UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
☒
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the fiscal year ended December 31, 2021
☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from _________ to ________
Commission
file number: 001-38543
OptimizeRx Corporation |
(Exact
name of registrant as specified in its charter) |
Nevada |
|
26-1265381 |
(State
or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification No.) |
|
|
|
400
Water Street, Ste. 200
Rochester, MI |
|
48307 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number: 248-651-6568
Securities
registered under Section 12(b) of the Exchange Act:
Title
of each class
|
|
Trading
Symbol |
|
Name
of each exchange on which
registered |
Common
Stock, par value $0.001 |
|
OPRX |
|
NASDAQ
Capital Market |
Securities
registered under Section 12(g) of the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities
Act. Yes ☒ No ☐
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
Indicate
by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
☒
Large Accelerated Filer |
☐
Accelerated filer |
☐
Non-accelerated filer |
☒
Smaller reporting company |
|
☐
Emerging growth company |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☒
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter.
$1,030,061,063
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date.
17,875,435 common shares as of February 24, 2022.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
portions of the registrant’s definitive proxy statement, in
connection with its 2022 Annual Meeting of Shareholders, to be
filed with the Securities and Exchange Commission within 120 days
after December 31, 2021, are incorporated by reference into PART
III of this Annual Report on Form 10-K.
TABLE OF
CONTENTS
Explanatory
Note
OptimizeRx Corporation is filing this Amendment No. 1 on Form
10-K/A (“Amendment No. 1”) to its Annual Report on Form 10-K for
the year ended December 31, 2021, originally filed with the
Securities and Exchange Commission (SEC) on February 28, 2022 (the
“Original Filing”) to address management’s re-evaluation of our
disclosure controls and procedures, internal control over financial
reporting and to reflect the identification of a material weakness.
The material weakness did not result in any change to the Company’s
consolidated financial statements as set forth in the Original
Filing.
This Amendment No. 1 is limited in scope to make the following
changes to the Original Filing:
|
● |
To
amend Part I - Item 1A. Risk Factors to amend a risk factor
regarding the potential adverse impact material weaknesses could
have on our timely and accurate reporting of financial
results. |
|
● |
To
amend Part II - Item 8. Financial Statements and Supplementary Data
to include UHY’s reissued adverse audit report on the effectiveness
of the Company’s internal control over financial reporting as of
December 31, 2021 dated February 28, 2022, except as to the
restatement of the effectiveness of internal control over financial
reporting which is as of March 10, 2023. |
|
● |
To
amend Part II - Item 9A. Controls and Procedures to reflect
management’s (i) re-evaluation of our disclosure controls and
procedures and internal control over financial reporting, and (ii)
identification of a material weakness. |
|
● |
To
amend Part IV - Item 15. Exhibits and Financial Statement Schedules
to include the following currently dated documents: (i) auditor
consent, which is filed herewith as Exhibit 23.1, and (ii)
certifications from the Company’s Chief Executive Officer and Chief
Financial Officer as required by Sections 302 and 906 of the
Sarbanes Oxley Act of 2002, which certifications are filed herewith
as Exhibits 31.1, 31.2, and 32.1. |
This Amendment No. 1 has not been updated or amended to give effect
to any subsequent events beyond those that existed as of the
original filing date and should thus be read in conjunction with
the Original Filing and any of the Company’s other filings with the
SEC subsequent to the Original Filing, together with any amendments
to those filings. Other than the filing of the information
identified above, this amendment does not modify or update the
disclosure in the Original Filing in any way. Unless
otherwise specified or the context otherwise requires, when used in
this Amendment No. 1, the terms “we,” “our,” “us,” “OptimizeRx,” or
the “Company” refer to OptimizeRx Corporation and its
subsidiaries.
The Company is concurrently filing Amendment No. 1 to each of its
Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 2022, June 30, 2022 and September 30, 2022.
PART I
Item 1A. Risk Factors
Risks Relating to Our Business
Because we have historically experienced losses, if we are
unable to achieve profitability, our financial condition and
company could suffer.
While we were profitable for the full year of 2021, since the
inception of our business we have historically incurred losses as a
result of investing in future growth. We incurred losses in 2019
and 2020 as a result of our increased spending to build the
organization to support expected future growth – both through
additional new hires, as well as through acquisitions. While we
have increased revenues significantly, we have not yet consistently
achieved profitability due to these investments and non-cash
expenses. Our ability to achieve consistent profitability depends
on our ability to generate sales through our technology platform
and advertising model, while maintaining reasonable expense levels.
If we do not achieve sustainable profitability, it may impact our
ability to continue our operations.
The global pandemic may disrupt our business or the business
of our customers
In December 2019, a novel strain of corona virus, which causes the
infectious disease known as COVID-19 was reported. The World Health
Organization declared COVID-19 a Public Health Emergency and Global
Pandemic. COVID-19 has had, and continues to have, a severe impact
on economies around the world, in particular in the healthcare
industry in which we operate. We have taken steps to modify our
business practices and mitigate the impact of the pandemic on us,
and may take further precautions as required by government
authorities or to protect the health of our employees, customer,
and partners - but there can be no assurance that such steps will
be successful, or that our business operations, or the operations
of our customers or partners will not be materially and adversely
affected by the consequences of the pandemic. This could materially
impact our results of operations, cash flows, and financial
condition.
We may be unable to support our technology to further scale
our operations successfully.
Our plan is to grow rapidly through further integration of our
technology in electronic platforms. Our growth will place
significant demands on our management and technology development,
as well as our financial, administrative and other resources. We
cannot guarantee that any of the systems, procedures and controls
we put in place will be adequate to support the commercialization
of our operations. Our operating results will depend substantially
on the ability of our officers and key employees to manage changing
business conditions and to implement and improve our financial,
administrative and other resources. If we are unable to respond to
and manage changing business conditions, or the scale of our
solutions, services and operations, then the quality of our
services, our ability to retain key personnel and our business
could be harmed.
Developing and implementing new and updated applications,
features and services for our portals may be more difficult than
expected, may take longer and cost more than expected and may not
result in sufficient increases in revenue to justify the
costs.
Attracting and retaining users of our portals requires us to
continue to improve the technology underlying those portals and to
continue to develop new and updated applications, features and
services for those portals. If we are unable to do so on a timely
basis or if we are unable to implement new applications, features
and services without disruption to our existing ones, we may lose
potential users and clients. The costs of development of these
enhancements may negatively impact our ability to achieve
profitability.
We rely on a combination of internal development, strategic
relationships, licensing and acquisitions to develop our portals
and related applications, features and services. Our development
and/or implementation of new technologies, applications, features
and services may cost more than expected, may take longer than
originally expected, may require more testing than originally
anticipated and may require the acquisition of additional personnel
and other resources. There can be no assurance that the revenue
opportunities from any new or updated technologies, applications,
features or services will justify the amounts spent.
Any failure to offer high-quality customer support for our
portals may adversely affect our relationships with our customers
and harm our financial results.
Once our solutions are implemented, our customers use our support
organization to resolve technical issues relating to our solutions.
In addition, we also believe that our success in selling our
solutions is highly dependent on our business reputation and on
favorable recommendations from our existing customers. Any failure
to maintain high-quality customer support, or a market perception
that we do not maintain high-quality support, could harm our
reputation, adversely affect our ability to maintain existing
customers or sell our solutions to existing and prospective
customers, and harm our business, operating results and financial
condition.
We may be unable to respond quickly enough to accommodate
short-term increases in customer demand for support services.
Increased customer demand for these services, without corresponding
revenues, could also increase costs and adversely affect our
operating results.
We are dependent on a concentrated group of
customers.
Our revenues are concentrated in less than 50 customers, primarily
large pharmaceutical manufacturers. Loss of one or more of our
larger customers could have a negative impact on our operating
results. In both 2021 and 2020, we had three customers that each
represented slightly over 10% of our revenues; however only one
customer represented over 10% of our revenues in both years.
We expect that we will continue to depend upon a relatively small
number of customers for a significant portion of our total revenues
for the foreseeable future. The loss of any of these customers or
groups of customers for any reason, or a change of relationship
with any of our key customers could cause a material decrease in
our total revenues.
Additionally, mergers or consolidations among our customers in the
healthcare industry could reduce the number of our customers and
could adversely affect our revenues and sales. In particular, if
our customers are acquired by entities that are not also our
customers, that do not use our solutions or that have more
favorable contract terms with competitors and choose to
discontinue, reduce or change the terms of their use of our
solutions, our business and operating results could be materially
and adversely affected.
If we are unable to maintain our contracts with electronic
prescription platforms, our business will suffer.
We are reliant upon our contracts with leading electronic
prescribing platforms and electronic health record systems to
generate our revenues received from customers Such arrangements
subject us to a number of risks, including the following:
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● |
Our contract partners may
experience financial, regulatory or operational difficulties, which
may impair their ability to focus on and fulfill their contract
obligations to us; |
|
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Legal disputes or disagreements,
including the ownership of intellectual property, may occur with
one or more of our partners and may lead to lengthy and expensive
litigation or arbitration; |
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● |
Significant changes in a partner’s
business strategy may adversely affect a partner’s willingness or
ability to satisfy obligations under any such arrangement; and |
|
● |
A partner could terminate the
partnership arrangement, which could negatively impact our ability
to sell our solutions and achieve revenues. |
We will need to maintain these relationships as well as diversify
them. The inability to do so could adversely impact our business.
We generated 53.9% and 52.7% of our revenue through our largest
partner in 2021 and 2020, respectively.
Our agreements with electronic prescription platforms and
electronic health record systems are subject to audit.
Our agreements with our partners provide for revenue sharing
payments to the platform partners based on the revenue we generate
through the platform. These payments are subject to audit by our
partners, at their cost, and if there is a dispute as to the
calculation, we may be liable for additional payments. If an
underpayment is determined to be in excess of a certain amount, for
example 10%, some agreements would require us to pay for the cost
of the audit, as well.
Our future growth depends on our ability to attract, retain
customers, and the loss of existing customers, or failure to
attract new ones, could adversely impact our business and future
prospects.
We currently work with many leading pharmaceutical companies,
medical device manufacturers, associations, and other companies.
While we have experienced customer growth, this growth may not
continue at the same pace in the future or at all. Achieving growth
in our customer base may require us to engage in increasingly
sophisticated and costly sales and marketing efforts that may not
result in additional customers. We may also need to modify our
pricing model to attract and retain such customers. If we fail to
attract new customers or fail to maintain or expand existing
relationships in a cost-effective manner, our business and future
prospects may be materially and adversely impacted.
Actual or perceived failures to comply with applicable laws
and regulations that affect the healthcare industry, including data
protection, privacy and security, fraud and abuse laws,
regulations, standards and other requirements could adversely
affect our business, results of operations, and financial
condition.
The global data protection landscape is rapidly evolving, and we
are or may become subject to numerous state, federal and foreign
laws, requirements and regulations governing the collection, use,
disclosure, retention, and security of personal information,
including health-related information. This evolution may create
uncertainty in our business, affect our ability to operate in
certain jurisdictions or to collect, store, transfer, use and share
personal information, necessitate the acceptance of more onerous
obligations in our contracts, result in liability or impose
additional costs on us. The cost of compliance with these laws,
regulations and standards is high and is likely to increase in the
future. Any failure or perceived failure by us to comply with
federal, state or foreign laws or regulation, our internal policies
and procedures or our contracts governing our processing of
personal information could result in negative publicity, government
investigations and enforcement actions, claims by third parties,
and damage to our reputation, any of which could have a material
adverse effect on our operations, financial performance and
business.
We also may be bound by contractual obligations and other
obligations relating to privacy, data protection, and information
security that are more stringent than applicable laws and
regulations. The costs of compliance with, and other burdens
imposed by, laws, regulations, standards, and other obligations
relating to privacy, data protection, and information security are
significant. Although we work to comply with applicable laws,
regulations, and standards, our contractual obligations and other
legal obligations, these requirements are evolving and may be
modified, interpreted and applied in an inconsistent manner from
one jurisdiction to another, and may conflict with another or other
legal obligations with which we must comply. Accordingly, our
failure, or perceived inability, to comply with these laws,
regulations, standards, and other obligations may limit the use and
adoption of our solution, reduce overall demand for our solution,
lead to regulatory investigations, breach of contract claims,
litigation, and significant fines, penalties, or liabilities for
actual or alleged noncompliance or slow the pace at which we close
sales transactions, any of which could harm our business.
