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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
October 20, 2023
OptimizeRx Corporation
(Exact name of registrant as specified in charter)
Nevada |
|
001-38543 |
|
26-1265381 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
260 Charles Street, Suite 302, Waltham, MA |
|
02453 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: 248.651.6568
Not Applicable
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.
below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name
of each exchange on which registered |
Common Stock, $0.001 Par Value |
|
OPRX |
|
The Nasdaq Capital Market |
Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Explanatory Note
On
October 11, 2023, OptimizeRx Corporation (the “Company” or “OptimizeRx”) entered into a definitive Agreement and
Plan of Merger (the “Merger Agreement”) with Healthy Offers, Inc. (d/b/a Medicx Health), a Nevada corporation (“Medicx”),
the securityholders of Medicx named therein (the “Securityholders”), and Michael Weintraub, not in his individual capacity,
but solely in his capacity as representative, agent and attorney-in-fact of the Securityholders. On October 24, 2023, pursuant to the Merger
Agreement, a newly formed wholly-owned subsidiary of the Company consummated the merger with and into Medicx, with Medicx continuing
as the surviving company and a wholly-owned subsidiary of the Company (the “Merger”).
On October 25, 2023,
OptimizeRx filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Original Form 8-K”) to report
the consummation of the Merger. Among other things, this Amendment No. 1 to the Original Form 8-K amends and supplements Item 9.01 of
the Original Form 8-K to provide the financial statements and pro forma financial information required under Items 9.01(a) and (b) of
Form 8-K, which were excluded from the Original Form 8-K in reliance on the instructions to such items.
Item 9.01. Financial Statements and Exhibits
(a)
Financial Statements of Businesses Acquired
(i) The audited balance sheets of Medicx as of December 31, 2022 and
2021, and the related statements of income, changes in stockholders’ equity and cash flows for the fiscal years ended December 31,
2022 and 2021 are included as Exhibit 99.2 to this report and incorporated by reference herein.
(ii) The unaudited balance sheets of Medicx as of June 30, 2023 and
December 31, 2022 and the related statements of income, changed in stockholders’ equity and cash flows for the three and six months
ended June 30, 2023 and 2022 are included as Exhibit 99.3 to this report and incorporated by reference herein.
(b)
Pro Forma Financial Information
OptimizeRx’s
unaudited pro forma combined balance sheet as of June 30, 2023 and pro forma condensed combined
statement of operations for the six months ended June 30, 2023 and the year ended December 31, 2022 are included as Exhibit 99.4 to this
report and incorporated by reference herein.
(d)
Exhibits
* |
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 the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
OPTIMIZERX CORPORATION |
|
|
Date: January 5, 2024 |
By: |
/s/ Edward Stelmakh |
|
|
Name: |
Edward Stelmakh |
|
|
Title: |
Chief Financial Officer |
3
Exhibit 23.1
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We consent to
the incorporation by reference in the following registration statements on Form S-3 (File No. 333-252844) and Forms S-8 (File Nos.
333-259218; 333-237630; 333-230212, 333-210653 and 333-189439) of OptimizeRx Corporation and Subsidiaries (the "Company")
of our report dated December 29, 2023, with respect to the financial statements of Healthy Offers, Inc. as of December 31, 2022 and 2021
and for the years then ended, which is included in this Form 8-K of the Company.
UHY LLP
Sterling Heights, Michigan
January
5, 2024
Exhibit
99.2
HEALTHY
OFFERS, INC.
FINANCIAL
STATEMENTS
YEARS
ENDED DECEMBER 31, 2022 AND 2021
INDEPENDENT
AUDITOR’S REPORT
To
the Board of Directors of
Healthy
Offers, Inc.
Opinion
We
have audited the accompanying financial statements of Healthy Offers, Inc. (the Company), which comprise the balance sheets as of December
31, 2022 and 2021, and the related statements of income, stockholders’ equity, and cash flows for the years then ended, and the
related notes to the financial statements.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company
as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting
principles generally accepted in the United States of America.
Basis
for Opinion
We
conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section
of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the
relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Responsibilities
of Management for the Financial Statements
Management
is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally
accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In
preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate,
that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the
financial statements are available to be issued.
To
the Board of Directors of
Healthy
Offers, Inc.
Page
Two
Auditor’s
Responsibilities for the Audit of the Financial Statements
Our
objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always
detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate,
they would influence the judgment made by a reasonable user based on the financial statements.
In
performing an audit in accordance with GAAS, we:
| ● | Exercise
professional judgment and maintain professional skepticism throughout the audit. |
| ● | Identify
and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. |
| ● | Obtain
an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control. Accordingly, no such opinion
is expressed. |
| ● | Evaluate
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluate the overall presentation of the financial
statements. |
| ● | Conclude
whether, in our judgment, there are conditions or events, considered in the aggregate, that
raise substantial doubt about the Company’s ability to continue as a going concern
for a reasonable period of time. |
We
are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit,
significant audit findings, and certain internal control related matters that we identified during the audit.
Sterling
Heights, Michigan
December
29, 2023
HEALTHY
OFFERS, INC.
BALANCE
SHEETS
| |
December 31,
2022 | | |
December 31,
2021 | |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash
and cash equivalents | |
$ | 4,701,355 | | |
$ | 5,125,511 | |
Short-term
investments | |
| 1,595,000 | | |
| — | |
Accounts
receivable, net | |
| 6,840,793 | | |
| 5,247,376 | |
Prepaid
expenses and other | |
| 179,952 | | |
| 115,382 | |
Employee
retention credit receivables | |
| 712,779 | | |
| — | |
Total current assets | |
| 14,029,879 | | |
| 10,488,269 | |
Property and equipment, net | |
| 49,092 | | |
| 51,588 | |
Other assets | |
| | | |
| | |
Net deferred
tax asset | |
| 567,652 | | |
| 311,696 | |
Investments | |
| 2,486,103 | | |
| — | |
Intangible
assets, net | |
| 1,241,786 | | |
| 1,229,942 | |
Operating
right-of-use assets, net | |
| 234,943 | | |
| 339,302 | |
Deposits | |
| 11,086 | | |
| 10,392 | |
Total
other assets | |
| 4,541,570 | | |
| 1,891,332 | |
TOTAL
ASSETS | |
$ | 18,620,541 | | |
$ | 12,431,189 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Factoring
line of credit | |
$ | — | | |
$ | 567,742 | |
Accounts
payable – trade | |
| 2,460,803 | | |
| 777,347 | |
Accrued
expenses | |
| 2,813,961 | | |
| 1,597,887 | |
Income
tax payable | |
| 437,725 | | |
| 235,674 | |
Deferred
revenue | |
| 270,000 | | |
| 101,771 | |
Current
portion of lease liabilities | |
| 113,484 | | |
| 88,958 | |
Current
portion of notes payable | |
| — | | |
| 4,386 | |
Total
current liabilities | |
| 6,095,973 | | |
| 3,373,765 | |
Non-current liabilities | |
| | | |
| | |
Lease liabilities,
net of current portion | |
| 151,256 | | |
| 261,246 | |
Notes
payable, net of current portion | |
| — | | |
| 145,614 | |
Total
noncurrent liabilities | |
| 151,256 | | |
| 406,860 | |
Total
liabilities | |
| 6,247,229 | | |
| 3,780,625 | |
Stockholders’ equity | |
| | | |
| | |
Preferred
stock, Series A convertible, $0.001 par value, 10,000,000 shares authorized, 166,667 issued and outstanding at December 31, 2022
and December 31, 2021 | |
| 250 | | |
| 250 | |
Common
stock, $0.001 par value, 20,000,000 shares authorized, 9,951,000 and 9,950,000 shares issued and outstanding at December 31, 2022
and December 31, 2021, respectively | |
| 9,951 | | |
| 9,950 | |
Treasury
Stock, $0.001 par value, 25,000 shares held on December 31, 2022 and December 31, 2021 | |
| (25 | ) | |
| (25 | ) |
Additional
paid-in-capital | |
| 2,895,929 | | |
| 2,674,293 | |
Retained
earnings | |
| 9,467,207 | | |
| 5,966,096 | |
Total
stockholders’ equity | |
| 12,373,312 | | |
| 8,650,564 | |
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 18,620,541 | | |
$ | 12,431,189 | |
The
accompanying notes are an integral part of these financial statements.
HEALTHY
OFFERS, INC.
STATEMENTS
OF INCOME
| |
For
the year ended December 31,
2022 | | |
For
the year ended December 31,
2021 | |
| |
| | |
| |
Net revenue | |
$ | 28,071,080 | | |
$ | 18,549,873 | |
Cost
of revenues, exclusive of depreciation and amortization presented separately below | |
| 12,172,546 | | |
| 9,467,667 | |
Gross
profit | |
| 15,898,534 | | |
| 9,082,206 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Selling,
general, and administrative | |
| 10,520,437 | | |
| 7,673,669 | |
Depreciation,
amortization, and noncash lease expense | |
| 298,735 | | |
| 282,430 | |
Total operating expenses | |
| 10,819,172 | | |
| 7,956,099 | |
Income from operations | |
| 5,079,362 | | |
| 1,126,107 | |
Other income (expense) | |
| | | |
| | |
Other
income | |
| 726,000 | | |
| - | |
Interest Income | |
| 33,789 | | |
| 9,710 | |
Interest
expense | |
| (26,461 | ) | |
| (41,596 | ) |
Total other income (expense) | |
| 733,328 | | |
| (31,886 | ) |
Income before provision for
income taxes | |
| 5,812,690 | | |
| 1,094,221 | |
Income
tax provision | |
| 1,350,329 | | |
| 325,689 | |
Net income | |
$ | 4,462,361 | | |
$ | 768,532 | |
The
accompanying notes are an integral part of these financial statements.
HEALTHY
OFFERS, INC.
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
| |
Series
A Convertible Preferred Stock | | |
Common
Stock | | |
Treasury
Stock | | |
Additional
Paid
in | | |
Retained | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Earnings | | |
Total | |
Balance
December 31, 2020 | |
| 166,667 | | |
$ | 250 | | |
| 9,950,000 | | |
$ | 9,950 | | |
| (25,000 | ) | |
$ | (25 | ) | |
$ | 2,412,445 | | |
$ | 5,212,564 | | |
$ | 7,635,184 | |
Stock
based compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 246,848 | | |
| — | | |
| 246,848 | |
Accretion
of preferred stock dividends | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 15,000 | | |
| (15,000 | ) | |
| — | |
Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 768,532 | | |
| 768,532 | |
Balance
December 31, 2021 | |
| 166,667 | | |
| 250 | | |
| 9,950,000 | | |
| 9,950 | | |
| (25,000 | ) | |
| (25 | ) | |
| 2,674,293 | | |
| 5,966,096 | | |
| 8,650,564 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity
incentive common shares exercised | |
| — | | |
| — | | |
| 1,000 | | |
| 1 | | |
| — | | |
| — | | |
| 2,429 | | |
| — | | |
| 2,430 | |
Stock
based compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 257,957 | | |
| — | | |
| 257,957 | |
Preferred
stock dividend | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (53,750 | ) | |
| (946,250 | ) | |
| (1,000,000 | ) |
Accretion
of preferred stock dividends | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 15,000 | | |
| (15,000 | ) | |
| — | |
Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 4,462,361 | | |
| 4,462,361 | |
Balance
December 31, 2022 | |
| 166,667 | | |
$ | 250 | | |
| 9,951,000 | | |
$ | 9,951 | | |
| (25,000 | ) | |
$ | (25 | ) | |
$ | 2,895,929 | | |
$ | 9,467,207 | | |
$ | 12,373,312 | |
The
accompanying notes are an integral part of these financial statements.
