UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ Quarterly Report pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30,
2023
☐
Transition Report pursuant to 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) | | (IRS Employer Identification No.) |
260 Charles Street, Suite 302
Waltham, MA 02453
(Address of principal executive offices)
248-651-6568
(Registrant’s telephone number, including
area code)
400 Water Street, Suite 200
Rochester, MI
48307
(Former name, former address and former fiscal
year, if changed since last report)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.001 | | OPRX | | Nasdaq Capital Market |
Indicate by check mark 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the number of shares outstanding of each
of the issuer’s classes of common stock, as of the latest practicable date: 16,637,891 common shares as of August 11, 2023.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Our condensed consolidated financial statements included in this Form
10-Q are as follows:
OPTIMIZERX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| |
June 30,
2023 | | |
December 31, 2022 | |
| |
| | |
| |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 9,808,330 | | |
$ | 18,208,685 | |
Short-term investments | |
| 52,931,831 | | |
| 55,931,821 | |
Accounts receivable, net | |
| 18,281,133 | | |
| 22,155,301 | |
Prepaid expenses and other | |
| 4,052,729 | | |
| 2,280,828 | |
Total current assets | |
| 85,074,023 | | |
| 98,576,635 | |
Property and equipment, net | |
| 140,968 | | |
| 137,448 | |
Other assets | |
| | | |
| | |
Goodwill | |
| 22,673,820 | | |
| 22,673,820 | |
Technology assets, net | |
| 8,366,375 | | |
| 7,702,895 | |
Patent rights, net | |
| 1,831,839 | | |
| 1,940,178 | |
Right of use assets, net | |
| 14,544 | | |
| 235,320 | |
Other intangible assets, net | |
| 3,223,305 | | |
| 3,384,889 | |
Total other assets | |
| 36,109,883 | | |
| 35,937,102 | |
TOTAL ASSETS | |
$ | 121,324,874 | | |
$ | 134,651,185 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable – trade | |
$ | 817,779 | | |
$ | 1,549,979 | |
Accrued expenses | |
| 1,503,477 | | |
| 2,601,246 | |
Revenue share payable | |
| 2,722,127 | | |
| 3,990,440 | |
Current portion of lease liabilities | |
| 14,545 | | |
| 89,902 | |
Deferred revenue | |
| 451,787 | | |
| 164,309 | |
Total current liabilities | |
| 5,509,715 | | |
| 8,395,876 | |
Non-current liabilities | |
| | | |
| | |
Lease liabilities, net of current portion | |
| — | | |
| 144,532 | |
Total liabilities | |
| 5,509,715 | | |
| 8,540,408 | |
Commitments and contingencies (See note 10) | |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding at June 30, 2023 or December 31, 2022 | |
| — | | |
| — | |
Common stock, $0.001 par value, 166,666,667 shares authorized, 18,376,771 and 18,288,571 shares issued at June 30, 2023 and December 31, 2022, respectively | |
| 18,377 | | |
| 18,289 | |
Treasury stock, $0.001 par value, 1,741,397 and 1,214,398 shares held at June 30, 2023 and December 31, 2022, respectively | |
| (1,741 | ) | |
| (1,214 | ) |
Additional paid-in-capital | |
| 173,049,784 | | |
| 172,785,800 | |
Accumulated deficit | |
| (57,251,261 | ) | |
| (46,692,098 | ) |
Total stockholders’ equity | |
| 115,815,159 | | |
| 126,110,777 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 121,324,874 | | |
$ | 134,651,185 | |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
For the Three Months Ended
June 30, | | |
For the Six Months Ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net revenue | |
$ | 13,818,166 | | |
$ | 13,978,665 | | |
$ | 26,821,076 | | |
$ | 27,710,195 | |
Cost of revenues, exclusive of depreciation and amortization presented separately below | |
| 5,993,145 | | |
| 4,988,716 | | |
| 11,562,766 | | |
| 10,618,574 | |
Gross profit | |
| 7,825,021 | | |
| 8,989,949 | | |
| 15,258,310 | | |
| 17,091,621 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
General and administrative expenses | |
| 12,242,128 | | |
| 12,320,362 | | |
| 26,274,669 | | |
| 23,711,597 | |
Depreciation, amortization and noncash lease expense | |
| 464,761 | | |
| 578,117 | | |
| 928,695 | | |
| 1,049,656 | |
Total operating expenses | |
| 12,706,889 | | |
| 12,898,479 | | |
| 27,203,364 | | |
| 24,761,253 | |
Loss from operations | |
| (4,881,868 | ) | |
| (3,908,530 | ) | |
| (11,945,054 | ) | |
| (7,669,632 | ) |
Other income | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 720,419 | | |
| 23,816 | | |
| 1,385,891 | | |
| 23,820 | |
Loss before provision for income taxes | |
| (4,161,449 | ) | |
| (3,884,714 | ) | |
| (10,559,163 | ) | |
| (7,645,812 | ) |
Income tax benefit | |
| — | | |
| — | | |
| — | | |
| — | |
Net loss | |
$ | (4,161,449 | ) | |
$ | (3,884,714 | ) | |
$ | (10,559,163 | ) | |
$ | (7,645,812 | ) |
Weighted average number of shares outstanding – basic | |
| 16,992,100 | | |
| 18,122,500 | | |
| 17,043,793 | | |
| 18,000,958 | |
Weighted average number of shares outstanding – diluted | |
| 16,992,100 | | |
| 18,122,500 | | |
| 17,043,793 | | |
| 18,000,958 | |
Loss per share – basic | |
$ | (0.24 | ) | |
$ | (0.21 | ) | |
$ | (0.62 | ) | |
$ | (0.42 | ) |
Loss per share – diluted | |
$ | (0.24 | ) | |
$ | (0.21 | ) | |
$ | (0.62 | ) | |
$ | (0.42 | ) |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2023
(UNAUDITED)
| |
Common Stock | | |
Treasury Stock | | |
Additional
Paid in | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance January 1, 2023 | |
| 18,288,571 | | |
$ | 18,289 | | |
| (1,214,398 | ) | |
$ | (1,214 | ) | |
$ | 172,785,800 | | |
$ | (46,692,098 | ) | |
$ | 126,110,777 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,466,694 | | |
| — | | |
| 1,466,694 | |
Restricted stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,913,809 | | |
| — | | |
| 2,913,809 | |
Issuance of common stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For options exercised | |
| 9,668 | | |
| 10 | | |
| — | | |
| — | | |
| 40,596 | | |
| — | | |
| 40,606 | |
For restricted stock units vested | |
| 33,272 | | |
| 33 | | |
| — | | |
| — | | |
| (170,433 | ) | |