The Health Insurance Portability and Accountability Act of 1996, or
HIPAA, and the rules promulgated thereunder require certain
entities, referred to as Covered Entities, to comply with
established standards, including standards regarding the privacy
and security of protected health information, or PHI. HIPAA further
requires that Covered Entities enter into agreements meeting
certain regulatory requirements with their business associates, as
such term is defined by HIPAA, which, among other things, obligate
the business associates to safeguard the covered entity’s PHI
against improper use and disclosure. While we are not a Covered
Entity and not directly regulated by HIPAA, our customers or
distributors might face significant contractual liability pursuant
to such an agreement if the business associate breaches the
agreement or causes the Covered Entity to fail to comply with
HIPAA. It is possible that HIPAA compliance could become a
substantial regulatory burden and expense to our operations as we
expand our point of care technology solutions to help patients
start and stay on therapies.
Certain other laws and regulations such as federal and state
anti-kickback and false claims laws may apply to us indirectly
through our relationships with our customers and partners.
Violations can result in considerable penalties and sanctions. If
we are found to have violated, or to have facilitated the violation
of such laws, we could be subject to significant penalties.
If we are unable to adhere to the regulatory and competitive
climate in which we operate, we could be materially and negatively
impacted.
Due to the labyrinth of regulations in healthcare space, state and
federal, as well as political sensitivity of healthcare delivery,
our business model could be negatively impacted or fail.
The markets in which we operate are competitive, continually
evolving and, in some cases, subject to rapid change.
Our platforms face competition from numerous other companies, both
in attracting users and in generating revenue from advertisers and
sponsors. We compete for users with online services and websites
that provide savings on medications and healthcare products,
including both commercial sites and not-for-profit sites. We
compete for advertisers and sponsors with health-related web sites,
general purpose consumer web sites that offer specialized health
sub-channels, other high-traffic web sites that include both
healthcare-related and non-healthcare-related content and services,
search engines that provide specialized health searches, and
advertising networks that aggregate traffic from multiple
sites.
Many of our competitors have greater financial, technical, product
development, marketing and other resources than we do. These
organizations may be better known than we are and have more
customers or users than we do. We cannot provide assurance that we
will be able to compete successfully against these organizations or
any alliances they have formed or may form. Since there are no
substantial barriers to entry into the markets in which our public
portals participate, we expect that competitors will continue to
enter these markets.
Developments in the healthcare industry could adversely
affect our business.
Most of our revenue is derived from the healthcare industry and
could be affected by changes affecting healthcare spending. We are
particularly dependent on pharmaceutical, biotechnology and medical
device companies for our advertising and sponsorship revenue.
General reductions in expenditures by healthcare industry
participants could result from, among other things:
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Government regulation or private
initiatives that affect the manner in which healthcare providers
interact with patients, payers or other healthcare industry
participants, including changes in pricing or means of delivery of
healthcare products and services; |
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Government regulation prohibiting
the use of coupons by patients covered by federally funded health
insurance programs; |
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Consolidation of healthcare
industry participants; |
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Reductions or changes in
governmental funding for healthcare; and |
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Adverse changes in business or
economic conditions affecting healthcare payers or providers,
pharmaceutical, biotechnology or medical device companies or other
healthcare industry participants. |
Even if general expenditures by industry participants remain the
same or increase, developments in the healthcare industry may
result in reduced spending in some or all of the specific market
segments that we serve or are planning to serve. For example, use
of our solutions and services could be affected by:
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Changes in the design of health
insurance plans; |
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A decrease in the number of new
drugs or medical devices coming to market; |
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A decrease in marketing
expenditures by pharmaceutical or medical device companies,
including as a result of governmental regulation or private
initiatives that discourage or prohibit advertising or sponsorship
activities by pharmaceutical or medical device companies; and |
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Payor pressure to move to generic
brands. |
In addition, our customers’ expectations regarding pending or
potential industry developments may also affect their budgeting
processes and spending plans with respect to solutions and services
of the types we provide.
The healthcare industry has changed significantly in recent years
and we expect that significant changes will continue to occur.
However, the timing and impact of developments in the healthcare
industry are difficult to predict. We cannot assure you that the
markets for our solutions and services will continue to exist at
current levels or that we will have adequate technical, financial
and marketing resources to react to changes in those markets.
If we are unable to manage growth, our operations could be
adversely affected.
Our ability to manage growth effectively will depend on our ability
to improve and expand operations, including our financial and
management information systems, and to recruit, train and manage
personnel. There can be no absolute assurance that management will
be able to manage growth effectively. To manage growth effectively,
we will be required to continue to implement and improve our
operating and financial systems and controls to expand, train and
manage our employee base. Our ability to manage our operations and
growth effectively will require us to continue to expend funds to
enhance our operational, financial and management controls,
reporting systems and procedures, and to attract and retain
sufficient talented personnel.
If we do not properly manage the growth of our business, we may
experience significant strains on our management and operations and
disruptions in our business. Various risks arise when companies
grow too quickly. If our business grows too quickly, our ability to
meet customer demand in a timely and efficient manner could be
challenged. We may also experience development delays as we seek to
meet increased demand for our solutions. Our failure to properly
manage the growth that we or our industry might experience could
negatively impact our ability to execute on our operating plan and,
accordingly, could have an adverse impact on our business, our cash
flow and results of operations, and our reputation with our current
or potential customers.
Our growth may be impacted by acquisitions. We may not be
able to identify suitable acquisition candidates, complete
acquisitions or integrate acquisitions successfully.
Our future growth is likely to depend to some degree on our ability
to acquire and successfully integrate new businesses. We may not be
able to identify suitable acquisition candidates, complete
acquisitions, or integrate acquisitions successfully. We may seek
additional acquisition opportunities, both to further diversify our
business and to penetrate or expand important product offerings or
markets. There are no assurances, however, that we will be able to
successfully identify suitable candidates, negotiate appropriate
terms, obtain financing on acceptable terms, complete proposed
acquisitions, successfully integrate acquired businesses, or expand
into new markets. Once acquired, operations may not achieve
anticipated levels of revenues or profitability. Acquisitions
involve risks, including difficulties in the integration of the
operations, technologies, services and products of the acquired
companies and the diversion of management’s attention from other
business concerns. Although our management will endeavor to
evaluate the risks inherent in any particular transaction, there
are no assurances that we will properly ascertain all such risks.
Difficulties encountered with acquisitions could have a material
adverse impact on our business.
Our business and growth may suffer if we are unable to
attract and retain key employees.
Our success has been largely dependent on the skills, experience
and efforts of our key employees and the loss of the services of
any of our executive officers or other key employees, without a
properly executed transition plan, could have an adverse effect on
us. The loss of any member of our senior management team or any of
our other key employees could damage critical customer
relationships, result in the loss of vital knowledge, experience
and expertise, could lead to an increase in recruitment and
training costs and make it more difficult to successfully operate
our business and execute our business strategy. We may not be able
to find qualified potential replacements for these individuals and
the integration of potential replacements may be disruptive to our
business.
Furthermore, our ability to expand operations to accommodate our
anticipated growth will also depend on our ability to attract and
retain qualified media, management, finance, marketing, sales and
technical personnel. However, competition for these types of
employees is intense due to the limited number of qualified
professionals. Our ability to meet our business development
objectives will depend in part on our ability to recruit, train and
retain top quality people with advanced skills who understand our
technology and business. If we are unable to engage and retain the
necessary personnel, our business may be materially and adversely
affected.
We could be subject to economic, political, regulatory and
other risks arising from our international operations.
Operating in international markets requires significant resources
and management attention and will subject us to regulatory,
economic and political risks that may be different from and
incremental to those in the United States. In addition to the risks
that we face in the United States, our international operations in
Israel and Croatia, may involve risks that could adversely affect
our business, including:
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difficulties and costs associated
with staffing and managing foreign operations; |
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natural or man-made disasters,
political, social and economic instability, including wars,
terrorism and political unrest, outbreak of disease (such as the
recent outbreak of the novel coronavirus, or COVID-19), boycotts,
curtailment of trade, and other business restrictions; |
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compliance with United States laws,
such as the Foreign Corrupt Practices Act, export controls and
economic sanctions, and local laws prohibiting corrupt payments to
government officials; |
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unexpected changes in regulatory
requirements; |
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less favorable foreign intellectual
property laws; |
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adverse tax consequences such as
those related to repatriation of cash from foreign jurisdictions
into the United States, non-income related taxes such as
value-added tax or other indirect taxes, changes in tax laws or
their interpretations, or the application of judgment in
determining our global provision for income taxes and other tax
liabilities given inter-company transactions and calculations where
the ultimate tax determination is uncertain; |
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fluctuations in currency exchange
rates, which could impact revenues and expenses of our
international operations and expose us to foreign currency exchange
rate risk; |
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profit repatriation and other
restrictions on the transfer of funds; |
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differing payment processing
systems as well as consumer use and acceptance of electronic
payment methods, such as payment cards; |
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new and different sources of
competition; |
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different and more stringent user
protection, data protection, privacy and other laws; and |
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availability of reliable broadband
connectivity and wide area networks in targeted areas for
expansion. |
Our failure to manage any of these risks successfully could harm
our international operations and our overall business, as well as
results of our operations.
Risks Related to Our Intellectual Property and
Technology
We are dependent, in part, on our intellectual property. If
we are not able to protect our proprietary rights or if those
rights are invalidated or circumvented, our business may be
adversely affected.
Our business is dependent, in part, on our ability to innovate,
and, as a result, we are reliant on our intellectual property. We
generally protect our intellectual property through patents,
trademarks, trade secrets, confidentiality and nondisclosure
agreements and other measures to the extent our budget permits.
There can be no assurance that patents will be issued from pending
applications that we have filed or that our patents will be
sufficient to protect our key technology from misappropriation or
falling into the public domain, nor can assurances be made that any
of our patents, patent applications, trademarks or our other
intellectual property or proprietary rights will not be challenged,
invalidated or circumvented. In the event a competitor or other
party successfully challenges our solutions, processes, patents or
licenses or claims that we have infringed upon their intellectual
property, we could incur substantial litigation costs defending
against such claims, be required to pay royalties, license fees or
other damages or be barred from using the intellectual property at
issue, any of which could have a material adverse effect on our
business, operating results and financial condition. We cannot
assure you that steps taken by us to protect our intellectual
property and other contractual agreements for our business will be
adequate, that our competitors will not independently develop or
patent substantially equivalent or superior technologies or be able
to design around patents that we may receive, or that our
intellectual property will not be misappropriated.
If we are unable to protect our proprietary rights, we may be at a
disadvantage to others who do not incur the substantial time and
expense we incur. Preventing unauthorized use or infringement of
our intellectual property rights is inherently difficult. Moreover,
it may be difficult or practically impossible to detect theft or
unauthorized use of our intellectual property. Any of the foregoing
could have a material adverse effect upon our business, financial
condition and results of operations.
Cybersecurity incidents could disrupt business operations,
result in the loss of critical and confidential information, and
adversely impact our reputation and results of
operations.
Global cybersecurity threats can range from uncoordinated
individual attempts to gain unauthorized access to our information
technology (IT) systems to sophisticated and targeted measures
known as advanced persistent threats. While we employ comprehensive
measures to prevent, detect, address and mitigate these threats
(including access controls, insurance, vulnerability assessments,
continuous monitoring of our IT networks and systems, maintenance
of backup and protective systems and user training and education),
cybersecurity incidents, depending on their nature and scope, could
potentially result in the misappropriation, destruction, corruption
or unavailability of critical data and confidential or proprietary
information (our own or that of third parties) and the disruption
of business operations. The potential consequences of a material
cybersecurity incident include reputational damage, loss of
customers, litigation with customers and other parties, loss of
trade secrets and other proprietary business data and increased
cybersecurity protection and remediation costs, which in turn could
adversely affect our competitiveness and results of operations.
Our business will suffer if our network systems fail or
become unavailable.
A reduction in the performance, reliability and availability of our
network infrastructure would harm our ability to distribute our
solutions to our users, as well as our reputation and ability to
attract and retain customers. Our systems and operations could be
damaged or interrupted by fire, flood, power loss,
telecommunications failure, Internet breakdown, earthquake and
similar events. Our systems could also be subject to viruses,
break-ins, sabotage, acts of terrorism, acts of vandalism, hacking,
cyber-terrorism and similar misconduct. We might not carry adequate
business interruption insurance to compensate us for losses that
may occur from a system outage. Any system error or failure that
causes interruption in availability of our solutions or an increase
in response time could result in a loss of potential customers,
which could have a material adverse effect on our business,
financial condition and results of operations. If we suffer
sustained or repeated interruptions, then our solutions and
services could be less attractive to our users and our business
would be materially harmed.
