OptimizeRx
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ________ Commission file number: 001-38543 OptimizeRx Corporation(Exact name of registrant as specified in its charter) Nevada 26-1265381(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 400 Water Street, Ste. 200Rochester, MI 48307(Address of principal executive offices) (Zip Code) Registrant’s telephone number: 248-651-6568 Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registeredCommon Stock, par value $0.001 Nasdaq Capital Market Securities registered under Section 12(g) of the Exchange Act: Title of each classCommon Stock, par value of $0.001 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐☐ No ☒☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐☐ No ☒☒ Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes ☒☒ No ☐☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes ☒☒ No ☐☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 232.405 of this chapter) is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. Yes ☐☐ No ☒☒ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, oremerging growth company. ☐☐ Large accelerated filer☒☒ Accelerated filer☐☐ Non-accelerated filer☒☒ Smaller reporting company ☐☐ Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐☐ No ☒☒ State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which thecommon equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recentlycompleted second fiscal quarter. $81,729,898 Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 12,095,111 common shares asof March 7, 2019.  TABLE OF CONTENTS Page PART I Item 1.Business1Item 1A.Risk Factors6Item 1B.Unresolved Staff Comments11Item 2.Properties11Item 3.Legal Proceedings11Item 4.Mine Safety Disclosures11 PART II Item 5.Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities12Item 6.Selected Financial Data13Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations14Item 8.Financial Statements and Supplementary Data21Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure22Item 9A.Controls and Procedures22Item 9B.Other Information23 PART III Item 10.Directors, Executive Officers and Corporate Governance24Item 11.Executive Compensation31Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters35Item 13.Certain Relationships and Related Transactions, and Director Independence36Item 14.Principal Accountant Fees and Services37 PART IV Item 15.Exhibits, Financial Statement Schedules38  PART I Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Certainstatements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expectedoperating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generallyare identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “willcontinue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject torisks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actualeffect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on aconsolidated basis include but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates,competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statementsand undue reliance should not be placed on such statements. Item 1. Business Overview We are a leading provider of digital health messaging via electronic health records (EHRs), providing a direct channel for pharmaceutical companies tocommunicate with healthcare providers and patients. Our cloud-based solution supports patient adherence to medications by providing real-time access tofinancial assistance and critical clinical information. Our network is comprised of leading EHR platforms and provides more than half a million healthcareproviders with access to these benefits within their workflow at the point of care. 2018 Company Highlights 1)Our net revenue increased to a record $21.2 million in 2018, a 75% increase over 2017. 2)Our net revenue was a record $6.6 million in Q4 2018, up 65% over Q4 2017. 3)We up-listed to the Nasdaq Capital Market in 2018. In connection with our up-listing, we completed a 1 for 3 reverse-split of our common stock andissued additional gross equity of $9.0 million and received net proceeds of $8.2 million. 4)We acquired CareSpeak Communications, a leader in interactive health messaging for improved medication adherence and care coordination inOctober. 5)We expanded our sales team and established a strong base, which helped drive record revenues for Q3 and Q4 2018 with expected continuedrevenue growth in 2019 and beyond. 6)We acquired new pharmaceutical manufacturers and brands for our core offerings of Financial and Brand messaging for distribution through ourexpanding number of channel partners. 7)We launched our own clinical messaging platform on a pilot basis in Q4 2018 with one channel partner. 8)An independent analytics firm determined that investment returns from our pharmaceutical promotions with multiple pharmaceutical brandsdifferentiate our programs as one of the most effective digital tactics available to pharmaceutical firms. 1 Pharmaceutical Sales and Marketing Updates Our sales team continues to expand our business with existing clients and with new clients. We are focused on adding additional brands for existing clients,providing new solutions, expanding the utilization of our network for existing brands, and obtaining new clients. Additionally, we have expanded our service offerings as follows: ●Brand Messaging – In 2018, we successfully built on the banner messaging platform that we launched in 2017 and have expanded the partners usingthe platform. We also developed our own clinical messaging system and launched it with our first partner in late 2018. We expect both of these toexpand in 2019. ●Brand Support – We have designed a service to better insure that manufacturer brands are available in every ePrescribing platform available, and wehave incorporated this to an overall program related to launch brands that include brand awareness messaging and financial messaging. We also have continued to ramp up our marketing efforts as follows: ●Co-hosted a plenary session, “Addressing Medication Adherence to Improve Quality of Care,” at the 12th Annual Digital Pharma East conference. ●Presented at multiple investor conferences in 2018, including: Noble Capital Markets’ 13th Annual Investor Conference, 30th Annual RothConference, 7th Annual LD Micro Invitational and Annual LD Micro Main Event, Roth London conference, Lake Street Investor conference, and BRiley FBR investor conference. With the growth of both the number of our pharmaceutical clients and brands and our distribution network, we expect our distribution of messages willcontinue to increase substantially in 2019. Operational Update In 2019, we plan to expand our existing network and increase physician utilization of our partner networks. We continue to work individually with ourpartners to improve point-of-care workflow, increase overall revenue derived from each channel and increase coupon utilization by providers who haveaccess. We are also focused on increasing the number of physicians who have access to our service offerings. In addition to revenue growth provided by newpharma brands and network partners, we believe there is significant revenue growth potential within existing brands by better utilizing our existing partnernetworks and expanding our product offerings. We completed the integration activities related to our acquisition of CareSpeak Communications, Inc and expect revenues from these patient engagementactivities to ramp up substantially in 2019. Technology Updates To support our growth, we have migrated our platform to Oracle database software and to further improve the efficiency of our system, we have moved oursoftware to Amazon Web Services. We have developed our own proprietary clinical messaging system designed to expand our ability to deliver key clinical messages in addition to financialsupport, and we plan to integrate this within EHRs that currently do not offer this valued product to their providers. We launched this system in 2018 withone channel partner and expect to launch it with additional partners in 2019. As a result of our acquisition of CareSpeak Communications, Inc., we now have a 7-person tech team based in Croatia to help develop further applicationsthroughout the organization. 2 Principal Products and Applications Our principal products and applications can be summarized as follows: ●Financial Messaging – Our integrated financial messaging platform is a revolutionary virtual “Patient Support Center” that allows doctors and staffto access a universe of sample vouchers, co-pay coupons and other patient support through their EMR and/or e-Prescribe systems. It allows them tosearch, print or electronically dispense directly to patients and a national network of pharmacies. Our platform eliminates the need for physicians tomanage and store physical drug samples by offering a more convenient and efficient way to allocate, administer and track samples and co-paysavings for their patients. Today, nearly 60% of doctor offices ban or limit drug representatives and the samples they offer. While samples are stillvaluable, our solution addresses the fact that many healthcare systems and doctors are looking for an easier, more effective way to increaseaffordable access and adherence to their prescribed branded medications. ●Brand and Clinical Messaging – Our brand messaging services include a variety of brand awareness and clinical messaging services that can betailored to meet the needs of a brand. These messages can include brand awareness messages, reminder ads, clinical messages and unbrandedmessages that can be targeted by specialty, diagnostic code and other criteria. Brand messaging is highly complementary to our core financialmessaging product. Historically, we have sold brand messaging based on specific products offered by our EHR partners, but we have developed ourown proprietary banner messaging system, rolled this product out in 2017, and expanded it in 2018. We also developed our own clinical messagingsystem and launched it with our first partner in late 2018. We believe brand messaging represents a significant growth opportunity for us. ●Brand Support – Our brand support is focused on educating and working with pharmaceutical manufacturers on identifying, formulating, andimplementing new eRx media strategies for promoting their products. Our services include: 1) Drug File Integration - a service designed to betterinsure that manufacturers’ drugs are present in every ePrescribing platform available; 2) Sales Force Training – a service to educate the extendedfield sales force on this new integrated solution and what to look for within their client base to insure maximum exposure of their brands; and 3)Strategy Development – a service that assists pharmaceutical manufacturers in identifying and building a competitive strategy to take advantage ofthis new digital frontier. Currently, this activity results in less than 10% of our revenue, but represents a significant growth opportunity for us. ●Patient engagement – Our patient engagement activities arose out of our acquisition of CareSpeak Communications in October 2018. Ourtechnology solution provides digital messaging services through our cloud based Mobile Health Messenger (“MHM”) Platform. We provideinteractive health messaging for improved medication adherence and care coordination. Our HIPAA-compliant, automated, mobile messagingplatform allows pharmaceutical manufactures and related entities to directly engage with patients to improve regimen compliance. Marketing and Sales We continue to extend our marketing efforts to build both brand and capabilities awareness in the market. As previously discussed, we continue to activelyparticipate in industry and partner events. We also continue to focus on the expansion of our strategic partnership with WPP, plc. We plan to continue to increase our marketing efforts with all of ourstrategic partners as we continue to promote our platform primarily through: ●Industry and Partner Events; ●Email Campaigns; ●Internet Marketing; ●Public Relations Campaigns; ●Physician Offices; ●Direct to Consumer Marketing; ●Trade Media Advertising; ●Pharmacy Partners; ●Physician Organizations and Associations; and ●Strategic Relationships. 3 Competition Our platform competes in the highly competitive pharmaceutical and healthcare digital marketing industry that is dominated by large well-known companieswith established names, solid market niches, wide arrays of product offerings and marketing networks. Our financial messaging offerings compete forpharmaceutical budgets with a variety of other forms of advertising and promotion. Despite these overall competitors, we do not have major competition in our specific portion of the financial messaging market. We have a growing list ofpotential partners whom either have content that they want to deliver through our distribution engine and network, or have complementary technology andwant to integrate our solution as a channel partner and thereby increase our reach to clinicians. The primary direct competitors in our space of the market areConnectiveRx and Aptus Health. However, we believe our breadth of brands offered, extensive list of pharmaceutical clients, and the vast reach of ournetwork give us a substantial advantage and allow us to achieve a dominant position in the marketplace. Intellectual Property In 2012, we were awarded a patent for our innovative solution (US Patent No. 8,341,015). This award was a result of our extensive research and developmentefforts. The awarded claims cover our ability to electronically process, display and distribute eligible prescription savings on the medications and therapieshealthcare providers wish to prescribe for their patients. As part of our acquisition of CareSpeak Communications, we also acquired (US Patent No. 7,956,727)related to methods and systems for medication management. We use a nationally ranked intellectual property law firm to further expand and protect our intellectual property. We believe our current and expanding IPwill allow us to continue being the leader in this rapidly growing space. We stand ready to prepare additional filings, as necessary, to protect our intellectualproperty on any forthcoming solutions that will further assist and support physicians, pharmacists and patients. OPTIMIZERx, CareSpeak and SampleMD are our licensed trademarks. Government Regulation Fraud and Abuse Laws Anti-Kickback Statutes The federal healthcare program Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providingremuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the furnishing, arranging for or recommending agood or service for which payment may be made in whole or part under a federal healthcare program such as Medicare or Medicaid. The definition ofremuneration has been broadly interpreted to include anything of value, including for example gifts, discounts, the furnishing of supplies or equipment,credit arrangements, payments of cash and waivers of payments. Several courts have interpreted the statute’s intent requirement to mean that if any onepurpose of an arrangement involving remuneration is to induce referrals or otherwise generate business involving goods or services reimbursed in whole or inpart under federal healthcare programs, the statute has been violated. The law contains a few statutory exceptions, including payments to bona fideemployees, certain discounts and certain payments to group purchasing organizations. Violations can result in significant penalties, imprisonment andexclusion from Medicare, Medicaid and other federal healthcare programs. Exclusion of a manufacturer would preclude any federal healthcare program frompaying for its products. In addition, kickback arrangements can provide the basis for an action under the Federal False Claims Act, which is discussed in moredetail below. The Anti-Kickback Statute is broad and potentially prohibits many arrangements and practices that are lawful in businesses outside of thehealthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements, theOffice of Inspector General of Health and Human Services, or OIG, issued a series of regulations, known as the safe harbors, beginning in July 1991. Thesesafe harbors set forth provisions that, if all the applicable requirements are met, will assure healthcare providers and other parties that they will not beprosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarilymean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbormay result in increased scrutiny by government enforcement authorities such as the OIG. Arrangements that implicate the Anti-Kickback Law, and that do notfall within a safe harbor, are analyzed by the OIG on a case-by-case basis. Government officials have focused recent enforcement efforts on, among otherthings, the sales and marketing activities of healthcare companies, and recently have brought cases against individuals or entities with personnel whoallegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business. Settlements of these cases by healthcarecompanies have involved significant fines and/or penalties and in some instances criminal pleas. In addition to the Federal Anti-Kickback Statute, manystates have their own kickback laws. Often, these laws closely follow the language of the federal law, although they do not always have the same exceptionsor safe harbors. In some states, these anti-kickback laws apply with respect to all payors, including commercial health insurance companies. 4 False Claims Laws Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government orknowingly making, or causing to be made, a false statement to get a false claim paid. Manufacturers can be held liable under false claims laws, even if they donot submit claims to the government, if they are found to have caused submission of false claims. The Federal Civil False Claims Act also includes whistleblower provisions that allow private citizens to bring suit against an entity or individual on behalf of the United States and to recover a portion of anymonetary recovery. Many of the recent highly publicized settlements in the healthcare industry related to sales and marketing practices have been casesbrought under the False Claims Act. The majority of states also have statutes or regulations similar to the federal false claims laws, which apply to items andservices reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state lawsmay include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines andimprisonment. Privacy and Security The Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the rules promulgated there under require certain entities, referred to ascovered entities, to comply with established standards, including standards regarding the privacy and security of protected health information, or PHI. HIPAAfurther requires that covered entities enter into agreements meeting certain regulatory requirements with their business associates, as such term is defined byHIPAA, which, among other things, obligate the business associates to safeguard the covered entity’s PHI against improper use and disclosure. While notdirectly regulated by HIPAA, our customers or distributors might face significant contractual liability pursuant to such an agreement if the business associatebreaches the agreement or causes the covered entity to fail to comply with HIPAA. It is possible that HIPPA compliance could become a substantialregulatory burden and expense to our operations, although we do not believe that this will occur as a general website publisher. Employees As of December 31, 2018, we had 37 full-time employees, as well as contracted programmers, as needed, throughout the year. Subsidiaries We conduct our operations through our wholly-owned subsidiary, OptimizeRx Corporation, a Michigan corporation, CareSpeak Communications, Inc., aNew Jersey Corporation, and CareSpeak Communications, D.O.O, a controlled foreign corporation incorporated in Croatia. Recent developments In February 2019, the Company’s Board of Directors amended the 2013 Equity Compensation Plan to increase the number of shares authorized under theplan to 2,500,000. At the same time, the Company granted 50,000 shares of restricted common stock to officers and options to purchase 67,050 shares ofcommon stock with an exercise price of $13.06 to non-officers, both of which vest only if the Company achieves certain stretch revenue goals in 2019. Inaddition, the Company granted 35,500 time-based options, with the same exercise price, to new employees, and accelerated vesting to 2019 on 100,000existing options that previously were scheduled to vest in 2020. 