| — | | |
| (170,400 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (6,397,714 | ) | |
| (6,397,714 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance March 31, 2023 | |
| 18,331,511 | | |
$ | 18,332 | | |
| (1,214,398 | ) | |
$ | (1,214 | ) | |
$ | 177,036,466 | | |
$ | (53,089,812 | ) | |
$ | 123,963,772 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,654,770 | | |
| — | | |
| 1,654,770 | |
Restricted stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,848,353 | | |
| — | | |
| 1,848,353 | |
Issuance of common stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For options exercised | |
| 10,000 | | |
| 10 | | |
| — | | |
| — | | |
| 105,090 | | |
| — | | |
| 105,100 | |
For restricted stock units vested | |
| 35,260 | | |
| 35 | | |
| — | | |
| — | | |
| (72,996 | ) | |
| — | | |
| (72,961 | ) |
Repurchase of common stock | |
| | | |
| | | |
| (526,999 | ) | |
| (527 | ) | |
| (7,521,899 | ) | |
| | | |
| (7,522,426 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (4,161,449 | ) | |
| (4,161,449 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance June 30, 2023 | |
| 18,376,771 | | |
$ | 18,377 | | |
| (1,741,397 | ) | |
$ | (1,741 | ) | |
$ | 173,049,784 | | |
$ | (57,251,261 | ) | |
$ | 115,815,159 | |
OPTIMIZERX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2022
(UNAUDITED)
| |
Common Stock | | |
Treasury Stock | | |
Additional Paid in | | |
Accumulated | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance January 1, 2022 | |
| 17,860,975 | | |
$ | 17,861 | | |
| — | | |
$ | — | | |
$ | 166,615,514 | | |
$ | (35,253,658 | ) | |
$ | 131,379,717 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options | |
| — | | |
| — | | |
| — | | |
| — | | |
| 905,744 | | |
| — | | |
| 905,744 | |
Restricted stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,268,354 | | |
| — | | |
| 2,268,354 | |
Issuance of common stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For options exercised | |
| 28,006 | | |
| 28 | | |
| — | | |
| — | | |
| 258,100 | | |
| — | | |
| 258,128 | |
For restricted stock units vested | |
| 13,627 | | |
| 14 | | |
| — | | |
| — | | |
| (14 | ) | |
| — | | |
| — | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,761,098 | ) | |
| (3,761,098 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance March 31, 2022 | |
| 17,902,608 | | |
$ | 17,903 | | |
| — | | |
$ | — | | |
$ | 170,047,698 | | |
$ | (39,014,756 | ) | |
$ | 131,050,845 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,336,810 | | |
| — | | |
| 1,336,810 | |
Restricted stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| 2,688,513 | | |
| — | | |
| 2,688,513 | |
Issuance of common stock | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For options exercised | |
| 43,701 | | |
| 44 | | |
| — | | |
| — | | |
| 572,303 | | |
| — | | |
| 572,347 | |
For acquisition | |
| 240,741 | | |
| 241 | | |
| — | | |
| — | | |
| 9,374,214 | | |
| — | | |
| 9,374,455 | |
Repurchase of common stock | |
| — | | |
| — | | |
| (12,868 | ) | |
| (13 | ) | |
| (321,041 | ) | |
| — | | |
| (321,054 | ) |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (3,884,714 | ) | |
| (3,884,714 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance June 30, 2022 | |
| 18,187,050 | | |
$ | 18,188 | | |
| (12,868 | ) | |
$ | (13 | ) | |
$ | 183,698,497 | | |
$ | (42,899,470 | ) | |
$ | 140,817,202 | |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
For the Six Months Ended June 30, | |
| |
2023 | | |
2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net loss | |
$ | (10,559,163 | ) | |
$ | (7,645,812 | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 928,695 | | |
| 1,049,656 | |
Stock-based compensation | |
| 7,883,626 | | |
| 7,199,421 | |
Increase in bad debt reserve | |
| 238,748 | | |
| 98,727 | |
Changes in: | |
| | | |
| | |
Accounts receivable | |
| 3,635,420 | | |
| 5,969,009 | |
Prepaid expenses and other assets | |
| (1,771,899 | ) | |
| 1,266,478 | |
Accounts payable | |
| (732,200 | ) | |
| 64,232 | |
Revenue share payable | |
| (1,268,313 | ) | |
| (2,001,379 | ) |
Accrued expenses and other liabilities | |
| (1,096,881 | ) | |
| (1,263,971 | ) |
Deferred revenue | |
| 287,478 | | |
| (347,989 | ) |
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | |
| (2,454,489 | ) | |
| 4,388,372 | |
| |
| | | |
| | |
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of property and equipment | |
| (48,556 | ) | |
| (41,335 | ) |
Purchases of held-to-maturity investments | |
| (109,501,032 | ) | |
| — | |
Redemptions of held-to-maturity investments | |
| 112,501,021 | | |
| — | |
EvinceMed acquisition | |
| — | | |
| (2,000,000 | ) |
Acquisition of intangible assets, including intellectual property rights | |
| (3,068 | ) | |
| (145,257 | ) |
Capitalized software development costs | |
| (1,274,150 | ) | |
| — | |
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | |
| 1,674,215 | | |
| (2,186,592 | ) |
| |
| | | |
| | |
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES: | |
| | | |
| | |
Cash paid for employee withholding taxes related to the vesting of restricted stock units | |
| (243,361 | ) | |
| — | |
Repurchase of common stock | |
| (7,522,426 | ) | |
| (321,054 | ) |
Proceeds from exercise of stock options | |
| 145,706 | | |
| 830,474 | |
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | |
| (7,620,081 | ) | |
| 509,420 | |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | |
| (8,400,355 | ) | |
| 2,711,200 | |
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | |
| 18,208,685 | | |
| 84,681,770 | |
CASH AND CASH EQUIVALENTS - END OF PERIOD | |
$ | 9,808,330 | | |
$ | 87,392,970 | |
| |
| | | |
| | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for interest | |
$ | — | | |
$ | — | |
Reduction of EvinceMed purchase price for amounts previously paid | |
$ | — | | |
$ | 708,334 | |
Shares issued in connection with acquisition | |
$ | — | | |
$ | 9,374,455 | |
Cash paid for income taxes | |
$ | — | | |
$ | — | |
The accompanying notes are an integral part of
these condensed consolidated financial statements.
OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2023
NOTE 1 – NATURE OF BUSINESS AND BASIS OF
PRESENTATION
The accompanying condensed consolidated financial
statements include OptimizeRx Corporation and its wholly owned subsidiaries (collectively, the “Company”, “we”,
“our”, or “us”).
We are a digital health 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.
The condensed consolidated financial statements
for the three and six months ended June 30, 2023 and 2022 have been prepared by us without audit pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments necessary to present
fairly our financial position at June 30, 2023, and our results of operations, changes in stockholders’ equity, and cash flows
for the six months ended June 30, 2023 and 2022, have been made. Those adjustments consist of normal and recurring adjustments.
The condensed consolidated balance sheet as of December 31, 2022, has been derived from the audited consolidated condensed balance
sheet as of that date.
Certain information and note disclosures, including
a detailed discussion about the Company’s significant accounting policies, normally included in our annual consolidated financial
statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with a reading of the consolidated financial statements and notes thereto included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on March 10, 2023.
The results of operations for the six months
ended June 30, 2023, are not necessarily indicative of the results to be expected for the full year.
NOTE 2 – NEW ACCOUNTING STANDARDS
ASU Topic 2021-08 Business Combinations (Topic
805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, 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 was effective for the Company’s
fiscal year beginning January 1, 2023. The adoption of this standard did not have a material effect on our financial position, results
of operations, or cash flows.
OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2023
NOTE 3 - CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents include items almost as liquid
as cash with maturity periods of three months or less when purchased, and short-term investments include items with maturity dates between
three months and one year when purchased. We account for marketable securities in accordance with ASC 320, “Investments - Debt Securities”,
which require that certain debt securities be classified into one of three categories: held-to-maturity, available-for-sale, or trading
securities, and depending upon the classification, value the security at amortized cost or fair market value. At June 30, 2023 and
December 31, 2022, we have recorded $52.9 million and $55.9 million, respectively, of held-to-maturity United States’ Treasury Bills
at amortized cost basis. Our held-to-maturity United States’ Treasury Bills have maturity dates between July 2023 and September 2023.
NOTE 4 - CAPITALIZED SOFTWARE COSTS
The Company capitalizes certain development costs
incurred in connection with software development for internal-use software platforms used in operations and for providing services to
our customers. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development
stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended
use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades
and enhancements when it is probable the expenditures will result in additional functionality. Capitalized internal use software development
costs are included in intangible assets and are amortized on a straight-line basis over the estimated useful life of the software platforms
and are included in depreciation and amortization within operating expenses in the consolidated statements of operations. Amortization
of capitalized internal use software expense for the six months ended June 30, 2023 and 2022 was $95,108 and $226,819, respectively.
The Company accumulates capitalizable costs related to current projects in a CIP software account, the balance of which was $1.3 million
and zero at June 30, 2023 and December 31, 2022, respectively.
NOTE 5 – REVENUES
Under ASC 606, Revenue from Contracts with
Customers, we record revenue when earned, rather than when billed. From time to time, we may record revenue based on our revenue
recognition policies in advance of being able to invoice the customer, or we may invoice the customer prior to being able to recognize
the revenue. Included in accounts receivable are unbilled amounts of $2,975,040 and $3,582,735 at June 30, 2023, and December 31,
2022, respectively. Amounts billed in advance of revenue recognition are presented as deferred revenue on the condensed consolidated
balance sheets.
The Company has several signed contracts with
customers for the distribution of 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. Deferred revenue was $451,787 and $164,309 as of June 30, 2023
and December 31, 2022, respectively. The 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 for the deferred revenue account for the quarter ended June 30.
| |
2023 | | |
2022 | |
Balance January 1 | |
$ | 164,309 | | |
$ | 1,389,907 | |
Revenue recognized | |
| (8,778,893 | ) | |
| (6,013,181 | ) |
Amount collected | |
| 9,349,724 | | |
| 5,916,318 | |
Balance March 31 | |
$ | 735,140 | | |
$ | 1,293,044 | |
Revenue recognized | |
| (9,619,380 | ) | |
| (7,373,802 | ) |
Amount collected | |
| 9,336,027 | | |
| 7,122,677 | |
Balance June 30 | |
$ | 451,787 | | |
$ | 1,041,919 | |
Disaggregation of Revenue
Consistent with ASC Topic 606, we have disaggregated
our revenue by timing of revenue recognition. The majority of our revenue is recognized over time as solutions are provided. A small
portion of our revenue related to program development, solution architect design, and other solutions is recognized at a point in time
upon delivery to customers. A break down is set forth in the table below.
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenue recognized over time | |
$ | 13,033,714 | | |
$ | 12,169,710 | | |
$ | 25,606,135 | | |
$ | 25,123,323 | |
Revenue recognized at a point in time | |
| 784,452 | | |
| 1,808,955 | | |
| 1,214,941 | | |
| 2,586,872 | |
Total Revenue | |
$ | 13,818,166 | | |
$ | 13,978,665 | | |
$ | 26,821,076 | | |
$ | 27,710,195 | |
OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2023
NOTE 6 – LEASES
During the six months ended, we had operating
leases for office space in two multi tenant facilities in Rochester, Michigan and Zagreb, Croatia. We also had a lease on office space
in Cranbury, New Jersey, which expired in January 2022. The lease in Rochester, Michigan was terminated during the quarter ended June
30, 2023. The lease in Zagreb, Croatia ends on February 28th, 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. Amortization of the right of use assets is recognized as non-cash
lease expense on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Short term lease
costs include month to month leases and occasional rent for transient meeting and office spaces in shared office space facilities.
For the six months ended June 30, 2023 and
2022, the Company’s lease cost consists of the following components, each of which is included in operating expenses within the
Company’s condensed consolidated statements of operations:
| |
Six Months Ended June 30, | |
| |
2023 | | |
2022 | |
Operating lease cost | |
$ | 49,472 | | |
$ | 49,747 | |
Short-term lease cost | |
| 8,340 | | |
| 21,899 | |
Total lease cost | |
$ | 57,812 | | |
$ | 71,646 | |
The table below presents the future minimum lease
payments to be made under operating leases as of June 30, 2023:
As of June 30, 2023 | |
| |
| |
| |
2023 | |
$ | 10,170 | |
2024 | |
| 5,085 | |
Total | |
| 15,255 | |
Less: discount | |
| 1,236 | |
Total lease liabilities | |
$ | 14,019 | |
The weighted average remaining lease term at
June 30, 2023 for operating leases is 0.7 years and the weighted average discount rate used in calculating the operating lease asset
and liability is 4.5%. Cash paid for amounts included in the measurement of lease liabilities was $44,708 and $45,599 for the six months
ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023 and 2022, payments on lease obligations
were $49,359 and $52,168, respectively, and amortization on the right of use assets was $49,472 and $52,662, respectively.
