of 2020 level, or slightly lower as we further implement our business plan and expand our operations to grow the
business in a very dynamic and active marketplace. However, we have established a strong team as a base to support growth and we
are seeing the results of the investment in our team last year in our strong revenue growth this year. We do not expect human resource
costs to increase as quickly as revenues.
Net Income (Loss)
We had a net loss of $1.1 million for the three months ended
June 30, 2020, as compared to net income of $0.4 million during the same period in 2019, and down from the $2.2 million loss in
the three months ended March 31, 2020. We had a loss of approximately $3.3 million for the six months ended June 30, 2020, as compared
to net income of approximately $0.4 million during the same period in 2019. The reasons and specific components associated with
the change are discussed above. Overall, the loss resulted from increased operating expenses to support strong revenue growth throughout
2020 and beyond.
Liquidity and Capital Resources
As of June 30, 2020, we had total current assets of $27.6 million,
compared with current liabilities of $12.2 million, resulting in working capital of approximately $15.4 million and a current ratio
of 2.3 to 1. This represents a decrease from our working capital of approximately $21.0 million and current ratio of 4.4 to 1 at
December 31, 2019.
Our operating activities used approximately $3.6 in cash flow
during the six months ended June 30, 2020, compared with cash provided of approximately $0.8 million in the same period in 2019.
In the 2020 period, operating activities used $3.7 million in the first quarter and provided approximately $0.1 million in the
quarter ended June 30, 2020. The cash used in the 2020 period was primarily the result of increased investment in working capital;
in particular, we made a $2.0 million prepayment to a partner that accounts for the bulk of the increase in prepaid expenses and
will be expensed over the balance of the year as revenue is generated through that channel. In addition, as a result of our strong
revenue growth, our trade receivables increased by $3.4 million, which was partially offset by increased revenue share of $1.9
million owed to our channel partners. This increase in accounts receivable does not reflect on our customers’ ability to
pay. Our customers are large multinational companies that generally dictate extended payment terms, but offer discounts for quick
payment. Since we have sufficient cash reserves, we do not take advantage of the discounts, which translates to relatively high
implied rates of interest. The cash provided in the 2019 period was the result of our net income increased by noncash expenses.
We used approximately $25,000 and $1.05 million in investing
activities for the six months ended June 30, 2020, and 2019, respectively. These investments related to purchases of equipment
as well as investments related to the expansion of our network capabilities.
We had a net use of cash in financing activities in the six
months ended June 30, 2020. This included proceeds from financing activities of approximately $0.3 million related to the exercise
of stock options offset by approximately $1.4 million in payments related to contingent consideration. We had net proceeds of $21.9
million from financing activities during the six months ended June 30, 2019, primarily from a secondary offering of common stock
in June 2019.
We do not anticipate the need to raise additional capital in
the short or long term for operating purposes or to fund our growth plans. We are focused on growing our revenue, channel and partner
network. However, as a company in a market that is active with merger and acquisition activity, we may have opportunities, such
as for acquisitions or strategic partner relationships, which may require additional capital. We will assess these opportunities
as they arise with the view of maximizing shareholder value.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list
their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical
accounting policy” is one which is both important to the portrayal of a company’s financial condition and results,
and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. Our accounting policies are discussed in the footnotes to our financial
statements included in our annual report on Form 10-K for the year ended December 31, 2019; however, we consider our critical accounting
policies to be those related to determining the amount of revenue to be billed, the timing of revenue recognition, calculation
of revenue share expense, stock-based compensation, capitalization and related amortization of intangible assets, impairment of
assets, and the fair value of liabilities.
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the
“FASB”) issued 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 that 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 was effective for the Company on January 1, 2020. The adoption of this standard did not have a material
effect on our financial position, results of operations, or cash flows.
In August 2019, the FASB issued ASU 2019-13, Fair Value Measurement
(Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2019-13 modifies the disclosure
requirements on fair value measurements and became effective for the Company on January 1, 2020. The adoption of this standard
did not have a material effect on our financial position, results of operations, or cash flows.
In December 2019, the FASB issued ASU No. 2019-12, Income
Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to improve consistent application and
simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies
and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 12, 2020,
with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position,
results of operations, or cash flows.
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 adoption of this standard did not have a material effect on our financial position, results of operations,
or cash flows.
Off Balance Sheet Arrangements
As of June 30, 2020, there were no off-balance sheet arrangements.