Risks Relating to Our Common Stock
If a market for our common stock is not maintained,
shareholders may be unable to sell their shares.
Our common stock is traded under the symbol “OPRX” on the Nasdaq
Capital Market. We do not currently have a consistent active
trading market. There can be no assurance that a consistent active
and liquid trading market will develop or, if developed, that it
will be sustained.
Historically, our securities have been thinly traded. Accordingly,
it may be difficult to sell shares of our common stock without
significantly depressing the value of the stock. Unless we are
successful in developing continued investor interest in our stock,
sales of our stock could continue to result in major fluctuations
in the price of the stock.
The market price of our common stock is likely to be highly
volatile and could fluctuate widely in price in response to various
factors, many of which are beyond our control.
Our stock price is subject to a number of factors, including:
|
● |
Technological innovations or new
solutions and services by us or our competitors; |
|
|
|
|
● |
Government regulation of our
solutions and services; |
|
|
|
|
● |
The establishment of partnerships
with other healthcare companies; |
|
|
|
|
● |
Intellectual property
disputes; |
|
|
|
|
● |
Additions or departures of key
personnel; |
|
|
|
|
● |
Sales of our common stock; |
|
|
|
|
● |
Our ability to execute our business
plan; |
|
|
|
|
● |
Operating results below or
exceeding expectations; |
|
|
|
|
● |
Our operating and financial
performance and prospects; |
|
|
|
|
● |
Loss or addition of any strategic
relationship; |
|
|
|
|
● |
General financial, domestic,
international, economic, industry and other market trends or
conditions; and |
|
|
|
|
● |
Period-to-period fluctuations in
our financial results. |
Our stock price may fluctuate widely as a result of any of the
above. In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are
unrelated to the operating performance of particular companies.
These market fluctuations may also materially and adversely affect
the market price of our common stock.
We do not expect to pay dividends in the foreseeable future
and any return on investment may be limited to the value of our
common stock.
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain all available funds and future
earnings, if any, to fund our future growth and do not expect to
declare or pay any dividend on shares of our common stock in the
foreseeable future. As a result, the success of an investment in
our common stock may depend entirely upon any future appreciation
in its value. There is no guarantee that our common stock will
appreciate in value or even maintain the price at which it was
purchased.
Anti-takeover” provisions may make it more difficult for a third
party to acquire control of us, even if the change in control would
be beneficial to shareholders.
The Company is a Nevada corporation. Anti-takeover provisions in
Nevada law and our charter and bylaws could make it more difficult
for a third party to acquire control of us. These provisions could
adversely affect the market price of the common stock and could
reduce the amount that shareholders might receive if the Company is
sold. For example, our charter provides that the board of directors
may issue preferred stock without shareholder approval. In
addition, our bylaws provide that shareholders cannot act by
written consent and that directors may be removed by shareholders
only with the approval of the holders of not less than two-thirds
of the voting power of the issued and outstanding stock entitled to
vote at an annual or special meeting of the shareholders.
Risks Related to Being a Public Company
We have identified a material weakness in our internal
control over financial reporting. Failure to remediate the material
weakness or any other material weaknesses that we identify in the
future could result in material misstatements in our financial
statements.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as
amended, our management is required to report on the effectiveness
of our internal control over financial reporting. The rules
governing the standards that must be met for management to assess
our internal control over financial reporting are complex and
require significant documentation, testing and possible
remediation. Annually, we perform activities that include
reviewing, documenting and testing our internal control over
financial reporting. In addition, if we fail to maintain the
adequacy of our internal control over financial reporting, we will
not be able to conclude on an ongoing basis that we have effective
internal control over financial reporting in accordance with
Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to
achieve and maintain an effective internal control environment, we
could suffer misstatements in our financial statements and fail to
meet our reporting obligations, which would likely cause investors
to lose confidence in our reported financial information. This
could result in significant expenses to remediate any internal
control deficiencies and lead to a decline in our stock price.
Subsequent to the Original Filing, the Company has re-evaluated the
effectiveness of the Company’s disclosure controls and procedures
and internal control over financial reporting and identified a
material weakness in the Company’s internal control over financial
reporting. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of a company’s annual or interim financial statements will not be
prevented or detected on a timely basis. For further discussion of
the material weakness, see Item 9A, Controls and Procedures.
We cannot provide assurance that we have identified all, or that we
will not in the future have additional, material weaknesses in our
internal control over financial reporting. As a result, we may be
required to implement further remedial measures and to design
enhanced processes and controls to address deficiencies. If
we do not effectively remediate the material weakness identified by
management and maintain adequate internal controls over financial
reporting in the future, we may not be able to prepare reliable
financial reports and comply with our reporting obligations under
the Exchange Act on a timely basis. Any such delays in the
preparation of financial reports and the filing of our periodic
reports may result in a loss of public confidence in the
reliability of our financial statements, which, in turn, could
materially adversely affect our business, the market value of our
common stock and our access to capital markets.
PART II
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation
S-X:
Audited Financial Statements:
Report of Independent
Registered Public Accounting Firm
To the Stockholders and Board of Directors of
OptimizeRx Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets
of OptimizeRx Corporation and Subsidiaries (the “Company”) as of
December 31, 2021 and 2020, and the related consolidated statements
of operations, stockholders’ equity and cash flows for the years
then ended, and the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the
consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as
of December 31, 2021 and 2020, and the results of its operations
and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States) (PCAOB),
the Company’s internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), and
our report dated February 28, 2022, except for the restatement of
the effectiveness of internal control over financial reporting for
the material weakness related to the Company’s inability to obtain
evidence about the effectiveness of controls over financial
reporting at third-party service organizations, which is as of
March 10, 2023, expressed an adverse opinion on the effectiveness
of the Company’s internal control over financial
reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on
our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We
believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising
from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to
the audit committee and that: (1) relate to accounts or disclosures
that are material to the consolidated financial statements and (2)
involved especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any
way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matter
below, providing separate opinions on the critical audit matter or
on the accounts or disclosures to which they related.
Critical Audit
Matter - Revenue Recognition
As disclosed in Note 2 to the consolidated financial
statements, the Company recognizes revenue upon transfer of
control of promised products or services to customers in an amount
that reflects the consideration the Company expects to receive in
exchange for those products or services.
To the Stockholders and Board of Directors of
OptimizeRx Corporation
Page Two
Significant judgment is exercised by the Company in determining
revenue recognition for these customer agreements and includes the
following: (1) determining whether services are considered distinct
performance obligations that should be accounted for separately
versus together (2) the pattern and timing of delivery for each
distinct performance obligation, and (3) identification and
treatment of contract terms that may impact the timing and amount
of revenue recognized.
How the Critical
Audit Matter Was Addressed in the Audit
The audit procedures we performed to address this critical
audit matter included the following: (1) obtaining an understanding
of the design and operating effectiveness of controls related to
identifying distinct performance obligations, determining the
timing of revenue recognition and any estimation of variable
consideration, (2) selection of a sample of customer agreements and
testing management’s identification and treatment of contract
terms, and testing the mathematical accuracy of management’s
calculations of revenue and the associated timing of revenue
recognized in the consolidated financial statements.
We have served as the Company’s auditor since 2020.
/s/ UHY LLP
Sterling Heights, Michigan
February 28, 2022, except as to the restatement of the
effectiveness of internal control over financial reporting for the
material weakness, which is as of March 10, 2023
Report of Independent
Registered Public Accounting Firm
To the Stockholders and Board of Directors of
OptimizeRx Corporation
Adverse Opinion on Internal Control over Financial
Reporting
We have audited OptimizeRx Corporation and
Subsidiaries’ (the “Company”) internal control over
financial reporting as of December 31, 2021, based on criteria
established in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In our opinion, because of the effect of the
material weakness described in the following paragraph on the
achievement of the objectives of the control criteria, the Company
has not maintained effective internal control over financial
reporting as of December 31, 2021, based on the criteria
established in Internal Control---Integrated Framework (2013)
issued by COSO.
A material weakness is a control deficiency, or a combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of the Company’s annual or interim financial statements will not be
prevented or detected on a timely basis. The following material
weaknesses has been identified and included in management’s
assessment:
The Company did not maintain effective control over and was unable
to assess the effectiveness of controls at third-party service
organizations. The Company utilizes data received from these
service organizations in recording amounts pertaining to revenue,
accounts receivable, revenue share expense and revenue share
payable. Management’s inability to obtain evidence about the
effectiveness of controls over financial reporting at these service
organizations represents a material weakness.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated balance sheets and the related statements of
operations, stockholders’ equity, and cash flows of the
Company, and our report dated February 28, 2022, expressed an
unqualified opinion. This material weakness was considered in
determining the nature, timing, and extent of audit tests applied
in our audit of the 2021 consolidated financial statements, and
this report does not affect our report dated February 28, 2022, on
those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting,
included in the accompanying Item 9A, Management’s Assessment of
Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
To the Stockholders and Board of Directors of
OptimizeRx Corporation
Page Two
Definition and Limitations of Internal Control over Financial
Reporting
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ UHY LLP
Sterling Heights, Michigan
February 28, 2022, except as to the restatement of the
effectiveness of internal control over financial reporting for the
material weakness, which is as of March 10, 2023
OPTIMIZERx CORPORATION
Consolidated Balance Sheets
|
|
December 31,
2021 |
|
|
December 31,
2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
84,681,770 |
|
|
$ |
10,516,776 |
|
Accounts receivable, net |
|
|
24,800,585 |