5 Item 1A. Risk Factors Risks Relating to Business and Financial Condition Because we have historically experienced losses, if we are unable to achieve profitability, our financial condition and company could suffer. While we were profitable in 2018, since the inception of our business we have historically incurred losses. While we have increased revenues significantly,we have not yet been able to achieve consistent profitability due to significant investments in our growth, and non-cash expenses. Our ability to achieveconsistent profitability depends on our ability to generate sales through our technology platform and advertising model, while maintaining reasonableexpense levels. If we do not achieve sustainable profitability, it may impact our ability to continue our operations. Our business and growth may suffer if we are unable to attract and retain key employees. Our success depends on the expertise of our executive officers and certain other key technical personnel. It may be difficult to find sufficiently qualifiedindividuals to replace management or other key technical personnel in the event of death, disability or resignation, thus frustrating our ability to implementour business plan, which could negatively affect our operating results. Furthermore, our ability to expand operations to accommodate our anticipated growth will also depend on our ability to attract and retain qualified media,management, finance, marketing, sales and technical personnel. However, competition for these types of employees is intense due to the limited number ofqualified professionals. Our ability to meet our business development objectives will depend in part on our ability to recruit, train and retain top qualitypeople with advanced skills who understand our technology and business. If we are unable to engage and retain the necessary personnel, our business may bematerially and adversely affected. Our failure to obtain, retain or attract additional customers could prevent us from successfully executing our business plan. We currently work with many leading pharmaceutical companies, including Pfizer, Eli Lilly, Merck, AstraZeneca, Alcon, Novartis, Novo Nordisk, Valeant,Shire, and others. Our failure to retain existing customers or expand with new customers could negatively impact our business. We are dependent on a concentrated group of customers. Our revenues are concentrated in approximately 25 customers, primarily large pharmaceutical manufacturers. Loss of one or more of our larger customerscould have a negative impact on our operating results. In each of 2017 and 2018, our largest customer in the year accounted for approximately 12% ofrevenues, although it was a different customer in each year. We may be unable to support our technology to further scale our operations successfully. Our plan is to grow rapidly through further integration of our technology in electronic platforms. Our growth will place significant demands on ourmanagement and technology development, as well as our financial, administrative and other resources. We cannot guarantee that any of the systems,procedures and controls we put in place will be adequate to support the commercialization of our operations. Our operating results will depend substantiallyon the ability of our officers and key employees to manage changing business conditions and to implement and improve our financial, administrative andother resources. If we are unable to respond to and manage changing business conditions, or the scale of our products, services and operations, then thequality of our services, our ability to retain key personnel and our business could be harmed. 6 If we are unable to maintain our contracts with electronic prescription platforms, our business will suffer. We are reliant upon our contracts with leading electronic prescribing platforms, including Allscripts, Dr. First, Quest Diagnostics, Amazing Charts, and others.Such arrangements subject us to a number of risks, including the following: ●Our contract partners may experience financial, regulatory or operational difficulties, which may impair their ability to focus on and fulfill theircontract obligations to us; ●Legal disputes or disagreements, including the ownership of intellectual property, may occur with one or more of our partners and may lead tolengthy and expensive litigation or arbitration; ●Significant changes in a partner’s business strategy may adversely affect a partner’s willingness or ability to satisfy obligations under any sucharrangement; and ●A partner could terminate the partnership arrangement, which could negatively impact our ability to sell our products and achieve revenues. We will need to maintain these relationships as well as diversify them. The inability to do so could adversely impact our business. Our agreements with electronic prescription platforms are subject to audit. Our agreements with our electronic prescription platform partners provide for revenue sharing payments to the platform partners based on the revenue wegenerate through the platform. These payments are subject to audit by our partners, at their cost, and if there is a dispute as to the calculation, we may beliable for additional payments. If an underpayment is determined to be in excess of a certain amount, for example 10%, some agreements would require us topay for the cost of the audit, as well. Developing and implementing new and updated applications, features and services for our portals may be more difficult than expected, may take longerand cost more than expected and may not result in sufficient increases in revenue to justify the costs. We have completed the development and migration of our on-demand, rule based content delivery platform. Attracting and retaining users of our portalsrequires us to continue to improve the technology underlying those portals and to continue to develop new and updated applications, features and servicesfor those portals. If we are unable to do so on a timely basis or if we are unable to implement new applications, features and services without disruption to ourexisting ones, we may lose potential users and clients. The costs of development of these enhancements may negatively impact our ability to achieveprofitability. We rely on a combination of internal development, strategic relationships, licensing and acquisitions to develop our portals and related applications, featuresand services. Our development and/or implementation of new technologies, applications, features and services may cost more than expected, may take longerthan originally expected, may require more testing than originally anticipated and may require the acquisition of additional personnel and other resources.There can be no assurance that the revenue opportunities from any new or updated technologies, applications, features or services will justify the amountsspent. If we are unable to adhere to the regulatory and competitive climate in which we operate, we could be materially and negatively impacted. Do to the labyrinth of regulations in healthcare space, state and federal, as well as political sensitivity of healthcare delivery, our business model could benegatively impacted or fail. The markets in which we operate are competitive, continually evolving and, in some cases, subject to rapid change. ●Our portals face competition from numerous other companies, both in attracting users and in generating revenue from advertisers and sponsors. Wecompete for users with online services and websites that provide savings on medications and healthcare products, including both commercial sitesand not-for-profit sites. We compete for advertisers and sponsors with: health-related web sites; general purpose consumer web sites that offerspecialized health sub-channels; other high-traffic web sites that include both healthcare-related and non-healthcare-related content and services;search engines that provide specialized health search; and advertising networks that aggregate traffic from multiple sites. 7 ●Our healthcare provider portals compete with: providers of healthcare decision-support tools and online health management applications; wellnessand disease management vendors; and health information services and health management offerings of healthcare benefits companies and theiraffiliates. Many of our competitors have greater financial, technical, product development, marketing and other resources than we do. These organizations may bebetter known than we are and have more customers or users than we do. We cannot provide assurance that we will be able to compete successfully againstthese organizations or any alliances they have formed or may form. Since there are no substantial barriers to entry into the markets in which our public portalsparticipate, we expect that competitors will continue to enter these markets. Developments in the healthcare industry could adversely affect our business. Most of our revenue is derived from the healthcare industry and could be affected by changes affecting healthcare spending. We are particularly dependenton pharmaceutical, biotechnology and medical device companies for our advertising and sponsorship revenue. General reductions in expenditures by healthcare industry participants could result from, among other things: ●Government regulation or private initiatives that affect the manner in which healthcare providers interact with patients, payers or other healthcareindustry participants, including changes in pricing or means of delivery of healthcare products and services; ●Government regulation prohibiting the use of coupons by patients covered by federally funded health insurance programs; ●Consolidation of healthcare industry participants; ●Reductions in governmental funding for healthcare; and ●Adverse changes in business or economic conditions affecting healthcare payers or providers, pharmaceutical, biotechnology or medical devicecompanies or other healthcare industry participants. Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending insome or all of the specific market segments that we serve or are planning to serve. For example, use of our products and services could be affected by: ●Changes in the design of health insurance plans; ●A decrease in the number of new drugs or medical devices coming to market; ●A decrease in marketing expenditures by pharmaceutical or medical device companies, including as a result of governmental regulation or privateinitiatives that discourage or prohibit advertising or sponsorship activities by pharmaceutical or medical device companies; and ●Payor pressure to move to generic brands. In addition, our customers’ expectations regarding pending or potential industry developments may also affect their budgeting processes and spending planswith respect to products and services of the types we provide. The healthcare industry has changed significantly in recent years and we expect that significant changes will continue to occur. However, the timing andimpact of developments in the healthcare industry are difficult to predict. We cannot assure you that the markets for our products and services will continueto exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those markets. 8 Our success is dependent in part on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietaryrights of others. We seek patent protection for those inventions and technologies for which we believe such protection is suitable and is likely to provide a competitiveadvantage to us. Because patent applications in the United States are maintained in secrecy until either the patent application is published or a patent isissued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our products that may block our use of ourintellectual property or may be used in third-party products that compete with our products and processes. In the event a competitor or other partysuccessfully challenges our products, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incursubstantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectualproperty at issue, any of which could have a material adverse effect on our business, operating results and financial condition. We also rely substantially on trade secrets, proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect ourtechnology, application, design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect ourcompetitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual agreements for our business willbe adequate, that our competitors will not independently develop or patent substantially equivalent or superior technologies or be able to design aroundpatents that we may receive, or that our intellectual property will not be misappropriated. Our business will suffer if our network systems fail or become unavailable. A reduction in the performance, reliability and availability of our network infrastructure would harm our ability to distribute our products to our users, as wellas our reputation and ability to attract and retain customers. Our systems and operations could be damaged or interrupted by fire, flood, power loss,telecommunications failure, Internet breakdown, earthquake and similar events. Our systems could also be subject to viruses, break-ins, sabotage, acts ofterrorism, acts of vandalism, hacking, cyber-terrorism and similar misconduct. We might not carry adequate business interruption insurance to compensate usfor losses that may occur from a system outage. Any system error or failure that causes interruption in availability of our product or an increase in responsetime could result in a loss of potential customers, which could have a material adverse effect on our business, financial condition and results of operations. Ifwe suffer sustained or repeated interruptions, then our products and services could be less attractive to our users and our business would be materially harmed. If we are unable to manage growth, our operations could be adversely affected. Our progress is expected to require the full utilization of our management, financial and other resources. Our ability to manage growth effectively will dependon our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage personnel.There can be no absolute assurance that management will be able to manage growth effectively. If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in ourbusiness. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demandin a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our products.Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and,accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potentialcustomers. Our business is subject to changing regulation of corporate governance and public disclosure. Because our common stock is publicly traded, we are subject to certain rules and regulations of federal and state entities charged with the protection ofinvestors and the oversight of companies whose securities are publicly traded. These entities have continued to develop additional regulations andrequirements in response to laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Complying with these new regulations has resulted in,and is likely to continue to result in, increased general & administrative costs and a diversion of management time and attention from revenue generating andother business activities to compliance activities. 9 Risks Relating to Our Securities If a market for our common stock does not develop, shareholders may be unable to sell their shares. Our common stock is quoted under the symbol “OPRX” on the Nasdaq Capital Markets. We do not currently have a consistent active trading market. Therecan be no assurance that a consistent active and liquid trading market will develop or, if developed, that it will be sustained. Our securities are thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of the stock.Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major fluctuations in the price ofthe stock. The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which arebeyond our control. Our stock price is subject to a number of factors, including: ●Technological innovations or new products and services by us or our competitors; ●Government regulation of our products and services; ●The establishment of partnerships with other healthcare companies; ●Intellectual property disputes; ●Additions or departures of key personnel; ●Sales of our common stock; ●Our ability to integrate operations, technology, products and services; ●Our ability to execute our business plan; ●Operating results below or exceeding expectations; ●Whether we achieve profits or not; ●Loss or addition of any strategic relationship; ●Industry developments; ●Economic and other external factors; and ●Period-to-period fluctuations in our financial results. Our stock price may fluctuate widely as a result of any of the above. In addition, the securities markets have from time to time experienced significant priceand volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially andadversely affect the market price of our common stock. We do not expect to pay dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock. We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend onearnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. If we do notpay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates. 10 Provisions in the Nevada Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors orofficers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions. Members of our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limitedcircumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. Specifically, Section78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders or creditors for anydamages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that (1) the director’s or officer’s act or failure toact constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud ora knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their potential liability for monetarydamages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly, you may be unable to prevail in a legal action againstour directors or officers even if they have breached their fiduciary duty of care. In addition, our Bylaws allow us to indemnify our directors and officers fromand against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means that if you were able to enforce anaction against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and any judgmentor settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed financial resources and mayadversely affect our business, financial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock. Item 1B. Unresolved Staff comments None Item 2. Properties Currently, we do not own any real estate. Our principal executive offices are located at 400 Water Street, Suite 200, Rochester, Michigan 48307. We initially signed the lease for our current office space on December 1, 2011. That lease expired on November 30, 2016 and we signed a new lease coveringthe same space. The new lease is a three-year lease beginning December 1, 2016, with options for up to an additional 6 years. The rent is payable monthly atrates of $6,232, $6,308, and $6,384 per month for years 1, 2, and 3 of the lease, respectively. The monthly rates for the option years range from $6,384 permonth to $6,688 per month for the option years 4 through 9 of the lease. If we fail to exercise our option for option years 4 and 5, a lease termination paymentof $7,300 will be due at the end of the initial 3-year term. We have a short-term lease on shared office space in Somerset, New Jersey expiring March 31, 2019. The lease is a twelve-month lease calling for twelvemonthly payments of approximately $700. The Company also has a short-term lease on an office space in Zagreb, Croatia expiring July 4, 2019. The lease is a twelve-month lease calling for twelvemonthly payments of 550 €, or approximately $630 USD. We also have a month to month lease on shared office space in Nashville Tennessee, with monthly lease payments of approximately $2,050. We believe that our properties are adequate for our current needs, but growth potential may require larger facilities due to anticipated addition of personnel.We do not have any policies regarding investments in real estate, securities or other forms of property. Item 3. Legal Proceedings We have no current legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 11 PART II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded under the symbol “OPRX” on the Nasdaq Capital Market. Only a limited market exists for our securities. There is no assurancethat a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in ourcompany. The following tables set forth the range of high and low bid information for our common stock for the each of the periods indicated. These quotations reflectinter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Fiscal Year Ending December 31, 2017 Quarter Ended High $ Low $ March 31, 2017 2.55 2.67 June 30, 2017 3.30 1.89 September 30, 2017 3.90 2.76 December 31, 2017 3.42 2.13 Fiscal Year Ending December 31, 2018 Quarter Ended High $ Low $ March 31, 2018 4.98 3.36 June 30, 2018 11.00 4.29 September 30, 2018 18.39 9.32 December 31, 2018 18.00 8.92 Quarter Ended March 31, 2019 (through March 7, 2019) $15.10 $9.96 On March 7, 2019, the last sales price per share of our common stock was $14.70 Holders of Our Common Stock As of March 7, 2019, we had 12,095,111 shares of our common stock issued and outstanding, held by approximately 320 shareholders of record at ourtransfer agent, with approximately 1,200 additional shareholders holding our shares in street name. Dividends We currently intend to retain future earnings for the operation of our business. We have never declared or paid cash dividends on our common stock, and wedo not anticipate paying any cash dividends in the foreseeable future. In the event that a dividend is declared, common stockholders on the record date are entitled to share ratably in any dividends that may be declared from timeto time on the common stock by our board of directors from funds legally available. