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)
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
82,278,696
|
|
|
$
|
10,516,776
|
|
Accounts receivable, net
|
|
|
14,738,890
|
|
|
|
17,885,705
|
|
Prepaid expenses
|
|
|
3,519,528
|
|
|
|
4,456,611
|
|
Total Current Assets
|
|
|
100,537,114
|
|
|
|
32,859,092
|
|
Property and equipment, net
|
|
|
142,119
|
|
|
|
148,854
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
14,740,031
|
|
|
|
14,740,031
|
|
Technology assets, net
|
|
|
5,049,334
|
|
|
|
5,251,822
|
|
Patent rights, net
|
|
|
2,304,923
|
|
|
|
2,349,570
|
|
Right of use assets, net
|
|
|
422,635
|
|
|
|
445,974
|
|
Other intangible assets, net
|
|
|
4,361,665
|
|
|
|
4,519,552
|
|
Security deposits and other assets
|
|
|
12,859
|
|
|
|
12,859
|
|
Total Other Assets
|
|
|
26,891,447
|
|
|
|
27,319,808
|
|
TOTAL ASSETS
|
|
$
|
127,570,680
|
|
|
$
|
60,327,754
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable – trade
|
|
$
|
499,279
|
|
|
$
|
618,250
|
|
Accrued expenses
|
|
|
869,791
|
|
|
|
2,420,361
|
|
Revenue share payable
|
|
|
3,493,805
|
|
|
|
4,969,868
|
|
Current portion of lease obligations
|
|
|
119,389
|
|
|
|
123,220
|
|
Current portion of contingent purchase price payable
|
|
|
-
|
|
|
|
1,610,813
|
|
Deferred revenue
|
|
|
448,140
|
|
|
|
285,795
|
|
Total Current Liabilities
|
|
|
5,430,404
|
|
|
|
10,028,307
|
|
Non-current Liabilities
|
|
|
|
|
|
|
|
|
Lease obligations, net of current portion
|
|
|
305,039
|
|
|
|
325,533
|
|
Total Non-current liabilities
|
|
|
305,039
|
|
|
|
325,533
|
|
Total Liabilities
|
|
|
5,735,443
|
|
|
|
10,353,840
|
|
Commitments and contingencies (See note 7)
|
|
|
-
|
|
|
|
-
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding at March 31, 2021 or December 31, 2020
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value, 166,666,667 shares authorized, 17,260,588 and 15,223,340 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
|
|
|
17,261
|
|
|
|
15,223
|
|
Additional paid-in-capital
|
|
|
158,087,090
|
|
|
|
85,590,428
|
|
Accumulated deficit
|
|
|
(36,269,114
|
)
|
|
|
(35,631,737
|
)
|
Total Stockholders’ Equity
|
|
|
121,835,237
|
|
|
|
49,973,914
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
127,570,680
|
|
|
$
|
60,327,754
|
|
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 March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
TOTAL REVENUE
|
|
$
|
11,229,211
|
|
|
$
|
7,584,602
|
|
COST OF REVENUES
|
|
|
5,104,603
|
|
|
|
3,241,763
|
|
|
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
|
6,124,608
|
|
|
|
4,342,839
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
6,762,916
|
|
|
|
6,602,091
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(638,308
|
)
|
|
|
(2,259,252
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
931
|
|
|
|
55,321
|
|
TOTAL OTHER INCOME
|
|
|
931
|
|
|
|
55,321
|
|
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(637,377
|
)
|
|
|
(2,203,931
|
)
|
PROVISION FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
NET LOSS
|
|
$
|
(637,377
|
)
|
|
$
|
(2,203,931
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
16,101,837
|
|
|
|
14,609,499
|
|
DILUTED
|
|
|
16,101,837
|
|
|
|
14,609,499
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
$
|
(0.04
|
)
|
|
$
|
(0.15
|
)
|
DILUTED
|
|
$
|
(0.04
|
)
|
|
$
|
(0.15
|
)
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND
2020
(UNAUDITED)
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2021
|
|
|
15,223,340
|
|
|
$
|
15,223
|
|
|
$
|
85,590,428
|
|
|
$
|
(35,631,737
|
)
|
|
$
|
49,973,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public offering of common shares, net of offering costs
|
|
|
1,523,750
|
|
|
|
1,524
|
|
|
|
70,670,012
|
|
|
|
-
|
|
|
|
70,671,536
|
|
Shares issued as board compensation
|
|
|
2,695
|
|
|
|
3
|
|
|
|
124,991
|
|
|
|
-
|
|
|
|
124,994
|
|
Shares issued for stock options exercised
|
|
|
510,803
|
|
|
|
511
|
|
|
|
1,119,500
|
|
|
|
-
|
|
|
|
1,120,011
|
|
Stock-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
