UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 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, 2020
☐ 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
(State or other jurisdiction of
incorporation or organization)
400 Water Street, Ste. 200
Rochester, MI
(Address of principal executive offices)
26-1265381
(I.R.S. Employer
Identification No.)
48307
(Zip Code)
Registrant’s telephone number: 248-651-6568
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
Common Stock, par value $0.001
Name of each exchange on which registered
Nasdaq Capital Market
Securities registered under Section 12(g) of the Exchange Act:
Title of each class
Common 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
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer
☒ Non-accelerated filer
☐ Accelerated filer
☒ Smaller reporting company
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter. $185,090,055
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 16,806,637 common shares
as of March 3, 2021.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Exhibits, Financial Statement Schedules
PART IV
i
Page
1
6
14
14
14
14
15
17
17
26
27
27
28
36
38
39
40
41
Forward-Looking Statements
PART I
This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and
expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking
statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,”
“would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability
to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our
operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions, legislative/regulatory changes,
availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not be placed on such statements.
Item 1. Business
Overview
OptimizeRx is a digital health company that provides communications solutions for life science companies, physicians and patients. Connecting over half
of healthcare providers in the U.S. and millions of patients through a proprietary network, the OptimizeRx digital health platform helps patients afford and
stay on medications. The platform unlocks new patient and physician touchpoints for life science companies along the patient journey, from point-of-care,
to retail pharmacy, through mobile patient engagement.
2020 Company Highlights
1. Our net revenue increased to a record $43.3 million in 2020, a 76% increase over 2019
2. Our net revenue increased to a record $16.4 million in Q4 2020, up 123% over Q4 2019.
3. We expanded our sales leadership team by a adding a point of care expert and established a strong base for growth in 2021.
4. We launched our TelaRep solution in April and in December, it was recognized as one of the most innovative products for life sciences in 2020 by
PM 360 magazine.
Sales and Marketing Update
Our sales team continues to expand our business with existing and new clients communicating the increased value of our enterprise platform approach. We
are focused on increasing the depth and breadth of our business across existing client product portfolios by maximizing the utilization of our network. We
are expanding our business by providing new solutions and obtaining new clients. Our team is also working on converting current clients from individual
solutions to enterprise platform deals with access to our full set of solutions across our network. These enterprise deals enable us to increase our revenue
per customer, and give us a more predictable and consistent revenue stream.
While our expenditures were down in 2020 due to the global pandemic, we have continued to ramp up our marketing efforts by focusing more heavily on
strategic content with thought leadership in the media and at events, as well as tailoring our solution marketing with an account-based approach. Our
efforts are focused on cementing our image as a strategic partner with our buyers, so we have expanded our panel of thought leadership voices to include
more of our leadership team. They are actively participating as speakers and panelists at industry events, and we have significantly increased our footprint
within earned industry media. Additionally, we hosted a series of webinars featuring industry leaders in 2020 to foster collaboration, and we introduced the
first annual Innovate4Outcomes event, bringing together thought leaders from across the healthcare industry to collaborate on solutions to some of the
toughest challenges facing life sciences and providers.
1
We expanded our attendance and participation at investor conferences in 2020, most on a virtual basis. We have built marketing strategy momentum in
2020 with increased industry visibility that we expect to expand in 2021.
Operational Update
In 2020, we continued to expand our existing network and physician utilization of our partner networks. We continue to work individually with our partners
to improve point-of-care workflow, increase overall revenue derived from each channel and increase coupon utilization by providers who have access. We
are also focused on increasing the number of physicians who have access to our service offerings. In addition to revenue growth provided by new pharma
brands and network partners, we believe there is significant revenue growth potential within existing brands by better utilizing our existing partner
networks and expanding our available solutions.
We also signed agreements with partners that give us access to provide messages directly to consumers.
Technology Update
To support our growth and to further improve the efficiency of our systems, we have moved our core platforms to Amazon Web Services. As a result of our
acquisitions in 2018 and 2019, we now have tech teams based in both Croatia and Israel, in addition to our core team in the U.S., to help develop further
applications throughout the organization.
Principal Solutions and Applications
Our principal solutions 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
staff to access a universe of sample vouchers, co-pay coupons and other patient support options through their EMR and/or e-Prescribe systems. It
allows them to search, print or electronically dispense directly to patients and a national network of pharmacies. Our platform eliminates the need
for physicians to manage and store physical drug samples by offering a more convenient and efficient way to allocate, administer and track
samples and co-pay savings for their patients. Today, nearly 60% of doctor offices ban or limit drug representatives and the samples they offer.
While samples are still valuable, our solution addresses the fact that many healthcare systems and doctors are looking for an easier, more effective
way to increase affordable access and adherence to their prescribed branded medications.