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, doprohibit us from declaring dividends where, after giving effect to the distribution of the dividend: 1.We would not be able to pay our debts as they become due in the usual course of business; or 2.Our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders whohave preferential rights superior to those receiving the distribution. 12 Securities Authorized for Issuance under Equity Compensation Plans On June 13, 2013, our Board of Directors adopted the 2013 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the bestavailable personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and topromote our success. Under the initial Plan, we were able to issue up to an aggregate total of 1,500,000 incentive or non-qualified options to purchase ourcommon stock, stock awards and other offerings under the Plan. In March 2016, the Board expanded the number of shares issuable under the Plan to4,000,000 and in February 2018, the Board increased the number of shares issuable to 5,500,000 shares. In May, 2018, we completed a 1 for 3 reverse split ofour stock in connection with our listing on the Nasdaq Capital Market, which reduced the shares authorized under the plan to 1,833,334. In February 2019,the Board expanded the number of shares issuable under the Plan to 2,500,000 shares. Equity Compensation Plans as of December 31, 2018 Equity CompensationPlans Not Approved bythe Shareholders Numberof Securities tobe issued uponexerciseof outstandingoptions Weighted-averageexercise price ofoutstandingoptions Number ofSecuritiesremainingavailablefor futureissuance underequitycompensationplans (a) (b) (c) 2013 Equity Compensation Plan 1,554,700 $4.63 (1) Other Equity Compensation(restricted stock awards) 130,000 N/A N/A Total 1,684,700 $4.63 (1) (1)We had no remaining shares available to grant under the Plan at December 31, 2018. In February 2019, we increased our available shares under the Planto 2,500,000 shares. Recent Sales of Unregistered Securities The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period whichwere not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K. In December 2018, we issued 10,420 shares of restricted common stock to our outside Directors as part of our director compensation package for servicesrendered in Q4 2018. In October 2018, we issued 5,000 shares to our investor relations firm for services. We also issued 30,638 shares of common stock in October 2018 inconnection with our acquisition of CareSpeak Communications, Inc. to former shareholders of CareSpeak. From October through December 2018, we issued 21,764 shares and received proceeds of $65,327 in connection with the exercise of options. In 2019, the company issued 56,493 shares and received proceeds of $228,386 in connection with the exercise of options. In February 2019, we granted restricted stock awards for 50,000 shares of common stock to executive officers and options to purchase 67,050 shares ofcommon stock with an exercise price of $13.06 to non-officers, both of which vest only if we achieve certain stretch revenue goals in 2019. In addition, wegranted 35,000 time-based options with the same exercise price in February 2019 as well. These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention toacquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make aninformed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates withthe appropriate restrictive legend affixed to the restricted stock. Item 6. Selected Financial Data Not required under Regulation S-K for “smaller reporting companies.” 13 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for the Years Ended December 31, 2018 and 2017 Net Revenue Our net revenue for the year ended December 31, 2018 was approximately $21.2 million, an increase of 75% from the year ended December 31, 2017. Thisincrease resulted from increased pharmaceutical brands, an increased distribution network, and strong growth in our brand messaging product. We expectcontinued strong revenue growth in 2019 as a result of the foundations laid in 2017 and 2018. Because the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number ofcompanies. We have approximately 25 pharmaceutical companies as customers. We have focused our efforts on expanding both our customer base and ourproduct offerings and are becoming less dependent on any one customer. In each of 2018 and 2017, our largest customer only accounted for approximately12% of sales, and that was a different customer each year. Cost of Sales Our total cost of sales, composed primarily of revenue share expense, increased in the year ended December 31, 2018, from the year ended December 31, 2017due to the increase in revenues. Our revenue share expense as a percentage of revenue, however, decreased from approximately 51% in the year endedDecember 31, 2017 to approximately 42% in the year ended December 31, 2018. This decrease in revenue share expense as a percentage of revenue resulted primarily from product mix, and specifically from the substantial increase in ourbrand messaging revenue that had a substantial fixed cost component to it in 2017 and 2018. We expect revenue share expense as a percentage of revenue in2019 to increase from 2018 levels as a result of a shift back to more historical product mix levels. Gross Margin Our gross margin, which is simply the difference between our revenues and our cost of sales, discussed above, increased substantially from 2017 to 2018 as aresult of the increased revenue. In addition, our gross margin percentage increased from approximately 49% in 2017 to 58% in 2018 for the reasons discussedabove in the cost of sales section. We expect our margins to decline slightly in 2019, but are focused on maintaining our margins, at least at 55%, in 2019. Operating Expenses Operating expenses increased to approximately $12.0 million for the year ended December 31, 2018, from approximately $8.1 million for the year endedDecember 31, 2017, an increase of approximately 49%. The detail by major category is reflected in the table below. Years Ended December 31 2018 2017 Salaries, Wages and Benefits $5,823,057 $4,151,740 Professional Fees 362,678 324,117 Acquisition related costs 607,670 - Board Compensation 144,125 89,000 Investor Relations 113,059 126,548 Consultants 167,694 356,220 Advertising and Promotion 299,955 207,062 Depreciation and Amortization 316,502 324,551 Development and Maintenance 675,660 642,304 Integration Incentives 132,500 366,717 Office, Facility and Other 472,250 297,700 Travel 390,563 294,426 Subtotal 9,505,713 7,180,385 Stock-based compensation 2,520,852 902,389 Total Operating Expense $12,026,565 $8,082,774 14 The main reasons for the overall increase in operating expenses in 2018 was our focus on staffing and scaling our company to focus on, and be able tosupport, accelerated revenue growth. Within the operating expenses, there were a variety of increases, the largest of which was in salaries, wages and benefits, as a result of additional staff added in2017 and 2018, including related benefits. During 2018, we added to our staff in several key areas, including a head of data analytics, an additional VP ofSales, and a Controller. We also added 10 employees late in the year as a result of our CareSpeak acquisition. During 2017, we hired a president and two newvice presidents of sales, as well as additional supporting positions, which also resulted in an increase in 2018 because of the full year impact of thosepositions that were only partially included in 2017. Incentive compensation also increased in 2018, primarily as a result of the increase in revenues. Weexpect our compensation expense to increase in 2019, but at a much lower rate than in 2018. Professional fees increased primarily because of costs associated with our up-listing to Nasdaq and the completion of the Secondary offering related to thesale of WPP shares, as well as implementation of our Sarbanes Oxley testing. Acquisition costs are related to our acquisition of CareSpeak Communications in October 2018. These costs include investment banker fees, legal andaccounting due diligence, audit costs associated with CareSpeak, valuation experts for the purchase price allocation, and other miscellaneous costs. Board compensation increased from 2017 to 2018 due to both the increase in our Board from five directors to six directors, and the establishment of an auditcommittee. The cost of consultants decreased significantly from 2017 to 2018. The 2017 costs included approximately $105,000 in consulting costs paid to our priorCEO as part of his exit from the Company. In addition, there were approximately $120,000 in consulting costs paid to consultants that were ultimately hiredas employees, or employees were hired to assume the work the contractors were used for. Expenses related to development, management, and maintenance of our technology increased slightly in 2018 as a result of improvements to our system, aswell as costs associated with migrating our technology to Amazon Web Services. These costs were partially offset by the savings resulting from the move. Weexpect these costs to decrease significantly in 2019 due to the investments made in 2018. 15 Integration incentives are fees we pay to accelerate access to new partners. These fees decreased significantly from 2017 to 2018. We integrated a significantnew partner in 2017 that resulted in approximately $180,000 of integration costs, but had no such new partner in 2018. We expect 2019 integration costs tobe closer to the 2018 amount. Depreciation and amortization decreased slightly in 2018 from the 2017 levels. The increased amortization resulting from the acquisition of CareSpeak andthe resulting intangible assets was offset by other items which became fully depreciated or amortized in 2017 and 2018. We expect depreciation andamortization expense in 2019 to exceed $650,000. Office, facility, and other costs increased from 2017 to 2018. The main reason for the change related to hiring expenses, including approximately $120,000 inrecruiting fees related to new hires. The balance of the increase related to increased levels of activity, including our acquisition of CareSpeak. Stock based compensation increased by approximately $1.6 million from 2017 to 2018 for several reasons, including the significant increase in our stockprice. Stock based compensation for the Board of Directors increased from approximately $90,000 to approximately $430,000. The Board grant is based on aspecific number shares each quarter and while the number of independent Directors eligible to receive shares increased from three to four, the majority of theincrease related to the increase in stock price. In addition, the Company accelerated vesting on a portion of the options held by its CEO, which resulted inadditional expense of approximately $180,000. The Company also granted performance based options and restricted stock awards valued at approximately$750,000 that will vest only if certain stretch revenue goals are achieved. Those goals were achieved so the awards vested and the expense was recorded in2018. Net Loss We finished the year ended December 31, 2018 with a profit of approximately $226,000, as compared to a loss of approximately $2.1 million during the yearended December 31, 2017. The reasons for specific components are discussed above. Overall, we had an increase in revenue and gross margin partially offsetby increased operating expenses to support future growth. In addition, the income or loss in both periods included significant noncash items. We hadapproximately $2.85 million in noncash expense in 2018 and approximately $1.25 million in noncash expense in 2017. 16 Quarterly Financial Information Following is a table of our quarterly operating results for 2018 for information purposes. First Quarter Second Quarter Third Quarter Fourth Quarter Total Year Revenues $4,112,237 $5,099,474 $5,415,384 $6,579,268 $21,206,363 Revenue Share Expense 2,008,092 2,236,751 2,268,968 2,485,855 8,999,666 Gross Profit 2,104,145 2,862,723 3,146,416 4,093,413 12,206,697 Operating Expenses 2,295,341 2,589,126 2,923,238 4,218,860 12,026,565 Income (Loss) from Operations (191,196) 273,597 223,178 (125,447) 180,132 Other income 2,017 6,912 21,750 15,533 46,212 Loss before Taxes (189,179) 280,509 244,928 (109,914) 226,344 Provision for Taxes - - - - - Net Income (Loss) (189,179) 280,509 244,928 (109,914) 226,344 Loss per share Basic $(0.02) $0.03 $0.02 $(0.01) $0.02 Diluted $(0.02) $0.02 $0.02 $(0.01) $0.02 17 Liquidity and Capital Resources As of December 31, 2018, we had total current assets of approximately $16.0 million, compared with current liabilities of approximately $4.2 million,resulting in working capital of approximately $11.8 million and a current ratio of approximately 3.8 to 1. This compares with the working capital balance ofapproximately $5.3 million and the current ratio of 2.5 to 1 at December 31, 2017. This increase in working capital, as discussed in more detail below, isprimarily the result of the capital we raised in connection with our up-listing to Nasdaq. Following is a table with summary data from the consolidated statement of cash flows for the year ended December 31, 2018 and 2017, as presented. 2018 2017 Net cash provided by (used in) operating activities $792,555 $(1,479,831)Net cash used in investing activities (5,686,833) (42,243)Net cash provided by (used in) financing activities 8,685,739 (390,000) Net decrease in cash and cash equivalents $3,791,461 $(1,912,074) Our operating activities provided approximately $800,000 in the year ended December 31, 2018, as compared with approximately $1.5 million used inoperating activities in the year ended December 31, 2017. The cash provided in 2018 was the result of our net income and non-cash expenses, partially offsetby the increased working capital required to support higher revenues. The cash used in operations in 2017 was the result of both increased levels of workingcapital required to support higher revenue levels as well as a change in the contractual relationship related to certain partners resulting in a reduction ofrevenue share payable at December 31, 2017. We used approximately $5.7 million in investing activities in the year ended December 31, 2018, as compared with approximately $50,000 used ininvestment activities in the year ended December 31, 2017. The majority of the investing activities in 2018 related to our acquisition of CareSpeakcommunications in October 2018. Financing activities provided $8.7 million in the year ended December 31. 2018, as compared with cash used of $390,000 in 2017. The cash provided in2018 was primarily the result of the equity raised in connection with our up-listing to Nasdaq, as well as from the proceeds of option exercises. The cash usedin 2017 was the result of the redemption of shares of common stock held by our previous CEO. With our cash on hand, we have sufficient cash to operate our business for more than the next 12 months and we do not anticipate the need to raise additionalequity for operating purposes. Off Balance Sheet Arrangements As of December 31, 2018, there were no off-balance sheet arrangements. Critical Accounting Policies A “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’smost difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our accounting policies are discussed in detail in the footnotes to our financial statements included in this Annual Report on Form 10-K for the year endedDecember 31, 2018; however, we consider our critical accounting policies to be those related to determining the amount of revenue to be billed, the timing ofrevenue recognition, calculation of revenue share expense, stock-based compensation, capitalization and related amortization of intangible assets andimpairment of assets. Following is a summary of those policies. 18 Revenue Recognition Recognition of revenue requires evidence of a contact, probable collection of proceeds, and completion of substantially all performance obligations. We usea 5-step model to recognize revenue. These steps are: identify the performance obligations in the contract, determine the transaction price, allocate thetransaction price to the performance obligations in the contract, and recognize revenue when or as the performance obligations are satisfied. Revenues are primarily generated from content delivery activities in which the Company delivers financial clinical, or brand messaging through adistribution network of ePrescribers and Electronic Health Record technology providers (channel partners), directly to consumers, or from reselling servicesthat complement the business. Unless otherwise specified, revenue is recognized based on the gross selling price to customers. The Company’s contracts are generally all less than one year and the primary performance obligation is delivery of the message, but the contract may containadditional performance obligations. Additional performance obligations may include program design and set up, and reporting. As the messaging is distributed through the platform and network of channel partners (a transaction), these transactions are recorded, and revenue isrecognized, at the time of distribution. Revenue for transactions can be realized based on a price per message, a price per redemption, or as a flat fee occurringover a period of time, depending on the client contract. The Company recognizes setup fees that are required for integrating client offerings and campaignsinto the rule-based content delivery system and network over the life of the initial program, based either on time, or units delivered, depending upon which ismost appropriate in the specific situation. Additionally, the Company also recognizes revenue for providing program performance reporting andmaintenance, either by the Company directly delivering reports or by providing access to its online reporting portal that the client can utilize. These fees arecharged monthly and recognized as recurring monthly revenue at the time of delivery. In some instances, the Company also resells products and or services that are available through channel partners on a commission basis, and that arecomplementary to the core business and client base. In these instances, net revenue is recognized based on the commission based revenue split that theCompany receives. In instances where the Company resells services and have all financial risk and significant operation input and risk, the Company recordsthe revenue gross. Revenue Share Expense Based on the volume of transactions that are delivered through the channel partner network, the Company provides a revenue share to compensate the partnerfor their promotion of the campaign. Revenue shares are a negotiated percentage of the transaction fees and can also be specific to special considerations andcampaigns. In addition, the Company pays revenue share to ConnectiveRx (formerly LDM/PDR) as a result of a 2014 legal settlement in an amount equal tothe greater of 10% of financial messaging distribution revenues generated through its integrated network, or $0.37 per financial message distributed throughits integrated network. The contractual amount due to the channel partners is recorded as an expense at the time the eCoupon is distributed. Intangible Assets Intangible assets are stated at cost. Finite-lived assets are being amortized over their estimated useful lives of fifteen to seventeen years for patents, eight yearsfor customer relationships, four years for covenants not to compete, and three to four years for software and websites, all using the straight-line method. Theseassets, as well as our indefinite-lived asset, are evaluated annually in our fiscal fourth quarter for impairment. Goodwill We evaluate goodwill for impairment during our fiscal fourth quarter, or more frequently if an event occurs or circumstances change. 