HEALTHY
OFFERS, INC.
STATEMENTS
OF CASH FLOWS
| |
For
the year ended December 31,
2022 | | |
For
the year ended December 31,
2021 | |
CASH FLOWS FROM OPERATING
ACTIVITIES: | |
| | |
| |
Net
income | |
$ | 4,462,361 | | |
$ | 768,532 | |
Adjustments
to reconcile net income to cash | |
| | | |
| | |
Depreciation
and amortization | |
| 298,735 | | |
| 282,430 | |
Stock-based
compensation expense | |
| 257,957 | | |
| 246,848 | |
Noncash
lease expense | |
| 18,894 | | |
| 306 | |
Deferred
income taxes | |
| (255,956 | ) | |
| 41,485 | |
Effects of changes in operating
assets and liabilities: | |
| | | |
| | |
Accounts
receivable | |
| (1,593,417 | ) | |
| 2,050,340 | |
Prepaid
expenses and other current assets | |
| (65,264 | ) | |
| 36,253 | |
Employee
retention credit receivables | |
| (712,779 | ) | |
| — | |
Accounts
payable | |
| 1,683,456 | | |
| (744,325 | ) |
Accrued
expenses | |
| 1,216,074 | | |
| (1,096,950 | ) |
Income
taxes payable / receivable | |
| 202,051 | | |
| 635,143 | |
Deferred
revenue | |
| 168,229 | | |
| (124,521 | ) |
NET CASH
PROVIDED BY OPERATING ACTIVITIES | |
| 5,680,341 | | |
| 2,095,541 | |
| |
| | | |
| | |
CASH FLOWS
USED IN INVESTING ACTIVITIES: | |
| | | |
| | |
Purchases of property and
equipment | |
| (22,505 | ) | |
| (20,959 | ) |
Capitalized software development
costs | |
| (285,577 | ) | |
| (457,845 | ) |
Purchases of held-to-maturity
securities | |
| (4,746,103 | ) | |
| — | |
Proceeds
from the sale of held-to-maturity securities | |
| 665,000 | | |
| — | |
NET CASH
USED IN INVESTING ACTIVITIES | |
| (4,389,185 | ) | |
| (478,804 | ) |
| |
| | | |
| | |
CASH FLOWS
(USED IN ) / PROVIDED BY FINANCING ACTIVITIES: | |
| | | |
| | |
Net advances (payments) on
factoring line of credit | |
| (567,742 | ) | |
| 189,862 | |
Payments on notes payable | |
| (150,000 | ) | |
| — | |
Proceeds from exercise of
stock options | |
| 2,430 | | |
| — | |
Dividends
paid | |
| (1,000,000 | ) | |
| — | |
NET
CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES | |
| (1,715,312 | ) | |
| 189,862 | |
NET (DECREASE)
/ INCREASE IN CASH AND CASH EQUIVALENTS | |
| (424,156 | ) | |
| 1,806,599 | |
CASH
AND CASH EQUIVALENTS – BEGINNING OF PERIOD | |
| 5,125,511 | | |
| 3,318,912 | |
CASH
AND CASH EQUIVALENTS – END OF PERIOD | |
$ | 4,701,355 | | |
$ | 5,125,511 | |
SUPPLEMENTAL
CASH FLOW INFORMATION: | |
| | | |
| | |
Cash
paid for interest | |
$ | 33,583 | | |
$ | 35,999 | |
Income
taxes paid | |
$ | 1,405,118 | | |
$ | 79,166 | |
Noncash
accretion of preferred stock dividend | |
$ | 15,000 | | |
$ | 15,000 | |
The
accompanying notes are an integral part of these financial statements.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Healthy Offers, Inc. (the Company) is a specialized
data-driven company designed to offer advertisers solutions for addressable media in the pharmaceutical and health industries for any
cross-channel media campaign. As data and technology are driving enormous change in the structure and economics of media across all channels,
the Company was created to assist advertisers in navigating the new landscape. The Company offers the strategic thinking of a boutique
agency with addressable audience scale, leverage, and reach. The Company is headquartered in Scottsdale, Arizona.
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 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents consist of cash on deposit
with a bank.
Cash is held in depository accounts at financial
institutions. The combined account balances at the financial institutions often exceed the Federal Deposit Insurance Corporation (FDIC)
insurance coverage of $250,000 and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC
insurance coverage. Management believes, based on the quality of the financial institutions, that the risk is not significant.
Investments
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.
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.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
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 are valued using level 3 inputs.
The Company’s carrying amounts of financial instruments
including cash and cash equivalents, investments, accounts receivable, accounts payable, and other current liabilities approximate their
fair values due to their short maturities.
Accounts Receivable
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.
Management recognizes an allowance for uncollectible
accounts that reflects their best estimate of amounts that will not be collected based on management’s assessment of the collectibility
of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness
or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company
could be adversely affected. Management has determined an allowance for doubtful accounts is not required as of December 31, 2022 and
2021.
Property and Equipment
Property and equipment are stated at historical
cost. Depreciation is provided using straight-line methods over the estimated useful lives of the assets ranging from 3 to 7 years. Amortization
of leasehold improvements is provided over the shorter of the lease term or the estimated useful lives of the improvements.
Software
Development
Expenditures
for software development costs during preliminary project and post-implementation phases are expensed as incurred. Capitalization of internally
developed software occurs during the application development stage. Once a project has reached application development, internal and external
costs, if direct and incremental, are capitalized until the software is substantially complete and ready to be placed in service. The
Company capitalized approximately $285,577 and $457,845 of software development costs during the years ended December 31, 2022 and 2021,
respectively. Amortization of software development costs is provided using straight-line methods over the estimated useful life, generally
three to five years.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Costs incurred
related to implementation in a cloud computing arrangement are capitalized and recognized over the expected term of the hosting arrangement,
generally five years.
Impairment
of long-lived assets
The Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of carrying amount or fair value less costs to sell.
Stock-Based Compensation
The Company recognizes stock-based compensation
expense in the statement of income for share-based awards granted to employees based on their fair values at the time of grant over the
vesting period.
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.
Revenues are primarily generated from contracts
with advertisers for its performance based advertising services, which include the use of data analytics technology and other advertising
products and services. Customers typically receive the benefit of the Company’s services as they are performed and substantially all of
the Company’s revenue is recognized over time as the services are performed. Solutions include the creation of and access to custom audience
data; campaign management, including custom audience targeting; and custom analytics.
Under Topic 606, revenue from contracts with customers
is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected
on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and
is the unit of account under Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control over a product
or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such
products or services.
Costs incurred in fulfillment of customer contracts
principally consist of the cost of media placements. General and administrative costs are charged to expense as incurred. Deferred revenue
consists of billings or cash receipts from customers in advance of providing services.
The Company records the accounts receivable and
deferred revenue when it has the contractual right to invoice the customer. Deferred revenue is recognized as revenue when obligations
on customers contracts are completed. In some instances, the Company collaborates with third parties to perform campaign management. In
these instances, the Company provides customer audience data to be used in the execution of media campaigns. Revenue is recorded net of
all revenue share agreements and fees. Substantially all revenue is recorded over time as the audience data is accessed and messages are
delivered.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Contract Balances
The timing of revenue recognition, billings and
cash collections results in accounts receivable and deferred revenue (contract liabilities) on the balance sheets. Amounts are billed
as work progresses in accordance with agreed-upon contractual terms, generally on a monthly basis. However, advance deposits are sometimes
received before revenue is recognized, resulting in contract liabilities. These deposits are recorded as deferred revenue on the balance
sheets and are recognized as revenue when the services are provided.
The following is a summary of the Company’s accounts
receivable and contract liabilities:
| |
December 31,
2022 | | |
December 31,
2021 | | |
January 1,
2021 | |
Accounts receivable, net | |
$ | 6,840,793 | | |
$ | 5,247,376 | | |
$ | 7,297,716 | |
Deferred revenue | |
| 270,000 | | |
| 101,771 | | |
| 226,292 | |
Amounts recorded in deferred revenue are generally
recognized within 12 months.
Advertising Expenses
Advertising and marketing expenses primarily consist
of marketing event participation and business promotions. In fulfillment of customer contracts, the Company incurs advertising and marketing
expenses. Advertising and marketing costs incurred on behalf of a customer are recorded as cost of sales on a gross basis as the Company
is ultimately responsible for paying the expense to the vendor. Advertising and marketing costs presented in the financial statements
of $91,868 and $102,715 for the years ended December 31, 2022 and 2021, respectively, are expenses incurred for the benefit of the Company.
Income Taxes
Deferred income taxes are provided for temporary
differences between financial statements and income tax reporting. Temporary differences are differences between the amounts of the assets
and liabilities reported for financial statement purposes and their tax bases.
Deferred tax assets are recognized for temporary
differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets
are recognized only if it is more likely than not that a tax position will be realized or sustained upon examination by the relevant taxing
authority. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest
amount of tax benefit that ha a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge
of all relevant information.
Deferred tax assets are reduced by a valuation
allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities
are recognized for temporary differences that will be taxable in the future years’ tax returns.
Management believes there are no material uncertain
tax positions for which a liability (unrecognized tax benefit) should be recognized. The federal and state income tax returns of the Company
from 2019 to 2022 are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after
they were filed.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
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.
In June 2016, the Financial Accounting
Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model that requires measurement and recognition of
expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and
available for sale debt securities. ASU 2016-13 was effective for us on January 1, 2020. The adoption of this standard did not have
a material effect on our financial position, results of operations, or cash flows.
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 adoption of this standard is not expected to have a material effect
on our financial position, results of operations, or cash flows.
NOTE 3 – INVESTMENTS
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 December 31, 2022 and December 31, 2021, we have recorded $4.1 million and $0.0 million, respectively,
of held-to-maturity government bonds, U.S. Treasury notes, and certificates of deposit at amortized cost basis. Our held-to-maturity investments
have maturity dates between March 2024 and July 2025.
| |
Amortized
Cost | | |
Gross
Unrealized
Gains | | |
Gross
Unrealized
Losses | | |
Fair Value | |
Bonds | |
$ | 3,386,767 | | |
$ | — | | |
$ | 35,149 | | |
$ | 3,351,618 | |
Treasury notes | |
| 550,336 | | |
| — | | |
| 2,264 | | |
| 548,072 | |
Certificates of deposit | |
| 144,000 | | |
| — | | |
| 543 | | |
| 143,457 | |
Total | |
$ | 4,081,103 | | |
$ | — | | |
$ | 37,956 | | |
$ | 4,043,147 | |
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
| |
2022 | | |
2021 | |
Office furniture and equipment | |
$ | 82,948 | | |
$ | 82,948 | |
Leasehold improvements | |
| 118,809 | | |
| 118,809 | |
Equipment | |
| 180,463 | | |
| 157,957 | |
| |
| 382,220 | | |
| 359,714 | |
Less accumulated depreciation | |
| (333,128 | ) | |
| (308,126 | ) |
Property and equipment, net | |
$ | 49,092 | | |
$ | 51,588 | |
Depreciation expense was $25,002 and $38,362 for the years ended December
31, 2022 and 2021, respectively.