|
|
|
17,885,705 |
|
Prepaid expenses |
|
|
5,630,655 |
|
|
|
4,456,611 |
|
Total Current Assets |
|
|
115,113,010 |
|
|
|
32,859,092 |
|
Property and equipment, net |
|
|
143,818 |
|
|
|
148,854 |
|
Other Assets |
|
|
|
|
|
|
|
|
Goodwill |
|
|
14,740,031 |
|
|
|
14,740,031 |
|
Technology assets, net |
|
|
4,589,126 |
|
|
|
5,251,822 |
|
Patent rights, net |
|
|
2,155,026 |
|
|
|
2,349,570 |
|
Right of use assets, net |
|
|
328,820 |
|
|
|
445,974 |
|
Other intangible assets, net |
|
|
3,902,502 |
|
|
|
4,519,552 |
|
Security deposits and other assets |
|
|
12,859 |
|
|
|
12,859 |
|
Total Other Assets |
|
|
25,728,364 |
|
|
|
27,319,808 |
|
TOTAL ASSETS |
|
$ |
140,985,192 |
|
|
$ |
60,327,754 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable – trade |
|
$ |
606,808 |
|
|
$ |
618,250 |
|
Accrued expenses |
|
|
2,902,836 |
|
|
|
2,420,361 |
|
Revenue share payable |
|
|
4,378,216 |
|
|
|
4,969,868 |
|
Current portion of lease liabilities |
|
|
90,982 |
|
|
|
123,220 |
|
Contingent purchase price payable |
|
|
— |
|
|
|
1,610,813 |
|
Deferred revenue |
|
|
1,389,907 |
|
|
|
285,795 |
|
Total Current Liabilities |
|
|
9,368,749 |
|
|
|
10,028,307 |
|
Non-current Liabilities |
|
|
|
|
|
|
|
|
Lease liabilities, net of current portion |
|
|
236,726 |
|
|
|
325,533 |
|
Total Liabilities |
|
|
9,605,475 |
|
|
|
10,353,840 |
|
Commitments and contingencies (See Note 14) |
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized,
none
issued and outstanding at December 31, 2021 and 2020, |
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001 par value, 166,666,667 shares authorized,
17,860,975 and 15,223,340 shares issued and outstanding at
December 31, 2021 and 2020, respectively |
|
|
17,861 |
|
|
|
15,223 |
|
Additional paid-in-capital |
|
|
166,615,514 |
|
|
|
85,590,428 |
|
Accumulated deficit |
|
|
(35,253,658 |
) |
|
|
(35,631,737 |
) |
Total Stockholders’ Equity |
|
|
131,379,717 |
|
|
|
49,973,914 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
140,985,192 |
|
|
$ |
60,327,754 |
|
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx CORPORATION
Consolidated Statements of Operations
|
|
For the
year ended
December 31,
2021 |
|
|
For the
year ended
December 31,
2020 |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
61,292,598 |
|
|
$ |
43,313,323 |
|
Cost of revenues |
|
|
25,654,384 |
|
|
|
19,207,902 |
|
Gross
margin |
|
|
35,638,214 |
|
|
|
24,105,421 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
5,491,957 |
|
|
|
3,172,840 |
|
Depreciation,
amortization, and noncash lease expense |
|
|
2,086,454 |
|
|
|
2,075,888 |
|
Other general
and administrative expenses |
|
|
27,698,703 |
|
|
|
20,992,012 |
|
Total operating
expenses |
|
|
35,277,114 |
|
|
|
26,240,740 |
|
Income (loss)
from operations |
|
|
361,100 |
|
|
|
(2,135,319 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
Interest
income |
|
|
16,979 |
|
|
|
68,582 |
|
Change in fair
value of contingent consideration |
|
|
—
|
|
|
|
(140,390 |
) |
Total other
income (expense) |
|
|
16,979 |
|
|
|
(71,808 |
) |
Income (loss) before provision for
income taxes |
|
|
378,079 |
|
|
|
(2,207,127 |
) |
Income tax
benefit |
|
|
—
|
|
|
|
—
|
|
Net income
(loss) |
|
$ |
378,079 |
|
|
$ |
(2,207,127 |
) |
Weighted average number of shares
outstanding – basic |
|
|
17,228,019 |
|
|
|
14,827,923 |
|
Weighted average number of shares
outstanding – diluted |
|
|
17,690,489 |
|
|
|
14,827,923 |
|
Income (loss) per share –
basic |
|
$ |
0.02 |
|
|
$ |
(0.15 |
) |
Income (loss) per share –
diluted |
|
$ |
0.02 |
|
|
$ |
(0.15 |
) |
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx CORPORATION
Consolidated Statement of Stockholders’ Equity for the
Year
Ended December 31, 2021
|
|
Common
Stock
Shares |
|
|
Common
Stock
Amount |
|
|
Additional
Paid-in
Capital |
|
|
Accumulated
Deficit |
|
|
Total
Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2021 |
|
|
15,223,340 |
|
|
$ |
15,223 |
|
|
$ |
85,590,428 |
|
|
$ |
(35,631,737 |
) |
|
$ |
49,973,914 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
— |
|
|
|
—
|
|
|
|
2,709,781 |
|
|
|
—
|
|
|
|
2,709,781 |
|
Restricted Stock |
|
|
3,333 |
|
|
|
3 |
|
|
|
2,532,088 |
|
|
|
—
|
|
|
|
2,532,091 |
|
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
board compensation |
|
|
4,730 |
|
|
|
5 |
|
|
|
250,080 |
|
|
|
—
|
|
|
|
250,085 |
|
For
stock options exercised |
|
|
1,105,822 |
|
|
|
1,106 |
|
|
|
4,863,125 |
|
|
|
—
|
|
|
|
4,864,231 |
|
Public offering of common shares, net of offering costs |
|
|
1,523,750 |
|
|
|
1,524 |
|
|
|
70,670,012 |
|
|
|
—
|
|
|
|
70,671,536 |
|
Net income for the year |
|
|
— |
|
|
|
—
|
|
|
|
—
|
|
|
|
378,079 |
|
|
|
378,079 |
|
Balance, December 31, 2021 |
|
|
17,860,975 |
|
|
$ |
17,861 |
|
|
$ |
166,615,514 |
|
|
$ |
(35,253,658 |
) |
|
$ |
131,379,717 |
|
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx CORPORATION
Consolidated Statement of Stockholders’ Equity for the
Year
Ended December 31, 2020
|
|
Common
Stock
Shares |
|
|
Common
Stock
Amount |
|
|
Additional
Paid-in
Capital |
|
|
Accumulated
Deficit |
|
|
Total
Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2020 |
|
|
14,600,579 |
|
|
$ |
14,601 |
|
|
$ |
78,272,268 |
|
|
$ |
(33,424,610 |
) |
|
$ |
44,862,259 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
— |
|
|
|
—
|
|
|
|
1,884,202 |
|
|
|
—
|
|
|
|
1,884,202 |
|
Restricted Stock |
|
|
84,746 |
|
|
|
84 |
|
|
|
838,430 |
|
|
|
—
|
|
|
|
838,514 |
|
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
board compensation |
|
|
28,809 |
|
|
|
29 |
|
|
|
450,095 |
|
|
|
—
|
|
|
|
450,124 |
|
For
stock options exercised |
|
|
414,705 |
|
|
|
415 |
|
|
|
2,487,979 |
|
|
|
—
|
|
|
|
2,488,394 |
|
For
contingent purchase price and escrow hold back |
|
|
94,501 |
|
|
|
94 |
|
|
|
1,657,454 |
|
|
|
—
|
|
|
|
1,657,548 |
|
Net loss for the year |
|
|
— |
|
|
|
—
|
|
|
|
|
|
|
|
(2,207,127 |
) |
|
|
(2,207,127 |
) |
Balance, December 31, 2020 |
|
|
15,223,340 |
|
|
$ |
15,223 |
|
|
$ |
85,590,428 |
|
|
$ |
(35,631,737 |
) |
|
$ |
49,973,914 |
|
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx CORPORATION
Consolidated Statements of Cash Flows
|
|
For the
year ended
December 31,
2021 |
|
|
For the
year ended
December 31,
2020 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net
income (loss) |
|
$ |
378,079 |
|
|
$ |
(2,207,127 |
) |
Adjustments to reconcile net income
(loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
1,965,325 |
|
|
|
1,971,083 |
|
Noncash lease
expense |
|
|
121,129 |
|
|
|
104,805 |
|
Increase in bad
debt reserve |
|
|
80,000 |
|
|
|
200,000 |
|
Stock-based
compensation |
|
|
5,491,957 |
|
|
|
3,172,840 |
|
Change in fair
value of contingent consideration |
|
|
—
|
|
|
|
140,390 |
|
Changes in: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(6,994,880 |
) |
|
|
(10,667,680 |
) |
Prepaid
expenses and other assets |
|
|
(1,174,044 |
) |
|
|
(3,517,700 |
) |
Accounts
payable |
|
|
(11,442 |
) |
|
|
125,255 |
|
Revenue share payable |
|
|
(591,652 |
) |
|
|
3,351,430 |
|
Accrued
expenses and other |
|
|
482,475 |
|
|
|
1,416,884 |
|
Change in
operating lease liabilities |
|
|
(125,020 |
) |
|
|
(106,347 |
) |
Deferred revenue |
|
|
1,104,112 |
|
|
|
(294,219 |
) |
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
|
726,039 |
|
|
|
(6,310,386 |
) |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of
property and equipment |
|
|
(100,322 |
) |
|
|
(68,041 |
) |
Acquisition of
intangible assets, including intellectual property rights |
|
|
(21,511 |
) |
|
|
(11,932 |
) |
Capitalized software development costs |
|
|
(364,166 |
) |
|
|
(44,752 |
) |
NET
CASH USED IN INVESTING ACTIVITIES |
|
|
(485,999 |
) |
|
|
(124,725 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from
issuance of common stock, net of offering costs |
|
|
70,671,536 |
|
|
|
—
|
|
Proceeds from
exercise of stock options |
|
|
4,864,231 |
|
|
|
2,488,394 |
|
Payment of contingent consideration |
|
|
(1,610,813 |
) |
|
|
(4,389,187 |
) |
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
|
73,924,954 |
|
|
|
(1,900,793 |
) |
NET INCREASE
(DECREASE IN) CASH AND CASH EQUIVALENTS |
|
|
74,164,994 |
|
|
|
(8,335,904 |
) |
CASH
AND CASH EQUIVALENTS – BEGINNING OF PERIOD |
|
|
10,516,776 |
|
|
|
18,852,680 |
|
CASH AND
CASH EQUIVALENTS – END OF PERIOD |
|
$ |
84,681,770 |
|
|
$ |
10,516,776 |
|
SUPPLEMENTAL CASH
FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
$ |
—
|
|
|
$ |
—
|
|
Cash
paid for income taxes |
|
$ |
—
|
|
|
$ |
—
|
|
NON-CASH INVESTING
AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Acquisition liabilities paid in stock |
|
$ |
—
|
|
|
$ |
1,657,548 |
|
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
OptimizeRx is a digital health technology company enabling
care-focused engagement between life sciences organizations,
healthcare providers, and patients at critical junctures throughout
the patient care journey. Connecting over 60% of U.S. healthcare
providers and millions of their patients through an intelligent
technology platform embedded within a proprietary point-of-care
network, OptimizeRx helps patients start and stay on their
medications.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the
United States of America and are presented in US dollars.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Estimates and assumptions have been made in determining the
carrying value of assets, depreciable and amortizable lives of
tangible and intangible assets, the carrying value of liabilities,
the valuation allowance for the deferred tax asset, the timing of
revenue recognition and related revenue share expenses, and inputs
used in the calculation of stock based compensation. Actual results
could differ from these estimates.
Principles of
Consolidation
The financial statements reflect the consolidated results of
OptimizeRx Corporation, a Nevada corporation, and its wholly owned
subsidiaries: OptimizeRx Corporation, a Michigan corporation, RMDY
Health, Inc., a Delaware corporation, CareSpeak Communications,
Inc., a New Jersey corporation, Cyberdiet, a controlled foreign
corporation incorporated in Israel, and CareSpeak Communications
D.O.O., a Controlled Foreign Corporation incorporated in Croatia.
Together, these companies are referred to as “OptimizeRx” and “the
Company.” All material intercompany transactions have been
eliminated.
Reclassifications
Certain items in the previous year financial statements have been
reclassified to match the current year presentation.
Foreign Currency
The Company’s functional currency is the U.S. dollar, however it
pays certain expenses related to its two foreign subsidiaries in
the local currency, which is the sheckel for its subsidiary in
Israel and the kuna for its Croatian subsidiary. All transactions
are recorded at the exchange rate at the time of payment. If there
is a time lag between the time of recording the liability and the
time of payment, a gain or loss is recorded in the Consolidated
Statement of Operations due to any fluctuations in the exchange
rate.
Cash and Cash
Equivalents
For purposes of the accompanying financial statements, the Company
considers all highly liquid instruments, consisting of money market
accounts, with an initial maturity of three months or less to be
cash equivalents.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial
Instruments
Fair value is defined as the price that would be received upon sale
of an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and
in the principal or most advantageous market for that asset or
liability. The fair value should be calculated based on assumptions
that market participants would use in pricing the asset or
liability, not on assumptions specific to the entity. In addition,
the fair value of liabilities should include consideration of
non-performance risk including our own credit risk.
In addition to defining fair value, the disclosure requirements
around fair value establish a fair value hierarchy for valuation
inputs, which is expanded. The hierarchy prioritizes the inputs
into three levels based on the extent to which inputs used in
measuring fair value are observable in the market. Each fair value
measurement is reported in one of the three levels, which is
determined by the lowest level input that is significant to the
fair value measurement in its entirety. These levels are:
Level 1 – Inputs are based upon unadjusted quoted prices for
identical instruments traded in active markets.
Level 2 – Inputs are based upon significant observable inputs other
than quoted prices included in Level 1, such as quoted prices for
identical or similar instruments in markets that are not active,
and model-based valuation techniques for which all significant
assumptions are observable in the market or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities.
Level 3 – Inputs are generally unobservable and typically reflect
management’s estimates of assumptions that market participants
would use in pricing the asset or liability. The fair values are
therefore determined using model-based techniques that include
option pricing models, discounted cash flow models, and similar
techniques. The Company’s stock options and warrants are valued
using level 3 inputs.