19 Share-based Payments The Company uses the fair value method to account for stock-based compensation. The fair value of the equity instrument is charged directly tocompensation expense and additional paid-in capital over the period during which services are rendered. The fair value of each award is estimated on the dateof each grant. For restricted stock, the fair market value is based on the market value of the stock granted on the date of the grant. For options, it is estimatedusing the Black-Scholes option pricing model that uses the assumptions noted in the following table. Estimated volatilities are based on the historicalvolatility of the Company’s stock over the same period as the expected term of the options. The expected term of options granted represents the period oftime that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise behavior and to determine this term.The risk free rate used is based on the U.S. Treasury yield curve in effect at the time of the grant using a time period equal to the expected option term. TheCompany has never paid dividends and does not expect to pay any dividends in the future. The Black-Scholes option valuation model and other existing models were developed for use in estimating the fair value of traded options that have novesting restrictions and are fully transferable. These option valuation models require the input of, and are highly sensitive to, subjective assumptionsincluding the expected stock price volatility. The Company’s stock options have characteristics significantly different from those of traded options, andchanges in the subjective input assumptions could materially affect the fair value estimate. Recently Issued Accounting Pronouncements On January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, and all of the related amendments (“newrevenue standard”). We recorded the change, which was immaterial, related to adopting the new revenue standard using the modified retrospective method.Under this method, we recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retainedearnings. This results in no restatement of prior periods, which continue to be reported under the accounting standards in effect for those periods. We expectthe impact of the adoption of the new revenue standard to continue to be immaterial on an ongoing basis. We have applied the new revenue standard to all contracts as of the date of initial application. The overwhelming majority of our revenue continues to berecognized when transactions occur, such as the delivery of a message. We previously recognized revenue related to set-ups when a program launched, andall related activities had been accomplished. Under the new revenue standard, we are recognizing revenue related to these set ups over the term of the initialcontract. Since set up fees are generally small relative to the size of the overall contract and because most contracts are for a year or less, the impact of thischange is immaterial. The impact of recording this change as of January 1, 2018 resulted in an increase in deferred revenue of $142,027 at that date and a corresponding decrease inretained earnings as well. The impact of adopting the new revenue standard in 2018 resulted in lower revenues of $59,387 than would have been reportedunder the previous method. In October 2016, the FASB issued ASC 2016-16 amending the accounting for income taxes, primarily related to intercompany transfers of inventory. Weadopted this in 2018 and it had no impact on our financial statements or disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modifies lease accounting for lessees to increasetransparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. TheCompany will adopt ASU 2016-02 in its first quarter of 2019. While the Company is currently evaluating the timing and impact of adopting ASU 2016-02,currently the Company anticipates no material impact to its Consolidated Statements of Operations. However, the ultimate impact of adopting ASU 2016-02will depend on the Company’s lease portfolio as of the adoption date. We do not expect the adoption of these or other recently issued accounting pronouncements to have a significant impact on our results of operation, financialposition or cash flow. 20 Item 8. Financial Statements and Supplementary Data Index to Financial Statements Required by Article 8 of Regulation S-X: Audited Financial Statements: F-1Report of Independent Registered Public Accounting Firm;F-4Consolidated Balance Sheets as of December 31, 2018 and 2017;F-5Consolidated Statements of Operations for the years ended December 31, 2018 and 2017;F-6Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2017;F-7Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2018;F-8Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017; andF-9Notes to Consolidated Financial Statements 21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of OptimizeRx Corporation: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of OptimizeRx Corporation (“the Company”) as of December 31, 2018 and 2017, the relatedconsolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2018 and therelated notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cashflows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United Statesof America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 31, 2018, expressed an adverse opinion onthe effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures thatrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Sadler, Gibb & Associates, LLC We have served as the Company’s auditor since 2017. Salt Lake City, UTMarch 12, 2019 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of OptimizeRx Corporation: Opinion on Internal Control over Financial Reporting We have audited OptimizeRx Corporation’s (the Company’s) internal control over financial reporting as of December 31, 2018, based on criteria establishedin Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In ouropinion, because of the effect of the material weakness described in the following paragraph on the achievement of the objectives of the control criteria, theCompany has not maintained effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity, and cash flows foreach of the years in the two-year period ended December 31, 2018 and the related notes (collectively referred to as the “consolidated financial statements”),and our report dated March 12, 2019, expressed an unqualified opinion on those consolidated financial statements. A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Thefollowing material weaknesses have been identified and included in management’s assessment: ●There was ineffective segregation of duties assignments, and ineffective information technology general controls (ITGCs) in the areas of user accessand change-management over a certain information technology (IT) system, used in the Company’s financial reporting processes. As a result,business process automated and manual controls that are dependent on appropriate segregation of duties and are dependent on the affected ITGCswere ineffective because they could have been adversely impacted. ●There were ineffective controls related to revenue including ineffective controls over the review and approval of a key revenue calculationspreadsheet and ineffective controls over the accuracy and completeness of activity data produced by the Issuer’s proprietary IT system related touser actions in an electronic environment. These deficiencies were a result of a design deficiency in the review and approval process and IT controlprocesses lacking sufficient documentation. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 consolidated financialstatements, and this report does not affect our report on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A.Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that material weaknesses exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. F-2 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Sadler, Gibb & Associates, LLC We have served as the Company’s auditor since 2017. Salt Lake City, UTMarch 12, 2019 F-3 OPTIMIZERx CORPORATIONConsolidated Balance Sheets as ofDecember 31, 2018 and 2017 December 31, 2018 December 31, 2017 ASSETS Current Assets Cash and cash equivalents $8,914,034 $5,122,573 Accounts receivable 6,457,841 3,430,890 Prepaid expenses 590,744 255,428 Total Current Assets 15,962,619 8,808,891 Property and equipment, net 149,330 167,305 Other Assets Goodwill 3,678,513 - Patent rights, net 2,766,944 638,766 Other intangible assets, net 2,492,123 143,730 Security deposit 5,049 5,049 Total Other Assets 8,942,629 787,545 TOTAL ASSETS $25,054,578 $9,763,741 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable – trade $411,010 $457,289 Accrued expenses 1,300,882 953,947 Revenue share payable 1,908,616 1,624,806 Deferred revenue 610,625 507,160 Total Current Liabilities 4,231,133 3,543,202 Non-current Liabilities Contingent purchase price payable 2,365,000 - Total Liabilities 6,596,133 3,543,202 Stockholders’ Equity Preferred stock, $0.001 par value, 10,000,000 shares authorized, no issued and outstanding at December 31, 2018 and2017, - - Common stock, $0.001 par value, 500,000,000 shares authorized, 12,038,618 and 9,772,694 shares issued andoutstanding at December 31, 2018 and 2017, respectively 12,039 9,773 Stock warrants - 1,286,424 Additional paid-in-capital 48,725,211 35,287,464 Accumulated deficit (30,278,805) (30,363,122)Total Stockholders’ Equity 18,458,445 6,220,539 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $25,054,578 $9,763,741 The accompanying notes are an integral part of these financial statements. F-4 OPTIMIZERx CORPORATIONConsolidated Statements of Operations for the YearsEnded December 31, 2018 and 2017 For the year ended December 31,2018 For the year ended December 31,2017 Revenue $21,206,363 $12,127,422 Revenue share expense 8,999,666 6,174,614 Gross Margin 12,206,697 5,952,808 Operating expenses Stock-based compensation 2,520,852 902,389 Depreciation and amortization 316,502 324,551 Other general and administrative expenses 9,189,211 6,855,834 Total operating expenses 12,026,565 8,082,774 Income (loss) from operations 180,132 (2,129,966)Other income Interest income 46,212 25,937 Total other income 46,212 25,937 Income (loss) before provision for income taxes 226,344 (2,104,029)Provision for income taxes - - Net income (loss) $226,344 $(2,104,029)Weighted average number of shares outstanding – basic 10,832,209 9,819,753 Weighted average number of shares outstanding - diluted 11,862,991 9,819,753 Net income (loss) per share – basic $0.02 $(0.21)Net income (loss) per share - diluted $0.02 $(0.21) The accompanying notes are an integral part of these financial statements. F-5 OPTIMIZERx CORPORATIONConsolidated Statement of Stockholders’ Equity for the YearEnded December 31, 2017 PreferredStockShares PreferredStock Amount CommonStock Shares CommonStock Amount Stock Warrants AdditionalPaid-in Capital AccumulatedDeficit TotalStockholders’Equity Balance,December 31, 2016 - $- 9,906,289 $9,906 $2,294,416 $33,766,950 $(28,259,093) $7,812,179 Issuance of stock options toemployees 815,014 815,014 Issuance of common stock: for services 25,000 25 87,350 87,375 for cash for options 8,071 8 (8) - Shares redeemed for cash (166,666) (166) (389,834) (390,000)Expiration of Warrants (1,007,992) 1,007,992 - Net loss for theyear (2,104,029) (2,104,029)Balance,December 31, 2017 - $- 9,772,694 $9,773 $1,286,424 $35,287,464 $(30,363,122) $6,220,539 The accompanying notes are an integral part of these financial statements. F-6 OPTIMIZERx CORPORATIONConsolidated Statement of Stockholders’ Equity for the YearEnded December 31, 2018 PreferredStockShares PreferredStock Amount CommonStock Shares CommonStock Amount Stock Warrants AdditionalPaid-in Capital AccumulatedDeficit TotalStockholders’Equity Balance,December 31, 2017 - $- 9,772,694 $9,773 $1,286,424 $35,287,464 $(30,363,122) $6,220,539 Cumulative effect of changein accounting principlerelated to revenuerecognition (142,027) (142,027)Stock CompensationExpense 1,863,911 1,863,911 Issuance of common stock: for services 51,494 51 656,883 656,934 for cash 1,666,669 1,667 8,162,807 8,164,474 for options exercised 165,169 165 521,105 521,270 for warrants exercised 251,046 251 (1,286,424) 1,286,173 - Shares issued for acquisition 30,638 31 499,969 500,000 Shares issued in payment ofrevenue share 100,000 100 446,900 447,000 Additional shares issued inconnection with reversesplit due to rounding 908 1 (1) - Net income for theyear 226,344 226,344 Balance,December 31, 2018 - $- 12,038,618 $12,039 $- $48,725,211 $(30,278,805) $18,458,445 The accompanying notes are an integral part of these financial statements. F-7 OPTIMIZERx CORPORATIONConsolidated Statements of Cash Flows for the YearsEnded December 31, 2018 and 2017 For the year ended December 31,2018 For the year ended December 31, 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) for the period $226,344 $(2,104,029)Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 316,502 324,551 Loss on disposal of assets 2,401 65,738 Stock issued for services 656,934 815,014 Stock-based compensation 1,863,911 87,375 Changes in: Accounts receivable (2,789,252) (370,494)Prepaid expenses (319,754) (174,608)Accounts payable (83,319) 88,075 Revenue share payable 730,810 (997,711)Accrued expenses 226,535 665,679 Deferred revenue (38,557) 120,579 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 792,555 (1,479,831)CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (34,362) (42,243)Acquisition of intangible assets (56,651) - Cash paid in acquisition, net of cash acquired (5,595,820) - NET CASH USED IN INVESTING ACTIVITIES (5,686,833) (42,243)CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 8,164,475 - Proceeds from exercise of stock options 521,264 - Redemption of common stock - (390,000)NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 8,685,739 (390,000)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,791,461 (1,912,074)CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD 5,122,573 7,034,647 CASH AND CASH EQUIVALENTS – END OF PERIOD $8,914,034 $5,122,573 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $- $- Cash paid for income taxes $- $- NON-CASH INVESTING AND FINANCING ACTIVITIES: - Exercise of stock warrants $1,286,424 $- Common stock issued for debt $477,000 $- Shares issued in acquisition of CareSpeak $500,000 $- Effect of ASC 606 revenue recognition $142,027 $- The accompanying notes are an integral part of these financial statements. F-8 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS OptimizeRx Corporation is a leading provider of digital health messaging via electronic health records (EHRs), providing a direct channel for pharmaceuticalcompanies to communicate with healthcare providers. The Company’s cloud-based solution supports patient adherence to medications by providing real-time access to financial assistance, prior authorization, education and critical clinical information. The Company’s network is comprised of leading EHRplatforms and provides more than half of the ambulatory patient market with access to these benefits within their workflow at the point-of-care. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of PresentationThe financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of Americaand are presented in US dollars. The Company has adopted a December 31st fiscal year-end. Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Estimates and assumptions have been made in determining the carrying value of assets, depreciable and amortizablelives of tangible and intangible assets, the carrying value of liabilities, the amount of revenue to be billed, and the timing of revenue recognition and relatedrevenue share expenses. Actual results could differ from these estimates. Principles of ConsolidationThe financial statements reflect the consolidated results of OptimizeRx Corporation, a Nevada corporation, and its wholly owned subsidiaries, OptimizeRxCorporation, a Michigan Corporation, CareSpeak Communications, Inc., a New Jersey Corporation, and CareSpeak Communications D.O.O. a ControlledForeign Corporation incorporated in Croatia. Together, these companies are referred to as “OptimizeRx” and “the Company”. All material intercompanytransactions have been eliminated. ReclassificationsCertain items in the previous year financial statements have been reclassified to match the current year presentation. Cash and Cash EquivalentsFor purposes of the accompanying financial statements, the Company considers all highly liquid instruments with an initial maturity of three months or lessto be cash equivalents. Fair Value of Financial InstrumentsFair 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 marketparticipants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based onassumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value ofliabilities should include consideration of non-performance risk including our own credit risk. F-9 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 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. Thehierarchy 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 valuemeasurement 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 itsentirety. 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 similarinstruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can becorroborated 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 theasset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models,and similar techniques. The Company’s stock options and warrants are valued using level 3 inputs. The following tables present the fair values and carrying values of the Company’s financial assets and liabilities measured on a recurring basis as ofDecember 31, 2018 and 2017 and the valuation techniques used by the Company to determine those fair values. 