● Brand and Therapeutic Support Messaging – Our brand messaging services include a variety of brand awareness and therapeutic support
messaging services that can be tailored to meet the needs of a brand. These messages can include brand awareness messages, reminder ads,
therapeutic support messages and unbranded messages that can be targeted by specialty, diagnostic code and other criteria. Brand messaging is
highly complementary to our core financial messaging solution. Historically, we have sold brand messaging based on specific solutions offered by
our Electronic Health Record (“EHR”) partners, but we have developed our own proprietary banner messaging system, rolled this solution out in
2017, and expanded it since then. We also developed our own therapeutic support messaging system 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, and
implementing new eRx media strategies for promoting their solutions. Our services include: 1) Drug File Integration - a service designed to better
insure that manufacturers’ drugs are present in every ePrescribing platform available; 2) Sales Force Training – a service to educate the extended
field 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 of
this new digital frontier. Currently, this activity results in less than 10% of our revenue, but represents a significant growth opportunity for us.
2
● Patient Engagement – Our patient engagement activities arose out of our acquisition of CareSpeak Communications in October 2018, followed by
our acquisition of RMDY Health in 2019. Our technology solution provides digital messaging services through our cloud based Mobile Health
Messenger (“MHM”) Platform. We provide interactive health messaging for improved medication adherence and care coordination. Our HIPAA-
compliant, automated, mobile messaging platform allows pharmaceutical manufactures and related entities to directly engage with patients to
improve regimen compliance. We also deliver patient programs with treatment and affordability information, lifestyle and condition trackers,
Internet device connectivity, forms and surveys, with this all supported by a wide range of communication capabilities delivered via chat, bots,
audio and telehealth. We enable this functionality for our customers, with our solutions delivering a variety of intervention mechanisms that help
treat chronic conditions, such as diabetes and heart disease.
Competition
Our core platform competes in the highly competitive pharmaceutical and life sciences digital marketing industry that is dominated by large well-known
companies with established names, solid market niches, wide arrays of product offerings and marketing networks. Our messaging offerings compete for
pharmaceutical budgets with a variety of other forms of advertising and promotion.
We have a growing list of potential partners whom either have content that they want to deliver through our distribution engine and network, or have
complementary technology and want to integrate our solution as a channel partner and thereby increase their reach to clinicians. The primary direct
competitor in our space of the market is ConnectiveRx. However, we believe our breadth of brands offered, extensive list of pharmaceutical clients, and the
vast reach of our network 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
development efforts. The awarded claims cover our ability to electronically process, display and distribute eligible prescription savings on the medications
and therapies healthcare 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 also have other patent applications submitted in various stages of
review.
We use a nationally ranked intellectual property law firm to further expand and protect our intellectual property. We believe our current and expanding IP
will allow us to continue being the leader in this rapidly growing space. We stand ready to prepare additional filings, as necessary, to protect our intellectual
property on any forthcoming solutions that will further assist and support physicians, pharmacists and patients.
OPTIMIZERx, CareSpeak, RMDY Wellness Layers, Diet Watch, and SampleMD are our licensed trademarks.
3
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 providing
remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the furnishing, arranging for or recommending a
good or service for which payment may be made in whole or part under a federal healthcare program such as Medicare or Medicaid. The definition of
remuneration 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 one
purpose of an arrangement involving remuneration is to induce referrals or otherwise generate business involving goods or services reimbursed in whole or
in part under federal healthcare programs, the statute has been violated. The law contains a few statutory exceptions, including payments to bona fide
employees, certain discounts and certain payments to group purchasing organizations. Violations can result in significant penalties, imprisonment and
exclusion from Medicare, Medicaid and other federal healthcare programs. Exclusion of a manufacturer would preclude any federal healthcare program
from paying for its products. In addition, kickback arrangements can provide the basis for an action under the Federal False Claims Act, which is discussed
in more detail below. The Anti-Kickback Statute is broad and potentially prohibits many arrangements and practices that are lawful in businesses outside of
the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements, the
Office of Inspector General of Health and Human Services, or OIG, issued a series of regulations, known as the safe harbors, beginning in July 1991. These
safe harbors set forth provisions that, if all the applicable requirements are met, will assure healthcare providers and other parties that they will not be
prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not
necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable
safe harbor may result in increased scrutiny by government enforcement authorities such as the OIG. Arrangements that implicate the Anti-Kickback Law,
and that do not fall within a safe harbor, are analyzed by the OIG on a case-by-case basis. Government officials have focused recent enforcement efforts on,
among other things, the sales and marketing activities of healthcare companies, and recently have brought cases against individuals or entities with
personnel who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business. Settlements of these cases
by healthcare companies have involved significant fines and/or penalties and in some instances criminal pleas. In addition to the Federal Anti-Kickback
Statute, many states have their own kickback laws. Often, these laws closely follow the language of the federal law, although they do not always have the
same exceptions or safe harbors. In some states, these anti-kickback laws apply with respect to all payors, including commercial health insurance
companies.
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
or knowingly 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 do not submit claims to the government, if they are found to have caused submission of false claims. The Federal Civil False Claims Act also includes
whistle blower 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
any monetary recovery. Many of the recent highly publicized settlements in the healthcare industry related to sales and marketing practices have been cases
brought 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
and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and
state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines
and imprisonment.
4
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 as
covered entities, to comply with established standards, including standards regarding the privacy and security of protected health information, or PHI.