NOTE 5 – INTANGIBLE ASSETS
Intangible assets consisted of the following at December 31:
| |
2022 | | |
2021 | |
Internally developed software | |
$ | 1,833,892 | | |
$ | 1,195,302 | |
Software development in process | |
| 182,892 | | |
| 535,905 | |
| |
| 2,016,784 | | |
| 1,731,207 | |
Less accumulated amortization | |
| (774,998 | ) | |
| (501,265 | ) |
Total | |
$ | 1,241,786 | | |
$ | 1,229,942 | |
Amortization expense was $273,733 and $244,069 for the years ended
December 31, 2022 and 2021, respectively.
Estimated amortization expense for each of the next five years is as
follows:
Year Ending December 31 | |
Amount | |
2023 | |
$ | 319,113 | |
2024 | |
| 278,111 | |
2025 | |
| 233,919 | |
2026 | |
| 127,719 | |
2027 | |
| 100,032 | |
| |
$ | 1,058,894 | |
Software development in process | |
$ | 182,892 | |
Total | |
$ | 1,241,786 | |
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 6 – FACTORING LINE OF CREDIT
The Company had a $4,000,000 factoring credit
facility. The Company, from time to time, submitted selected accounts receivable invoices for the ability to draw up to 90% of the outstanding
invoice balance (remaining 10% placed in reserve until the corresponding invoice was paid). Under the factoring arrangement, in addition
to having the facility secured by the Company’s accounts receivable, the Company had full liability on any uncollected balances advanced
under the facility. Additionally, the Company paid an interest rate at the prime rate plus 3.75%, but not less than 7%, plus a fixed discount
of between 0.25%-0.75% depending on the age of the receivable factored and a monthly service charge for the use of the line of credit.
As of December 31, 2022 and 2021, the balance due under the factoring credit facility was $0 and $567,742, respectively. The total balance
of receivables factored under the agreement as of December 31, 2022 and 2021 was $0 and $1,187,061, respectively. In October 2022, all
the outstanding principal and interest was paid in full and the account was closed.
NOTE 7 – NOTES PAYABLE
On June 14, 2020, the Company received an Economic
Injury Disaster Loan (EIDL) from the SBA in the amount of $150,000 under the Small Business Act. The loan bore interest at a fixed rate
of 3.75% per annum, had a term of 30 years, and was secured by the assets of the Company. Payment of principal and interest was deferred
until 24 months from the date of the note, at which time the balance was scheduled to be repaid in monthly payments of principal and interest
totaling $731. During the year ended December 31, 2022, the note balance was paid in full.
On April 14, 2020, the Company received a Paycheck
Protection Program Loan (“PPP”) from a bank in the amount of $908,400 to fund payroll, rent, utilities, and interest on existing
debt. The Company recognized $916,222 of other income related to this agreement during the year ended December 31, 2020, which represents
the full principal and interest that would have been payable under the program.
NOTE 8 – LEASES
During the years ended December 31, 2022 and 2021,
we had operating leases for office space in one multi tenant facilities in Scottsdale, Arizona. We also had a vehicle lease which expires
January 2024. The Company also had a storage space lease in New York, New York.
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.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 8 – LEASES (CONTINUED)
For the twelve months ended December 31,
2022 and 2021, the Company’s operating lease cost was $118,180 and $126,308, respectively. Operating lease costs are included in
operating expenses within the Company’s statements of income:
As of December 31, 2022 |
| |
|
| |
2023 |
$ | 122,601 | |
2024 |
| 116,651 | |
2025 |
| 38,908 | |
Total |
| 278,160 | |
Less: discount |
| (13,420 | ) |
Total lease liabilities |
$ | 264,740 | |
The weighted average remaining lease term at December 31,
2022 for operating leases is 2.18 years and the weighted average discount rate used in calculating the operating lease asset and liability
is 4.47%. Cash paid for amounts included in the measurement of lease liabilities was $99,285 and $140,095 for the twelve months ended
December 31, 2022 and 2021, respectively. For the twelve months ended December 31, 2022 and 2021, payments on lease obligations
were $118,180 and $126,308, respectively, and amortization on the right of use assets was $104,358 and $108,560, respectively.
NOTE 9 – DEFERRED REVENUES
Under ASC
606, Revenue from Contracts with Customers, we record revenue when earned, rather than when billed. From time to time, we may invoice
the customer prior to being able to recognize the revenue. Amounts billed in advance of revenue recognition are presented as deferred
revenue on the 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 $270,000 and
$101,771 as of December 31, 2022 and December 31, 2021, respectively. The contracts are all short term in nature and all revenue is expected
to be recognized within 12 months, or less. The following is a summary of activity for the deferred revenue account during each of the
twelve months ended December 31, 2022 and 2021.
| |
2022 | | |
2021 | |
Balance January 1 | |
$ | 101,771 | | |
$ | 226,292 | |
Revenue recognized | |
| (542,027 | ) | |
| (673,127 | ) |
Amount collected | |
| 710,256 | | |
| 548,606 | |
Balance December 31 | |
$ | 270,000 | | |
$ | 101,771 | |
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 10 – STOCKHOLDERS’ EQUITY
Series A Convertible Preferred Stock
The Company had 10,000,000 shares of preferred
stock with 200,000 shares for Series A convertible preferred stock, authorized as of December 31, 2022 and 2021. The shares have a par
value of $0.001. The Company issued 166,667 shares of Series A preferred Stock during 2015, at $1.50 per share for a total of $250,000.
The stock accrues dividends at 6% per annum, paid quarterly for the first two years. Thereafter, the dividends will accrue and will be
payable in preference to any dividends paid on the common stock. During the years ended December 31, 2022 and 2021, the Company recorded
an accretion of undeclared dividends of $15,000, which is reflected as an increase in additional paid in capital on the preferred stock.
There were dividends of $53,750 paid in 2022.
There were no dividends paid in 2021.
Each share of Series A convertible preferred Stock
is convertible at the option of the holder into one share of common stock. Upon any liquidation, dissolution, or winding up of the Company,
after all creditors are paid in full and before any liquidation distribution is made to the holders of common stock, each holder of Series
A preferred will be entitled to receive a liquidation preference equal to $2.25 per share, plus accrued and unpaid dividends. As of December
31, 2022, there were $12,500 of undeclared dividends.
Common and Treasury Stock
The Company has authorized the issuance of 20,000,000
shares, $0.001 par value per share, of which 9,975,000 were issued in connection with a tax-free reorganization and exercise of stock
options. During 2019, 25,000 shares were repurchased for $50,000 and are maintained as treasury stock as of December 31, 2022.
NOTE 11 – STOCK BASED COMPENSATION
Stock Options
In September 2012, the Company adopted the Healthy
Offers, Inc. 2012 Stock Option Plan Agreement (the 2012 Plan). Under the 2012 Plan, the Company could make grants to employees, officers,
directors, consultants, and advisors of the Company. The 2012 Plan included provisions for the issuance of up to 2,000,000 shares of common
stock. Vesting terms and the option expiration were specified in each award as granted, with the term not to exceed 10 years.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
In 2015, the Company adopted the 2015 Option Plan
(the 2015 Plan). Under the 2015 Plan, awards of the Company’s equity may be granted to officers, employees, directors, and other key
persons (including consultants and prospective employees) of the Company to provide such individuals with an incentive for performance
to generate returns to Company stockholders. An award is an incentive stock option, or a nonqualified stock option granted pursuant to
the 2015 Plan. The Company initially reserved 3,000,000 shares of common stock for issuance under the 2015 Plan. The term of the stock
options granted under the Plan may not exceed 10 years.
The compensation expense related to options for
the years ended December 31, 2022 and 2021 was $257,957 and $246,848, respectively. The fair value of these instruments was calculated
using the Black-Scholes option pricing model.
During 2021, 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.
Summary information related to the stock option
plans are as follows:
| |
2022 | | |
2021 | |
| |
Options
Outstanding | | |
Weighted
average
exercise
price | | |
Options
Outstanding | | |
Weighted
average
exercise
price | |
Outstanding at beginning of year | |
| 1,292,652 | | |
$ | 2.15 | | |
| 1,314,872 | | |
$ | 2.10 | |
Granted | |
| 720,900 | | |
| 4.73 | | |
| 52,500 | | |
| 3.79 | |
Exercised | |
| (1,000 | ) | |
| 2.43 | | |
| — | | |
| — | |
Expired or forfeited | |
| (771,354 | ) | |
| 2.22 | | |
| (74,720 | ) | |
| 2.43 | |
Outstanding at end of year | |
| 1,241,198 | | |
$ | 3.61 | | |
| 1,292,652 | | |
$ | 2.15 | |
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
The table below reflects information for the total options outstanding
at December 31, 2022
| | |
Options Outstanding | | |
Options Exercisable | |
Range of Exercise Prices | | |
Number of
Options | | |
Weighted
average
remaining
contractual life
(years) | | |
Weighted
average
exercise price | | |
Options
Exercisable | | |
Weighted
Average
Remaining
Life (Years) | | |
Weighted
Average
Exercise Price | |
$ | 1.00 | | |
| 150,000 | | |
| 0.6 | | |
$ | 1.00 | | |
| 150,000 | | |
| 0.6 | | |
$ | 1.00 | |
| 1.50 | | |
| 12,500 | | |
| 2.8 | | |
| 1.50 | | |
| 12,500 | | |
| 2.8 | | |
| 1.50 | |
| 2.00 | | |
| 102,500 | | |
| 3.6 | | |
| 2.00 | | |
| 102,500 | | |
| 3.6 | | |
| 2.00 | |
| 2.43 | | |
| 192,798 | | |
| 7.1 | | |
| 2.43 | | |
| 87,620 | | |
| 7.0 | | |
| 2.43 | |
| 2.70 | | |
| 10,000 | | |
| 6.1 | | |
| 2.70 | | |
| 10,000 | | |
| 6.1 | | |
| 2.70 | |
| 3.79 | | |
| 167,500 | | |
| 9.1 | | |
| 3.79 | | |
| 17,500 | | |
| 8.7 | | |
| 3.79 | |
$ | 4.91 | | |
| 605,900 | | |
| 9.7 | | |
| 4.91 | | |
| — | | |
| — | | |
| 4.91 | |
| Total | | |
| 1,241,198 | | |
| 7.5 | | |
$ | 3.61 | | |
| 380,120 | | |
| 3.5 | | |
$ | 1.79 | |
The value of each common stock option granted is estimated on the date
of grant using the Black-Scholes method with the following weighted-average assumptions for the years ended December 31:
| |
2022 | | |
2021 | |
Expected Term (Years) | |
| 3 | | |
| 6 | |
Dividend Yield | |
| — | % | |
| — | % |
Risk-Free Interest Rate | |
| 1.99 | % | |
| 1.07 | % |
Volatility | |
| 65 | % | |
| 60 | % |
A summary of the status of the Company’s nonvested options as
of December 31, 2022, and changes during the year ended December 31, 2022, is presented below.