2018 Level 1 Level 2 Level 3 Fair Value Carrying Value Liabilities Contingent Purchase Price Payable (1) $- $- $2,365,000 $2,365,000 $2,365,000 (1)The contingent consideration is based off achieving certain revenue milestones in each of the next two years. The Geometric-Brownian motion analysiswas used to generate spot prices for use in an option pricing model. The hypothetical spot prices were simulated using a monte carlo simulation utilizing2018 revenue as a base and revenue volatility of 37%. The risk-free rate of return and terms utilized were 2.89% and 1.46-2.46, respectively andexpected volatility was 35%. The following table provides a summary of changes in fair value of the Company’s Level 3 financial instruments for the years ended December 31, 2018 and2017. Amount Balance December 31, 2017 $- Contingent consideration liability recorded as the result of the CareSpeak Communications acquisition (see note 3) 2,365,000 Balance December 31, 2018 $2,365,000 F-10 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounts Receivable and Allowance for Doubtful AccountsAccounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the relatedrevenue 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 processrelated to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, whichmay impact the collectability of these receivables or reserve estimates. Because the Company’s customers are primarily large well-capitalized companies,historically there has been very little bad debt expense. Bad debt expense was $0 for each of the years ended December 31, 2018 and 2017. The allowance fordoubtful accounts was $0 as of both December 31, 2018 and 2017. Property and EquipmentProperty and equipment are stated at cost and are being depreciated over their estimated useful lives of three to five years for office equipment and three yearsfor computer equipment using the straight-line method of depreciation for book purposes. Maintenance and repair charges are expensed as incurred. Intangible AssetsIntangible assets are stated at cost. Finite-lived assets are being amortized over their estimated useful lives of fifteen to seventeen years for patents, eight yearsfor customer relationships, four years for covenants not to compete, and three to four years for software and websites, all using the straight-line method. Theseassets, as well as our indefinite-lived asset, are evaluated annually in our fiscal fourth quarter for impairment. GoodwillWe evaluate goodwill for impairment during our fiscal fourth quarter, or more frequently if an event occurs or circumstances change. Revenue RecognitionRecognition of revenue requires evidence of a contact, probable collection of proceeds, and completion of substantially all performance obligations. We usea 5-step model to recognize revenue. These steps are: identify the performance obligations in the contract, determine the transaction price, allocate thetransaction price to the performance obligations in the contract, and recognize revenue when or as the performance obligations are satisfied. Revenues are primarily generated from content delivery activities in which the Company delivers financial clinical, or brand messaging through adistribution network of ePrescribers and Electronic Health Record technology providers (channel partners), directly to consumers, or from reselling servicesthat complement the business. Unless otherwise specified, revenue is recognized based on the gross selling price to customers. The Company’s contracts are generally all less than one year and the primary performance obligation is delivery of the message, but the contract may containadditional performance obligations. Additional performance obligations may include program design and set up, and reporting. As the messaging is distributed through the platform and network of channel partners (a transaction), these transactions are recorded, and revenue isrecognized, at the time of distribution. Revenue for transactions can be realized based on a price per message, a price per redemption, or as a flat fee occurringover a period of time, depending on the client contract. The Company recognizes setup fees that are required for integrating client offerings and campaignsinto the rule-based content delivery system and network over the life of the initial program, based either on time, or units delivered, depending upon which ismost appropriate in the specific situation. Additionally, the Company also recognizes revenue for providing program performance reporting andmaintenance, either by the Company directly delivering reports or by providing access to its online reporting portal that the client can utilize. These fees arecharged monthly and recognized as recurring monthly revenue at the time of delivery. F-11 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In some instances, the Company also resells products and or services that are available through channel partners on a commission basis, and that arecomplementary to the core business and client base. In these instances, net revenue is recognized based on the commission based revenue split that theCompany receives. In instances where the Company resells services and have all financial risk and significant operation input and risk, the Company recordsthe revenue gross. Revenue Share Expenses Based on the volume of transactions that are delivered through the channel partner network, the Company provides a revenue share to compensate the partnerfor their promotion of the campaign. Revenue shares are a negotiated percentage of the transaction fees and can also be specific to special considerations andcampaigns. In addition, the Company pays revenue share to ConnectiveRx (formerly LDM/PDR) as a result of a 2014 legal settlement in an amount equal tothe greater of 10% of financial messaging distribution revenues generated through its integrated network, or $0.37 per financial message distributed throughits integrated network. The contractual amount due to the channel partners is recorded as an expense at the time the eCoupon is distributed. Income TaxesIncome taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities aredetermined based on the differences between the financial reporting and tax basis of assets and liabilities and are measured using the currently enacted taxrates 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 bythe 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 ofincome tax expense. Concentration of Credit RisksThe Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has notexperienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financialdifficulties. As of December 31, 2018, the Company had $8,414,034 in cash balances in excess of federally insured limits, primarily at Bank ofAmerica/Merrill Lynch. Research and DevelopmentThe Company expenses research and development expenses as incurred. Our research efforts are focused on understanding the market dynamics that have thepotential to affect the business and increase revenue in both the short and long term. Our primary goal is to increase revenue by helping patients better affordand access the medicines their doctors prescribe, as well as other healthcare products and services they need. Based on this, the Company continually seeksways to improve its technology to enhance user experiences, and to develop new services and solutions for its customers. F-12 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Share-based PaymentsThe Company uses the fair value method to account for stock-based compensation. The fair value of the equity instrument is charged directly tocompensation expense and additional paid-in capital over the period during which services are rendered. The fair value of each award is estimated on the dateof each grant. For restricted stock, the fair market value is based on the market value of the stock granted on the date of the grant. For options, it is estimatedusing the Black-Scholes option pricing model that uses the assumptions noted in the following table. Estimated volatilities are based on the historicalvolatility of the Company’s stock over the same period as the expected term of the options. The expected term of options granted represents the period oftime that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise behavior and to determine this term.The risk free rate used is based on the U.S. Treasury yield curve in effect at the time of the grant using a time period equal to the expected option term. TheCompany has never paid dividends and does not expect to pay any dividends in the future. 2018 2017 Expected dividend yield 0% 0%Risk free interest rate 1.96% - 2.84% 1.47% - 1.81%Expected option term 3.5 - 5 years 3.5 - 5 years Turnover/forfeiture rate 0% 0%Expected volatility 64% - 66% 65% - 78% The Black-Scholes option valuation model and other existing models were developed for use in estimating the fair value of traded options that have novesting restrictions and are fully transferable. These option valuation models require the input of, and are highly sensitive to, subjective assumptionsincluding the expected stock price volatility. The Company’s stock options have characteristics significantly different from those of traded options, andchanges in the subjective input assumptions could materially affect the fair value estimate. F-13 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Loss Per Common and Common Equivalent ShareThe computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year. Thecomputation of diluted earnings per common share is based on the basic weighted average number of shares outstanding during the year plus common stockequivalents, which would arise from the exercise of options and warrants outstanding using the treasury stock method and the average market price per shareduring the year. The number of common shares potentially issuable upon the exercise of certain options and warrants that were excluded from the diluted lossper common share calculation in 2017 was approximately 489,201, because they are anti-dilutive, as a result of a net loss for the year ended December 31,2017. The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the year ended December 31, 2018consisted of the following: Net Income Shares Per ShareAmount Year ended December 31, 2018: Basic EPS $226,344 10,832,209 $0.02 Effect of dilutive stock options and warrants 1,030,782 Diluted EPS $226,344 11,862,911 $0.02 Impairment of Long-Lived AssetsThe 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 carryingvalue 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 ofthose 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 ofare reported at the lower of the carrying amount or the fair value less costs to sell. Recently Issued Accounting GuidanceOn January 1, 2018, we adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, and all of the related amendments (“newrevenue standard”). We recorded the change, which was immaterial, related to adopting the new revenue standard using the modified retrospective method.Under this method, we recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retainedearnings. This results in no restatement of prior periods, which continue to be reported under the accounting standards in effect for those periods. We expectthe impact of the adoption of the new revenue standard to continue to be immaterial on an ongoing basis. We have applied the new revenue standard to all contracts as of the date of initial application. The overwhelming majority of our revenue continues to berecognized when transactions occur, such as the delivery of a message. We previously recognized revenue related to set-ups when a program launched, andall related activities had been accomplished. Under the new revenue standard, we are recognizing revenue related to these set ups over the term of the initialcontract. Since set up fees are generally small relative to the size of the overall contract and because most contracts are for a year or less, the impact of thischange is immaterial. The impact of recording this change as of January 1, 2018 resulted in an increase in deferred revenue of $142,027 at that date and a corresponding decrease inretained earnings as well. The impact of adopting the new revenue standard in 2018 resulted in lower revenues of $59,387 than would have been reportedunder the previous method. F-14 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In October 2016, the FASB issued ASC 2016-16 amending the accounting for income taxes, primarily related to intercompany transfers of inventory. Weadopted this in 2018 and it had no impact on our financial statements or disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modifies lease accounting for lessees to increase transparencyand comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. The Companywill adopt ASU 2016-02 in its first quarter of 2019. While the Company is currently evaluating the timing and impact of adopting ASU 2016-02, currentlythe Company anticipates no material impact to its Consolidated Statements of Operations. NOTE 3 – ACQUISITION On October 17, 2018, we acquired CareSpeak Communications, Inc., a New Jersey corporation and technology solutions company, which provides digitalmessaging services to the healthcare industry to expand our service offerings. Through its cloud based Mobile Health Messenger (“MHM”) Platform,CareSpeak provides interactive health messaging for improved medication adherence, care coordination, and patient engagement. The total purchase pricewas $8,493,451. Acquisition costs of approximately $607,670 were expensed as incurred. The purchase price contains a contingent element that will be paid only if the Company achieves certain patient engagement revenues in 2019 and 2020.The total contingent payment may be up to $3.0 million. The calculated fair value of the contingent payment is $2,365,000 at December 31, 2018. We began consolidating the results of CareSpeak operations and cashflows into our consolidated financial statements after October 17, 2018, the date ofacquisition. The unaudited Pro forma results of operations as if the acquisition occurred January 1, 2017 are presented in the following table: 2018 2017 As Reported Pro Forma As Reported Pro Forma Net Sales $21,206,363 $22,152,995 $12,127,422 $12,927,881 Net Income (loss) 226,344 690,492 (2,104,029) (2,513,029)Earnings per common share: Basic $0.02 $0.06 $(0.21) $(0.26)Diluted $0.02 $0.06 $(0.21) $(0.26) F-15 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 3 – ACQUISITION (CONTINUED) Purchase Price Allocation The purchase price of the acquisition was allocated as follows: Purchase Price Cash paid $5,628,451 Common stock issued 500,000 Contingent payment 2,365,000 Total $8,493,451 Allocation Current assets $254,263 Property and equipment 8,487 Intangibles Goodwill, including assembled workforce in place 3,678,513 Patent 2,227,000 Tradename 982,000 Non-compete agreements 977,000 Customer relationships 492,000 Current liabilities assumed (125,812) Total $8,493,451 As described in greater detail in Note 6, the amortizable intangible assets acquired have estimated useful lives ranging from 4 to 15 years. We determined theestimated fair value of the identifiable intangible assets acquired primarily by using the income approach. NOTE 4 – PREPAID EXPENSES Prepaid expenses consisted of the following as of December 31, 2018 and 2017: 2018 2017 Insurance $43,284 $43,764 Rent 1,589 8,539 EHR access fees 533,125 203,125 Other 12,746 - Total prepaid expenses $590,744 $255,428 F-16 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 5 – PROPERTY AND EQUIPMENT The Company owned equipment recorded at cost which consisted of the following as of December 31, 2018 and 2017: 2018 2017 Computer equipment $94,384 $83,079 Furniture and fixtures 159,648 158,502 Subtotal 254,032 241,581 Less accumulated depreciation 104,702 74,276 Property and equipment, net $149,330 $167,305 Depreciation expense was $58,423 and $48,587 for the years ended December 31, 2018 and 2017, respectively. NOTE 6 – INTANBIGLE ASSETS Goodwill The goodwill is related to the acquisition of CareSpeak Communications in 2018 and is primarily related to expected improvements and technologyperformance and functionality, as well sales growth from future product and service offerings and new customers, together with certain intangible assets thatdo not qualify for separate recognition, such as the assembled workforce in place. Goodwill is generally not amortizable for tax purposes and is notamortizable for financial statement purposes. Intangible Assets Intangible assets included on the balance sheet consist of the following: December 31, 2017 Gross Carrying Amount Accumulated Amortization Net Patent rights $1,102,457 $463,691 $638,766 Other intangible assets Web-Based Technology 1,458,362 1,314,632 143,730 Total other 1,458,362 1,314,632 143,730 Total Intangibles $2,560,819 $1,778,323 $782,496 December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Weighted Average Life Remaining Patent rights $3,329,457 $562,513 $2,766,944 12.7 Other intangible assets Tradename 982,000 - 982,000 Indefinite Non-compete agreements 977,000 50,885 926,115 3.8 Customer relationships 492,000 12,812 479,188 7.8 Web-based technology 1,515,013 1,410,193 104,820 1.1 Total other 3,966,013 1,473,890 2,492,123 Total Intangibles $7,295,470 $2,036,403 $5,259,067 F-17 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 6 – INTANBIGLE ASSETS (CONTINUED) Intangibles are being amortized on a straight-line basis over the following estimated useful lives. Patents 15 - 17 years Non-compete agreements 4 years Customer relationships 8 years Web-based technology 3 years The Company recorded amortization expense $258,079 and $275,964 in the years ended December 31, 2018 and 2017, respectively. Expected futureamortization expenses of the intangibles assets as of December 31, 2018 is as follows: Year ended December 31, 2019 $593,682 2020 540,991 2021 536,468 2022 471,222 2023 277,857 Thereafter 1,856,847 Total $4,277,067 NOTE 7 – DEFERRED REVENUE The Company has several signed contracts with customers for the distribution of financial messaging, or other services, which include payment in advance.The payments are not recorded as revenue until the revenue is earned under its revenue recognition policy discussed in Note 2. Deferred revenue was$610,625 and $507,160 as of December 31, 2018 and 2017, respectively. NOTE 8 – RELATED PARTY TRANSACTIONS During the year ended December 31, 2010, the Company acquired the technical contributions and assignment of all exclusive rights to and for a key patentin process at the time from a former CEO in exchange for a total payment in shares of common stock and options valued at $930,000 at the time, and recordedat that cost. That patent remains in Patents on the consolidated balance sheet as of December 31, 2018. During the year ended December 31, 2015, WPP, plc made a strategic investment in the Company and owned approximately 20% of the outstanding shares ofthe Company until December 2018, when it sold the shares. As of December 31, 2018, WPP is no longer a related party, however the transactions betweenWPP and the Company are set forth in the table below. The Company considers the pharmaceutical companies being represented by WPP agencies to be itscustomers and it received no preferable pricing from WPP agencies as a result of its related party status. F-18 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 8 – RELATED PARTY TRANSACTIONS (CONTINUED) The following table sets forth the activity between the Company and WPP for the years ended December 31: 2018 2017 Total billings to WPP Agencies $6,217,735 $3,554,168 Revenue recognized from WPP Agencies $6,527,051 $3,696,214 Accounts receivable from WPP Agencies $2,051,532 $1,173,614 Rebates given to WPP Agencies $- $33,249 Marketing services purchased from WPP Agencies $- $54,762 Revenue share expense recorded to WPP Agencies $- $401,596 Revenue share expenses owed to WPP Agencies $- $447,670 NOTE 9 – CONTINGENT PURCHASE PRICE Our purchase of CareSpeak Communications contains a contingent element that will be paid only if the Company achieves certain patient engagementrevenues in 2019 and 2020. The total contingent payment may be up to $3.0 million. The calculated fair value of the contingent payment is $2,365,000 atDecember 31, 2018. We determined the fair value of the Contingent Purchase Price Payable using a Geometric-Brownian motion analysis of the expectedrevenue and resulting earnout payment using inputs that include the spot price, a risk free rate of return of return of 2.89%, a term of 2.46 years, and volatilityof 35%. Changes in the inputs could result in a different fair value measurement. NOTE 10 – EQUITY Preferred Stock The Company has 10,000,000 shares of preferred stock, $.001 par value per share, authorized as of December 31, 2018. No shares were issued or outstandingin either year presented. Common Stock The Company had 500,000,000 shares of common stock, $.001 par value per share, authorized as of December 31, 2018. There were 12,038,618 and9,772,694 shares of common stock issued and outstanding at December 31, 2018 and 2017, respectively. Effective May 14, 2018, in connection with our listing on the Nasdaq Capital Market, we implemented a reverse split of our common stock by exchangingeach three shares of our common stock for one share. Our financial statements and all equity transactions have been retroactively adjusted to account for thereverse stock split. We elected to round fractional shares up to the nearest whole number rather than redeem them for cash, and as a result we issued 908additional shares as a result of this rounding. In 2018, we issued 100,000 shares of common stock to a subsidiary of WPP, one of the world’s largest media companies, and a shareholder at the time, in fullpayment of all amounts due under a co-marketing agreement that covered certain WPP agencies, whereby we shared a portion of our revenue with thoseagencies related to new programs through those agencies. The shares were valued at $447,000, the market value of the stock on the date of issuance. Theamount due was recorded as a liability in revenue share payable at December 31, 2017. F-19 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 10 – EQUITY (CONTINUED) During 2018, in a private transaction, we issued 1,666,669 shares of our common stock for gross proceeds of $9,000,000. In connection with this transaction,we incurred equity issuance costs of $835,526 related to payments to advisors and legal fees associated with the transaction, resulting in net proceeds to theCompany of $8,164,474. The Company has a Director Compensation plan covering its independent non-employee Directors. A total of 36,494 and 25,000 shares were granted andissued in the years ended December 31, 2018 and 2017, respectively in connection with this compensation plan. These shares were valued at $428,884 