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company had 10,000,000 shares of preferred
stock, $0.001 par value per share, authorized as of June 30, 2023. No shares were issued or outstanding in either 2023 or 2022.
OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2023
NOTE 7 – STOCKHOLDERS’ EQUITY (CONTINUED)
Common Stock
The Company had 166,666,667 shares of common
stock, $0.001 par value per share, authorized as of June 30, 2023. There were 16,635,374 and 17,074,173 shares of common stock outstanding,
net of shares held in treasury of 1,741,397 and 1,214,398, at June 30, 2023 and December 31, 2022, respectively.
During the quarters ended June 30, 2023
and March 31, 2023, the Company issued 10,000 and 9,668 shares of our common stock, respectively, and received proceeds of $105,100 and
$40,606, respectively, in connection with the exercise of options under our 2013 Incentive Plan.
During the quarters ended June 30, 2022
and March 31, 2022, the Company issued 43,701 and 28,006 shares of our common stock, respectively, and received proceeds of $572,347
and $258,128, respectively, in connection with the exercise of options under our 2013 Incentive Plan.
The Company issued 35,260 and 33,272 shares of
common stock in the three months ended June 30, 2023 and March 31, 2023, respectively in connection with the vesting of restricted
stock units under our 2013 Incentive Plan and our 2021 Equity Incentive Plan. Some of the participants utilized a net withhold settlement
method, in which shares were surrendered to cover payroll withholding tax. Of the shares issued to participants during the six months
ended June 30, 2023, 23,217 shares, valued at $243,361, were surrendered and subsequently cancelled.
The Company issued 13,627 shares of common stock
in the three months ended March 31, 2022 in connection with the vesting of restricted stock units under our 2013 Incentive Plan and our
2021 Equity Incentive Plan. There were no shares of common stock issued in connection with the vesting of restricted stock units in the
three months ended June 30, 2022.
The Company issued 240,741 shares of common stock
valued at $9,374,455 during the quarter ended June 30, 2022 in connection with the acquisition of substantially all of the assets of
EvinceMed Corp.
Treasury Stock
During the quarter ended March 31, 2023, the
Board authorized a share repurchase program, under which the Company may repurchase up to $15 million of its outstanding common
stock. During the quarter ended June 30, 2023, there were 526,999 shares of our common stock repurchased under this program for
a total of $7,522,426, including commissions paid on repurchases. These shares were recorded as treasury shares using the par value method.
During 2022, the Board authorized a share repurchase
program, under which the Company could repurchase up to $20.0 million of its outstanding common stock. During 2022, the Company
repurchased 1,214,398 shares of our common stock for a total of $20,021,830, including commissions paid on repurchases. These shares
were recorded as treasury shares using the par value method.
NOTE 8 – STOCK BASED COMPENSATION
Stock Options
The compensation expense related to options for
the six months ended June 30, 2023 and 2022 was $3,121,464 and $2,242,554, respectively. The fair value of these instruments was
calculated using the Black-Scholes option pricing model. There is $12,254,201 of remaining expense related to unvested options to be
recognized in the future over a weighted average period of 1.89 years. The total intrinsic value of outstanding options at June 30,
2023 was $309,383.
During 2022, the Company granted certain performance
based stock options, the expense for which will be recorded over time once the achievement of the performance is deemed probable. There
was no expense related to these options recorded during the period.
OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2023
NOTE 8 - STOCK BASED COMPENSATION (CONTINUED)
Restricted Stock Units
The Company recorded of $4,762,162 and $4,956,867
in compensation expense related to restricted stock units for the six months ended June 30, 2023 and 2022, respectively. A total
of $13,252,855 remains to be recognized at June 30, 2023 over a weighted average period of 2.01.
During 2022, the Company granted certain performance
based restricted stock units, the expense for which will be recorded over time once the achievement of the performance is deemed probable.
There was no expense related to these restricted stock units recorded during the period.
The director’s compensation program calls for
the grant of restricted stock units with a one year vesting period. There was $351,765 and $129,515 included in the compensation expense
discussed above related to director’s compensation for the periods ended June 30, 2023 and 2022, respectively.
Equity Award Modification
On April 16, 2023, the Compensation Committee
approved a grant to the CEO of 86,685 restricted stock units and 161,698 stock options with a grant date fair value of $2.5 million to
vest over a three year period. Concurrently, the CEO forfeited his October 2021 grant of 182,398 market-based restricted stock units.
The forfeiture and accompanying grant are considered an equity modification according to ASC 718, Compensation-Stock Compensation.
The additional compensation value created by the termination and issuance of new equity awarded, as measured using a Monte Carlo simulation
was approximately $1.9 million in total. Under ASC 718 this results in a non-cash expense in current and future periods to be recognized
over a three year period. These expense values are reflected and included in the option and restricted stock expense values discussed
above.
NOTE 9 – LOSS PER SHARE
Basic earnings per share (“EPS”)
is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.
The number of shares related to options and restricted
stock units included in diluted EPS is based on the “Treasury Stock Method” prescribed in ASC 260-10, Earnings per Share.
This method assumes the theoretical repurchase of shares using proceeds of the respective stock options exercised, and for restricted
stock units, the amount of compensation cost attributed to future services which have not yet been recognized, and the amount of current
and deferred tax benefit, if any, that would be credited to additional paid in capital upon the vesting of the restricted stock units,
at a price equal to the issuer’s average stock price during the related earnings period. Accordingly, the number of shares includable
in the calculation of EPS in respect of the stock options and restricted stock units is dependent on this average stock price and will
increase as the average stock price increases.
OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
JUNE 30, 2023
NOTE 9 – LOSS PER SHARE (CONTINUED)
The following table sets forth the computation
of basic and diluted net loss per share.