Nonvested Options | |
Options | | |
Weighted
average exercise
price | |
Nonvested at January 1, 2022 | |
| 361,969 | | |
$ | 2.74 | |
Granted | |
| 720,900 | | |
$ | 4.73 | |
Vested | |
| (187,438 | ) | |
$ | 2.56 | |
Forfeited | |
| (34,353 | ) | |
$ | 2.43 | |
Nonvested at December 31, 2022 | |
| 861,078 | | |
$ | 4.41 | |
There is $1,590,086 of expense remaining to be
recognized over a period of approximately 2.5 years related to options outstanding at December 31, 2022.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 12 – CONTINGENCIES AND COMMITMENTS
The Company has contracts with various media channel
and data partners. From time to time the Company enters into arrangements with a partner to acquire minimum amounts of media or data.
As of December 31, 2022, the Company had commitments under long term agreements totaling $13.5 million through 2028. Of this total, $3.6
million is due in 2023.
The Company is not currently involved in any material
legal proceedings.
NOTE 13 – INCOME TAXES
The provision (benefit) for Federal income tax
consists of the following for the years ended December 31, 2022 and 2021:
| |
2022 | | |
2021 | |
Federal income tax benefit (expense) attributable to: | |
| | |
| |
Current tax expense | |
$ | 1,606,285 | | |
$ | 284,204 | |
Deferred tax (benefit) expense | |
| (255,956 | ) | |
| 41,485 | |
Total tax expense | |
$ | 1,350,329 | | |
$ | 325,689 | |
Income tax expense differs from the amounts computed by applying the
U.S. federal income tax rate of 21 percent to pretax income as a result of the following:
| |
2022 | | |
2021 | |
| |
| | |
| |
Computed income tax expense at the statutory rate | |
$ | 1,220,664 | | |
$ | 229,786 | |
State and local income taxes, net of federal income tax | |
| 122,712 | | |
| 44,076 | |
Effect of other permanent differences | |
| 53,375 | | |
| 51,838 | |
Research and development credits | |
| (48,391 | ) | |
| — | |
Other adjustments | |
| 1,969 | | |
| (11 | ) |
Total income tax expense | |
$ | 1,350,329 | | |
$ | 325,689 | |
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 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, 2022 and 2021:
| |
2022 | | |
2021 | |
Deferred Tax Assets | |
| | |
| |
Research and development credit carryovers | |
$ | 355,052 | | |
$ | 267,906 | |
Net operating loss carryovers | |
| 154,446 | | |
| 190,820 | |
ERC credit | |
| — | | |
| 123,232 | |
Accruals | |
| 104,721 | | |
| 66,109 | |
Lease liability - operating | |
| 65,311 | | |
| 86,132 | |
Other | |
| 213 | | |
| 15 | |
Total deferred tax assets | |
| 679,743 | | |
| 734,214 | |
| |
| | | |
| | |
Deferred Tax Liabilities | |
| | | |
| | |
Intangible assets | |
| — | | |
| (300,773 | ) |
Right of use assets | |
| (57,960 | ) | |
| (83,450 | ) |
Prepaid expenses and other current assets | |
| (42,020 | ) | |
| (25,607 | ) |
Property and equipment | |
| (12,111 | ) | |
| (12,688 | ) |
Total deferred tax liabilities | |
| (112,091 | ) | |
| (422,518 | ) |
Net deferred tax asset | |
$ | 567,652 | | |
$ | 311,696 | |
In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Management assesses the available positive and negative evidence to estimate if sufficient
future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, management believes
it is more likely than not that the Company will realize the benefits of its deferred tax assets.
Management does not believe that there are significant
uncertain tax positions in 2021. There are no interest and penalties related to uncertain tax positions in 2021.
NOTE 14 – CONCENTRATIONS
For the year ended December 31, 2022, two of the
Company’s customers represented approximately 58% of total sales. For the year ended December 31, 2021, three of the Company’s customers
represented approximately 65% of total sales. Accounts receivable related to these customers was approximately 56% and 51% of total accounts
receivable as of the years ended December 31, 2022 and 2021, respectively.
For the year ended December 31, 2022, there were
four vendors that represented approximately 79% of cost of sales. For the year ended December 31, 2021, three vendors represented approximately
66% of cost of sales.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 AND 2021
NOTE 15 – GOVERNMENT GRANTS
During 2022, the Company qualified to receive
Employee Retention Credits (ERC) which are funded from the Internal Revenue Service (IRS). The Company recognized $726,000 of other income
related to performance requirements being met and costs being incurred in compliance with the program.
Small Business Administration Loan
During the year ended December 31, 2021, the Company
received full forgiveness for a loan from the U.S. Small Business Administration (“SBA”). According to the rules of the SBA,
the Company is required to retain documentation for six years after the date the loan is forgiven or repaid in full, and permit authorized
representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request. Should the
SBA conduct such a review and reject all or some of the Company’s judgements pertaining to satisfying conditions of the loan, the Company
may be required to adjust previously reported amounts and disclosures in the consolidated financial statements.
NOTE 16 – BENEFIT PLAN
The Company has a defined contribution 401(k)
plan (the Plan) providing for matching contributions of 4%. Employees 21 years of age are eligible to participate in the Plan. The Company
incurred expenses related to the matching contributions of $230,171 and $147,413 to the Plan for the years ended December 31, 2022 and
2021, respectively.
NOTE 17 – RELATED-PARTY
TRANSACTIONS
In July 2018, the Company entered into a data
licensing agreement with one of the minority owners of the Company which expired July 2023. The agreement required payments based on prescription
claims data that ranged from $750,000 to $950,000 per year. The related party also provided ad hoc data reporting to the Company which
was contracted on an individual program basis. During the years ended December 31, 2022 and 2021, the Company incurred expenses of approximately
$1,419,297 and $1,404,012. The Company had balances due to the related party totaling $699,526 and $579,750 at December 31, 2022 and 2021,
respectively, which were included in accrued expenses on the accompanying balance sheets.
NOTE 18 – SUBSEQUENT EVENTS
In October 2023, the OptimizeRx Corporation acquired
100% of the outstanding shares of Healthy Offers, Inc. (d/b/a Medicx Health), a Nevada corporation. On October 24, 2023, a newly formed
wholly-owned subsidiary of OptimizeRx Corporation consummated the merger with and into Medicx Health, with Medicx Health continuing as
the surviving company and a wholly-owned subsidiary of OptimizeRx Corporation (the “Merger”). The aggregate merger consideration
the Company paid to the securityholders of Medicx at the closing was $95,000,000, subject to certain customary post-acquisition purchase
price adjustments.
20
Exhibit 99.3
HEALTHY OFFERS, INC.
FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
HEALTHY OFFERS, INC.
BALANCE SHEETS (UNAUDITED)
| |
June 30, 2023 | | |
December 31, 2022 | |
ASSETS | |
| | |
| |
Current assets | |
| | |
| |
Cash and cash equivalents | |
$ | 2,940,782 | | |
$ | 4,701,355 | |
Short-term investments | |
| 2,583,272 | | |
| 1,595,000 | |
Accounts receivable, net | |
| 6,696,242 | | |
| 6,840,793 | |
Prepaid expenses and other | |
| 519,097 | | |
| 179,952 | |
Employee retention credit receivables | |
| 212,251 | | |
| 712,779 | |
Income tax receivable | |
| 256,890 | | |
| — | |
Total current assets | |
| 13,208,534 | | |
| 14,029,879 | |
Property and equipment, net | |
| 38,683 | | |
| 49,092 | |
Other assets | |
| | | |
| | |
Net deferred tax asset | |
| 567,652 | | |
| 567,652 | |
Investments | |
| 1,759,024 | | |
| 2,486,103 | |
Intangible assets, net | |
| 1,268,146 | | |
| 1,241,786 | |
Operating right-of-use assets, net | |
| 184,254 | | |
| 234,943 | |
Deposits | |
| 9,728 | | |
| 11,086 | |
Total other assets | |
| 3,788,804 | | |
| 4,541,570 | |
TOTAL ASSETS | |
$ | 17,036,021 | | |
$ | 18,620,541 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable – trade | |
$ | 1,242,672 | | |
$ | 2,460,803 | |
Accrued expenses | |
| 2,753,214 | | |
| 2,813,961 | |
Income tax payable | |
| — | | |
| 437,725 | |
Deferred revenue | |
| 160,331 | | |
| 270,000 | |
Current portion of lease liabilities | |
| 113,384 | | |
| 113,484 | |
Total current liabilities | |
| 4,269,601 | | |
| 6,095,973 | |
Non-current liabilities | |
| | | |
| | |
Lease liabilities, net of current portion | |
| 95,630 | | |
| 151,256 | |
Total liabilities | |
| 4,365,231 | | |
| 6,247,229 | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock, Series A convertible, $0.001 par value, 10,000,000 shares authorized, 166,667 issued and outstanding at June 30, 2023 and December 31, 2022 | |
| 250 | | |
| 250 | |
Common stock, $0.001 par value, 20,000,000 shares authorized, 9,951,000 shares issued and outstanding at June 30, 2023 and December 31, 2022 | |
| 9,951 | | |
| 9,951 | |
Treasury Stock, $0.001 par value, 25,000 shares held on June 30, 2023 and December 31, 2022 | |
| (25 | ) | |
| (25 | ) |
Additional paid-in-capital | |
| 3,099,627 | | |
| 2,895,929 | |
Retained earnings | |
| 9,560,987 | | |
| 9,467,207 | |
Total stockholders’ equity | |
| 12,670,790 | | |
| 12,373,312 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 17,036,021 | | |
$ | 18,620,541 | |
The accompanying notes are an integral part of
these financial statements.
HEALTHY OFFERS, INC.