582,159
|
|
|
|
-
|
|
|
|
582,159
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(637,377
|
)
|
|
|
(637,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2021
|
|
|
17,260,588
|
|
|
$
|
17,261
|
|
|
$
|
158,087,090
|
|
|
$
|
(36,269,114
|
)
|
|
$
|
121,835,237
|
|
|
|
Common Stock
|
|
|
Additional 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
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Three Months
Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(637,377
|
)
|
|
$
|
(2,203,931
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation, amortization and non-cash lease expense
|
|
|
526,180
|
|
|
|
519,669
|
|
Stock-based compensation
|
|
|
582,159
|
|
|
|
754,512
|
|
Stock issued for board service
|
|
|
124,994
|
|
|
|
100,000
|
|
Provision for loss on accounts receivable
|
|
|
20,000
|
|
|
|
-
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,126,815
|
|
|
|
(1,643,495
|
))
|
Prepaid expenses and other assets
|
|
|
937,083
|
|
|
|
(2,099,448
|
)
|
Accounts payable
|
|
|
(118,971
|
)
|
|
|
55,105
|
|
Revenue share payable
|
|
|
(1,476,063
|
)
|
|
|
1,021,811
|
)
|
Accrued expenses and other liabilities
|
|
|
(1,581,415
|
)
|
|
|
(154,473
|
)
|
Deferred revenue
|
|
|
162,345
|
|
|
|
(88,576
|
)
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
1,665,750
|
|
|
|
(3,738,826
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS USED IN INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of intangible assets
|
|
|
(64,693
|
)
|
|
|
-
|
|
Purchase of equipment
|
|
|
(19,871
|
)
|
|
|
(15,937
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(84,564
|
)
|
|
|
(15,937
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from public offering of common
stock, net of offering costs
|
|
|
70,671,536
|
|
|
|
-
|
|
Proceeds from exercise of stock options
|
|
|
1,120,011
|
|
|
|
112,152
|
|
Payment of contingent consideration
|
|
|
(1,610,813
|
)
|
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
70,180,734
|
|
|
|
112,152
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
71,761,920
|
|
|
|
(3,642,611
|
)
|
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
|
10,516,776
|
|
|
|
18,852,680
|
|
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
|
$
|
82,278,696
|
|
|
$
|
15,210,069
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Lease liabilities arising from right of use assets
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERx CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
MARCH 31, 2021
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 digital health company that provides
communications solutions for life science companies, physicians and patients. Connecting over half of healthcare providers in the U.S.
and millions of patients through a proprietary network, the OptimizeRx digital health platform helps patients afford and stay on medications.
The platform unlocks new patient and physician touchpoints for life science companies along the patient journey, from point-of-care, to
retail pharmacy, through mobile patient engagement.
The condensed consolidated financial statements for the three months
ended March 31, 2021 and 2020 have been prepared by us without audit pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. In the opinion of management, all adjustments necessary to present fairly our financial position at March 31, 2021,
and our results of operations, changes in stockholders’ equity, and cash flows for the three months ended March 31, 2021 and 2020,
have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated condensed balance sheet as of
December 31, 2020, has been derived from the audited consolidated condensed 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 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, 2020, as filed with the U.S. Securities and Exchange Commission on March 8, 2021.
The results of operations for the three months ended March 31, 2021,
are not necessarily indicative of the results to be expected for the full year.