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Numerator | |
| | |
| | |
| | |
| |
Net loss | |
$ | (4,161,449 | ) | |
$ | (3,884,714 | ) | |
$ | (10,559,163 | ) | |
$ | (7,645,812 | ) |
| |
| | | |
| | | |
| | | |
| | |
Denominator | |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding used in computing net loss per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 16,992,100 | | |
| 18,122,500 | | |
| 17,043,793 | | |
| 18,000,958 | |
Effect of dilutive stock options, warrants, and stock grants | |
| — | | |
| — | | |
| — | | |
| — | |
Diluted | |
| 16,992,100 | | |
| 18,122,500 | | |
| 17,043,793 | | |
| 18,000,958 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss per share | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.24 | ) | |
$ | (0.21 | ) | |
$ | (0.62 | ) | |
$ | (0.42 | ) |
Diluted | |
$ | (0.24 | ) | |
$ | (0.21 | ) | |
$ | (0.62 | ) | |
$ | (0.42 | ) |
No calculation of diluted earnings per share
is included for the three or six months ended June 30, 2023 or 2022 as the effect of the calculation would be anti-dilutive.
The number of common shares potentially issuable
upon the exercise of certain options and the vesting of certain restricted stock units that were excluded from the diluted loss per common
share calculation are reflected in the table below.
| |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
Weighted average number of shares for the periods ended | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Options | |
| 19,824 | | |
| 156,018 | | |
| 24,923 | | |
| 176,996 | |
Unvested restricted stock unit awards | |
| 24,922 | | |
| 63,541 | | |
| 24,922 | | |
| 77,221 | |
Total | |
| 44,746 | | |
| 219,559 | | |
| 49,845 | | |
| 254,217 | |
NOTE 10 – CONTINGENCIES
Litigation
The Company is not currently involved in any
material legal proceedings.
NOTE 11 – INCOME TAXES
As discussed in our annual report on Form 10-K
for the year ended December 31, 2022, we had net operating loss carry-forwards for federal income tax purposes of approximately
$21.5 million as of December 31, 2022. Accordingly, no federal income tax expense or benefit is recorded in the current period.
Management monitors company-specific, and macro- economic factors and assesses the likelihood that the Company’s net deferred tax
assets will be utilized prior to their expiration. As previously disclosed in our annual report, the Company maintained a valuation allowance
against its net deferred tax assets.
NOTE 12 – SUBSEQUENT EVENTS
Subsequent to June 30, 2023, the Company entered
into a sublease agreement for a new office space in Waltham, MA. The term of the sublease commences on July 1, 2023 and will terminate
on July 31, 2024. The Company is obligated to pay approximately $5,800 per month over the term of the lease .
On June 2, 2023, the Company entered into a one-year
term lease agreement for a new office space in Zagreb, Croatia which commenced on July 1, 2023. The Company has the option to renew for
a period of five years. The Company is obligated to pay approximately $2,800 plus VAT or approximately $3,500 per month over the term
of the lease.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains statements that relate to future events and expectations and, as such, constitute forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements, other than purely historical
information, including estimates, projections, statements relating to our strategies, outlook, business and financial prospects, business
plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements.” These forward-looking statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely result,”
and similar expressions.
Forward-looking
statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results
to differ materially from the forward-looking statements. Forward-looking statements are not guarantees of future performance. Although
OptimizeRx believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations
may not be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements
due to a variety of risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.
Forward-looking
statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such
forward-looking statements due to a variety of factors, including: seasonal trends in the pharmaceutical brand marketing industry; the
inability to support our technology and scale our operations successfully, developing and implementing new and updated applications,
features and services for our portals may be more difficult and expensive and take longer than expected; the inability to offer high-quality
customer support for our portals; dependence on a concentrated group of customers; inability to maintain contracts with electronic prescription
platforms, agreements with electronic prescription platforms and electronic health record systems being subject to audit; inability to
attract and retain customers; inability to comply with laws and regulations that affect the healthcare industry; competition; developments
in the healthcare industry; inability to manage growth; inability to identify suitable acquisition candidates, complete acquisitions
or integrate acquisitions successfully; inability to attract and retain senior management and other key employees; economic, political,
regulatory and other risks arising from our international operations; inability to protect our intellectual property; cybersecurity incidents;
reduction in the performance, reliability and availability of our network infrastructure; increases in costs due to inflation and other
adverse economic conditions; decreases in customer demand due to macroeconomic factors; lack of a consistent active trading market for
our common stock; and volatility in the market price of our common stock.
The
risks and uncertainties included here are not exhaustive. Further information concerning our business, including additional factors that
could materially affect our financial results, is included herein and in our other filings with the SEC, including our Annual Report
on Form 10-K for the year ended December 31, 2022. Moreover, we operate in a rapidly changing and competitive environment. New risk
factors emerge from time to time, and it is not possible for management to predict all such risk factors.
Further,
it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any
obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this report.
Overview
We
are 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.
Historically,
our revenue was generated primarily through the facilitation of financial messages to health care providers via their EHR and ePrescribe
systems using the OptimizeRx proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives
and healthcare providers that have presented in the rapidly changing healthcare industry. Over time, as the demand for communication
of an increasing variety of different health information between life science companies, providers, and patients continued to rise, our
platform has expanded to encompass additional solutions that enable healthcare providers to access information for patients at the point
of care. These solutions include brand messaging, therapeutic support messaging, brand support, and innovative patient engagement services,
all of which now make up a significant portion of our total revenue.
We employ a “land and expand” strategy focused on growing
our existing client base and generating greater and more consistent revenues in part through the continued shift in our business model
toward enterprise level engagements, while also broadening our platform with innovative proprietary solutions such as our artificial intelligence-powered
real-world data solution which uses sophisticated proprietary algorithms to derive additional revenue from our existing network. Management
will continue to optimize our portfolio of solutions to align our resource deployment to the best market opportunities.
Because
the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number
of companies. We have approximately 100 pharmaceutical companies as customers, and our revenues are concentrated in these customers.
Loss of one of more of our larger customers could have a negative impact on our operating results.
Seasonality
In
general, the pharmaceutical brand marketing industry experiences seasonal trends that affect the vast majority of participants in the
pharmaceutical digital marketing industry. Many pharmaceutical companies allocate the largest portion of their brand marketing to the
fourth quarter of the calendar year. As a result, the first half of the year tends to reflect lower activity levels and lower revenue,
with gradual increases in the following quarters. We generally expect these seasonality trends to continue and our ability to effectively
manage our resources in anticipation of these trends may affect our operating results.