and$87,375, respectively. The Company also awarded 130,001 restricted stock awards, valued at 546,007, to executive officers. These awards would vest only ifthe Company achieved certain stretch revenue goals in 2018 or 2019. It was determined that the goal was achieved as of December 31, 2018, so the entireexpense was recognized in 2018, but the shares related to these awards will be issued in 2019. During 2018, we issued 15,000 shares of our common stock, valued at $228,050, for investor relations services. We also issued 30,638 shares of commonstock, valued at $500,000, to the former shareholders of CareSpeak Communications, Inc., in connection with the acquisition of the CareSpeak in 2018. The entire amount recorded in equity related to stock-based compensation is $1,863,911, including the $1,317,904 discussed in Note 11 below related tooptions. During, 2018, we issued 251,046 shares of common stock in connection with the cashless exercise of a warrant to purchase 348,194 shares. We also issued165,169 shares of common stock and received proceeds of $521,270 in connection with the exercise of options in 2018. In 2017 the Company issued 24,214shares in connection with the exercise of stock options. The options exercised in 2017 were exercised on a net settled basis and no cash proceeds werereceived. We adopted the new accounting standard ASC 606, Revenue from Contracts with Customers, as of January 1, 2018, which resulted in a charge of $142,027 toRetained Earnings on that date. In 2017, the Company purchased and cancelled 500,000 shares of common stock held by the previous CEO at a price of $0.78 per share for a total payment of$390,000. NOTE 11 – STOCK OPTIONS The Company sponsors a stock-based incentive compensation plan known as the 2013 Equity Compensation Plan (the “Plan”), which was established by theBoard of Directors of the Company in June 2013. A total of 500,000 (post-split) shares were initially reserved for issuance under the Plan. The Plan wasamended in 2016 to increase the authorized shares to 1,333,334 shares, again in 2018 to increase the authorized shares to 1,833,334, and again in 2019 toincrease the authorized shares to 2,500,000. A total of 1,554,700 shares of common stock underlying options were outstanding at December 31, 2018. TheCompany had no remaining shares available to grant under the Plan at December 31, 2018. The Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, or restricted stock. The incentive stockoptions are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted. The incentivestock options are limited to persons who are regular full-time employees of the Company at the date of the grant of the option. Non-qualified options may begranted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Board or CompensationCommittee believes have contributed, or will contribute, to the success of the Company. Non-qualified options may be issued at option prices of less than fairmarket value on the date of grant and may be exercisable for up to ten years from date of grant. The option vesting schedule for options granted is determinedby the Compensation Committee of the Board of Directors at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is achange in control, as defined in the Plan. F-20 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 11 – STOCK OPTIONS (CONTINUED) The compensation cost that has been charged against income related to options for the years ended December 31, 2018 and 2017, was $1,317,904 and$815,014, respectively. No income tax benefit was recognized in the income statement and no compensation was capitalized in any of the years presented. The Company had the following option activity during the years ended December 31, 2018 and 2017: Number ofOptions Weightedaverageexercise price Weightedaverageremainingcontractual life(years) Aggregateintrinsic value$ Outstanding, January 1, 2017 1,040,022 $3.36 Granted – 2017 480,417 $2.88 Exercised – 2017 (43,333) $3.81 Expired – 2017 (108,334) $4.02 Outstanding, December 31, 2017 1,368,772 $3.12 3.2 Granted – 2018 401,099 $9.27 Exercised – 2018 (165,169) $3.16 Expired – 2018 (50,002) $5.48 Outstanding, December 31, 2018 1,554,700 $4.63 3.0 $10,523,497 Exercisable, December 31, 2018 1,041,533 $3.34 2.8 $7,928,828 Of the options outstanding at December 31, 2018, 1,041,533 were exercisable with a weighted average contractual life of 2.8 years and the remaining513,167 were non-vested. F-21 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 11 – STOCK OPTIONS (CONTINUED) The table below shows the expiration date and exercise price of the options outstanding at December 31, 2018. Number of Options Exercise Price Expiration Date 194,666 $2.46 03/31/22 20,000 $3.15 03/17/19 18,334 $3.15 05/19/19 46,668 $3.15 06/24/20 235,604 $3.15 07/27/22 500,000 $3.21 02/22/21 129,169 $3.45 07/28/21 5,167 $3.51 11/01/22 28,574 $3.66 03/03/19 161,675 $4.20 02/01/23 15,003 $4.62 03/31/23 10,420 $4.71 12/31/22 10,420 $10.40 06/30/23 16,000 $12.49 08/13/23 6,000 $12.51 08/20/23 10,000 $12.70 08/22/23 15,000 $12.73 09/04/23 125,000 $15.40 10/16/23 7,000 $16.24 10/22/23 Total1,554,700 $4.63 There is $1,433,198 of expense remaining to be recognized related to options outstanding at December 31, 2018. NOTE 12 –WARRANTS The Company has issued warrants to purchase common stock, primarily in connection with capital raising activities. However, all remaining warrants wereexercised in 2018 and there are no remaining warrants outstanding at December 31, 2018. The Company had the following warrant activity during the years ended December 31, 2018 and 2017: Number ofSharesUnderlyingWarrants Weightedaverageexercise price Outstanding, January 1, 2017 681,527 $5.01 Expired (333,333) $6.75 Balance, December 31, 2017 348,194 $3.33 Exercised (348,194) $3.33 Balance, December 31, 2018 - - F-22 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 13 – MAJOR CUSTOMERS AND VENDORS The Company had the following customers that accounted for 10% or greater of revenue in either 2018 or 2017. No other customers accounted for more than10% of revenue in either year presented. 2018 2017 $ % $ % Customer A 2,547,113 12.0 957,222 7.9 Customer B 2,280,873 10.8 1,422,072 11.7 Customer C 2,122,657 10.0 1,153,714 9.5 The Company had four key partners through which 10% or greater of its revenue was generated in either 2018 or 2017 as set forth below. 2018 2017 $ % $ % Partner A 6,841,386 32.3 3,901,811 32.2 Partner B 5,350,393 25.2 2,047,238 16.9 Partner C 2,584,103 12.2 1,231,662 10.2 Partner D 2,159,356 10.2 1,279,321 10.5 NOTE 14 – INCOME TAXES As of December 31, 2018, the Company had net operating loss carry forwards of approximately $10.9 million that expire from 2027 through 2037 that areavailable to offset future taxable income. The Company was formed in 2006 as a limited liability company and changed to a corporation in 2007. Activityprior to incorporation is not reflected in the Company’s corporate tax returns. In the future, the cumulative net operating loss carry-forward for income taxpurposes may differ from the cumulative financial statement loss due to timing differences between book and tax reporting. In 2017, the U.S. enacted the Tax Cuts and Jobs Act which significantly changed U.S. tax law. The Act lowered the U.S. statutory federal income tax rate from35% to 21% effective January 1, 2018. This had an affect on the value of the Company’s net operating loss carryover, but since the deferred tax asset is fullyreserved, it had no impact on the Company’s financial statements. The impact of the change was reflected in the 2017 financial statements. The provision for Federal income tax consists of the following for the years ended December 31, 2018 and 2017: 2018 2017 Federal income tax benefit attributable to: Current operations $(48,000) $715,000 Permanent and timing differences (net) (36,000) (280,000) Tax rate change - (1,600,000) Valuation allowance 84,000 1,165,000 Net provision for federal income tax $- $- F-23 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 14 – 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, 2018 and2017: 2018 2017 Deferred tax asset attributable to: Net operating loss carryover $2,290,000 $2,551,000 Depreciation and amortization 119,000 98,000 Stock compensation 535,000 372,000 Other (6,000) Valuation allowance (2,938,000) (3,021,000) Net deferred tax asset $- $- Under certain circumstances issuance of common shares can result in an ownership change under Internal Revenue Code Section 382, which limits theCompany’s ability to utilize carry forwards from prior to the ownership change. Any such ownership change resulting from stock issuances and redemptionscould limit the Company’s ability to utilize any net operating loss carry forwards or credits generated before this change in ownership. These limitations canlimit both the timing of usage of these laws, as well as the loss of the ability to use these net operating losses. It is likely that fundraising activities haveresulted in such an ownership change. NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES Legal The Company is not involved in any legal proceedings. Revenue-share contracts The Company has contacts with various Electronic Health Records systems and ePrescribe platforms, whereby we agree to share a portion of the revenue wegenerate for eCoupons distributed through their networks. These contracts grant audit rights related to the payments to our partners, and in some cases wouldrequire us to pay for the audit if the audit determined there was an underpayment and the underpayment meets certain thresholds, such as 10%. Operating Leases The Company initially signed the lease for its current office space located in Rochester Michigan on December 1, 2011. That lease expired on November 30,2016 and the Company signed a new lease for the same space. The current lease is a three-year lease beginning December 1, 2016, with options for up to anadditional 6 years. The rent is payable monthly at rates of $6,232, $6,308, and $6,384 per month for years 1, 2, and 3 of the lease, respectively. The monthlyrates for the option years range from $6,384 per month to $6,688 per month for the option years 4 through 9 of the lease. If the Company fails to exercise itsoption for option years 4 and 5, a lease termination payment of $7,300 will be due at the end of the initial 3-year term. F-24 OPTIMIZERx CORPORATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2018 NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) The Company also has a short-term lease on office space in Somerset, New Jersey expiring March 31, 2018. The lease is a twelve-month lease calling fortwelve monthly payments of $700. The Company also has a short-term lease on an office space in Zagreb, Croatia expiring July 4, 2018. The lease is a twelve-month lease calling for twelvemonthly payments approximately $630 USD. The Company also has a month to month leases on shared office spaces in Nashville, Tennessee, payable at a rate of approximately $2,050 per month. Minimum annual rent payments are as follows for the remaining term of the leases: Year ended December 31: 2019 76,104 Total lease commitment $76,104 NOTE 16 – RETIREMENT PLAN The Company sponsors a defined contribution 401(k) profit sharing plan which was adopted in December 2015, effective in January 2016. Under the terms ofthe plan, the Company matches 100% of the first 3% of payroll contributed by the employee and 50% of the next 2% of payroll contributed by the employeeto a maximum of 4% of an employee’s payroll. There was expense of $172,107 and $137,858 recorded in 2018 and 2017, respectively, for companycontributions to the plan. NOTE 17 – SUBSEQUENT EVENTS In February 2019, the Company’s Board of Directors amended the 2013 Equity Compensation Plan to increase the number of shares authorized under theplan to 2,500,000. At the same time, the Company granted 50,000 shares of restricted common stock to officers and options to purchase 67,050 shares ofcommon stock with an exercise price of $13.06 to non-officers, both of which vest only if the Company achieves certain stretch revenue goals in 2019. Inaddition, the Company granted 35,500 time-based options, with the same exercise price, to new employees, as well as accelerated vesting to 2019 on 100,000existing options that previously vested in 2020. In January 2019, the Company signed a new lease on office space in Cranbury New Jersey commencing on February 1, 2019. The lease is a 3-year leasecalling for monthly payments ranging from $2,707 to $2,808 plus utilities during the term of the lease. In 2019, the company issued 56,493 shares and received proceeds of $228,386 in connection with the exercise of options. F-25 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed toensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reportedwithin the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed isaccumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure.Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer andprincipal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under theExchange Act were not effective as of December 31, 2018 due to the material weaknesses described below. Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f)under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1)pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) providereasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on ourfinancial statements Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate. Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). A materialweakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that amaterial misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Based on this assessment,Management identified the following two material weaknesses: There was ineffective segregation of duties assignments, and ineffective information technology general controls (ITGCs) in the areas of user access andchange-management over a certain information technology (IT) system, used in the Company’s financial reporting processes. As a result, business processautomated and manual controls that are dependent on appropriate segregation of duties and are dependent on the affected ITGCs were ineffective becausethey could have been adversely impacted. There were ineffective controls related to revenue including ineffective controls over the review and approval of a key revenue calculation spreadsheet andineffective controls over the accuracy and completeness of activity data produced by the Issuer’s proprietary IT system related to user actions in an electronicenvironment. These deficiencies were a result of a design deficiency in the review and approval process and IT control processes lacking sufficientdocumentation. The material weaknesses did not result in any identified misstatements to the financial statements, and there were no changes to previously released financialresults. Based on these material weaknesses, the Company’s management concluded that at December 31, 2018, the Company’s internal control overfinancial reporting was not effective. The Company’s independent registered public accounting firm, Sadler Gibb and Associates, LLC, has issued an adverse audit report on the effectiveness ofthe Company’s internal control over financial reporting as of December 31, 2018, which appears in Item 8 of this Form 10-K. 22 Management’s Remediation Plan Due to our size, segregation of all conflicting duties has not always been possible and may not be economically feasible. The Chief Financial Officer hasbeen heavily involved in all accounting functions. In addition, we have used QuickBooks as our accounting system. QuickBooks lacks sufficient usercontrols to ensure that timely prevention and detection of unauthorized use or disposition of Company assets, given the access the CFO has withinQuickBooks. In addition, a significant amount of the calculation of revenue to be recognized is done by the Chief Financial Officer using spreadsheets andfor the majority of the year, the Company lacked sufficient personnel in the accounting function to adequately review these spreadsheets. To address theissues related to limited personnel, the Company has historically for years consistently established compensating controls, reviews, and procedures to ensurethat the data generated by the financial and accounting systems is accurate and that the financial statements included herein fairly present, in all materialrespects, our financial position, results of operations and cash flows for the periods presented. Based on these procedures, management believes that ourconsolidated financial statements included in this Form 10-K have been prepared in accordance with U.S. GAAP. Our CEO and CFO have certified that, basedon their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financialcondition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K. Sadler, Gibb & Associates has issuedan unqualified opinion on our financial statements, which is included in Item 8 of this Form 10-K. In addition, in 2019, we are making the following improvements to our internal control structure: 1.We have hired an additional person in the finance department, who will be in place by the end of the first quarter. 2.We are investigating new accounting software to replace QuickBooks. Our current goal is to have new accounting software by the beginning of Q3. 3.We are improving the documentation related to the review procedures that we currently perform that we use to ensure the accuracy and completenessof the activity data produced by our proprietary IT system. These changes will allow us to reallocate duties, moving the CFO to a review role related to revenue calculation and other areas to address the segregation ofduties issue. Specifically, starting in January, the Controller now calculates the revenue to be recognized and that calculation is reviewed by the ChiefFinancial Officer. The new accounting software will provide additional user controls to allow timely detection of unauthorized transactions. We believe these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controlsoperate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that theremediation of this material weakness will be completed prior to the end of fiscal 2019. Changes in Internal Control Over Financial Reporting During the most recently completed fiscal quarter, there has been no material change in our internal control over financial reporting that has materiallyaffected or is reasonably likely to materially affect, our internal control over financial reporting. We did hire a controller in October 2018 as a result of oursignificant growth. This allowed us to improve our segregation of duties and document our existing controls better. Item 9B. Other Information None 23 PART III Item 10. Directors, Executive Officers and Corporate Governance The following information sets forth the names, ages, and positions of our current directors and executive officers. Name Age Positions and Offices HeldWilliam J. Febbo 50 Chief Executive Officer and DirectorMiriam J. Paramore 56 PresidentTerence J. Hamilton 53 SVP – SalesDouglas P. Baker 62 Chief Financial OfficerGus D. Halas 68 Chairperson and DirectorPatrick Spangler 63 DirectorLynn Vos 63 DirectorJames Lang 54 Director Set forth below is a brief description of the background and business experience of each of our current executive officers and directors. William J. Febbo Mr. Febbo joined our company as Chief Executive Officer on February 22, 2016. Mr. Febbo brings more than 20 years of experience in building andmanaging health services and financial businesses. Before joining our company, Mr. Febbo served as Chairman and Founder of Plexuus, LLC, a paymentprocessing business for medical professionals. From 2007 to 2015, he worked with Merriman Holdings, Inc., an investment banking firm. There he served asChief Operating Officer and assisted with capital raises in the tech, biotech, cleantech, consumer and resources industries. From 2013 to 2015, he also workedwith Digital Capital Network, Inc., which operated a transaction platform for institutional and accredited investors. There he served as Chief ExecutiveOfficer and Co-Founder and managed the day-to-day operations of the digital portal for institutional level investments. Prior to Merriman, Mr Febbo wasCEO and co-founder of MedPanel, a provider of market intelligence and communications for the pharmaceutical, biomedical, and medical device industries,which was eventually acquired by MCF Corporation. Aside from that provided above, Mr. Febbo does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. Mr. Febbo is qualified to serve on our Board of Directors because of his wealth of experience in building and managing health services and financialbusinesses. Miriam J. Paramore Ms. Paramore joined the company as President in August 2017. She has vast experience with healthcare companies, running businesses ranging from start-upsto large divisions of public and private companies. Her early career was spent at Ernst & Young, as a Healthcare Management Consultant. She has sinceoccupied executive level and director positions at several healthcare companies. Most recently, from April 2016 to April 2017, Ms. Paramore served as COOand CTO of Lucro, Inc., a privately held company located in| Nashville, Tennessee focused on the healthcare sector. From March 2015 to February 2016, sheserved as Executive Vice President of PDX a privately held company in Fort Worth, Texas that provides health information technology for pharmacies. FromMay 2008 to December 2013, she served as Executive Vice President of Emdeon, Inc. in Nashville, Tennessee, a health information technology and tech-enabled services company. Aside from that provided above, Ms. Paramore does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. 