STATEMENTS OF INCOME (UNAUDITED)
| |
For the three months ended June 30, | | |
For the six months ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net revenue | |
$ | 8,590,206 | | |
$ | 5,832,473 | | |
$ | 16,618,317 | | |
$ | 11,006,016 | |
Cost of revenues, exclusive of depreciation and amortization presented separately below | |
| 3,413,821 | | |
| 2,289,705 | | |
| 7,308,166 | | |
| 4,659,471 | |
Gross profit | |
| 5,176,385 | | |
| 3,542,768 | | |
| 9,310,151 | | |
| 6,346,545 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Selling, general, and administrative | |
| 3,425,420 | | |
| 2,441,950 | | |
| 6,357,180 | | |
| 4,403,073 | |
Depreciation, amortization, and noncash lease expense | |
| 95,600 | | |
| 67,390 | | |
| 196,739 | | |
| 134,634 | |
Total operating expenses | |
| 3,521,020 | | |
| 2,509,340 | | |
| 6,553,919 | | |
| 4,537,707 | |
Income from operations | |
| 1,655,365 | | |
| 1,033,428 | | |
| 2,756,232 | | |
| 1,808,838 | |
Other income (expense) | |
| | | |
| | | |
| | | |
| | |
Other income | |
| 44,587 | | |
| 899 | | |
| 141,552 | | |
| 1,797 | |
Interest expense | |
| — | | |
| (8,457 | ) | |
| — | | |
| (19,201 | ) |
Total other income (expense) | |
| 44,587 | | |
| (7,558 | ) | |
| 141,552 | | |
| (17,404 | ) |
Income before provision for income taxes | |
| 1,699,952 | | |
| 1,025,870 | | |
| 2,897,784 | | |
| 1,791,434 | |
Income tax provision | |
| 471,669 | | |
| 244,307 | | |
| 804,019 | | |
| 426,624 | |
Net income | |
$ | 1,228,283 | | |
$ | 781,563 | | |
$ | 2,093,765 | | |
$ | 1,364,810 | |
The accompanying notes are an integral part of
these financial statements.
HEALTHY OFFERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2023 (UNAUDITED)
| |
Series A Convertible Preferred Stock | | |
Common Stock | | |
Treasury Stock | | |
Additional
Paid in | | |
Retained | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Earnings | | |
Total | |
Balance December 31, 2022 | |
| 166,667 | | |
$ | 250 | | |
| 9,951,000 | | |
$ | 9,951 | | |
| (25,000 | ) | |
$ | (25 | ) | |
$ | 2,895,929 | | |
$ | 9,467,207 | | |
$ | 12,373,312 | |
Preferred stock dividend | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,999,985 | ) | |
| (1,999,985 | ) |
Stock based compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 76,344 | | |
| — | | |
| 76,344 | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 865,482 | | |
| 865,482 | |
Balance March 31, 2023 | |
| 166,667 | | |
| 250 | | |
| 9,951,000 | | |
| 9,951 | | |
| (25,000 | ) | |
| (25 | ) | |
| 2,972,273 | | |
| 8,332,704 | | |
| 11,315,153 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 127,354 | | |
| — | | |
| 127,354 | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 1,228,283 | | |
| 1,228,283 | |
Balance June 30, 2023 | |
| 166,667 | | |
$ | 250 | | |
| 9,951,000 | | |
$ | 9,951 | | |
| (25,000 | ) | |
$ | (25 | ) | |
$ | 3,099,627 | | |
$ | 9,560,987 | | |
$ | 12,670,790 | |
The accompanying notes are an integral part of
these financial statements.
HEALTHY OFFERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
2022 (UNAUDITED)
| |
Series A Convertible Preferred Stock | | |
Common Stock | | |
Treasury Stock | | |
Additional
Paid in | | |
Retained | | |
| |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Earnings | | |
Total | |
Balance December 31, 2021 | |
| 166,667 | | |
$ | 250 | | |
| 9,950,000 | | |
$ | 9,950 | | |
| (25,000 | ) | |
$ | (25 | ) | |
| 2,674,293 | | |
$ | 5,966,096 | | |
$ | 8,650,564 | |
Preferred stock dividend | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (53,750 | ) | |
| (946,250 | ) | |
| (1,000,000 | ) |
Stock based compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 73,195 | | |
| — | | |
| 73,195 | |
Equity incentive common shares exercised | |
| — | | |
| — | | |
| 1,000 | | |
| 1 | | |
| — | | |
| — | | |
| 2,429 | | |
| — | | |
| 2,430 | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 583,247 | | |
| 583,247 | |
Balance March 31, 2022 | |
| 166,667 | | |
| 250 | | |
| 9,951,000 | | |
| 9,951 | | |
| (25,000 | ) | |
| (25 | ) | |
| 2,696,167 | | |
| 5,603,093 | | |
| 8,309,436 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation expense | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 91,978 | | |
| — | | |
| 91,978 | |
Net income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 781,563 | | |
| 781,563 | |
Balance June 30, 2022 | |
| 166,667 | | |
$ | 250 | | |
| 9,951,000 | | |
$ | 9,951 | | |
| (25,000 | ) | |
$ | (25 | ) | |
$ | 2,788,145 | | |
$ | 6,384,656 | | |
$ | 9,182,977 | |
The accompanying notes are an integral part of
these financial statements.
HEALTHY OFFERS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
For the six months ended June 30, 2023 | | |
For the six months ended June 30, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| |
Net income | |
$ | 2,093,765 | | |
$ | 1,364,810 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 196,739 | | |
| 134,634 | |
Stock-based compensation | |
| 203,698 | | |
| 165,173 | |
Noncash lease expense | |
| (5,038 | ) | |
| 44,191 | |
Effects of changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 144,551 | | |
| (885,475 | ) |
Prepaid expenses and other assets | |
| (337,787 | ) | |
| (140,880 | ) |
Employee retention credit receivables | |
| 500,528 | | |
| — | |
Accounts payable | |
| (1,218,131 | ) | |
| 624,310 | |
Accrued expenses | |
| (60,746 | ) | |
| 666,041 | |
Income taxes payable/receivable | |
| (694,615 | ) | |
| (73,668 | ) |
Deferred revenue | |
| (109,669 | ) | |
| 104,433 | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | |
| 713,295 | | |
| 2,003,569 | |
| |
| | | |
| | |
CASH FLOWS USED IN INVESTING ACTIVITIES: | |
| | | |
| | |
Purchases of property and equipment | |
| (3,564 | ) | |
| (5,727 | ) |
Capitalized software development costs | |
| (209,127 | ) | |
| (136,204 | ) |
Proceeds from the redemption of held-to-maturity securities | |
| 2,274,586 | | |
| — | |
Purchases of held-to-maturity securities | |
| (2,535,778 | ) | |
| — | |
NET CASH USED IN INVESTING ACTIVITIES | |
| (473,883 | ) | |
| (141,931 | ) |
| |
| | | |
| | |
CASH FLOWS USED IN FINANCING ACTIVITIES: | |
| | | |
| | |
Net advances (payments) on factoring line of credit | |
| — | | |
| 102,609 | |
Payments on notes payable | |
| — | | |
| (150,000 | ) |
Proceeds from exercise of stock options | |
| — | | |
| 2,430 | |
Dividends paid | |
| (1,999,985 | ) | |
| (1,000,000 | ) |
NET CASH USED IN FINANCING ACTIVITIES | |
| (1,999,985 | ) | |
| (1,044,961 | ) |
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS | |
| (1,760,573 | ) | |
| 816,677 | |
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD | |
| 4,701,355 | | |
| 5,125,511 | |
CASH AND CASH EQUIVALENTS – END OF PERIOD | |
$ | 2,940,782 | | |
$ | 5,942,188 | |
SUPPLEMENTAL CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for interest | |
$ | — | | |
$ | 26,598 | |
Income taxes paid | |
$ | 987,747 | | |
$ | 499,867 | |
The accompanying notes are an integral part of
these financial statements.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Healthy Offers, Inc. (the Company) is a specialized
data-driven company designed to offer advertisers solutions for addressable media in the pharmaceutical and health industries for any
cross-channel media campaign. As data and technology are driving enormous change in the structure and economics of media across all channels,
the Company was created to assist advertisers in navigating the new landscape. The Company offers the strategic thinking of a boutique
agency with addressable audience scale, leverage, and reach. The Company is headquartered in Scottsdale, Arizona.
The consolidated financial statements for the
three and six months ended June 30, 2023 and 2022 have been prepared without audit pursuant to the rules and regulations of the United
States Securities and Exchange Commission ("SEC"). In the opinion of management, all adjustments necessary to present fairly
our financial position at June 30, 2023, and results of operations, changes in stockholders’ equity, and cash flows for the three
and six months ended June 30, 2023 and 2022, have been made. Those adjustments consist of normal and recurring adjustments. The balance
sheet as of December 31, 2022, has been derived from the audited 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 the Company's annual financial statements
prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should
be read in conjunction with a reading of the financial statements and notes thereto included in this Form 8-K
The results of operations for the three and six
months ended June 30, 2023 and 2022, are not necessarily indicative of the results to be expected for the full year.
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 United States
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 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.
Cash and Cash Equivalents
For purposes of the accompanying financial statements,
we consider all highly liquid instruments, consisting of money market accounts, with an initial maturity of three months or less to be
cash equivalents.
Cash is held in depository accounts at financial
institutions. The combined account balances at the financial institutions often exceed the Federal Deposit Insurance Corporation (FDIC)
insurance coverage of $250,000 and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC
insurance coverage. Management believes, based on the quality of the financial institutions, that the risk is not significant.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Investments
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.
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 Company's carrying amounts of financial instruments
including cash and cash equivalents, investments, accounts receivable, accounts payable, and other current liabilities approximate their
fair values due to their short maturities.
Accounts Receivable
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.
Management recognizes an allowance for uncollectible
accounts that reflects their best estimate of amounts that will not be collected based on management's assessment of the collectibility
of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer's credit worthiness
or actual defaults are higher than the historical experience, management's estimates of the recoverability of amounts due the Company
could be adversely affected. Management has determined an allowance for doubtful accounts is not required as of June 30, 2023 and December
31, 2022.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment are stated at historical
cost. Depreciation is provided using straight-line methods over the estimated useful lives of the assets ranging from 3 to 7 years. Amortization
of leasehold improvements is provided over the shorter of the lease term or the estimated useful lives of the improvements.
Software
Development
Expenditures
for software development costs during preliminary project and post-implementation phases are expensed as incurred. Capitalization of internally
developed software occurs during the application development stage. Once a project has reached application development, internal and external
costs, if direct and incremental, are capitalized until the software is substantially complete and ready to be placed in service. The
Company capitalized approximately $109,877 and $209,125 of software development costs during the three and six months ended June 30, 2023,
respectively.The Company capitalized approximately $61,551 and $136,204 of software development costs during the three and six months
ended June 30, 2022, respectively. Amortization of software development costs is provided using straight-line methods over the estimated
useful life, generally three to five years.
Costs incurred
related to implementation in a cloud computing arrangement are capitalized and recognized over the expected term of the hosting arrangement,
generally five years.
Impairment of long-lived assets
The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. IF such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell.
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.
Revenues are primarily generated from contracts
with advertisers and pharmaceutical companies for its performance based advertising services, which include the use of data analytics
technology and other advertising products and services. Customers typically receive the benefit of the Company's services as they are
performed and substantially all of the Company's revenue is recognized over time as the services are performed.
Under Topic 606, revenue from contracts with customers
is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected
on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and
is the unit of account under Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control over a product
or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such
products or services.
Costs incurred in fulfillment of customer contracts
principally consist of the cost of media placements. General and administrative costs are charged to expense as incurred. Deferred revenue
consists of billings or cash receipts from customers in advance of providing services.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
The Company records the accounts receivable and
deferred revenue when it has the contractual right to invoice the customer. Deferred revenue is recognized as revenue when obligations
on customers contracts are completed.