Impact
of Macroeconomic Events
Unfavorable
conditions in the economy may negatively affect the growth of our business and our results of operations. For example, macroeconomic
events including the COVID-19 pandemic, rising inflation and the U.S. Federal Reserve raising interest rates have led to economic uncertainty.
In addition, high levels of employee turnover across the pharmaceutical industry as well as a fewer number of U.S. drug approvals could
create additional uncertainty within our target customer markets. Historically, during periods of economic uncertainty and downturns,
businesses may slow spending, which may impact our business and our customers’ businesses. Adverse changes in demand could impact
our business, collection of accounts receivable and our expected cash flow generation, which may adversely impact our financial condition
and results of operations.
Key Performance
Indicators
We
monitor the following key performance indicators to help us evaluate our business, measure our performance, identify trends affecting
our business and make strategic decisions. We have updated the definition of “top 20 pharmaceutical manufacturers” in our key
performance indicators to be based upon Fierce Pharma’s most updated list of “The top 20 pharma companies by 2022 revenue”.
We previously used “The top 20 pharma companies by 2020 revenue”. As a result of this change, prior periods have been restated
for comparative purposes.
Average
revenue per top 20 pharmaceutical manufacturer. Average revenue per top 20 pharmaceutical manufacturer is calculated by taking the
total revenue the company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma companies
by 2022 revenue” over the last twelve months, divided by the total number of the aforementioned pharmaceutical manufacturers that
our solutions helped support over that time period. The Company uses this metric to monitor its progress in “landing and expanding”
with key customers within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress
in penetrating this important customer segment. The decrease in the average in twelve months ended June 30, 2023 as compared to
the twelve months ended June 30, 2022 is primarily the result of the convergence of numerous macroeconomic factors that resulted
in our customers slowing their rate of spend, particularly for large and/or new implementations, which we believe prolonged sales cycles
with the top 20 pharmaceutical manufacturers that were existing customers.
| |
Rolling
Twelve Months
Ended June 30, | |
| |
2023 | | |
2022 | |
Average revenue per top 20 pharmaceutical
manufacturer | |
$ | 1,972,308 | | |
$ | 2,452,836 | |
Percent
of top 20 pharmaceutical manufacturers that are customers. Percent of top 20 pharmaceutical manufacturers that are customers is calculated
by taking the number of revenue generating customers that are pharmaceutical manufacturers listed in Fierce Pharma’s “The
top 20 pharma companies by 2022 revenue” over the last 12 months, which is then divided by 20—which is the number of pharmaceutical
manufacturers included in the aforementioned list. The Company uses this metric to monitor its progress in penetrating key customers
within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating
this important customer segment. Our penetration within this core customer group stayed consistent from the twelve months ended June 30,
2022 to the twelve months ended June 30, 2023.
| |
Rolling
Twelve Months Ended June 30, | |
| |
2023 | | |
2022 | |
Percent of top 20 pharmaceutical
manufacturers that are customers | |
| 90 | % | |
| 90 | % |
Percent
of total revenue attributable to top 20 pharmaceutical manufacturers. Percent of total revenue attributable to top 20 pharmaceutical
manufacturers is calculated by taking the total revenue the company recognized through pharmaceutical manufacturers listed in Fierce
Pharma’s “The top 20 pharma companies by 2022 revenue” over the last twelve months, divided by our consolidated revenue
over the same period. The Company uses this metric to monitor its progress in “landing and expanding” with key customers
within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating
this important customer segment. Our revenue from customers that aren’t top 20 pharmaceutical manufacturers increased faster than
our overall revenue, decreasing the percentage of our overall revenues from top 20 pharmaceutical manufacturers.
| |
Rolling
Twelve Months Ended June 30, | |
| |
2023 | | |
2022 | |
Percent of total revenue attributable
to top 20 pharmaceutical manufacturers | |
| 58 | % | |
| 69 | % |
Net
revenue retention. Net revenue retention is a comparison of revenue generated from all customers in the previous twelve-month period
to total revenue generated from the same customers in the following twelve-month period (i.e., excludes new customer relationships for
the most recent twelve-month period). The Company uses this metric to monitor its ability to improve its penetration with existing customers
and believes it also provides investors with a metric to chart our ability to increase our year-over-year penetration and revenue with
existing customers. The retention rate in the twelve months ended June 30, 2023 was lower due to the convergence of numerous macroeconomic
factors that resulted in our customers slowing their rate of spend, particularly for large and/or new implementations, which we believe
prolonged sales cycles.
| |
Rolling
Twelve Months Ended June 30, | |
| |
2023 | | |
2022 | |
Net revenue retention | |
| 89 | % | |
| 113 | % |
Revenue
per average full-time employee. We define revenue per average full-time employee as total revenue over the last twelve months divided
by the average number of employees over the last twelve months (i.e., the average between the number of FTEs at the end of the reported
period and the number of FTEs at the end of the same period of the prior year). The Company uses this metric to monitor the productivity
of its workforce and its ability to scale efficiently over time and believes the metric provides investors with a way to chart our productivity
and scalability. Our revenue rate per employee declined year over year due to slower revenue growth and a higher average number of FTEs
over the last 12 month period.