24 Terence J. Hamilton Mr. Hamilton joined our company as VP of Sales in February 2008 and became SVP of Sales in 2016. Prior to that, Mr. Hamilton was Manager at MedImmunefrom 2005 to 2008 and was Senior National Account Manager for Glaxo SmithKline pharmaceuticals for 13 years prior to that. Mr. Hamilton has spent theover 25 years working in the pharmaceutical and biotech arenas within various sales, marketing and managed markets management positions. He also hasheld many positions within the pharmaceutical and biotech industries, including District Manager, Brand Manager, Managed Market Specialist, ContractManager, and Government Account Manager. Mr. Hamilton was a Director of the Company from 2008 through March 2016. Aside from that provided above, Mr. Hamilton does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. Gus D. Halas Mr. Halas joined our company as a Director on August 7, 2014. Mr. Halas has served as CEO of several companies. He was Chief Executive Officer andPresident of the Central Operating Companies at Central Garden & Pet Company from April 2011 through May 2013 and currently serves as a consultant tothat Company. Mr. Halas was President and Chief Executive Officer of T-3 Energy Services, Inc. from May 2003 to March 2009 and also served as Chairmanof the Board of Directors from March 2004 to March 2009. From August 2001 to April 2003, Mr. Halas served as President and Chief Executive Officer ofClore Automotive, Inc. He also serves as a director for Triangle Petroleum Corp., Hooper Holmes, Inc., School Specialty, Inc., and Madelena Energy. Aside from that provided above, Mr. Halas does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. Mr. Halas is qualified to serve on our Board of Directors because of his experience and expertise as an executive and a director with companies implementing“turnaround” strategies. Lynn Vos Ms. Vos has been the President and CEO of the Muscular Distrophy Association since October 2017. Prior to that, Ms. Vos had been chief executive officer ofghg | greyhealth group since 1994 and is a champion of using digital capabilities to improve the public health. Ms. Vos also serves on the board of nTelosWireless, a NASDAQ listed company, the Jed Foundation, a leading nonprofit dedicated to protecting the emotional health of college students, and was afounding board member of MMRF, a pioneering cancer research foundation. Aside from that provided above, Ms. Vos does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. Ms. Vos is qualified to serve on our Board of Directors because of her extensive executive skills in digital marketing and communications in the healthcareindustry. 25 James Lang Mr. Lang joined our Board January 12, 2017. He brings us more than 25 years of experience in healthcare data, analytic, and technology enabled businessservices. Mr. Lang is the CEO of Eversana, a leading independent provider of global commercial services to the life science industry, and also presentlyserves as an executive advisor to Water Street, a strategic private equity firm focused exclusively on building market-leading companies in healthcare. In thatcapacity, he currently serves as Board Chairman to The Access Group, Health Strategies Group, Alliance Life Sciences, and Dohmen Life Science Services. He is also a director of BioVie, a development-stage company pioneering an innovative therapeutic that targets complications due to liver cirrhosis. Mr. Lang previously served as CEO of Decision Resources Group, a leading healthcare research and consulting company providing high-value healthcareindustry analysis and insights, where he helped transform the company into an industry leader. Earlier, he was president of Strategic Decisions Group, apremier global strategy consultancy, and he expanded the life sciences practice and later sold it to IMS Health. He is an active private investor and advisorwith healthcare companies, including Boston Heart Diagnostics (acquired by Eurofins) and AlphalmpactRx (acquired by IMS Health). Aside from that provided above, Mr. Lang does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. Mr. Lang is qualified to serve on our Board of Directors because of his extensive executive skills and background in the healthcare industry. Patrick Spangler Spangler presently serves as CFO of VigiLanz, a digital healthcare intelligence firm, and as a member of the board of directors of Lifespace Communities. Hehas more than 30 years of experience in the health care industry, executing domestic and international growth and exit strategies. He has helped lead high-performance, emerging growth firms, as well as large publicly-traded companies. Earlier, Spangler served as executive vice president and CFO of Healthland, an EHR company serving the critical access hospital market. He has also servedas CFO at the point-of-care medical applications provider, Epocrates, that he helped bring public in 2011, and which was eventually acquired byAthenahealth. Prior to Epocrates, he was CFO of the ev3, a vascular therapy that went public in 2005 and then acquired by Covidien, as well as CFO of themedical device manufacturer, Empi, which was acquired by Encore Medical. Aside from that provided above, Mr. Spangler does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. Mr. Spangler is qualified to serve on our Board of Directors because of his extensive executive skills and background in the healthcare industry and hisfinance experience. Douglas P. Baker Mr. Baker has served as our CFO since May 19, 2014. Mr. Baker is a Certified Public Account with a Master’s Degree in Business Administration. He hasextensive business experience including 9 years in public accounting with Plante Moran, 4 years as CFO of a privately held printing company, 5 years in avariety of divisional financial roles at MascoTech, Inc., a Fortune 500 automotive supplier, and from 1996 to 2014 as Chief Financial Officer of AppliedNanotech Holdings, Inc., (“APNT”) a publicly held nanotechnology research and licensing company. Mr. Baker was also a member of the Board of Directorsof APNT from 2006 through 2014. He is also currently Chairman of the Board of Total Health Care, Inc., a Detroit based Health Maintenance Organizationand has been a member of that Board since 1987. Aside from that provided above, Mr. Baker does not hold and has not held over the past five years any other directorships in any company with a class ofsecurities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any companyregistered as an investment company under the Investment Company Act of 1940. 26 Directors Our bylaws authorize no less than three (3) and no more than Seven (7) Directors unless changed by the Board of Directors. We currently have five (5)Directors. Term of Office Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office inaccordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board, subject to their respectiveemployment agreements. Significant Employees We have no significant employees other than our officers and directors. Family Relationships There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executiveofficers. Involvement in Certain Legal Proceedings During the past 10 years, other than as set forth below, none of our current directors, nominees for directors or current executive officers has been involved inany legal proceeding identified in Item 401(f) of Regulation S-K, including: 1. Any petition under the Federal bankruptcy laws or any state insolvency law filed by or against, or a receiver, fiscal agent or similar officer was appointedby a court for the business or property of such person, or any partnership in which he or she was a general partner at or within two years before the time ofsuch filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing; 2. Any conviction in a criminal proceeding or being named a subject of a pending criminal proceeding (excluding traffic violations and other minoroffenses); 3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently ortemporarily enjoining him or her from, or otherwise limiting, the following activities: i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transactionmerchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investmentadviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loanassociation or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; ii. Engaging in any type of business practice; or iii. Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or Statesecurities laws or Federal commodities laws; 27 4. Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending orotherwise limiting for more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures TradingCommission, securities, investment, insurance or banking activities, or to be associated with persons engaged in any such activity; 5. Being found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment insuch civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; 6. Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federalcommodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed,suspended or vacated; 7. Being subject to, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended orvacated, relating to an alleged violation of: i. Any Federal or State securities or commodities law or regulation; or ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order ofdisgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or iii. Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 8. Being subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined inSection 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with amember. On January 29, 2018, FINRA accepted a Letter of Acceptance, Waiver and Consent (No. 2015044865501) (the Consent) submitted by William Febbo. FromAugust 2012 to October 2015, Mr. Febbo was the Financial and Operations Principal (FinOp) for a registered broker-dealer, Merriman Capital, Inc.(Merriman). During certain months while Mr. Febbo was FINOP, FINRA found that certain of Merriman’s net capital filings with FINRA were inaccuratebecause of the method by which Merriman calculated net capital and that, when corrected, it was retroactively determined that Merriman had operated belowits minimum net capital requirements. Febbo, as FinOp, signed certain of these reports and was thus held responsible. Based on the Consent, in settlement,Mr. Febbo, who was then no longer registered with any broker-dealer, accepted a fine of $5,000 and a 10-business day suspension from acting as FinOp forany FINRA member. Director Independence The Board of Directors reviews the independence of our directors on the basis of standards adopted by the Nasdaq Stock Market (“Nasdaq”). As a part of thisreview, the Board of Directors considers transactions and relationships between our company, on the one hand, and each director, members of the director’simmediate family, and other entities with which the director is affiliated, on the other hand. The purpose of such a review is to determine which, if any, ofsuch transactions or relationships were inconsistent with a determination that the director is independent under Nasdaq rules. As a result of this review, theBoard of Directors has determined that each of our directors other than Mr. Febbo is an “independent director” within the meaning of applicable Nasdaqlisting standards. 28 Committees of the Board The Board of Directors has three standing committees to facilitate and assist the Board of Directors in the execution of its responsibilities: (1) Nominatingand Governance Committee; (2) Audit Committee and (3) Compensation Committee. Each committee acts pursuant to a written charter adopted by the Boardof Directors. Each committee’s charter is available on our corporate website at http://www.optimizerx.com. (The information contained in our website is notincorporated into this Annual Report on Form 10-K.) All of the committees are comprised solely of non-employee, independent directors as defined byNasdaq market listing standards. Nominating and Governance Committee The Board of Directors has established a Nominating and Governance Committee. In 2018, the Committee was composed of Directors, Archambault,Spangler, and Vos, and is chaired by Director Vos. Director Archambault resigned in December 2018 and is no longer a Director. The Nominating andCorporate Governance Committee held 4 meetings during the fiscal year ended December 31, 2018. In 2019, the committee members are Directors Vos(Chair), Lang, and Halas. The Nominating and Corporate Governance Committee’s responsibilities, which are discussed in detail in its charter, include theresponsibility to: ●Develop qualifications and criteria for selecting and evaluating directors and nominees;●Consider and propose director nominees;●Make recommendations to the Board regarding Board compensation;●Make recommendations to the Board regarding Board committee memberships;●Develop and recommend to the Board corporate governance guidelines;●Facilitate an annual assessment of the performance of the Board and each of its standing committees;●Consider the independence of each director and nominee for director; and●Perform other functions or duties deemed appropriate by the Board. Compensation Committee The Board of Directors has established a Compensation Committee. The Compensation Committee held 4 meetings during the fiscal year ended December31, 2018, and held other informal discussions as needed. The Committee is composed of Directors, Halas, Spangler, and Lang, and is chaired by DirectorLang. The Compensation Committee’s responsibilities, which are discussed in detail in its charter, include the responsibility to: ●In consultation with our senior management, establish our general compensation philosophy and oversee the development and implementation ofour compensation programs;●Recommend the base salary, incentive compensation and any other compensation for our Chief Executive Officer to the Board of Directors andreview and approve the Chief Executive Officer’s recommendations for the compensation of all other officers of our company and its subsidiary;●Administer our incentive and stock-based compensation plans, and discharge the duties imposed on the Compensation Committee by the terms ofthose plans;●Review and approve any severance or termination payments proposed to be made to any current or former officer of our company; and●Perform other functions or duties deemed appropriate by the Board of Directors. Audit Committee The Audit Committee was established in March 2018 and in 2018 was comprised of Directors Archambault, Spangler and Vos, and is chaired by DirectorSpangler. Director Archambault resigned in December 2018 and is no longer a Director. The Audit Committee held four meetings during the fiscal year endedDecember 31, 2018 and held informal discussions as necessary. In 2019, the committee members are Directors Spangler (Chair), Vos, and Halas. The Audit Committee approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issuesrelated to financial reporting. In addition, the Audit Committee reviews the scope and results of the audit with the independent accountants, reviews withmanagement and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considersother auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. 29 For the fiscal year ending December 31, 2018, the Audit Committee: 1.Reviewed and discussed the audited financial statements with management, and2.Reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor's independence. Based upon the Audit Committee’s review and discussion of the matters above, the board of directors authorized inclusion of the audited financial statementsfor the year ended December 31, 2018 to be included in this Annual Report on Form 10-K and filed with the Securities and Exchange Commission. The Board has determined that each member of the Audit Committee qualifies as an audit committee financial expert as defined under applicable SEC rulesand also meets the additional criteria for independence of audit committee members set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934,as amended. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered classof the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equitysecurities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies ofall Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us, nopersons have failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended December 31,2018, other than as set forth in the following information. Director Lang filed a Form 4 two days late due to issues with his SEC filing codes. Code of Ethics In October 2017, the Board of Directors adopted a Code of Ethics for the Company, which was attached to our 2017 Annual Report on Form 10-K as Exhibit14.1. 30 Item 11. Executive Compensation The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended December31, 2018 and 2017. Name and principal position Year Salary($) Bonus ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) Total ($) William J. Febbo (1) 2018 275,000 294,838 336,000 - 17,300 923,138 CEO, Director 2017 250,000 156,937 - - 14,968 421,905 Miriam Paramore (2) 2018 232,500 131,781 70,000 - 11,000 445,281 President 2017 91,667 46,036 - 329,950 24,786 492,430 Terence J. Hamilton (3) 2018 210,000 219,028 70,000 - 12,604 511,632 SVP of Sales 2017 200,000 100,440 - 89,380 10,412 400,232 Douglas P. Baker (4) 2018 220,000 124,696 70,000 - 11,000 425,696 CFO 2017 200,000 95,330 - 134,070 9,794 439,194 Narrative Disclosure to the Summary Compensation Table (1)Amounts reflected in All Other Compensation column for Mr. Febbo in 2018 is composed of $11,000 employer matching contributions to theCompany’s retirement plan, $4,000 for a term life policy, and $2,300 for legal fees. The 2017 amounts are $10,800 employer matching contributionsto the Company’s retirement plan and the balance for legal fees.(2)Amount reflected in All Other Compensation for Ms. Paramore for 2017 reflects $2,200 of employer matching contributions to the Company’sretirement plan and $22,586 paid to her as a consultant prior to her starting employment for the Company. The 2018 amount represents employermatching contributions to the Company’s retirement plan.(3)Amounts reflected in All Other Compensation column for Mr. Hamilton in 2018 is $11,000 employer matching contributions to the Company’sretirement plan and $1,604 of other miscellaneous benefits. The 2017 amount represents employer matching contributions to the Company’sretirement plan.(4)Amounts reflected in All Other Compensation column for Mr. Baker in both years represents employer matching contributions to the Company’sretirement plan. Mr. Febbo joined the Company as CEO on February 22, 2016. On September 10, 2018 Mr. Febbo signed a new employment agreement calling for a basesalary of $275,000 in 2018 and $300,000 in 2019. In addition, he is eligible to participate in the Company’s executive bonus plan with a target bonus of50% of his annual salary. In February 2019, the Board of Directors approved a special discretionary bonus of $100,000 to Mr. Febbo for his performance in2018 and increased his target bonus to 60% of his annual salary for 2019. He is also eligible for vacation, sick days, insurance, to participate in theCompany’s 401k plan, and other benefits covering all employees. Mr. Febbo’s contract also calls for him to be reimbursed $4,000 per year for a separate termlife insurance policy. Mr. Febbo’s contract calls for 12 months of severance if he is terminated without cause. In February 2018, the Board of Directors agreed to accelerate vesting on 100,000 of Mr. Febbo’s options that were originally scheduled to vest on the fifthanniversary of his contract in 2021, by three years, to vest in February 2018. In February 2019, the Board of Directors agreed to accelerate the vesting of theremaining 100,000 unvested options held by Mr. Febbo from February 2020 to February 2019. The Company also granted to Mr. Febbo 80,000 shares of restricted common stock in February 2018 that vest if the Company achieved targeted stretchrevenue goals in either 2018 or 2019. The Company achieved those targeted revenues in 2018, so the shares vested. In February 2019, the Board of Directorsalso granted Mr. Febbo an additional 30,000 shares of restricted common stock if the Company achieves certain targeted stretch revenue goals in 2019. 