The following tables present the fair values and carrying values of
the Company’s financial assets and liabilities measured on a
recurring basis as of December 31, 2021 and 2020 and the
valuation techniques used by the Company to determine those fair
values.
|
|
|
2021 |
|
|
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Fair Value |
|
|
|
Carrying
Value |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Purchase Price Payable |
|
$ |
—
|
|
|
$ |
—
|
|
|
$ |
—
|
|
|
$ |
—
|
|
|
$ |
—
|
|
|
|
|
2020 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair
Value |
|
|
Carrying
Value |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Purchase Price Payable (1) |
|
$ |
—
|
|
|
$ |
—
|
|
|
$ |
1,610,813 |
|
|
$ |
1,610,813 |
|
|
$ |
1,610,813 |
|
|
(1) |
The contingent consideration is
based off achieving certain revenue milestones in each of the next
two years. The Geometric-Brownian motion analysis was used to
generate spot prices for use in an option pricing model. For 2020,
the final payout had been determined and was paid in 2021. |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table provides a summary of changes in fair value of
the Company’s Level 3 financial instruments for the years ended
December 31, 2021 and 2020.
|
|
Amount |
|
Balance December 31, 2019 |
|
$ |
6,720,000 |
|
Payment of CareSpeak Communication
contingent consideration |
|
|
(1,389,187 |
) |
Payment of RMDY Health, Inc.
contingent consideration |
|
|
(3,860,390 |
) |
Increase in the
value of the RMDY Health, Inc. contingent consideration |
|
|
140,390 |
|
Balance December 31, 2020 |
|
|
1,610,813 |
|
Payment of
CareSpeak Communication contingent consideration |
|
|
(1,610,813 |
) |
Balance December 31, 2021 |
|
$ |
—
|
|
Accounts Receivable and
Allowance for Doubtful Accounts
Accounts receivable are reported at realizable value, net of
allowances for doubtful accounts, which is estimated and recorded
in the period the related revenue is recorded. The Company has a
standardized approach to estimate and review the collectability of
its receivables based on a number of factors, including the period
they have been outstanding. Historical collection and payer
reimbursement experience is an integral part of the estimation
process related to allowances for doubtful accounts. In addition,
the Company regularly assesses the state of its billing operations
in order to identify issues, which may impact the collectability of
these receivables or reserve estimates. Because the Company’s
customers are primarily large well-capitalized companies,
historically there has been very little bad debt expense. Bad debt
expense was $80,000 for the year ended December 31, 2021 and
$200,000 for the year ended December 31, 2020. The allowance
for doubtful accounts was $241,219 and $158,163 as of
December 31, 2021 and 2020, respectively. From time to time,
we may record revenue based on our revenue recognition policies
described below in advance of being able to invoice the customer.
Included in accounts receivable are unbilled amounts of $2,110,865
and $757,218 at December 31, 2021, and December 31, 2020,
respectively.
Property and
Equipment
Property and equipment are stated at cost and are being depreciated
over their estimated useful lives of three to five years for office
equipment and three years for computer equipment using the
straight-line method of depreciation for book purposes. Maintenance
and repair charges are expensed as incurred.
Intangible
Assets
Intangible assets are stated at cost. Finite-lived assets are being
amortized over their estimated useful lives of fifteen to seventeen
years for patents, eight years for customer relationships, fifteen
years for tradenames, four years for covenants not to compete, and
three to four years for software and websites, all using the
straight-line method. These assets are evaluated when there is a
triggering event. There was no impairment of our intangible assets
in either year presented.
Goodwill
We evaluate goodwill for impairment during our fiscal fourth
quarter, or more frequently if an event occurs or circumstances
change. Our analysis determined that there was no impairment of our
goodwill.
Revenue
Recognition
Recognition of revenue requires evidence of a contract, probable
collection of proceeds, and completion of substantially all
performance obligations. We use a 5-step model to recognize
revenue. These steps are: identify the contract with a customer,
identify the performance obligations in the contract, determine the
transaction price, allocate the transaction price to the
performance obligations in the contract, and recognize revenue when
or as the performance obligations are satisfied.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenues are primarily generated from content delivery activities
in which the Company delivers financial, clinical, or brand
messaging through a distribution network of eprescribers and
electronic health record technology providers (channel partners),
directly to consumers, or from reselling services that complement
the business. This content delivery for a customer is referred to
as a program. Unless otherwise specified, revenue is recognized
based on the selling price to customers.
The Company’s contracts are generally all less than one year and
the primary performance obligation is delivery of messages, or
content, but the contract may contain additional services.
Additional services may include program design, which is the design
of the content delivery program, set up, and reporting. We consider
set up and reporting services to be complimentary to the primary
performance obligation and recognized through performance of the
delivery of content. We consider program design and related
consulting services to be performance obligations separate from the
delivery of messages.
As the content is distributed through the platform and network of
channel partners (a transaction), these transactions are recorded,
and revenue is recognized, over time as the distributions occur.
Revenue for transactions can be realized based on a price per
message, a price per redemption, as a flat fee occurring over a
period of time, or upon completion of the program, depending on the
client contract. The Company recognizes setup fees that are
required for integrating client offerings and campaigns into the
rule-based content delivery system and network over the life of the
initial program, based either on time, or units delivered,
depending upon which is most appropriate in the specific situation.
Should a program be cancelled before completion, the balance of set
up revenue is recognized at the time of cancellation, as set up
fees are nonrefundable. Additionally, the Company also recognizes
revenue for providing program performance reporting and
maintenance, either by the Company directly delivering reports or
by providing access to its online reporting portal that the client
can utilize. This reporting revenue is recognized over time as the
messages are delivered. Program design, which is the design of the
content delivery program, and related consulting services are
recognized as services are performed.
The majority of our revenue is earned from life sciences companies,
such as pharmaceutical and biotech companies, or medical device
makers. A small portion of our revenue is earned from other
sources, such as associations and technology companies. A break
down is set forth in the table below.
|
|
2021 |
|
|
2020 |
|
Life Science
Companies |
|
$ |
59,018,033 |
|
|
$ |
41,358,746 |
|
Other |
|
|
2,274,565 |
|
|
|
1,954,577 |
|
Total
Revenue |
|
$ |
61,292,598 |
|
|
$ |
43,313,323 |
|
Revenues (cont.)
In some instances, we license certain of our software applications
in arrangements that do not include other performance obligations.
In those instances, we record license revenue when the software is
delivered for use to the license. In instances where our contracts
included Software as a service, the revenue is recognized over the
subscription period as services are delivered to the customer.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In some instances, the Company also resells messaging solutions
that are available through channel partners that are complementary
to the core business and client base. These partner specific
solutions are frequently similar to our own solutions and revenue
recognition for these programs is the same as described above. In
instances where the Company sells solutions on a commission basis,
net revenue is recognized based on the commission-based revenue
split that the Company receives. There were no programs recorded on
a net basis in the years presented. In instances where the Company
resells these messaging solutions and has all financial risk and
significant operation input and risk, the Company records the
revenue based on the gross amount sold and the amount paid to the
channel partner as a cost of sales.
Cost of Revenues
The primary cost of revenue is revenue share expense. Based on the
volume of transactions that are delivered through the channel
partner network, the Company provides a revenue share to compensate
the partner, or others, for their promotion of the campaign.
Revenue shares are a negotiated percentage of the transaction fees
and can also be specific to special considerations and
campaigns.
Income Taxes
Income taxes are computed using the asset and liability method.
Under the asset and liability method, deferred income tax assets
and liabilities are determined based on the differences between the
financial reporting and tax basis of assets and liabilities and are
measured using the currently enacted tax rates and laws. A
valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be
realized.
The Company recognizes the tax benefit from uncertain tax positions
if it is more likely than not that the tax positions will be
sustained on examination by the tax authorities, based on the
technical merits of the position. The tax benefit is measured based
on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement. It is the Company’s policy
to include interest and penalties related to tax positions as a
component of income tax expense.
Concentration of Credit
Risks
The Company maintains its cash and cash equivalents in bank deposit
accounts, which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts; however,
amounts in excess of the federally insured limit may be at risk if
the bank experiences financial difficulties. As of
December 31, 2021 and 2020 the Company had $83,312,524 and
$9,936,806, respectively, in cash balances in excess of federally
insured limits, primarily at Bank of America/Merrill Lynch.
Research and
Development
The Company expenses research and development expenses as incurred.
There was no research and development expense for the years ended
December 31, 2021 and 2020.
Stock-based
Compensation
The Company uses the fair value method to account for stock-based
compensation. The fair value of the equity instrument is charged
directly to compensation expense and additional paid-in capital
over the period during which services are rendered. The fair value
of each award is estimated on the date of each grant.
For restricted stock awards, the fair value is based on the market
value of the Company’s common stock on the date of grant. For
market based restricted stock units, the fair value is estimated
using a Monte Carlo simulation model. This valuation technique
includes estimating the movement of stock prices and the effects of
volatility, interest rates and dividends.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
For options, fair value is estimated using the Black-Scholes option
pricing model that uses the following assumptions. Estimated
volatilities are based on the historical volatility of the
Company’s common stock over the same period as the expected term of
the options. The expected term of options granted represents the
period of time that options granted are expected to be outstanding.
The Company uses historical data to estimate option exercise
behavior and to determine this term. The risk-free rate used is
based on the U.S. Treasury yield curve in effect at the time of the
grant using a time period equal to the expected option term. The
Company has never paid dividends and do not expect to pay any
dividends in the future.
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Expected dividend
yield |
|
|
0 |
% |
|
|
0 |
% |
Risk free interest rate |
|
|
0.19% - 0.67 |
% |
|
|
0.16% - 1.63 |
% |
Expected option term |
|
|
3.5 years |
|
|
|
3.5 years |
|
Turnover/forfeiture rate |
|
|
0 |
% |
|
|
0 |
% |
Expected volatility |
|
|
67% - 70 |
% |
|
|
65% - 71 |
% |
Weighted average grant date fair value |
|
$ |
26.36 |
|
|
$ |
5.49 |
|
The Black-Scholes option valuation model and other existing models
were developed for use in estimating the fair value of traded
options that have no vesting restrictions and are fully
transferable. These option valuation models require the input of,
and are highly sensitive to, subjective assumptions including the
expected stock price volatility. The Company’s stock options have
characteristics significantly different from those of traded
options, and changes in the subjective input assumptions could
materially affect the fair value estimate.
Loss Per Common and Common
Equivalent Share
The computation of basic (loss) earnings per common share is
computed using the weighted average number of common shares
outstanding during the year. The computation of diluted (loss)
earnings per common share is based on the basic weighted average
number of shares outstanding during the year plus common stock
equivalents, which would arise from the exercise of options and
warrants outstanding using the treasury stock method and the
average market price per share during the year. 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 820,059 related to options, and 91,667
related to restricted stock units, for a total of 911,726 because
they are anti-dilutive, as a result of a net loss for the year
ended December 31, 2020.
The computation of weighted average shares outstanding and the
basic and diluted earnings per common share for the years ended
December 31, 2021 and 2020 consisted of the following:
|
|
Net
Income |
|
|
Shares |
|
|
Per
Share
Amount |
|
Year ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
Basic EPS |
|
$ |
378,079 |
|
|
|
17,228,019 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
378,079 |
|
|
|
17,690,489 |
|
|
$ |
0.02 |
|
|
|
Net
(Loss) |
|
|
Shares |
|
|
Per
Share
Amount |
|
Year ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
Basic EPS |
|
$ |
(2,207,127 |
) |
|
|
14,827,923 |
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
(2,207,127 |
) |
|
|
14,827,923 |
|
|
$ |
(0.15 |
) |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived
Assets
The Company continually monitors events and changes in
circumstances that could indicate carrying amounts of long-lived
assets may not be recoverable. When such events or changes in
circumstances are present, the Company assesses the recoverability
of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future
cash flows. If the total of the future cash flows is less than the
carrying amount of those assets, the Company recognizes an
impairment loss based on the excess of the carrying amount over the
fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or the fair value less costs to
sell.
Segment
reporting
We operate in one reportable segment. Overall, our business
involves connecting life science companies to patients and
providers. We have a common customer base for all of our solutions,
which are primarily all communications with healthcare providers or
patients on behalf of life science customers. Our customers are
geographically located in the U.S although we have two technology
centers located internationally. We do not prepare separate
internal income statements by solutions as our focus is on selling
enterprise arrangements covering multiple solutions that span the
entire patient journey with a specific brand.
Recently Issued Accounting
Guidance
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 us as of
January 1, 2021 The adoption of this standard did not have a
material effect on our financial position, results of operations,
or cash flows.
Not Yet Adopted
ASU Topic 2021-08 Business Combinations (Topic 805), Accounting for
Contract Assets and Contract Liabilities from Contracts with
Customers, which requires contract assets and contract liabilities
acquired in a business combination to be recognized and measured by
the acquirer on the acquisition date in accordance with ASC 606,
Revenue from Contracts with Customers, as if it had originated the
contracts. The standard is effective for the Company’s fiscal year
beginning January 1, 2023, with early adoption permitted. The
Company is currently evaluating the effect of this pronouncement on
its Consolidated Financial Statements, but it is not expected to
have a material impact.