NOTE 2 – NEW ACCOUNTING STANDARDS
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 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)
MARCH 31, 2021
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 months ended March 31, 2021 and 2020, the Company’s
lease cost consists of the following components, each of which is included in operating expenses within the Company’s condensed
consolidated statements of operations:
|
|
Three Months
Ended
March 31,
2021
|
|
|
Three Months
Ended
March 31,
2020
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
33,365
|
|
|
$
|
32,814
|
|
Short-term lease cost
|
|
|
15,924
|
|
|
|
44,629
|
|
Total lease cost
|
|
$
|
49,289
|
|
|
$
|
77,443
|
|
The table below presents the future minimum lease payments to be made
under operating leases as of March 31, 2021:
As
of March 31, 2021
|
|
|
|
|
|
|
|
2021(a)
|
|
$
|
106,915
|
|
2022
|
|
|
104,572
|
|
2023
|
|
|
101,414
|
|
2024
|
|
|
80,742
|
|
2025
|
|
|
70,224
|
|
Total
|
|
|
463,867
|
|
Less: discount
|
|
|
39,439
|
|
Total lease liabilities
|
|
$
|
424,428
|
|
(a) For the nine month period beginning April
1, 2021.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH
31, 2021
NOTE
3 – LEASES (continued)
The
weighted average remaining lease term at March 31, 2021 for operating leases is 4.1 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 $30,846 and $28,316 for the three months ending March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021
and 2020, payments on lease obligations were $35,657 and $34,416, respectively, and amortization on the right of use assets was $29,859
and $28,019, respectively.
NOTE
4 – STOCKHOLDERS’ EQUITY
During
the quarter ended March 31, 2021, in an underwritten primary offering, we issued 1,523,750 shares of our common stock for gross proceeds
of $75,425,625. In connection with this transaction, we incurred equity issuance costs of $4,754,089 related to payments to the underwriter,
advisors and legal fees associated with the transaction, resulting in net proceeds to the Company of $70,671,536.
During
the quarters ended March 31, 2021 and 2020, we issued 2,695 and 11,136 shares, respectively, of our common stock to our independent directors
in connection with our Director Compensation Plan. These shares were valued at $124,994 and $100,000 at March 31, 2021 and 2020, respectively.
During
the quarter ended March 31, 2021, we issued a total of 510,803 shares of our common stock and received total proceeds of $1,120,011 in
connection with the exercise of stock options under our 2013 Incentive Plan. A total of 368,329 shares were issued in a cashless transaction
related to 394,739 expiring options using the net settled method whereby 26,410 options were used to pay the purchase price. The remaining
116,064 shares issued in connection with the exercise of options were all issued for cash. During the quarter ended March 31, 2020, we
issued 35,032 shares of our common stock and received proceeds of $112,152 in connection with the exercise of stock options under our
2013 Incentive Plan.
NOTE
5 – SHARE BASED PAYMENTS – OPTIONS AND RESTRICTED STOCK
We
use the fair value method to account for stock-based compensation. We recorded $391,318 and $547,828 in compensation expense in the three
months ended March 31, 2021 and 2020, respectively, related to options issued under our 2013 Incentive 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 $4,929,984 of remaining expense related to unvested options to be recognized in the future over a weighted average period of 2.6 years.
The total intrinsic value of outstanding options at March 31, 2021 was $41,423,990.
In
addition to the grants to Directors described in Note 4, we also recorded $190,841 and $206,684 in compensation expense related to restricted
stock awards that vest over time in the three months ended March 31, 2021 and 2020, respectively. There is $2,797,682 of remaining expense
related to unvested restricted stock awards to be recognized in the future over a weighted average period of 3.6 years.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH
31, 2021
NOTE
6 – NET LOSS PER SHARE
The
following table sets forth the computation of basic and diluted net loss per share.
|
|
Three Months Ended
March 31
|
|
|
|
2021
|
|
|
2020
|
|
Numerator
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(637,377
|
)
|
|
$
|
(2,203,931
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding used in computing net loss per share
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,101,837
|
|
|
|
14,609,499
|
|
Effect of dilutive stock options, warrants, and stock grants
|
|
|
-
|
|
|
|
-
|
|
Diluted
|
|
|
16,101,837
|
|
|
|
14,609,499
|
|
|
|
|
|
|
|
|
|
|
Net Loss per share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.04
|
)
|
|
$
|
(0.15
|
)
|
Diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.15
|
)
|
No
calculation of diluted earnings per share is included for 2021 or 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 2021 was 846,441 related to options, and 137,304 related to restricted stock, for a total of 983,745 shares. 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 779,670 related to options, and 174,176 related to restricted stock, for a total of 953,846 shares.
NOTE
7 – CONTINGENCIES
Litigation
The
Company is not currently involved in any legal proceedings.
NOTE
8 – SUBSEQUENT EVENTS
In
April 2021, the Company issued 19,664 shares and received proceeds of $167,729 in connection with the exercise of options.
In
accordance with ASC 855-10, we have analyzed our operations subsequent to March 31, 2021 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.