| |
Rolling
Twelve Months Ended June 30, | |
| |
2023 | | |
2022 | |
Revenue per average full-time employee | |
| 559,646 | | |
| 661,319 | |
Results
of Operations for the Three and Six Months Ended June 30, 2023 and 2022
The
following tables sets forth, for the periods indicated, the dollar value and percentage of net revenue represented by certain items in
our consolidated statements of operations:
| |
Three
months ended June 30, | |
| |
2023 | | |
2022 | |
Net revenue | |
$ | 13,818,166 | | |
| 100.0 | % | |
$ | 13,978,665 | | |
| 100.0 | % |
Cost of revenues | |
| 5,993,145 | | |
| 43.4 | % | |
| 4,988,716 | | |
| 35.7 | % |
Gross profit | |
| 7,825,021 | | |
| 56.6 | % | |
| 8,989,949 | | |
| 64.3 | % |
Operating expenses | |
| 12,706,889 | | |
| 92.0 | % | |
| 12,898,479 | | |
| 92.3 | % |
Loss from operations | |
| (4,881,868 | ) | |
| (35.3 | )% | |
| (3,908,530 | ) | |
| (28.0 | )% |
Other income | |
| 720,419 | | |
| 5.2 | % | |
| 23,816 | | |
| 0.2 | % |
Loss before provision for income taxes | |
| (4,161,449 | ) | |
| (30.1 | )% | |
| (3,884,714 | ) | |
| (27.8 | )% |
Income tax benefit | |
| — | | |
| — | % | |
| — | | |
| — | % |
Net loss | |
$ | (4,161,449 | ) | |
| (30.1 | )% | |
$ | (3,884,714 | ) | |
| (27.8 | )% |
| * | Balances
and percentage of net revenue information may not add due to rounding |
| |
Six
months ended June 30, | |
| |
2023 | | |
2022 | |
Net revenue | |
$ | 26,821,076 | | |
| 100.0 | % | |
$ | 27,710,195 | | |
| 100.0 | % |
Cost of revenues | |
| 11,562,766 | | |
| 43.1 | % | |
| 10,618,574 | | |
| 38.3 | % |
Gross profit | |
| 15,258,310 | | |
| 56.9 | % | |
| 17,091,621 | | |
| 61.7 | % |
Operating expenses | |
| 27,203,364 | | |
| 101.4 | % | |
| 24,761,253 | | |
| 89.4 | % |
Loss from operations | |
| (11,945,054 | ) | |
| (44.5 | )% | |
| (7,669,632 | ) | |
| (27.7 | )% |
Other income | |
| 1,385,891 | | |
| 5.2 | % | |
| 23,820 | | |
| 0.1 | % |
Loss before provision for income taxes | |
| (10,559,163 | ) | |
| (39.4 | )% | |
| (7,645,812 | ) | |
| (27.6 | )% |
Income tax benefit | |
| — | | |
| — | % | |
| — | | |
| — | % |
Net loss | |
$ | (10,559,163 | ) | |
| (39.4 | )% | |
$ | (7,645,812 | ) | |
| (27.6 | )% |
| * | Balances
and percentage of net revenue information may not add due to rounding |
Net
Revenues
Our net revenue reported for the three months ended June 30, 2023
was approximately $13.8 million, a decrease of 1% over the approximately $14.0 million from the same period in 2022. Our net revenue reported
for the six months ended June 30, 2023 was approximately $26.8 million, a decrease of 3% over the approximately $27.7 million from
the same period in 2022. The decrease in revenue was primarily as a result of a revenue shortfall in certain non-core business lines as
well as longer than expected medical, legal and regulatory reviews that pushed revenue into the second half of the year. In addition,
revenue continues to be effected by the macroeconomic pressures affecting our customers.
Cost
of Revenues
Our
cost of revenues, composed primarily of revenue share expense paid to our network partners, was approximately $6.0 million for the three
months ended June 30, 2023 compared to $5.0 million for the same period of 2022. Our cost of revenues for the six month period ended
June 30, 2023 increased from $10.6 million to $11.6 million, compared to the same period in 2022. Our cost of revenues as a percentage
of revenue increased to approximately 43.4% for the quarter ended June 30, 2023 from approximately 35.7% for the quarter ended June 30,
2022. Our cost of revenues as a percentage of revenue increased to approximately 43.1% for the six months ended June 30, 2023 from
approximately 38.3% for the six months ended June 30, 2022. This increase in cost of revenue as a percentage of revenue was a result
of solution and channel mix. Additional discussion is included in the gross margin section below.
Gross
Margin
Our
gross margin, which is the difference between our revenues and our cost of revenues, decreased for the three and six months ended June 30,
2023, as a result of solution and channel mix. During the six months ended June 30, 2023, there was a decrease in the percentage
of activity flowing through our lower cost channels compared with a year ago.
Operating
Expenses
Operating
expenses decreased to approximately $12.7 million for the three months ended June 30, 2023 from approximately $12.9 million for
the same period in 2022, a decrease of approximately 1%. Operating expenses increased from approximately $24.8 million for the six months
ended June 30, 2022 to approximately $27.2 million for the same period in 2023, an increase of approximately 10%. The detail by major
category is reflected in the table below.
| |
Three
Months Ended
June 30, | | |
Six
Months Ended
June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Stock-based compensation | |
$ | 3,503,123 | | |
$ | 4,025,323 | | |
$ | 7,883,626 | | |
$ | 7,199,421 | |
Depreciation, amortization and noncash lease
expense | |
| 464,761 | | |
| 578,117 | | |
| 928,695 | | |
| 1,049,656 | |
Other general and administrative
expenses | |
| 8,739,005 | | |
| 8,295,039 | | |
| 18,391,043 | | |
| 16,512,176 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expense | |
$ | 12,706,889 | | |
$ | 12,898,479 | | |
$ | 27,203,364 | | |
$ | 24,761,253 | |
The
greatest increase was in other general and administrative expenses. Other general and administrative expenses increased from approximately
$8.3 million for the three months ended June 30, 2022 to approximately $8.7 million for the same period in 2023. Other general and administrative
expenses increased from $16.5 million for the six months ended June 30, 2022 to approximately $18.4 million for the same period in 2022.
This increase is mostly as a result of an increase in headcount as well as other investments to
support our growth initiatives and operations.
Net Loss
We
had a net loss of approximately $4.2 million for the three months ended June 30, 2023, as compared to a net loss of approximately
$3.9 million during the same period in 2022. We had a net loss of approximately $10.6 million for the six months ended June 30,
2023, as compared to a net loss of approximately $7.6 million during the same period in 2022. The reasons and specific components associated
with the change are discussed above.
Liquidity
and Capital Resources
Historically,
our primary sources of liquidity have been cash receipts from customers and proceeds from equity offerings. As of June 30, 2023,
we had total current assets of approximately $85.1 million, compared with current liabilities of approximately $5.5 million, resulting
in working capital of approximately $79.6 million and a current ratio of approximately 15.4 to 1. This represents a decrease from our
working capital of approximately $90.2 million and an increase from the current ratio of 11.7 to 1 at December 31, 2022. This decrease
in our working capital is discussed in more detail below.