NOTE 3 – PREPAID EXPENSES
Prepaid expenses consisted of the following as of December 31,
2021 and 2020:
|
|
2021 |
|
|
2020 |
|
Prepaid revenue share and
exclusivity payments |
|
|
4,266,668 |
|
|
|
3,750,000 |
|
EHR access fees |
|
|
250,000 |
|
|
|
317,726 |
|
Data |
|
|
168,462 |
|
|
|
29,408 |
|
Insurance |
|
|
156,327 |
|
|
|
77,887 |
|
Other |
|
|
789,198 |
|
|
|
281,590 |
|
Total prepaid
expenses |
|
$ |
5,630,655 |
|
|
$ |
4,456,611 |
|
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 4 – PROPERTY AND EQUIPMENT
The Company owned equipment recorded at cost, which consisted of
the following as of December 31, 2021 and 2020:
|
|
2021 |
|
|
2020 |
|
Computer equipment |
|
$ |
267,917 |
|
|
$ |
169,247 |
|
Furniture and
fixtures |
|
|
200,250 |
|
|
|
198,665 |
|
|
|
|
468,167 |
|
|
|
367,912 |
|
Less
accumulated depreciation |
|
|
324,349 |
|
|
|
219,058 |
|
Property and equipment, net |
|
$ |
143,818 |
|
|
$ |
148,854 |
|
Depreciation expense was $105,360 and $95,202 for the years ended
December 31, 2021 and 2020, respectively.
NOTE 5 – INTANBIGLE ASSETS
Goodwill
Our goodwill is related to the acquisitions of RMDY Health, Inc. in
2019 and CareSpeak Communications in 2018. Goodwill is generally
not amortizable for tax purposes and is not amortizable for
financial statement purposes.
Intangible Assets
Intangible assets included on the consolidated balance sheets
consist of the following:
|
|
December 31,
2021 |
|
|
Weighted |
|
|
|
Gross
Carrying
Amount |
|
|
Accumulated
Amortization |
|
|
Net |
|
|
Average Life
Remaining |
|
Patent rights |
|
$ |
3,362,898 |
|
|
$ |
1,207,872 |
|
|
|
2,155,026 |
|
|
9.6 |
|
Technology
Assets |
|
$ |
8,548,930 |
|
|
$ |
3,959,804 |
|
|
|
4,589,126 |
|
|
4.9 |
|
Other intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename |
|
$ |
3,586,000 |
|
|
$ |
537,900 |
|
|
|
3,084,100 |
|
|
12.7 |
|
Non-compete
agreements |
|
|
1,093,000 |
|
|
|
899,635 |
|
|
|
193,365 |
|
|
0.6 |
|
Customer relationships |
|
|
923,000 |
|
|
|
261,963 |
|
|
|
661,037 |
|
|
8.4 |
|
Total other |
|
|
5,602,000 |
|
|
|
1,699,498 |
|
|
|
3,902,502 |
|
|
|
|
Total
Intangibles |
|
$ |
17,513,828 |
|
|
$ |
6,867,174 |
|
|
|
10,646,654 |
|
|
|
|
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 5 – INTANBIGLE ASSETS (CONTINUED)
|
|
December 31,
2020 |
|
|
Weighted |
|
|
|
Gross
Carrying
Amount |
|
|
Accumulated
Amortization |
|
|
Net |
|
|
Average Life
Remaining |
|
Patent rights |
|
$ |
3,341,388 |
|
|
$ |
991,818 |
|
|
|
2,349,570 |
|
|
11.5 |
|
Technology
Assets |
|
$ |
8,184,765 |
|
|
$ |
2,932,943 |
|
|
|
5,251,822 |
|
|
7.7 |
|
Other intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename |
|
$ |
3,586,000 |
|
|
$ |
298,833 |
|
|
|
3,287,167 |
|
|
13.7 |
|
Non-compete
agreements |
|
|
1,093,000 |
|
|
|
611,885 |
|
|
|
481,115 |
|
|
1.6 |
|
Customer relationships |
|
|
923,000 |
|
|
|
171,730 |
|
|
|
751,270 |
|
|
9.8 |
|
Total other |
|
|
5,602,000 |
|
|
|
1,082,448 |
|
|
|
4,519,552 |
|
|
|
|
Total
Intangibles |
|
$ |
17,128,153 |
|
|
$ |
5,007,209 |
|
|
|
12,120,944 |
|
|
|
|
Intangibles are being amortized on a straight-line basis over the
following estimated useful lives.
Patents |
|
|
15 – 17 years |
|
Tradenames |
|
|
15
years |
|
Non-compete agreements |
|
|
2 – 4
years |
|
Customer relationships |
|
|
8 – 15
years |
|
Technology assets |
|
|
3 – 10
years |
|
The Company recorded amortization expense of $1,859,965 and
$1,875,882 in the years ended December 31, 2021 and 2020,
respectively. Expected future amortization expenses of the
intangibles assets as of December 31, 2021 is as follows:
Year ended December 31, |
|
|
|
2022 |
|
$ |
1,532,756 |
|
2023 |
|
|
1,203,639 |
|
2024 |
|
|
1,203,639 |
|
2025 |
|
|
1,131,058 |
|
2026 |
|
|
1,009,499 |
|
Thereafter |
|
|
4,566,063 |
|
Total |
|
$ |
10,646,654 |
|
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 6 – DEFERRED REVENUE
The Company has several signed contracts with customers for the
distribution of financial messaging, or other services, which
include payment in advance. The payments are not recorded as
revenue until the revenue is earned under its revenue recognition
policy discussed in Note 2. Deferred revenue was $1,389,908 and
$285,795 as of December 31, 2021 and 2020, respectively. These
contracts are all short term in nature and all revenue is expected
to be recognized within 12 months, or less. Following is a summary
of activity in the deferred revenue account for the year ended
December 31, 2021.
Balance January 1, 2021 |
|
$ |
285,795 |
|
Revenue recognized |
|
|
(18,006,973 |
) |
Amount
collected |
|
|
19,111,086 |
|
Balance December 31, 2021 |
|
$ |
1,389,908 |
|
Following is a summary of activity in the deferred revenue account
for the year ended December 31, 2020.
Balance January 1, 2020 |
|
$ |
580,014 |
|
Revenue recognized |
|
|
(16,260,166 |
) |
Amount
collected |
|
|
15,680,152 |
|
Balance December 31, 2020 |
|
$ |
285,795 |
|
NOTE 7 – RELATED PARTY TRANSACTIONS
During the year ended December 31, 2010, the Company acquired the
technical contributions and assignment of all exclusive rights to
and for a key patent in process at the time from a former CEO in
exchange for a total payment in shares of common stock and options
valued at $930,000 at the time of the acquisition and recorded the
patent at that cost. That patent remains in Patents on the
consolidated balance sheet as of December 31, 2021.
Jim Lang, one of our Board Members, is the CEO of Eversana, a
leading global provider of services to the life sciences industry.
Eversana is similar to other customers we generate revenue from,
such as agencies or resellers. During the year ended
December 31, 2021, we have recognized $218,333 in revenue from
contracts engaged with Eversana. No revenues were recognized in
2020 related to contracts with Eversana. These contracts were
sourced by Eversana on behalf of life science customers of theirs.
The contracts are at market rates and were generated in the normal
course of business.
NOTE 8 – CONTINGENT PURCHASE PRICE
Our purchase of CareSpeak Communications contained a contingent
element that would be paid only if the Company achieved certain
patient engagement revenues in 2019 and 2020. The total contingent
payment could have been up to $3.0 million. The target patient
engagement revenues were achieved in both 2019 and in 2020. The
calculated fair value of the contingent payment was $3,000,000 at
December 31, 2019 and $1,610,813 at December 31, 2020.
The final required payment was made in 2021.
Our purchase of RMDY Health, Inc. also contained a contingent
element that would be paid only if the Company achieves certain
revenues in 2020 and 2021 related to the RMDY business. The total
contingent payment could have been up to $30.0 million. The minimum
payment was $1.0 million in each of the two years. The calculated
fair value of the contingent payment was $3,720,000 at
December 31, 2019. We determined the fair value of the
Contingent Purchase Price Payable at December 31, 2019 using a
Geometric-Brownian motion analysis of the expected revenue and
resulting earnout payment using inputs that include the spot price,
a risk free rate of return of 1.4%, a term of 2 years, and
volatility of 35%. During 2020, we reached agreement with the
former shareholders of RMDY to fix the liability at $3.75 million,
payable in a combination of cash and stock. Because of the change
in the share price between the date of agreement and the date of
payment, the amount recorded for the stock amount varied from the
agreed amount. The liability was paid in full during 2020 and was
paid with a $3.0 million cash payment and the remainder in shares
of common stock.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 8 – CONTINGENT PURCHASE PRICE (CONTINUED)
There was no contingent purchase price payable at December 31,
2021.
The total fair value of contingent purchase price payable at
December 31, 2020 is as follows.
|
|
Current |
|
|
Long-Term |
|
|
Total |
|
CareSpeak Communications,
Inc. |
|
$ |
1,610,813 |
|
|
|
—
|
|
|
$ |
1,610,813 |
|
RMDY
Health |
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total |
|
$ |
1,610,813 |
|
|
|
—
|
|
|
$ |
1,610,813 |
|
NOTE 9 – STOCKHOLDERS’ EQUITY
Preferred
Stock
The Company has 10,000,000 shares of preferred stock, $.001 par
value per share, authorized as of December 31, 2021. No shares
were issued or outstanding in either 2020 or 2021.
Common
Stock
The Company had 166,666,667 shares of common stock, $.001 par value
per share, authorized as of December 31, 2021. There were
17,860,975 and 15,223,340 shares of common stock issued and
outstanding at December 31, 2021 and 2020, respectively.
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.
The Company had a Director Compensation plan covering its
independent non-employee Directors that was in effect through June
30, 2021. A total of 4,730 and 28,809 shares were granted and
issued in the years ended December 31, 2021 and 2020,
respectively, in connection with this compensation plan. These
shares were valued at $250,085 and $450,124, respectively. The plan
was changed to grant restricted stock units under the Company’s
2021 Equity compensation plan and those grants are reflected in the
information in Note 10.
We issued 1,105,822 shares of common stock and received proceeds of
$4,864,231 in 2021 in connection with the exercise of options. We
also issued 414,705 shares of common stock and received proceeds of
$2,488,394 in 2020 in connection with the exercise of options.
We issued 3,333 shares of common stock in 2021 and 84,746 shares of
common in stock in 2020 in connection with the vesting of
restricted stock units and discussed in greater detail in Note 10,
Stock Compensation.
NOTE 10 – STOCK COMPENSATION
The Company sponsors two stock-based incentive compensation
plans.
The first plan is known as the 2013 Incentive Plan (the “2013
Plan”) and was established by the Board of Directors of the Company
in June 2013. The 2013 Plan, as amended, authorized the issuance of
3,000,000 shares of Company common stock. The amended plan was
approved by shareholders. A total of 671,011 shares of common stock
underlying options and 145,550 shares of common stock underlying
restricted stock unit awards were outstanding at December 31,
2021. In connection with the adoption of a new plan in 2021, the
Company froze the 2013 Plan. At December 31, 2021, there were
no shares available for grant under the 2013 Plan.
In 2021, the Company adopted a new plan known as the 2021 Equity
Incentive Plan (“2021 Plan”). The plan was established by the Board
of Directors and approved by shareholders in August 2021. A total
of 2,500,000 shares are authorized for issuance under the 2021
Plan. A total of 112,536 shares of common stock underlying options
and 254,188 shares of common stock underlying restricted stock unit
awards were outstanding at December 31, 2021. At
December 31, 2021, 2,133,276 shares were available for grant
under the 2021 Plan.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 10 – STOCK COMPENSATION (CONTINUED)
The 2021 Plan allows the Company to grant incentive stock options,
non-qualified stock options, stock appreciation rights, restricted
stock, restricted stock units, performance awards and other
stock-based awards. Incentive stock options may only be granted to
persons who are regular full-time employees of the Company at the
date of the grant of the option. Non-qualified options may be
granted to any person, including, but not limited to, directors,
officers, employees and consultants, who the Company’s Board or
Compensation Committee determines. The exercise price of options
granted under the 2021 Plan must be equal to at least 100% of the
fair market value of our common stock as of the date of the grant
of the option. Options granted under the 2021 Plan are exercisable
as determined by the Compensation Committee and specified in the
applicable award agreement. In no event will an option be
exercisable after ten years from the date of grant.