Contract Balances
The timing of revenue recognition, billings and
cash collections results in accounts receivable and deferred revenue (contract liabilities) on the balance sheets. Amounts are billed
as work progresses in accordance with agreed-upon contractual terms, generally on a monthly basis. However, advance deposits are sometimes
received before revenue is recognized, resulting in contract liabilities. These deposits are recorded as deferred revenue on the balance
sheets and are recognized as revenue when the services are provided.
The following is a summary of the Company's accounts
receivable and contract liabilities:
| |
June 30,
2023 | | |
December 31,
2022 | |
| |
| | |
| |
Accounts receivable, net | |
$ | 6,696,242 | | |
$ | 6,840,793 | |
Deferred revenue | |
$ | 160,331 | | |
$ | 270,000 | |
Amounts recorded in deferred revenue are generally
recognized within 12 months.
Advertising Expenses
Advertising and marketing expenses primarily consist
of marketing event participation and business promotions. In fulfillment of customer contracts, the Company incurs advertising and marketing
expenses. Advertising and marketing costs incurred on behalf of a customer are recorded as cost of sales on a gross basis as the Company
is ultimately responsible for paying the expense to the vendor. Advertising and marketing costs presented in the financial statements
of $99,915 and $148,690 for the three and six months ended June 30, 2023, respectively, are expenses incurred for the benefit of the Company.
Advertising and marketing costs were $26,627 and $26,897 for the three and six months ended June 30, 2022, respectively.
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.
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 options,
fair value is estimated using the Black-Scholes option pricing model.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
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.
Recently Issued Accounting Guidance
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 adoption of this standard did not have a material effect on our financial
position, results of operations, or cash flows.
NOTE 3 – INVESTMENTS
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 $4.3 million and $4.1 million, respectively,
of held-to-maturity government bonds, U.S. Treasury notes, and certificates of deposit at amortized cost basis. Our held-to-maturity investments
have maturity dates between July 2023 and December 2025.
June 30, 2023 | |
Amortized
Cost | | |
Gross
Unrealized Gains | | |
Gross
Unrealized Losses | | |
Fair Value | |
Bonds | |
$ | 3,896,317 | | |
$ | — | | |
$ | 30,903 | | |
$ | 3,865,414 | |
Treasury notes | |
| 301,979 | | |
| 634 | | |
| 1,415 | | |
| 301,198 | |
Certificates of deposit | |
| 144,000 | | |
| — | | |
| 3,009 | | |
| 140,991 | |
Total | |
$ | 4,342,296 | | |
$ | 634 | | |
$ | 35,327 | | |
$ | 4,307,603 | |
December 31, 2022 | |
Amortized
Cost | | |
Gross
Unrealized Gains | | |
Gross
Unrealized Losses | | |
Fair Value | |
Bonds | |
$ | 3,386,767 | | |
$ | — | | |
$ | 35,149 | | |
$ | 3,351,618 | |
Treasury notes | |
| 550,336 | | |
| — | | |
| 2,264 | | |
| 548,072 | |
Certificates of deposit | |
| 144,000 | | |
| — | | |
| 543 | | |
| 143,457 | |
Total | |
$ | 4,081,103 | | |
$ | — | | |
$ | 37,956 | | |
$ | 4,043,147 | |
NOTE 4 – LEASES
During the
six months ended June 30, 2023 and 2022, we had operating leases for office space in one multi tenant facilities in Scottsdale, Arizona.
We also had a vehicle lease which expires January 2024. The Company also had a storage space lease in New York, New York.
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.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
NOTE 4 – LEASES (CONTINUED)
Operating lease cost was $27,920 and $55,840 for
the three and six month periods ended June 30, 2023, respectively, and is included in operating expenses within the Company’s statements
of income. Operating lease cost was $30,520 and $62,340 for the three and six month periods ending June 30, 2022.
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 | |
$ | 61,723 | |
2024 | |
| 116,651 | |
2025 | |
| 38,908 | |
Total | |
| 217,282 | |
Less: discount | |
| (8,268 | ) |
Total lease liabilities | |
$ | 209,014 | |
The weighted average remaining lease term at June 30,
2023 for operating leases is 1.74 years and the weighted average discount rate used in calculating the operating lease asset and liability
is 4.48%. Cash paid for amounts included in the measurement of lease liabilities was $60,878 and $38,831 for the six months ended June 30,
2023 and 2022, respectively, and amortization on the right of use assets was $50,690 and $54,980, 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.
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 $160,331 and $270,000 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 each of the six months ended June 30, 2023 and 2022.
| |
2023 | | |
2022 | |
Balance January 1 | |
$ | 270,000 | | |
$ | 101,771 | |
Revenue recognized | |
| (439,357 | ) | |
| (202,684 | ) |
Amount collected | |
| 329,688 | | |
| 307,117 | |
Balance June 30 | |
$ | 160,331 | | |
$ | 206,204 | |
NOTE 6 – STOCKHOLDERS’ EQUITY
Series A Convertible Preferred Stock
The Company authorized and issued 166,667 shares
of Series A Convertible Preferred Stock during 2015, at $1.50 per share for a total of $250,000. The shares have a par value of $0.001
per share. The stock accrues dividends at 6% per annum, paid quarterly for the first two years. Thereafter, the dividends will accrue
and will be payable in preference to any dividends paid on the common stock.
HEALTHY OFFERS, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2023 AND 2022
NOTE 6 – STOCKHOLDERS’ EQUITY (CONTINUED)
Each share of Series A Convertible Preferred Stock
is convertible at the option of the holder into one share of common stock. Upon any liquidation, dissolution, or winding up of the Company,
after all creditors are paid in full and before any liquidation distribution is made to the holders of common stock, each holder of Series
A Convertible preferred will be entitled to receive a liquidation preference equal to $2.25 per share, plus accrued and unpaid dividends.
The Company paid dividends of $1,999,985 and $1,000,000
during the six months ended June 2023 and 2022, respectively.
Common Stock
The Company has authorized the issuance of 20,000,000
shares, $0.001 par value per share, of which 9,975,000 were issued in connection with a tax-free reorganization and exercise of stock
options. During 2019, 25,000 shares were repurchased for $50,000 and are maintained as treasury stock as of June 30, 2023 and December
31, 2022, respectively.
NOTE 7 – STOCK BASED COMPENSATION
Stock Options
Compensation expense related to options for the
three and six months ended June 30, 2023 was $127,354 and $203,698, respectively. The Compensation expense related to options for
the three and six months ended June 30, 2022 was $91,978 and $165,173, respectively. The fair value of these instruments was calculated
using the Black-Scholes option pricing model. There is $1,462,236 of remaining expense related to unvested options to be recognized in
the future over a weighted average period of 1.6 years. During the six months ended June 30, 2022, 1,000 stock options were exercised
in exchange for 1,000 shares of the common stock.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company has contracts with various media channel
and data partners. From time to time the Company enters into arrangements with a partner to acquire minimum amounts of media or data.
As of June 30, 2023 the Company had commitments totaling $11.7 million through 2028.
Litigation
The Company is not currently involved in any material
legal proceedings.
NOTE 9 – INCOME TAXES
The Company reported tax expense of $471,669 and
$244,307 at effective tax rates of 27.75% and 23.81% for the three months ended June 30, 2023 and 2022, respectively. The effective tax
rate for the three months ended June 30, 2023 and 2022, respectively reflect the impact of certain permanent differences that are not
deductible for tax purposes.
The Company reported tax expense of $804,019 and
$426,624 at effective tax rates of 27.75% and 23.81% for the six months ended June 30, 2023 and 2022, respectively. The effective tax
rate for the six months ended June 30, 2023 and 2022, respectively reflect the impact of certain permanent differences that are not deductible
for tax purposes.
NOTE 10 – RELATED-PARTY
TRANSACTIONS
In July 2018, the Company entered into a new data
licensing agreement with the related party which expires July 2023. The agreement requires payments based on prescription claims data
that range from $750,000 to $950,000 per year. The related party also provided ad hoc data reporting to the Company which was contracted
on an individual program basis. During the three and six month periods ended June 30, 2023, the Company incurred expenses of approximately
$388,500 and $851,000, respectively. During the three and six month periods ended June 30, 2022, the Company incurred expenses of approximately
$418,500 and $695,000, respectively. The Company had balances due to the related party totaling $786,082 and $699,526 at June 30, 2023
and December 31, 2022, respectively, which were included in accrued expenses on the accompanying balance sheets.
NOTE 11 – SUBSEQUENT EVENTS
In October 2023, the OptimizeRx Corporation acquired
100% of the outstanding shares of Healthy Offers, Inc. (d/b/a Medicx Health), a Nevada corporation. On October 24, 2023, a newly formed
wholly-owned subsidiary of OptimizeRx Corporation consummated the merger with and into Medicx Health, with Medicx Health continuing as
the surviving company and a wholly-owned subsidiary of OptimizeRx Corporation (the "Merger"). The aggregate merger consideration
the Company paid to the securityholders of Medicx at the closing was $95,000,000, subject to certain customary post-acquisition purchase
price adjustments.
12
Exhibit
99.4
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Unless
the context otherwise requires, the “Company” refers to OptimizeRx Corporation, a Nevada Corporation and “Medicx”
refers to Healthy Offers, Inc., a Nevada corporation d/b/a Medicx Health.
Description
of the Business Combination
On
October 24, 2023, as a result of the previously announced Agreement and Plan of Merger (the “Merger Agreement”) dated October
11, 2023, the Company’s newly created subsidiary (“Merger Sub”) was merged into Medicx, with Medicx remaining as the surviving
entity and a wholly-owned subsidiary of the Company (the “Merger”).
In
connection with the Merger, each share of Medicx stock, both preferred and common, issued and outstanding prior to the Merger was
automatically cancelled and extinguished and converted into the right to receive a portion of the merger consideration. In addition
each vested Medicx option was cancelled and automatically converted into the right to receive a cash payment equal to (i) the excess
of the per-share merger consideration over the applicable exercise price of such option, multiplied by (ii) the number of shares of
Medicx common stock subject to such option.
OptimizeRx
is considered to be the accounting acquirer, as further discussed in “Note 1 — Basis of Presentation” of this unaudited
pro forma condensed combined financial information.
The
unaudited pro forma condensed combined financial statements are presented for informational purposes only, in accordance with Article
11 of Regulation S-X and are not intended to represent or to be indicative of the income or financial position that the Company would
have reported had the Merger been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements
due to various factors. The unaudited pro forma condensed combined statement of financial position does not purport to represent the
future financial position of the Company and the unaudited pro forma condensed combined statements of operations do not purport to represent
the future results of operations of the Company.
The
unaudited pro forma condensed combined balance sheet as of June 30, 2023 combines the historical unaudited condensed balance sheet of
the Company as of June 30, 2023 and the historical unaudited balance sheet of Medicx as of June 30, 2023 on a pro forma basis as if the
Merger had been consummated on June 30, 2023. The unaudited pro forma condensed combined statement of operations for the six months ended
June 30, 2023 and the unaudited pro forma condensed statement of operations for the year ended December 31, 2022 combines the historical
condensed statement of operations of the Company for the six months ended June 30, 2023 and the year ended December 31, 2022 and the
historical statement of operations of Medicx for the same periods on a pro forma basis as if the Merger had been consummated on January
1, 2022.