31 Ms. Paramore joined the Company as President on August 1, 2017. On September 10, 2018 Ms. Paramore signed a new employment agreement calling for abase salary of $250,000. In addition, she is eligible to participate in the Company’s executive bonus plan with a target bonus of 40% of her annual salary.She is also eligible for vacation, sick days, insurance, to participate in the Company’s 401k plan, and other benefits covering all employees. Ms. Paramore’scontract also calls for 12 months of severance if she is terminated without cause. Under the terms of her contract, in 2017, the Company also granted to Ms. Paramore an option to purchase 166,667 shares of common stock, exercisable at aprice of $3.15 per share, and vesting annually over a period of 5 years. Ms. Paramore was also granted 16,667 shares of restricted common stock in February2018 that vest if the Company achieved targeted stretch revenue goals in either 2018 or 2019. The Company achieved those targeted revenues in 2018, sothe shares vested. In February 2019, the Board of Directors also granted Ms. Paramore an additional 10,000 shares of restricted common stock if the Companyachieves certain targeted stretch revenue goals in 2019. On September 10, 2018, Mr. Hamilton’s signed a new employment agreement calling for a base salary of $210,000. In addition, he is eligible to participate inthe Company’s executive bonus plan with a target bonus of 40% of his annual salary. He is also eligible for vacation, sick days, insurance, to participate inthe Company’s 401k plan, and other benefits covering all employees. Mr. Hamilton’s contract also calls for 12 months of severance if he is terminatedwithout cause. In February 2019, Mr. Hamilton signed an amended employment agreement increasing his base salary to $230,000 for 2019 For 2018, Mr. Hamilton also had the opportunity to earn up to $100,000 of additional bonus in excess of the targeted amount, in increments of $20,000, ifthe Company exceeded its revenue targets by certain predefined milestones. The Company exceeded those milestones, so Mr. Hamilton was awarded the full$100,000 special bonus for 2018. In February 2019 Mr. Hamilton was granted to the opportunity to earn an additional $100,000 bonus in 2019 in incrementsof $20,000 if the Company achieves certain stretch revenue goals. Mr. Hamilton was also granted 16,667 shares of restricted stock in February 2018 thatvested if the Company achieves targeted stretch revenue goals in either 2018 or 2019. The Company achieved those targeted revenues in 2018, so the sharesvested. On September 10, 2018, Mr. Baker signed a new employment agreement calling for a base salary of $220,000. In addition, he is eligible to participate in theCompany’s executive bonus plan with a target bonus of 40% of his annual salary. He is also eligible for vacation, sick days, insurance, to participate in theCompany’s 401k plan, and other benefits covering all employees. Mr. Baker’s contract calls for 12 months of severance if he is terminated without cause. InFebruary 2019, Mr. Baker signed an amended employment agreement increasing his base salary to $240,000 for 2019. Mr. Baker was also granted 16,667 shares of restricted common stock in February 2018 that vests if the Company achieves targeted stretch revenue goals ineither 2018 or 2019. The Company achieved those targeted revenues in 2018, so the shares vested. In February 2019, the Board of Directors also granted Mr.Baker an additional 10,000 shares of restricted common stock if the Company achieves certain targeted stretch revenue goals in 2019. For all four executive officers, the executive bonus plan contains a provision whereby each officer could receive a bonus ranging from $0 to $750,000 if achange of control transaction occurs in 2019, depending up on the transaction price. 32 Outstanding Equity Awards at Fiscal Year-End The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officers as ofDecember 31, 2018. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDOPTION AWARDS STOCK AWARDS Name Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable EquityIncentivePlan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#) OptionExercisePrice ($) OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested (#) MarketValue ofShares orUnits ofStock ThatHave NotVested ($) EquityIncentivePlan Awards:Number ofUnearnedShares, Unitsor OtherRights ThatHave NotVested (#) EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares,Units orOtherRightsThatHave NotVested (#) Will Febbo 300,000 200,000 $3.21 02/21/21 MiriamParamore 33,334 133,333 $3.15 07/27/22 DouglasBaker 18,334 - $3.15 05/19/19 33,334 - $3.15 06/24/20 100,001 - $2.46 03/31/22 TerryHamilton 66,667 - $3.45 07/28/21 66,667 - $2.46 03/31/22 Director Compensation The table below summarizes all compensation of our directors as of December 31, 2018: Name Fees Earned orPaid in Cash ($) Stock Awards ($) Option Awards ($) All OtherCompensation($) Total ($) Gus D. Halas 40,625 90,278 - - 130,903 James Lang 30,000 90,278 - - 120,278 Jack Pinney 25,875 87,034 - - 112,909 Patrick Spangler 25,125 80,650 - - 105,775 Lynn Vos 22,500 80,650 - - 103,150 Brian Archambault - - - - - 33 Narrative Disclosure to the Director Compensation Table Pursuant to our Director Compensation Plan, independent directors (“Outside Directors”) shall receive (a) annual cash retainer for Board and Committeeservice as set forth in the table below, payable in equal quarterly installments, and (b) reimbursement for expenses related to Board meeting attendance andany committee participation. Annual Fee ($) Basic Director Fee 25,000 Board Chair 12,500 Audit Committee Chair 5,000 Audit Committee Member 2,500 Compensation Committee Chair 5,000 Compensation Committee Member 2,500 Nominating and Governance Chair 2,500 Nominating and Governance Committee Member 1,000 Directors are expected to attend four meetings per year as well as spend an additional 10 – 20 hours per month on company matters. In addition, OutsideDirectors shall also receive 25,000 shares of Common Stock, payable in equal quarterly installments, which shall vest immediately. Directors that are alsoemployees of our company shall not receive additional compensation for serving on the Board. Both the cash retainer and stock awards are prorated forpartial quarters of service when a new Director joins the Board. Director Bryan Archambault was the designated WPP director and as such was compensated by WPP for Board Service. Director Archambault resigned inDecember 2018 in connection with WPP’s sale of its ownership position in the Company. 34 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. CERTAIN BENEFICIAL OWNERS The following table sets forth the beneficial ownership by each person, other than executive officers and directors, known to us to beneficially own 5% ormore of our outstanding common stock as of March 7, 2019. This information is based on public filings as of March 7, 2019. For the purposes of this AnnualReport on Form 10-K, beneficial ownership of securities is defined in accordance with the rules of the SEC to mean generally the power to vote or dispose ofsecurities, regardless of any economic interest therein, including any such security that the person has the right to acquire within 60 days after such date. More Than 5% Beneficial Owners: Name and Address Common Shares Owned Percentage of Class Common AWM Investment(1) 527 Madison Ave. Suite 2600 New York, NY 10022 1,367,925 11.4%Common Wolverine Flagship FundTrading Limited(2)175 W Jackson Blvd, 3rd FlrChicago, IL 60604 755,821 6.3%Common Harvey L. Poppel(3)110 El MirasolPalm Beach, FL 33480 994,898 8.3%Common Park West Asset Management(6) 900 Larkspur Landing Circle Suite 160 Larkspur, CA 94939 967,448 8.1%Common Ronald L. Chez(4)55 East Monroe Street, Suite 3700Chicago, IL 60603 907,325 7.5%Common Goldman Capital Management(5)767 Third Avenue, 25th FloorNew York, NY 10017 510,798 4.2% (1)As stated in a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2019.(2)As stated in a Schedule 13D filed with the Securities and Exchange Commission on June 20, 2018.(3)As stated in a Schedule 13G filed with the Securities and Exchange Commission on January 10, 2019.(4)As stated in a Schedule 13D/A filed with the Securities and Exchange Commission on October 27, 2015.(5)As stated in a Schedule 13G filed with the Securities and Exchange Commission on October 24, 2014.(6)As stated in a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2019. 35 SECURITY OWNERSHIP OF MANAGEMENT Set forth below is certain information with respect to beneficial ownership of our common stock as of March 7, 2019, by each director, each executive officer,and by the directors and executive officers as a group. Unless otherwise indicated, each person or member of the group listed has sole voting and investmentpower with respect to the shares of common stock listed. Name(1) OptionsIncludedin BeneficialOwnership (2) RestrictedStockAwards (3) CommonSharesOwned Common StockBeneficialOwnership Percentageof Class William J. Febbo 500,000 80,000 18,267 598,267 4.8%Miriam Paramore 33,334 16,667 7,412 57,413 * Terence J. Hamilton 133,334 16,667 124,804 276,805 2.3%Lynn Vos - 15,302 15,302 * Douglas P. Baker 146,669 16,667 31,884 195,220 1.6%Gus D. Halas - 45,924 45,924 * Patrick Spangler - 6,347 6,347 * James Lang - 16,672 16,672 * All Executive Officers and Directors as a group (8 persons) 818,337 130,001 268,6112 1,211,950 9.4% *Less than 1% (1)The address of each person named in this table is c/o OptimizeRx Corp., 400 Water Street, Suite 200, Rochester, MI 48307.(2)This column lists shares that are subject to options exercisable within sixty (60) days of March 7, 2019, and are included in common stock beneficialownership pursuant to Rule 13d-3(d)(1) of the Exchange Act.(3)This column lists shares resulting from restricted stock awards that have vested as of March 7, 2019, but for which shares have not been issued. Item 13. Certain Relationships and Related Transactions, and Director Independence Other than described below or the transactions described under the heading “Executive Compensation” (or with respect to which such information is omittedin accordance with SEC regulations), there have not been, and there is not currently proposed, any transaction or series of similar transactions to which wewere or will be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets atyear-end for the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or anymember of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. During the year ended December 31, 2015, WPP made a strategic investment in the Company and was a shareholder that owns approximately 20% of theshares of the Company at the time. WPP sold its entire ownership position in December 2018, and is no longer a shareholder of the Company. 36 The following table sets forth the activity between the Company and WPP in 2018 and 2017. 2018 2017 Total billings to WPP Agencies $6,217,735 $3,554,168 Revenue recognized from WPP Agencies $6,527,051 $3,696,214 Accounts receivable from WPP Agencies $2,051,532 $1,173,614 Rebates given to WPP Agencies $- $33,249 Marketing services purchased from WPP Agencies $- $54,762 Revenue share expense recorded to WPP Agencies $- $401,596 Revenue share expenses owed to WPP Agencies $- $447,670 On May 9, 2016, we entered into a Corporate Consulting Agreement with our former CEO, David Harrell that set forth the terms of his continued relationshipwith the company and went effective as of June 1, 2016. Under the terms of this agreement Mr. Harrell agreed to consult for our company for a period of 16months and he received a monthly payment of $15,000, with the potential for up to $54,000 in additional bonus payments during the term of the agreement.This agreement also called for insurance benefits for seven months. Finally, the agreement contained a Consultant Confidentiality, Invention Assignment andNon-Compete Agreement that contains restrictive covenants that include a one year non-compete following the completion of Mr. Harrell’s period ofconsulting, and an inventions assignment clause during the term of his consulting relationship. On May 11, 2017, we entered into a Separation and Stock Purchase Agreement with Mr. Harrell pursuant to which we agreed to repurchase from Mr. Harrell166,667 shares of our common stock for aggregate consideration of $390,000, representing a purchase price of $2.34 per share. Also under the agreement, we agreed that the consulting agreement with Mr. Harrell would terminate on July 31, 2017, but that his non-compete agreementwith us shall extend to July 31, 2019. The agreement also stipulated that Mr. Harrell would resign as a member of our board of directors effective June 30,2017. Item 14. Principal Accounting Fees and Services Below are tables of Audit Fees (amounts in US$) billed by our auditors in connection with the audit of the Company’s annual financial statements and reviewof the quarterly financial statements for the years ended: KLJ & Associates, LLP Financial Statements for theYear Ended December 31 Audit Services Audit RelatedFees Tax Fees Other Fees 2018 $- $10,500 $- $ - 2017 $31,000 $- $3,000 $- Sadler Gibb & Associates Financial Statements for theYear Ended December 31 Audit Services Audit RelatedFees Tax Fees Other Fees 2018 $116,430 $14,220 $ - $ - 2017 $20,000 $- $- $- 37 PART IV Item 15. Exhibits, Financial Statements Schedules (a)Financial Statements and Schedules The following financial statements and schedules listed below are included in this Form 10-K.Financial Statements (See Item 8) (b) Exhibits ExhibitNumber Description3.1 Articles of Incorporation of OptimizeRx Corporation (the “Company”)13.2 Amended and Restated Bylaws of the Company23.3 Certificate of Designation, filed on September 5, 2008 with the Secretary of State of the State of Nevada by the Company13.4 Certificate of Designation, filed on June 3, 2010 with the Secretary of State of the State of Nevada by the Company33.5** Certificate of Correction, dated April 30, 20183.6** Certificate of Withdrawal of Certificate of Designation, dated May 10, 201810.1 Separation Agreement, Corporate Consulting Agreement and Confidentiality Agreement between the Company and David Harrell dated May5, 2016410.2 Amended and Restated 2013 Equity Incentive Plan510.3 Amendment to Employment Agreement with Miriam Paramore, dated September 10, 2018610.4 Purchase Agreement, dated May 2, 2018710.5 Registration Rights Agreement, dated May 2, 2018710.6 Stock Purchase Agreement, dated October 17, 2018810.7 Amendment to Employment Agreement with Terry Hamilton, dated February 7, 2019910.8 Amendment to Employment Agreement with Doug Baker, dated February 7, 2019910.9 Amendment to Employment Agreement with William Febbo, dated February 25, 20191014.1 Code of Business Conduct and Ethics1121.1** List of Subsidiaries23.1** Consent of Sadler, Gibb & Associates, LLC**31.1** Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 ofthe Sarbanes-Oxley Act of 200231.2** Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 ofthe Sarbanes-Oxley Act of 200232.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002101** The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 formatted in ExtensibleBusiness Reporting Language (XBRL). 1Incorporated by reference to the Form S-1, filed by the Company with the Securities and Exchange Commission on November 12, 2008.2Incorporated by reference to the Form 8-K, filed by the Company with the Securities and Exchange Commission on July 16, 2010.3Incorporated by reference to the Form 8-K, filed by the Company with the Securities and Exchange Commission on June 11, 2010.4Incorporated by reference to the Form 10-Q, filed by the Company with the Securities and Exchange Commission on May 9, 2016.5Incorporated by reference to the Form 8-K filed by the Company with the Securities and Exchange Commission on March 31, 2016.6Incorporated by reference to the Form 8-K filed by the Company with the Securities and Exchange Commission on September 14, 2018.7Incorporated by reference to the Form 10-Q filed by the Company with the Securities and Exchange Commission on May 2, 2018.8Incorporated by reference to the Form 8-K filed by the Company with the Securities and Exchange Commission on October 17, 2018.9Incorporated by reference to the Form 8-K filed by the Company with the Securities and Exchange Commission on February 7, 2019.10Incorporated by reference to the Form 8-K filed by the Company with the Securities and Exchange Commission on February 26, 2019.11Incorporated by reference to the Form 10-K filed by the Company with the Securities and Exchange Commission on March 8, 2018. **provided herewith 38 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized. OptimizeRx Corporation By:/s/ William J. Febbo William Febbo Chief Executive Officer, Principal Executive Officer March 12, 2019 By:/s/ Douglas P. Baker Douglas P. Baker Title:Chief Financial Officer, Principal Financial Officer andPrincipal Accounting Officer Date:March 12, 2019 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated. By:/s/ William J. Febbo William J. Febbo Title:Director Date:March 12, 2019 By:/s/ James Lang James Lang Title:Director Date:March 12, 2019 By:/s/ Gus D. Halas Gus D. Halas Title:Chairman and Director Date:March 12, 2019 By:/s/ Patrick Spangler Patrick Spangler Title:Director Date:March 12, 2019 By:/s/ Lynn Vos Lynn Vos Title:Director Date:March 12, 2019 39Exhibit 3.5 Exhibit 3.6 Exhibit 21.1 List of Subsidiaries OptimizeRx Corporation, A Michigan Corporation CareSpeak Communications, Inc., a New Jersey Corporation CareSpeak Communications D.O.O., a controlled foreign corporation, located in Croatia. Exhibit 23.1 Registered with the Public CompanyAccounting Oversight Board CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statements on Form S-3 No. 333-228357 and Form S-8 No. 333-210653 of our report datedMarch 12, 2019, with respect to the audited consolidated financial statements of OptimizeRx Corp. and its subsidiaries for the years ended December 31,2018 and 2017 appearing in this Annual Report on Form 10-K of OptimizeRx Corp. for the year ended December 31, 2018. /s/ Sadler, Gibb & Associates, LLC Salt Lake City, UTMarch 12, 2019 Exhibit 31.1 CERTIFICATIONS I, William J. Febbo, certify that; 1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2018 of OptimizeRx Corp (the “registrant”); 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: March 12, 2019 /s/ William J. Febbo By: William J. Febbo Title: Chief Executive Officer, Principal Executive OfficerExhibit 31.2 CERTIFICATIONS I, Douglas P. Baker, certify that; 1.I have reviewed this annual report on Form 10-K for the year ended December 31, 2018 of OptimizeRx Corp (the “registrant”); 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: March 12, 2019 /s/ Douglas P. Baker By: Douglas P. Baker Title: Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER ANDCHIEF FINANCIAL OFFICERPURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual Report of OptimizeRx Corp (the “Company”) on Form 10-K for the year ended December 31, 2018 filed with the Securitiesand Exchange Commission (the “Report”), I, William J. Febbo, Chief Executive Officer of the Company, and I, Douglas P. Baker, certify, pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1.The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the datespresented and the consolidated result of operations of the Company for the periods presented. By:/s/ William J. Febbo Name: William J. Febbo Title:Chief Executive Officer, Principal Executive OfficerDate:March 12, 2019 By:/s/ Doug Baker Name:Doug Baker Title:Chief Financial Officer, Principal Financial Officer andPrincipal Accounting OfficerDate:March 12, 2019 This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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