The compensation cost that has been charged against income related
to options for the years ended December 31, 2021 and 2020, was
$2,709,781 and $1,884,202, respectively. No income tax benefit was
recognized in the consolidated statements of income and no
compensation was capitalized in any of the years presented.
The Company had the following option activity during the year ended
December 31, 2021 and 2020:
|
|
Number of
Options |
|
|
Weighted
average exercise price |
|
|
Weighted
average remaining contractual life (years) |
|
|
Aggregate
intrinsic
value $ |
|
Outstanding at January 1, 2020 |
|
|
1,624,221 |
|
|
$ |
6.27 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
467,549 |
|
|
$ |
11.39 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(420,586 |
) |
|
$ |
6.45 |
|
|
|
|
|
|
|
|
|
Expired or
forfeited |
|
|
(125,666 |
) |
|
$ |
13.09 |
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020 |
|
|
1,545,518 |
|
|
$ |
7.31 |
|
|
|
2.3 |
|
|
$ |
36,862,947 |
|
Granted |
|
|
424,588 |
|
|
$ |
54.34 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,137,065 |
) |
|
$ |
7.33 |
|
|
|
|
|
|
|
|
|
Expired or
forfeited |
|
|
(49,494 |
) |
|
$ |
24.57 |
|
|
|
|
|
|
|
|
|
Outstanding, December 31,
2021 |
|
|
783,547 |
|
|
$ |
34.17 |
|
|
|
3.4 |
|
|
$ |
23,368,961 |
|
Exercisable, December 31, 2021 |
|
|
197,271 |
|
|
$ |
10.87 |
|
|
|
2.1 |
|
|
$ |
10,109,168 |
|
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 10 – STOCK COMPENSATION (CONTINUED)
The table below reflects information for the total options
outstanding at December 31, 2021
Range of Exercise
Prices |
|
Number of
Options |
|
|
Weighted
average remaining contractual life (years) |
|
|
Weighted
average exercise price |
|
$2.46 to $10.00 |
|
|
127,005 |
|
|
|
1.1 |
|
|
$ |
4.05 |
|
$10,00 to $20.00 |
|
|
166,945 |
|
|
|
2.8 |
|
|
$ |
12.51 |
|
$20.00 to $40.00 |
|
|
180,561 |
|
|
|
3.9 |
|
|
$ |
30.52 |
|
$40.00 to $60.00 |
|
|
196,500 |
|
|
|
4.3 |
|
|
$ |
51.88 |
|
$60.00 to $96.70 |
|
|
112,536 |
|
|
|
4.7 |
|
|
$ |
75.19 |
|
Total |
|
|
783,547 |
|
|
|
3.4 |
|
|
$ |
34.17 |
|
The table below reflects information for the vested options
outstanding at December 31, 2021.
Range of Exercise
Prices |
|
Number of
Options |
|
|
Weighted
average remaining contractual life (years) |
|
|
Weighted
average exercise price |
|
$2.46 to $10.00 |
|
|
78,669 |
|
|
|
0.9 |
|
|
$ |
3.76 |
|
$10,00 to $20.00 |
|
|
89,938 |
|
|
|
2.5 |
|
|
$ |
13.36 |
|
$20.00 to $40.00 |
|
|
28,664 |
|
|
|
3.9 |
|
|
$ |
22.52 |
|
$40.00 to $60.00 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
$60.00 to $96.70 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
197,271 |
|
|
|
2.1 |
|
|
$ |
10.87 |
|
A summary of the status of the Company’s nonvested options as of
December 31, 2021, and changes during the year ended
December 31, 2021, is presented below.
Nonvested Options |
|
Options |
|
|
Weighted-
Average Exercise Price |
|
Nonvested at January 1, 2021 |
|
|
331,006 |
|
|
$ |
12.44 |
|
Granted |
|
|
424,588 |
|
|
|
54.34 |
|
Vested |
|
|
(119,823 |
) |
|
|
11.23 |
|
Forfeited |
|
|
(49,495 |
) |
|
|
24.57 |
|
Nonvested at December 31, 2021 |
|
|
586,276 |
|
|
$ |
42.01 |
|
There is $9,685,867 of expense remaining to be recognized over a
period of approximately 2.4 years related to options outstanding at
December 31, 2021.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 10 – STOCK COMPENSATION (CONTINUED)
The Company had the following restricted stock unit (“RSU”)
activity during the years ended December 31, 2021 and
2020:
|
|
Number of
RSUs |
|
|
Grant date
fair value |
|
|
Weighted
average remaining contractual life (years) |
|
Outstanding at January 1, 2020 |
|
|
90,000 |
|
|
$ |
10.43 |
|
|
|
|
|
Granted |
|
|
94,746 |
|
|
$ |
8.98 |
|
|
|
|
|
Shares issued |
|
|
(84,746 |
) |
|
$ |
7.54 |
|
|
|
|
|
Outstanding at December 31, 2020 |
|
|
100,000 |
|
|
$ |
11.51 |
|
|
|
2.4 |
|
Granted |
|
|
303,556 |
|
|
$ |
66.30 |
|
|
|
|
|
Forfeited |
|
|
(485 |
) |
|
$ |
61.82 |
|
|
|
|
|
Shares issued |
|
|
(3,333 |
) |
|
$ |
21.20 |
|
|
|
|
|
Outstanding at December 31,
2021 |
|
|
399,738 |
|
|
$ |
52.99 |
|
|
|
3.3 |
|
The Company granted restricted stock units of 303,556 and 94,746
units in 2021 and 2020, respectively, and valued at $20,125,861 and
$850,985, respectively. These restricted stock units vest over a
period of 1.6 to 5 years. The Company recognized expense of
$2,532,091 and $838,514 in 2021 and 2020, respectively, related to
these restricted stock units. A total of $18,389,797 remains to be
recognized at December 31, 2021 over a period of 3.0
years.
Of the restricted stock units issued in 2021, 182,938 are
market-based awards that vest if the Company’s stock price hits
certain price targets and maintains that price for 30 days. A total
of 60,191, 60,191, and 62,016 units vest if the stock price hits
$98.87, $131.82, $164.78, respectively.As described in Note 2,
these market-based restricted stock units were valued using a Monte
Carlo simulation model, with expected vesting in 1.6, 2.25, and
2.71 years, respectively, for the three price targets.
NOTE 11 – LEASES
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. Under the guidance, we have
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, 2023, with a 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 Cranbury, New Jersey, which
expired in January 2022 with a monthly payment of $3,158, as well
as a lease of approximately $1,883 per month in Zagreb, Croatia
expiring in 2024.
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.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 11 – LEASES (CONTINUED)
For the years ended December 31, 2021 and 2020, 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:
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
Operating lease cost |
|
$ |
132,305 |
|
|
$ |
119,954 |
|
Short-term
lease cost (1) |
|
|
52,375 |
|
|
|
130,216 |
|
Total lease
cost |
|
$ |
184,680 |
|
|
$ |
250,170 |
|
|
(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 December 31, 2021:
For the year ending December 31, |
|
|
|
2022 |
|
|
103,418 |
|
2023 |
|
|
100,260 |
|
2024 |
|
|
80,550 |
|
2025 |
|
|
70,224 |
|
Total |
|
|
354,452 |
|
Less: present
value discount |
|
|
26,744 |
|
Total lease
liabilities |
|
$ |
327,708 |
|
The weighted average remaining lease term for operating leases is
3.6 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 $124,919. For the year ended December 31, 2021, payments
on lease obligations were $142,284 and amortization on the right of
use assets was $121,129. For the year ended December 31, 2020,
payments on lease obligations were $138,019 and amortization on the
right of use assets was $104,805.
NOTE 12 – MAJOR CUSTOMERS AND VENDORS
The Company had the following customers that accounted for 10% or
greater of revenue in either 2021 or 2020. No other customers
accounted for more than 10% of revenue in either year
presented.
|
|
2021 |
|
|
2020 |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Customer A |
|
|
14,268,819 |
|
|
|
23.0 |
|
|
|
5,037,888 |
|
|
|
11.6 |
|
Customer B |
|
|
5,206,305 |
|
|
|
8.5 |
|
|
|
4,824,454 |
|
|
|
11.1 |
|
Customer C |
|
|
3,157,075 |
|
|
|
5.2 |
|
|
|
5,469,126 |
|
|
|
12.1 |
|
Our accounts receivable included 2 agencies that represented
multiple customers that individually made up more than 10% of our
accounts receivable at December 31, 2021 in the percentages of
33.5% and 12.2%. As of December 31, 2020, our accounts
receivable included 4 entities, including agencies that represented
multiple customers that individually made up more than 10% of our
accounts receivable in the percentages of 19.7%, 16.2%, 15.8% and
14.4%.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 12 – MAJOR CUSTOMERS AND VENDORS (CONTINUED)
The Company generates its revenues through its EHR and ePrescribe
partners. It had two key partners and/or vendors through which 10%
or greater of its revenue was generated in either 2021 or 2020 as
set forth below. The amounts in the table below reflect the amount
of revenue generated through those partners.
|
|
2021 |
|
|
2020 |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
Partner A |
|
|
33,041,503 |
|
|
|
53.9 |
|
|
|
22,813,574 |
|
|
|
52.7 |
|
Partner B |
|
|
9,554,266 |
|
|
|
15.6 |
|
|
|
7,092,477 |
|
|
|
16.4 |
|
NOTE 13 – INCOME TAXES
As of December 31, 2021, the Company had net operating loss
carry-forwards for federal income tax purposes of approximately
$26.4 million, consisting of pre-2018 losses in the amount of
approximately $13.2 million that expire from 2021 through 2037, and
post-2017 losses in the amount of approximately $13.2 million that
will never expire. These net operating losses are available to
offset future taxable income. The Company was formed in 2006 as a
limited liability company and changed to a corporation in 2007.
Activity prior to incorporation is not reflected in the Company’s
corporate tax returns. In the future, the cumulative net operating
loss carry-forward for income tax purposes may differ from the
cumulative financial statement loss due to timing differences
between book and tax reporting.
The provision for Federal income tax consists of the following for
the years ended December 31, 2021 and 2020:
|
|
|
2021 |
|
|
|
2020 |
|
Federal income tax benefit (expense) attributable to: |
|
|
|
|
|
|
Current operations |
|
$ |
(79,000 |
) |
|
$ |
463,000 |
|
State tax effect, net of federal
benefit |
|
|
582,000 |
|
|
|
—
|
|
State rate change |
|
|
397,000 |
|
|
|
—
|
|
Change in fair value of contingent
consideration |
|
|
—
|
|
|
|
(29,000 |
) |
Option exercise benefits, net of
Section 162M limitations |
|
|
2,171,000 |
|
|
|
207,000 |
|
Other permanent items |
|
|
(9,000 |
) |
|
|
(7,000 |
) |
Other adjustments |
|
|
(30,000 |
) |
|
|
104,000 |
|
NOLs expiring |
|
|
(26,000 |
) |
|
|
(209,000 |
) |
Valuation
allowance |
|
|
(3,006,000 |
) |
|
|
(529,000 |
) |
Net provision for
federal income tax |
|
$ |
—
|
|
|
$ |
—
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
Current tax benefit
(expense) - Federal |
|
$ |
—
|
|
|
$ |
—
|
|
Deferred tax benefit (expense) -
Federal |
|
|
—
|
|
|
|
—
|
|
Adjustment of
valuation allowance from business combination |
|
|
—
|
|
|
|
—
|
|
Total tax benefit
(expense) on income |
|
$ |
—
|
|
|
$ |
—
|
|
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 13 – INCOME TAXES (CONTINUED)
The cumulative tax effect of significant items comprising our net
deferred tax amount at the expected rate of 21% is as follows as of
December 31, 2021 and 2020:
|
|
2021 |
|
|
2020 |
|
Deferred tax asset attributable to: |
|
|
|
|
|
|
Net operating loss
carryover |
|
$ |
6,887,000 |
|
|
$ |
4,057,000 |
|
Stock compensation |
|
|
809,000 |
|
|
|
353,000 |
|
Operating lease liability |
|
|
88,000 |
|
|
|
94,000 |
|
Fixed Assets |
|
|
13,000 |
|
|
|
—
|
|
Other |
|
|
85,000 |
|
|
|
44,000 |
|
Deferred tax
asset |
|
$ |
7,882,000 |
|
|
$ |
4,548,000 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities attributable
to: |
|
|
|
|
|
|
|
|
Intangibles |
|
$ |
(2,490,000 |
) |
|
$ |
(2,181,000 |
) |
Operating lease right of use
assets |
|
|
(88,000 |
) |
|
|
(94,000 |
) |
Other |
|
|
(41,000 |
) |
|
|
(16,000 |
) |
Deferred tax
liability |
|
$ |
(2,619,000 |
) |
|
$ |
(2,291,000 |
) |
Net deferred tax asset |
|
$ |
5,263,000 |
|
|
|
2,257,000 |
|
Valuation
allowance |
|
|
(5,263,000 |
) |
|
|
(2,257,000 |
) |
Net deferred tax
asset, net of valuation allowance |
|
$ |
—
|
|
|
$ |
—
|
|
The ultimate realization of deferred tax assets is dependent upon
the Company’s ability to generate sufficient taxable income during
the periods in which the net operating losses expire and the
temporary differences become deductible. The Company has determined
that there is significant uncertainty that the results of future
operations and the reversals of existing taxable temporary
differences will generate sufficient taxable income to realize the
deferred tax assets; therefore, a valuation allowance has been
recorded. In making this determination, the Company considered
historical levels of income, projections for future periods, and
the significant amount of tax deductions to be generated from the
future exercise of stock options.