The
unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies,
tax savings, or cost savings that may be associated with the Merger.
The
unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the Merger, and should
be read in conjunction with the following:
| ● | The
audited financial statements of the Company included in its annual report, on Form 10-K,
for the year ended December 31, 2022, filed with the Commission on March 10, 2023. |
| ● | The
unaudited financial statements for the six months ended June 30, 2023, included in the Company’s
quarterly report, on Form 10-Q, for the quarter ending June 30, 2023, filed with the Commission
on August 14, 2023. |
| ● | The
audited financial statements of Medicx as of and for the year ended December 31, 2022 and
the unaudited financial statements as of and for the six months ended June 30, 2023, included
in this Form 8-K/A. |
| ● | The
sections entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included in the Company’s annual report, on Form 10-K, for
the year ended December 31, 2022, and quarterly report, on Form 10-Q, for the quarter ended
June 30, 2023, filed with the Commission on March 10, 2023 and August
14, 2023, respectively. |
Management
Investor Shares
As
previously disclosed, certain members of Medicx’s management team (“Management Investors”) agreed to use a portion
of the consideration received to purchase, in the aggregate, approximately $10.5 million of the Company’s common stock. On October
24, 2023, at the closing of the Merger, each Management Investor executed a common stock purchase agreement (the “Subscription
Agreement”). Pursuant to the Subscription Agreement, the Company issued 1,444,581 shares of its common stock in the aggregate to
the Management Investors.
The
fair value of these shares, $12.1 million, based on the quoted market price as of the date of the Merger, has been included in the calculation
of the fair value of the consideration transferred in connection with the Merger.
Term
Loan
A
portion of the cash purchase price was funded through debt financing. The financing agreement provides for a term loan in the aggregate
principal amount of $40,000,000. The term loan is repayable in quarterly installments on the last business day of each fiscal quarter
commencing on December 31, 2023 in an amount equal to 1.25% of the principal amount. The outstanding unpaid principal amount of the term
loan, and all accrued and unpaid interest thereon, shall be due and payable on the earliest of (i) the fourth (4th) anniversary of the
closing of the financing agreement and funding of the term loan and (ii) the date on which the term loan is declared due and payable
pursuant to the terms of the financing agreement. The term loan bears a variable interest rate which is currently priced at 14.12%.
The
Company incurred debt issuance costs of $2.1 million in connection with the term loan. These costs are being amortized as interest expense
on a straight line basis over the life of the term loan.
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 2023
| |
OptimizeRx (Historical) | | |
Medicx (Historical) | | |
Transaction Accounting Adjustments | | |
Notes | | |
Pro Forma Combined | |
|
ASSETS | |
| | |
| | |
| | |
| | |
| |
Current assets | |
| | |
| | |
| | |
| | |
| |
Cash and cash equivalents | |
$ | 9,808,330 | | |
$ | 2,940,782 | | |
$ | 37,895,000 | | |
| A. | | |
$ | 16,552,547 | |
| |
| — | | |
| — | | |
| (31,150,783 | ) | |
| B. | | |
| — | |
| |
| — | | |
| — | | |
| (2,940,782 | ) | |
| D. | | |
| — | |
Short-term investments | |
| 52,931,831 | | |
| — | | |
| (52,931,831 | ) | |
| B. | | |
| — | |
Investments | |
| — | | |
| 2,583,272 | | |
| (2,583,272 | ) | |
| D. | | |
| — | |
Accounts receivable, net | |
| 18,281,133 | | |
| 6,696,242 | | |
| — | | |
| | | |
| 24,977,375 | |
Prepaid expenses and other | |
| 4,052,729 | | |
| 519,097 | | |
| — | | |
| | | |
| 4,571,826 | |
Employee retention credit receivables | |
| — | | |
| 212,251 | | |
| — | | |
| | | |
| 212,251 | |
Income tax receivable | |
| — | | |
| 256,890 | | |
| — | | |
| | | |
| 256,890 | |
Total current assets | |
| 85,074,023 | | |
| 13,208,534 | | |
| (51,711,668 | ) | |
| | | |
| 46,570,889 | |
Property and equipment, net | |
| 140,968 | | |
| 38,683 | | |
| — | | |
| | | |
| 179,651 | |
Other assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Goodwill | |
| 22,673,820 | | |
| — | | |
| 53,871,208 | | |
| C. | | |
| 76,545,028 | |
Customer relationships | |
| — | | |
| — | | |
| 34,800,000 | | |
| C. | | |
| 34,800,000 | |
Technology assets, net | |
| 8,366,375 | | |
| 1,268,146 | | |
| 200,000 | | |
| D. | | |
| 8,566,375 | |
| |
| — | | |
| — | | |
| (1,268,146 | ) | |
| C. | | |
| | |
Patent rights, net | |
| 1,831,839 | | |
| — | | |
| 9,300,000 | | |
| C. | | |
| 11,131,839 | |
Operating right-of-use assets, net | |
| 14,544 | | |
| 184,254 | | |
| — | | |
| | | |
| 198,798 | |
Other intangible assets, net | |
| 3,223,305 | | |
| — | | |
| 6,100,000 | | |
| C. | | |
| 9,323,305 | |
Net deferred tax asset | |
| — | | |
| 567,652 | | |
| (567,652 | ) | |
| D. | | |
| — | |
Investments | |
| — | | |
| 1,759,024 | | |
| (1,759,024 | ) | |
| D. | | |
| — | |
Deposits | |
| — | | |
| 9,728 | | |
| — | | |
| | | |
| 9,728 | |
Total other assets | |
| 36,109,883 | | |
| 3,788,804 | | |
| 100,676,386 | | |
| | | |
| 140,575,073 | |
Total Assets | |
$ | 121,324,874 | | |
$ | 17,036,021 | | |
$ | 48,964,718 | | |
| | | |
$ | 187,325,613 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
Current portion of long-term debt | |
$ | — | | |
$ | — | | |
$ | 2,000,000 | | |
| A. | | |
$ | 2,000,000 | |
Accounts payable – trade | |
| 817,779 | | |
| 1,242,672 | | |
| — | | |
| | | |
| 2,060,451 | |
Accrued expenses | |
| 1,503,477 | | |
| 2,753,214 | | |
| — | | |
| | | |
| 4,256,691 | |
Revenue share payable | |
| 2,722,127 | | |
| — | | |
| — | | |
| | | |
| 2,722,127 | |
Current portion of lease liabilities | |
| 14,545 | | |
| 113,384 | | |
| — | | |
| | | |
| 127,929 | |
Deferred revenue | |
| 451,787 | | |
| 160,331 | | |
| — | | |
| | | |
| 612,118 | |
Total current liabilities | |
| 5,509,715 | | |
| 4,269,601 | | |
| 2,000,000 | | |
| | | |
| 11,779,316 | |
Non-current liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
Long-term debt, less current portion | |
| — | | |
| — | | |
| 35,895,000 | | |
| A. | | |
| 35,895,000 | |
Deferred tax liability | |
| — | | |
| — | | |
| 11,649,382 | | |
| C. | | |
| 11,649,382 | |
Lease liabilities, net of current portion | |
| — | | |
| 95,630 | | |
| — | | |
| | | |
| 95,630 | |
Total liabilities | |
| 5,509,715 | | |
| 4,365,231 | | |
| 49,544,382 | | |
| | | |
| 59,419,328 | |
Commitments and contingencies | |
| | | |
| | | |
| | | |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | | |
| | | |
| | | |
| | |
Preferred Stock, Series A Convertible | |
| — | | |
| 250 | | |
| (250 | ) | |
| C. | | |
| — | |
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding OptimizeRx (Historical) and Pro Forma Combined | |
| — | | |
| — | | |
| — | | |
| | | |
| — | |
Common stock, $0.001 par value, 166,666,667 shares authorized, 18,376,771 and 19,821,352 shares issued OptimizeRx (Historical) and Pro Forma Combined, respectively | |
| 18,377 | | |
| 9,951 | | |
| (9,951 | ) | |
| C | | |
| 19,822 | |
| |
| — | | |
| — | | |
| 1,445 | | |
| B | | |
| — | |
Treasury stock, $0.001 par value, 1,741,397 and 1,214,398 shares held OptimizeRx (Historical) and Pro Forma Combined, respectively | |
| (1,741 | ) | |
| (25 | ) | |
| 25 | | |
| C. | | |
| (1,741 | ) |
Additional paid-in-capital | |
| 173,049,784 | | |
| 3,099,627 | | |
| 12,089,681 | | |
| B. | | |
| 185,139,465 | |
| |
| — | | |
| — | | |
| (3,099,627 | ) | |
| C. | | |
| — | |
Accumulated deficit | |
| (57,251,261 | ) | |
| 9,560,987 | | |
| (9,560,987 | ) | |
| C. | | |
| (57,251,261 | ) |
Total stockholders’ equity | |
| 115,815,159 | | |
| 12,670,790 | | |
| (579,664 | ) | |
| | | |
| 127,906,285 | |
Total Liabilities and Stockholder’s Equity | |
$ | 121,324,874 | | |
$ | 17,036,021 | | |
$ | 48,964,718 | | |
| | | |
$ | 187,325,613 | |
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2023
| |
OptimizeRx (Historical) | | |
Medicx (Historical) | | |
Transaction Accounting Adjustments | | |
Notes | | |
Pro Forma Combined | |
|
Net revenue | |
$ | 26,821,076 | | |
$ | 16,618,317 | | |
$ | — | | |
| | | |
$ | 43,439,393 | |
Cost of revenues, exclusive of depreciation and amortization presented separately below | |
| 11,562,766 | | |
| 7,308,166 | | |
| — | | |
| | | |
| 18,870,932 | |
Gross profit | |
| 15,258,310 | | |
| 9,310,151 | | |
| — | | |
| | | |
| 24,568,461 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
General and administrative expenses | |
| 26,274,669 | | |
| 6,357,180 | | |
| — | | |
| | | |
| 32,631,849 | |
Depreciation, amortization and noncash lease expense | |
| 928,695 | | |
| 196,739 | | |
| 1,950,000 | | |
| AB. | | |
| 2,892,668 | |
| |
| — | | |
| — | | |
| (182,766 | ) | |
| AC. | | |
| — | |
Total operating expenses | |
| 27,203,364 | | |
| 6,553,919 | | |
| 1,767,234 | | |
| | | |
| 35,524,517 | |
Income (loss) from operations | |
| (11,945,054 | ) | |
| 2,756,232 | | |
| (1,767,234 | ) | |
| | | |
| (10,956,056 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| — | | |
| — | | |
| (3,175,527 | ) | |
| AA. | | |
| (3,175,527 | ) |
Interest income | |
| 1,385,891 | | |
| 141,552 | | |
| (141,552 | ) | |
| AD. | | |
| 1,385,891 | |
Income (loss) before provision for income taxes | |
| (10,559,163 | ) | |
| 2,897,784 | | |
| (5,084,313 | ) | |
| | | |
| (12,745,692 | ) |
Income tax provision | |
| — | | |
| 804,019 | | |
| (804,019 | ) | |
| AE. | | |
| — | |
Net income (loss) | |
$ | (10,559,163 | ) | |
$ | 2,093,765 | | |
$ | (4,280,294 | ) | |
| | | |
$ | (12,745,692 | ) |
Weighted average number of shares outstanding – basic | |
| 17,043,793 | | |
| — | | |
| 1,444,581 | | |
| | | |
| 18,488,374 | |
Weighted average number of shares outstanding – diluted | |
| 17,043,793 | | |
| — | | |
| 1,444,581 | | |
| | | |
| 18,488,374 | |
Loss per share – basic | |
$ | (0.62 | ) | |
| — | | |
| — | | |
| | | |
$ | (0.69 | ) |
Loss per share – diluted | |
$ | (0.62 | ) | |
| — | | |
| — | | |
| | | |
$ | (0.69 | ) |
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022
| |
OptimizeRx (Historical) | | |
Medicx (Historical) | | |
Transaction Accounting Adjustments | | |