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, 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
COVID-19
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 year or quarter,
or through the date of this filing, we cannot estimate the impact COVID-19 will have in the future if 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 virtually 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 April 2021
1.
|
Generated
sales of $11.2 million for the first three months of 2021, a 48% increase over the same period in 2020.
|
2.
|
Achieved
positive cash flow from operations of $1.7 million.
|
3.
|
Raised
an additional $70.7 million of capital in a public offering.
|
4.
|
Secured
new enterprise-level deals for 2021 that provide access to the company’s full suite of solutions and nationwide digital healthcare
platform.
|
5.
|
Enhanced
our leadership team by adding a General Counsel and Chief Compliance Officer as well as elevated the Chief Technology Officer to
report directly to the CEO.
|
6.
|
Secured
multiple new channel partnerships outside of electronic health record companies for additional reach to oncologists and other specialties.
|
7.
|
Committed
to an inclusion and diversity pledge.
|
8.
|
Enhanced
our patient engagement commercial team to further scale that portion of the business.
|
9.
|
Consolidated
our technology centers of excellence in Zagreb, Croatia.
|
10.
|
Completed
all integration work for previous two acquisitions and paid last earnout payment related to acquisitions.
|
11.
|
Maintained
a no travel, virtual operational plan with a particular focus on training, open communication, and great work culture.
|
Results
of Operations for the Three Months Ended March 31, 2021 and 2020
Revenues
Our
total revenue reported for the three months ended March 31, 2021 was approximately $11.2 million, an increase of 48% over the approximately
$7.6 million from the same period in 2020. The increased revenue resulted from increases in sales in all our messaging products.
We
expect that our revenues will continue to grow for the balance of 2021 as a result of the new enterprise clients we secured in the first
quarter of the year as well as those we expect to pick up for the remainder of the year. In addition, we believe that the foundations
we laid in 2019 and 2020, including the noted shift to enterprise contracts, increased pharmaceutical brands, an increased distribution
network, and strong growth in our messaging solutions will result in steady growth throughout the year.
Cost
of Revenues
Our
cost of revenue percentage, composed primarily of revenue share expense, increased as a percentage of revenues, from approximately 43%
in the quarter ended March 31, 2020 to approximately 45% for the quarter ended March 31, 2021. This increase was a result of solution
mix, both as it relates to solutions and the partners through which the messages are delivered. We expect our cost of revenues to decrease
for future quarters as revenues from new solutions with higher margins increase as a percentage of our revenue.
Gross
Margin
Our
gross margin declined from 57% in the quarter ended March 31, 2020 to 55% in the quarter ended March 31, 2021. As discussed under cost
of revenues above, this is a result of solution mix. Our gross margin for the entire calendar year of 2020 was 56% and our target for
the full year of 2021 is 58%. We expect our gross margin to improve on a quarter over quarter basis for the balance of the year as we
launch new solutions that have higher margins.
Operating
Expenses
Operating
expenses increased from approximately $6.6 million for the three months ended March 31, 2020 to approximately $6.8 million for the same
period in 2021, an increase of approximately 2.5%. Overall, this increase results from our efforts to expand our product line and build
out our organization to establish a strong base for current and future growth. Our expenses increased at a substantially lower rate than
our revenues as a result of the operating leverage of our model. The detail of expenditures by major category is reflected in the table
below.
|
|
Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Salaries, Wages, & Benefits
|
|
$
|
3,580,817
|
|
|
$
|
3,206,137
|
|
Stock-Based Compensation
|
|
|
707,153
|
|
|
|
854,512
|
|
Contractors and Consultants
|
|
|
299,376
|
|
|
|
485,225
|
|
Travel
|
|
|
9,830
|
|
|
|
274,511
|
|
Board Compensation
|
|
|
61,250
|
|
|
|
51,375
|
|
Professional Fees
|
|
|
321,220
|
|
|
|
485,469
|
|
Investor Relations
|
|
|
46,287
|
|
|
|
19,450
|
|
Advertising and Promotion
|
|
|
128,885
|
|
|
|
134,887
|
|
Technology Infrastructure Costs
|
|
|
213,279
|
|
|
|
157,749
|
|
Integration and Exclusivity Costs
|
|
|
318,558
|
|
|
|
207,973
|
|
Data Costs
|
|
|
287,912
|
|
|
|
51,612
|
|
Office, Facility, and Other
|
|
|
262,169
|
|
|
|
153,522
|
|
Depreciation and Amortization
|
|
|
526,180
|
|
|
|
519,669
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expense
|
|
$
|
6,762,916
|
|
|
$
|
6,602,091
|
|
The
increase in operating expenses related to salaries, wages, and benefits and other human resource related costs is due to the expansion
of our team to support additional growth. This increase is partly offset by the decrease in contractors and consultants, as we have brought
functions in house that were previously performed by outsiders.