The tax years 2018 to 2021 remain open for potential audit by the
Internal Revenue Service. There are no uncertain tax positions as
of December 31, 2020 or December 31, 2021, and none are
expected in the next 12 months. The Company’s foreign subsidiaries
are cost centers that are primarily reimbursed for expenses, as a
result they generate an immaterial amount of income or loss. Pretax
book income (loss) is all from domestic operations. Up to four
years of returns remain open for potential audit in foreign
jurisdictions, however any audits for periods prior to ownership by
the Company are the responsibility of the previous owners.
Under certain circumstances issuance of common shares can result in
an ownership change under Internal Revenue Code Section 382, which
limits the Company’s ability to utilize carry-forwards from prior
to the ownership change. Any such ownership change resulting from
stock issuances and redemptions could limit the Company’s ability
to utilize any net operating loss carry-forwards or credits
generated before this change in ownership. These limitations can
limit both the timing of usage of these laws, as well as the loss
of the ability to use these net operating losses. It is likely that
fundraising activities have resulted in such an ownership
change.
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 14 – COMMITMENTS AND CONTINGENT LIABILITIES
Legal
The Company is not involved in any legal proceedings.
Revenue-share
contracts
The Company has contracts with various electronic health records
systems and ePrescribe platforms, whereby we agree to share a
portion of the revenue we generate for eCoupons distributed through
their networks. These contracts grant audit rights related to the
payments to our partners, and, in some cases would require us to
pay for the audit if the audit determined there was an underpayment
and the underpayment meets certain thresholds, such as 10%. From
time to time the Company enters into arrangements with a partner to
acquire minimum amounts of messaging capabilities. As of
December 31, 2021, the Company had commitments for future
minimum payments of $3.4 million that will be reflected in cost of
revenues during the years from 2022 through 2023. Minimum payments
are due in 2022 and 2023, in the amounts of $2.65 million and $0.75
million, respectively.
NOTE 15 – RETIREMENT PLAN
The Company sponsors a defined contribution 401(k) profit sharing
plan which was adopted in December 2015, effective in January 2016.
Under the terms of the plan, the Company matches 100% of the first
3% of payroll contributed by the employee and 50% of the next 2% of
payroll contributed by the employee to a maximum of 4% of an
employee’s payroll. There was expense of $343,221 and $373,027
recorded in 2021 and 2020, respectively, for the Company’s
contributions to the plan.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures designed to provide
reasonable assurance that information required to be disclosed in
reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission’s rules and
forms and accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, or persons
performing similar functions, as appropriate to allow timely
decisions regarding required disclosures.
In connection with the Company’s Original Filing, our management,
with the participation of our Chief Executive Officer and our Chief
Financial Officer, conducted an evaluation, as of the end of the
period covered by this report, of the effectiveness of our
disclosure controls and procedures, as such term is defined in
Exchange Act Rule 13a-15(e). Based on this evaluation, at the time
the Company filed the Original Filing, our Chief Executive Officer
and our Chief Financial Officer concluded that, as of the end of
the period covered by this report, our disclosure controls and
procedures, as defined in Rule 13a-15(e), were effective at the
reasonable assurance level.
However, because of the material weakness in our internal
control over financial reporting identified by a subsequent review
described below, our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, re-evaluated
our disclosure controls and procedures and concluded such controls
were not effective as of December 31, 2021. A material
weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of a Company’s
annual or interim financial statements will not be prevented or
detected on a timely basis.
Notwithstanding the material weakness, our management has
concluded, based on substantive testing performed, that the
Company’s consolidated financial statements included in the
Original Filing fairly present in all material respects the
Company’s financial condition, results of operations and cash flows
of the Company as of, and for, the periods presented in this
report, in conformity with accounting principles generally accepted
in the United States.
Management’s Report on Internal Control Over Financial
Reporting.
The Company’s management is responsible for establishing and
maintaining adequate internal control over financial reporting, as
defined in Exchange Act Rule 13a-15(f). Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles in the
United States of America. The Company’s internal control over
financial reporting includes those policies and procedures
that:
|
● |
pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the
Company; |
|
● |
provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and |
|
● |
provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Company’s assets that could
have a material effect on the financial statements. |
Because of its inherent limitations, any system of internal control
over financial reporting, no matter how well defined, may not
prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The Company’s management assessed the effectiveness of the
Company’s internal control over financial reporting as of December
31, 2021. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control — Integrated
Framework (2013). Based on this assessment using those
criteria, at the time the Company filed the Original Filing,
management concluded that the Company’s internal control over
financial reporting was effective as of December 31, 2021.
Subsequent to the Original Filing, UHY LLP, our independent
registered public accounting firm, advised the Company that in the
course of a post-engagement review, they believed that a potential
undisclosed weakness in our internal control over financial
reporting may have existed as of December 31, 2021. As a
result, we re-evaluated, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, the effectiveness of the
Company’s internal control over financial reporting and
identified the following material weakness existed as of December
31, 2021: inadequate controls to ensure that data received
from third-party service organizations is complete and accurate.
As a result, the Company’s management has concluded that we
did not maintain effective internal control over financial
reporting as of December 31, 2021, based on the criteria
in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Accordingly, management
has revised its report on internal control over financial
reporting.
UHY LLP, our independent registered public accounting firm that
audited the consolidated financial statements included in our
previously filed Annual Report on Form 10-K for the year ended
December 31, 2021, has reissued an adverse audit report on the
effectiveness of the Company’s internal control over financial
reporting as of December 31, 2021 dated February 28, 2022, except
as to the restatement of the effectiveness of internal control over
financial reporting which is as of March 10, 2023. This reissued
audit report is included in Item 8 of this Amendment No. 1
and is incorporated by reference herein.
Plan for Remediation of Material Weakness
Management is actively engaged in the planning for, and
implementation of, remediation efforts to address the material
weakness identified above. Management intends to implement the
following remediation steps:
|
● |
The Company will require each third-party service organization to
provide a SOC-1, Type 2 report to us. |
|
● |
If a SOC-1, Type 2 report is not available, the Company will
evaluate each third-party’s relevant system(s) and reporting
directly through inquiry and substantive testing of such
third-party’s control environment. |
Management believes the measures described above will remediate the
material weakness that we have identified. As management continues
to evaluate and improve our disclosure controls and procedures and
internal control over financial reporting, the Company may decide
to take additional measures to address control deficiencies or
determine to modify, or in appropriate circumstances not to
complete, certain of the remediation measures identified.
Changes in Internal Control Over Financial Reporting.
There was no change in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act),
that occurred during the quarter ended December 31, 2021 that has
materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
PART IV
Item 15. Exhibits and Financial Statements Schedules
(a) The consolidated financial statements and exhibits listed below
are filed as part of this Annual Report on Form 10-K.
|
(1) |
The Company’s consolidated
financial statements, the notes thereto and the report of the
Independent Registered Public Accounting Firm are included in PART
II, Item 8. “Financial Statements and Supplementary Data.” |
|
(2) |
Financial statement schedules have
been omitted because they are not applicable, not required, or the
required information is included in the Consolidated Financial
Statements or Notes thereto. |
|
(3) |
Exhibits. Reference is made to Item
15(b) below. |
(b) Exhibits. The Exhibit Index, which immediately precedes
the signature page, is incorporated by reference into this Annual
Report on Form 10-K.
(c) Financial Statement Schedules. Reference is made to Item
15(a)(2) above.
EXHIBIT INDEX
Exhibit
Number
|
|
Description |
3.1 |
|
Articles of Incorporation of
OptimizeRx Corporation (the “Company”) Incorporated by reference to
Exhibit 3.1 to the Company’s Registration Statement on Form S-1
(Registration No. 333-155280) filed on November 12,
2008. |
3.2 |
|
Certificate of Correction, dated
April 30, 2018. Incorporated by reference to Exhibit 3.5 to the
Company’s Annual Report on Form 10-K for the year ended December
31, 2018. |
3.3 |
|
Second Amended and Restated Bylaws of
the Company. Incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed on June 25,
2021. |
4.1 |
|
Description of the Registrant’s Securities Registered Pursuant to
Section 12 of the Securities Exchange Act of 1934. Incorporated by
reference to Exhibit 4.1 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2021 filed on February 28,
2022.
|
10.1† |
|
Fourth Amended and Restated 2013
Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed on March 12,
2020. |
10.2† |
|
OptimizeRx 2021 Equity Incentive
Plan. Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on August 25,
2021. |
10.3† |
|
Form of Stock Option Award for grants
under the OptimizeRx Corporation 2021 Equity Incentive Plan.
Incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on August 25, 2021. |
10.4† |
|
Form of Performance Stock Option
Award for grants under the OptimizeRx Corporation 2021 Equity
Incentive Plan. Incorporated by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed on August 25,
2021. |
10.5† |
|
Form of Restricted Stock Unit Award
for grants under the OptimizeRx Corporation 2021 Equity Incentive
Plan. Incorporated by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K filed on August 25,
2021. |
10.6† |
|
Form of Performance Restricted Stock
Unit Award for grants under the OptimizeRx Corporation 2021.
Incorporated by reference to Exhibit 10.5 to the Company’s Current
Report on Form 8-K filed on August 25, 2021 |
10.7† |
|
Amended Employment Agreement by and
between the Company and William J. Febbo. Incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
on February 26, 2019. |
10.8† |
|
Amendment to the Employment Agreement
with William Febbo. Incorporated by reference to Exhibit 10.4 to
the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019. |
10.9 † |
|
Addendum to the Employment Agreement
with William J. Febbo. Incorporated by reference to Exhibit 10.1 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2021. |
10.10*† |
|
Third Addendum to the Employment
Agreement with William J. Febbo,. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
October 19, 2021. |
10.11† |
|
Amended Employment Agreement with
Miriam Paramore. Incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on September 14,
2018. |
10.12† |
|
Amendment to the Employment Agreement
with Miriam Paramore. Incorporated by reference to Exhibit 10.6 to
the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019. |
10.13† |
|
Letter Agreement by and between the
Company and Miriam Paramore. Incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on December
22, 2021. |
10.14† |
|
Employment Agreement by and between
the Company and Stephen Silvestro. Incorporated by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
May 3, 2019. |
10.15† |
|
Amendment to the Employment Agreement
with Stephen Silvestro. Incorporated by reference to Exhibit 10.5
to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019. |
10.16† |
|
Employment Agreement with Marion
Odence-Ford. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on February 11,
2021. |
10.17*† |
|
Offer Letter by and between the
Company and Edward Stelmakh. Incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on September
30, 2021. |
14.1 |
|
Code of Business Conduct and Ethics
Incorporated by reference to Exhibit 14.1 to the Company’s Current
Report on Form 8-K filed on June 25, 2021. |
|
† |
Management Contracts and Compensatory Plans, Contracts or
Arrangements. |
|
* |
Exhibits have been omitted pursuant
to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish
supplementally a copy of any omitted exhibit to the SEC upon
request. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
OptimizeRx Corporation
|
|
|
|
|
By: |
/s/ William J. Febbo |
|
|
William Febbo |
|
Title: |
Chief
Executive Officer |
|
|
|
|
Date: |
March
10, 2023 |
|
|
|
|
By: |
/s/ Edward Stelmakh |
|
|
Edward Stelmakh |
|
Title: |
Chief Financial Officer
Chief Operations Officer
|
|
|
|
|
Date: |
March
10, 2023 |
|
16
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