Following
is a table with summary data from the consolidated statements of cash flows for the six months ended June 30, 2023 and 2022, as
presented.
| |
Six
Months Ended
June 30, | |
| |
2023 | | |
2022 | |
Net cash (used in) / provided by
operating activities | |
$ | (2,454,489 | ) | |
$ | 4,388,372 | |
Net cash provided by / (used in) investing
activities | |
| 1,674,215 | | |
| (2,186,592 | ) |
Net cash (used in) /
provided by financing activities | |
| (7,620,081 | ) | |
| 509,420 | |
Net (decrease) / increase
in cash and cash equivalents | |
$ | (8,400,355 | ) | |
$ | 2,711,200 | |
We
used approximately $2.5 million for operating activities during the six months ended June 30, 2023, compared with $4.4 million provided
by operating activities in the same period in 2022. We had a net loss of $10.6 million for the first six months of 2023. Noncash expenses
of $9.1 million and working capital generated by the collection of receivables partially offset the loss. Additional channel partner
investment in the second quarter of 2023 as well as the timing of certain revenue share payments increased our balance of prepaid services
year over year. This in conjunction with the greater net loss, led to the year over year decrease cash flow from operations.
Cash
provided by investing activities was approximately $1.7 million for the six months ended June 30, 2023. We redeemed $112.5 million
in treasury bills which was partially offset by reinvestment of $109.5 million in treasury bills. We also invested in internally developed
software in the amount of $1.3 million.
Cash
used for financing activities was approximately $7.6 million mostly related to a company stock repurchase program approved in March 2023.
During the quarter ended June 30, 2023 we used $7.5 million to purchase 526,999 shares of common stock. Additionally, we used $0.2 million
to pay withholding taxes on behalf of employees vesting in restricted stock units. This activity was partially offset by the receipt
of funds from the exercise of stock options.
We
believe that funds generated from operations, together with existing cash, will be sufficient to finance our current operations for the
next twelve (12) months. In addition, we believe we can generate the cash needed to operate beyond the next 12 months from operations.
However, we may seek additional debt, equity financing, or lines of credit to supplement cash from operations to fund acquisitions or
strategic partner relationships, make capital expenditures, and satisfy working capital needs.
Critical
Accounting Estimates
We
prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. The preparation
of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual
results could differ from those estimates and assumptions. Our significant accounting policies are described in Note 2 to the Consolidated
Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report on Form 10-K). The
accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our 2022 Annual
Report on Form 10-K. Our critical accounting estimates are described in Management’s Discussion and Analysis included in the 2022
Annual Report on Form 10-K.
Recently
Issued Accounting Pronouncements
ASU
Topic 2021-08 Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,
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 was effective for the Company’s fiscal year beginning January 1, 2023. The adoption of this standard did not have
a material effect on our financial position, results of operations, or cash flows.
Off Balance
Sheet Arrangements
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 or banners through their network. From time to time the Company enters into arrangements with a
partner to acquire minimum amounts of messaging capabilities. As of June 30, 2023, the Company had commitments for future minimum payments
of $13.3 million that will be reflected in cost of revenues during the years 2023 through 2025.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Not
applicable.
Item 4.
Controls and Procedures
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.
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, 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 not effective
at the reasonable assurance level due to a material weakness in our internal controls over financial reporting which was disclosed in
our Annual Report on Form 10-K for the year ended December 31, 2022.
To
address the material weakness referenced above, the Company performed additional analysis and performed other procedures in order to
prepare the consolidated financial statements in accordance with generally accepted accounting principles (GAAP). Accordingly, management
believes that the consolidated financial statements included in this quarterly report on this Form 10-Q fairly present, in all material
respects, our financial condition, results of operations and cash flows for the periods presented.
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:
| a. | The
Company will require each third-party service organization to provide a SOC-1, Type 2 report
to us. |
| b. | 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. |
During
the quarters ended June 30, 2023 and March 31, 2023, the Company met with the third-party service organizations to discuss the reporting
requirements. 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
Except
as noted above, 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 June 30, 2023 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
Limitations
on the Effectiveness of Controls
A
control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of
the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls
to enhance, where necessary, its procedures and controls.
PART
II – OTHER INFORMATION
Item 1.
Legal Proceedings
We are not
a party to any material pending legal proceeding.
Item
1A: Risk Factors
There
have been no material changes in our risk factors from the risks previously reported in PART 1, ITEM 1A, “Risk Factors” of
our Annual Report on Form 10-K for the year ended December 31, 2022. You should carefully consider the factors discussed in PART
I, ITEM 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially
affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks
we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating results.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer
Purchases of Equity Securities
During the
three months ended June 30, 2023, we purchased shares of our common stock as follows:
Period |
|
Total
Number of
Shares
Purchased (1) |
|
|
Average
Price Paid
per Share |
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs (1) |
|
|
Maximum
Number (or
Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (1) |
|
4/1/23 - 4/30/23 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
15,000,000 |
|
5/1/23 - 5/31/23 |
|
|
132,000 |
|
|
$ |
13.15 |
|
|
|
132,000 |
|
|
$ |
13,267,253 |
|
6/1/23 - 6/30/23 |
|
|
394,000 |
|
|
$ |
14.65 |
|
|
|
394,000 |
|
|
$ |
7,488,116 |
|
(1) | On
March 14, 2023, the Company announced that its Board of Directors had authorized the repurchase of up to $15 million of the Company’s
outstanding common stock. Under this new program, share repurchases may be made from time to time depending on market conditions, share
price and availability and other factors at the Company’s discretion. This stock repurchase authorization expires on the earlier
of March 12, 2024, or when the repurchase of $15 million of shares of its common stock has been reached. |
The
Company’s repurchase of shares took place in open market transactions or privately negotiated transactions in accordance with applicable
securities and other laws, including the Exchange Act. The Company intends to finance the purchase using its available cash and cash
equivalents.
Item 3.
Defaults upon Senior Securities
None
Item 4.
Mine Safety Disclosures
N/A
Item 5.
Other Information
None
Item
6. Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities 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 |
Date:
August 14, 2023 |
|
|
|
By: |
/s/
William J. Febbo |
|
|
William
J. Febbo |
|
Title:
|
Chief
Executive Officer
(principal
executive officer) |
|
|
|
|
OptimizeRx
Corporation |
Date:
August 14, 2023 |
|
|
|
By: |
/s/
Edward Stelmakh |
|
|
Edward
Stelmakh |
|
Title:
|
Chief
Financial Officer and
Chief
Operations Officer
(principal
financial and accounting officer) |
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I, William
J. Febbo, certify that;
In connection with the quarterly Report of OptimizeRx
Corp (the “Company”) on Form 10-Q for the quarter ended June 30, 2023 filed with the Securities and Exchange Commission
(the “Report”), I, Will Febbo, Chief Executive Officer and I, Edward Stelmakh, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
This certification has been furnished solely pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.