Notes | |
Pro Forma Combined | |
|
Net revenue | |
$ | 62,450,156 | | |
$ | 28,071,080 | | |
| — | | |
| |
$ | 90,521,236 | |
Cost of revenues, exclusive of depreciation and amortization presented separately below | |
| 23,483,336 | | |
| 12,172,546 | | |
| — | | |
| |
| 35,655,882 | |
Gross profit | |
| 38,966,820 | | |
| 15,898,534 | | |
| — | | |
| |
| 54,865,354 | |
| |
| | | |
| | | |
| | | |
| |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| |
| | |
General and administrative expenses | |
| 49,235,529 | | |
| 10,520,437 | | |
| — | | |
| |
| 59,755,966 | |
Depreciation, amortization and noncash lease expense | |
| 2,022,029 | | |
| 298,735 | | |
| 3,900,000 | | |
AB. | |
| 5,947,031 | |
| |
| | | |
| | | |
| (273,733 | ) | |
AC. | |
| | |
Total operating expenses | |
| 51,257,558 | | |
| 10,819,172 | | |
| 3,626,267 | | |
| |
| 65,702,997 | |
Income (loss) from operations | |
| (12,290,738 | ) | |
| 5,079,362 | | |
| (3,626,267 | ) | |
| |
| (10,837,643 | ) |
Other income (expense) | |
| | | |
| | | |
| | | |
| |
| | |
Interest expense | |
| — | | |
| (26,461 | ) | |
| (6,351,054 | ) | |
AA. | |
| (6,377,515 | ) |
Interest income | |
| 852,298 | | |
| 33,789 | | |
| (33,789 | ) | |
AD. | |
| 852,298 | |
Other income | |
| — | | |
| 726,000 | | |
| | | |
| |
| 726,000 | |
Total other income (expense) | |
| 852,298 | | |
| 733,328 | | |
| (6,384,843 | ) | |
| |
| (4,799,217 | ) |
Loss before provision for income taxes | |
| (11,438,440 | ) | |
| 5,812,690 | | |
| (10,011,110 | ) | |
| |
| (15,636,860 | ) |
Income tax provision | |
| — | | |
| 1,350,329 | | |
| (1,350,329 | ) | |
AE. | |
| — | |
Net income (loss) | |
$ | (11,438,440 | ) | |
$ | 4,462,361 | | |
$ | (8,660,781 | ) | |
| |
$ | (15,636,860 | ) |
Weighted average number of shares outstanding – basic | |
| 17,783,992 | | |
| — | | |
| 1,444,581 | | |
| |
| 19,228,573 | |
Weighted average number of shares outstanding – diluted | |
| 17,783,992 | | |
| — | | |
| 1,444,581 | | |
| |
| 19,228,573 | |
Loss per share – basic | |
$ | (0.64 | ) | |
| — | | |
| — | | |
| |
$ | (0.81 | ) |
Loss per share – diluted | |
$ | (0.64 | ) | |
| — | | |
| — | | |
| |
$ | (0.81 | ) |
NOTES
TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note
1. Basis of Presentation
In
accordance with ASC 805 - Business Combination, the Company will be considered as the acquirer for financial reporting purposes. Accordingly,
for accounting purposes, the Company will record the assets and, identifiable intangibles acquired and liabilities assumed in the Merger
at their fair values at the date of acquisition. Any remaining purchase price not allocated to these items will be recorded as goodwill.
The
unaudited pro forma condensed combined balance sheet as of June 30, 2023, gives pro forma effect to the Merger as if it had occurred on
June 30, 2023. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2023, and for the
year ended December 31, 2022, gives pro forma effect to the Merger as if it had been completed on January 1, 2022. These periods are presented
on the basis of the Company as the accounting acquirer.
The
pro forma adjustments reflecting the consummation of the Merger and related transactions are based on certain currently available information
and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro
forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated.
Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the differences may
be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant
effects of the Merger and related transactions based on information available to management at the time and that the pro forma adjustments
give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The
unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies,
tax savings, or cost savings that may be associated with the Merger. The unaudited pro forma condensed combined financial information
is not necessarily indicative of what the actual results of operations and financial position would have been had the Merger and related
transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial
position of the Company. They should be read in conjunction with the historical financial statements and notes thereto of the Company
and Medicx.
Note
2. Accounting Policies
In
connection with the consummation of the Merger, management is performing a comprehensive review of the two entities’ accounting
policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when
conformed, could have a material impact on the financial statements of the Company. Based on its initial analysis, management did not
identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a
result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.
Note
3. Preliminary Purchase Price Allocation and Intangible Assets
The
following table summarizes the components of the purchase consideration.
Base purchase price | |
$ | 95,000,000 | |
Cash adjustment | |
| 950,000 | |
Working capital adjustment | |
| (1,433,193 | ) |
Management investment in common stock | |
| (10,434,193 | ) |
Net cash transferred | |
| 84,082,614 | |
Fair value of common stock transferred | |
| 12,091,126 | |
Fair value of consideration transferred | |
$ | 96,173,740 | |
A
preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed by the
Company in connection with the Merger is as follows:
| |
Medicx (Historical) | | |
Estimated useful life | |
Assets Acquired | |
| | |
| |
Accounts receivable, net | |
$ | 6,696,242 | | |
| |
Prepaid expenses and other | |
| 988,238 | | |
| |
Property and equipment, net | |
| 38,683 | | |
| |
Right of use assets | |
| 184,254 | | |
| |
Customer relationship intangible | |
| 34,800,000 | | |
15 years | |
Patent intangible | |
| 9,300,000 | | |
10 years | |
Trademark intangible | |
| 6,100,000 | | |
10 years | |
Technology intangible | |
| 200,000 | | |
| |
Deposits | |
| 9,728 | | |
| |
| |
| 58,317,145 | | |
| |
Liabilities Assumed | |
| | | |
| |
Accounts payable | |
| 1,242,672 | | |
| |
Accrued Expenses | |
| 2,753,214 | | |
| |
Lease liabilities | |
| 209,014 | | |
| |
Deferred revenue | |
| 160,331 | | |
| |
Deferred tax liabilities | |
| 11,649,382 | | |
| |
| |
| 16,014,613 | | |
| |
Goodwill | |
| 53,871,208 | | |
| |
Fair value of consideration transferred | |
$ | 96,173,740 | | |
| |
The
pro-forma purchase price allocation presented above is preliminary and, as a result, the amounts presented could change materially when
the purchase price allocation is finalized.
Note
4. Adjustments to Unaudited Pro Forma Condensed Combined Financial Statements
The
adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2023, are as follows:
A. |
Reflects
the issuance of the $40 million term loan, net of debt issuance costs of $2.1 million. |
|
|
B. |
Represents the net cash payment of $84.1 million and issuance of 1,444,581
shares of the Company’s common stock in connection with the Merger and the agreement with the Management Investors to use
a portion of the Merger consideration received to purchase, in the aggregate, approximately $10.4 million of the Company’s common
stock. |
|
|
C. |
Reflects
preliminary purchase price allocation and elimination of Medicx’s historical shareholders’ equity. |
|
|
D. |
Reflects
elimination of assets not included in the Merger and elimination of historical balance of Medicx intangibles, which were recorded
at fair value in C. above. |
The
pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for year ended December 31, 2022
and for the six month period ended June 30, 2023 are as follows:
AA.
Represents interest payable on the term loan.
AB.
Represents the amortization of the identifiable intangibles acquired in the Merger.
AC.
Represents elimination of the amortization of Medicx’s historical intangibles.
AD.
Represents elimination of interest income as Medicx’s historical cash and investments balances did not transfer in the Merger.
AE.
Represents the reversal of Medicx’s historical tax provision due to the combined net loss position.
The
Company’s net deferred tax assets as of June 30, 2023, are subject to a full valuation allowance, therefore the Condensed Combined
Statements of Operation do not reflect any income tax benefit that may arise from the adjustments in AA above.
Note
5. Loss per Share
Loss
per share was calculated using the Company’s historical weighted average basic and diluted shares outstanding for the periods ended December
31, 2022, and June 30, 2023, adjusted for the impact of 1,444,581 shares issued to the Management Investors in connection with the Merger,
assuming the shares were outstanding since January 1, 2022.
As
the Merger related transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation
of weighted average shares outstanding for basic and diluted loss per share assumes that the shares issuable to the Management Investors
have been outstanding for the entirety of all periods presented.
8
v3.23.4
Cover
|
Oct. 20, 2023 |
Cover [Abstract] |
|
Document Type |
8-K/A
|
Amendment Flag |
true
|
Amendment Description |
On October 25, 2023,
OptimizeRx filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Original Form 8-K”) to report
the consummation of the Merger. Among other things, this Amendment No. 1 to the Original Form 8-K amends and supplements Item 9.01 of
the Original Form 8-K to provide the financial statements and pro forma financial information required under Items 9.01(a) and (b) of
Form 8-K, which were excluded from the Original Form 8-K in reliance on the instructions to such items.
|
Document Period End Date |
Oct. 20, 2023
|
Entity File Number |
001-38543
|
Entity Registrant Name |
OptimizeRx Corporation
|
Entity Central Index Key |
0001448431
|
Entity Tax Identification Number |
26-1265381
|
Entity Incorporation, State or Country Code |
NV
|
Entity Address, Address Line One |
260 Charles Street
|
Entity Address, Address Line Two |
Suite 302
|
Entity Address, City or Town |
Waltham
|
Entity Address, State or Province |
MA
|
Entity Address, Postal Zip Code |
02453
|
City Area Code |
248
|
Local Phone Number |
651.6568
|
Written Communications |
false
|
Soliciting Material |
false
|
Pre-commencement Tender Offer |
false
|
Pre-commencement Issuer Tender Offer |
false
|
Title of 12(b) Security |
Common Stock, $0.001 Par Value
|
Trading Symbol |
OPRX
|
Security Exchange Name |
NASDAQ
|
Entity Emerging Growth Company |
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