We
expect salaries, wages, and benefits to increase on a quarter over quarter basis for the balance of the year due to the full impact of
new hires during the first quarter as well as new hires in the pipeline.
The
decreased stock-based compensation results from the lengthening of vesting periods for new grants. The majority of new grants now vest
over three years or longer, as opposed to 1 year in previous years.
Travel
expense is down significantly as a result of travel restrictions due to the pandemic. We expect travel expense to increase significantly
starting in the third quarter of the year due to expected relaxed travel restrictions related to the COVID-19 pandemic as increasing
percentages of the population are vaccinated.
Professional
fees decreased in 2021 primarily as a result of our change in auditors, as well as the change in SEC rules that eliminated the need for
a third-party opinion on our internal controls.
Investor
relations expense increased due to the expansion of our communication efforts to reach retail investors and expand our shareholder base.
Technology
infrastructure costs increased due to continued investment in our operating systems to facilitate new products as well as the implementation
of additional software products to increase efficiency and information dissemination.
Data
costs increased as we have purchased more data, primarily to aid in our selling effort and allow customers to target their messages more
appropriately, thereby increasing our ability to charge premium prices for more highly targeted messages.
Integration
and exclusivity costs represent payments to partners for access and/or exclusivity and increased because of new agreements signed after
the first quarter of 2020. 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.
Our
office, facility and other expense increased primarily because of increased activity. The largest single increase related to hiring expenses
associated with expanding our team, both for new additions in the first quarter, as well as new hires scheduled for the second quarter
including recruiter fees in some instances. Other expenses related to higher short-term costs from employees working remotely, rather
than in office settings, as well as hiring cost related to new team members.
All
other variances in the table above are the result of normal fluctuations in activity.
We
expect our overall operating expenses to increase from the first quarter of 2021 level 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, however we do expect to continue to add people to accelerate
our growth and invest in future growth.
Net
Loss
We
had a net loss of approximately $600,000 for the three months ended March 31, 2021, as compared to a net loss of approximately $2.2 million
during the same period in 2020. The reasons and specific components associated with the change are discussed above. Overall, the decreased
loss resulted from an increased margin generated by our higher revenues, partially offset by the increased operating expenses.
Liquidity
and Capital Resources
As
of March 31, 2021, we had total current assets of approximately $100 million, compared with current liabilities of approximately $5 million,
resulting in working capital of approximately $95 million and a current ratio of approximately 19 to 1. This represents an increase from
our working capital of approximately $23 million and current ratio of 3 to 1 at December 31, 2020.
Our
operating activities provided approximately $1.7 in cash flow during the three months ended March 31, 2021, compared with cash used of
approximately $3.7 million in the same period in 2020. The cash provided in the 2021 period was the result of our net loss increased
by noncash expenses, as well as working capital generated by the collection of receivables. 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 was expensed
over the balance of the year.
We
used insignificant amounts in investing activities in both the three months ended March 31, 2021 and 2020. These investments related
to purchases of equipment as well as investments related to the expansion of our network capabilities in our patient engagement solution.
Our
financing activities provided $70 million in the three months ended March 31, 2021, compared with cash provided of approximately $112,000
in the same period in 2020. We raised $70.7 million in a public offering of our common stock as well as generated $1.1 million from the
issuance of shares related to the exercise of stock options. These were partially offset by the payment of $1.6 in earnout payments from
a previous acquisition. We have no remaining earnout payments due in the future. We had proceeds from financing activities of approximately
$112,000 related to the exercise of stock options during the three months ended March 31, 2020.
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, 2020; however,
we consider our critical accounting policies to be those related to revenue recognition, calculation of revenue share expense (cost of
revenues), stock-based compensation, capitalization and related amortization of intangible assets and impairment of assets.
Recently
Issued Accounting Pronouncements
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 was effective for annual and interim reporting
periods beginning after December 12, 2020, with early adoption permitted. 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 March 31, 2021, there were no off-balance sheet arrangements.