HIPAA further requires that covered entities enter into agreements meeting certain regulatory requirements with their business associates, as such term is
defined by HIPAA, which, among other things, obligate the business associates to safeguard the covered entity’s PHI against improper use and disclosure.
While not directly regulated by HIPAA, our customers or distributors might face significant contractual liability pursuant to such an agreement if the
business associate breaches the agreement or causes the covered entity to fail to comply with HIPAA. It is possible that HIPPA compliance could become a
substantial regulatory 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, 2020, we had 57 full-time employees in the U.S, as well as 14 full-time international employees. None of our employees are
represented by a labor union with respect to their employment with us. We have not experienced any work stoppages, and we consider our relations with
our employees to be good.
Subsidiaries
We conduct our operations through our wholly-owned subsidiaries, OptimizeRx Corporation, a Michigan corporation, CareSpeak Communications, Inc., a
New Jersey corporation, CareSpeak Communications, D.O.O, a controlled foreign corporation incorporated in Croatia, RMDY Health, Inc. a Delaware
corporation, and Cyberdiet, a controlled foreign corporation incorporated in Israel.
Recent developments
In March 2021, our Board of Directors amended the 2013 Incentive Plan to increase the number of shares authorized under the Plan to 6,000.000 shares.
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 for the full year of 2018 and in the fourth quarter of 2020, since the inception of our business we have historically incurred losses
as a result of investing in growth. We incurred losses in 2019 and 2020 as a result of our increased spending to invest in growth – both through additional
new hires, as well as through the acquisition of RMDY. While we have increased revenues significantly, we have not yet consistently achieved profitability
due to significant investments in our growth, and non-cash expenses. Our ability to achieve consistent profitability depends on our ability to generate sales
through our technology platform and advertising model, while maintaining reasonable expense levels. If we do not achieve sustainable profitability, it may
impact our ability to continue our operations.
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 qualified
individuals to replace management or other key technical personnel in the event of death, disability or resignation, thus frustrating our ability to implement
our 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 of
qualified professionals. Our ability to meet our business development objectives will depend in part on our ability to recruit, train and retain top quality
people with advanced skills who understand our technology and business. If we are unable to engage and retain the necessary personnel, our business may
be materially and adversely affected.
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, medical device manufacturers, medtech, associations, and other companies. 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 less than 50 customers, primarily large pharmaceutical manufacturers. Loss of one or more of our larger customers could
have a negative impact on our operating results. In both 2020 and 2019, we had three customers that each represented slightly over 10% of our revenues;
however only one customer represented over 10% of our revenues in both years.
We may be unable to support our technology to further scale our operations successfully.
Our plan is to grow rapidly through further integration of our technology in electronic platforms. Our growth will place significant demands on our
management and technology development, as well as our financial, administrative and other resources. We cannot guarantee that any of the systems,
procedures and controls we put in place will be adequate to support the commercialization of our operations. Our operating results will depend substantially
on the ability of our officers and key employees to manage changing business conditions and to implement and improve our financial, administrative and
other resources. If we are unable to respond to and manage changing business conditions, or the scale of our solutions, services and operations, then the
quality of our services, our ability to retain key personnel and our business could be harmed.
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 and electronic health record systems to generate our revenues received from
customers 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 their
contract 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 to
lengthy 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 such
arrangement; and
● A partner could terminate the partnership arrangement, which could negatively impact our ability to sell our solutions and achieve revenues.
We will need to maintain these relationships as well as diversify them. The inability to do so could adversely impact our business. We generated 52.7% and
37.4% of our revenue through our largest partner in 2020 and 2019, respectively.
Our agreements with electronic prescription platforms and electronic health record systems are subject to audit.
Our agreements with our partners provide for revenue sharing payments to the platform partners based on the revenue we generate through the platform.
These payments are subject to audit by our partners, at their cost, and if there is a dispute as to the calculation, we may be liable for additional payments. If
an underpayment is determined to be in excess of a certain amount, for example 10%, some agreements would require us to pay for the cost of the audit, as
well.
Developing and implementing new and updated applications, features and services for our portals may be more difficult than expected, may take longer
and cost more than expected and may not result in sufficient increases in revenue to justify the costs.
Attracting and retaining users of our portals requires us to continue to improve the technology underlying those portals and to continue to develop new and
updated applications, features and services for those portals. If we are unable to do so on a timely basis or if we are unable to implement new applications,
features and services without disruption to our existing ones, we may lose potential users and clients. The costs of development of these enhancements may
negatively impact our ability to achieve profitability.
We rely on a combination of internal development, strategic relationships, licensing and acquisitions to develop our portals and related applications,
features and services. Our development and/or implementation of new technologies, applications, features and services may cost more than expected, may
take longer than originally expected, may require more testing than originally anticipated and may require the acquisition of additional personnel and other
resources. There can be no assurance that the revenue opportunities from any new or updated technologies, applications, features or services will justify the
amounts spent.
If we are unable to adhere to the regulatory and competitive climate in which we operate, we could be materially and negatively impacted.
Due to the labyrinth of regulations in healthcare space, state and federal, as well as political sensitivity of healthcare delivery, our business model could be
negatively impacted or fail.
7
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.
We compete for users with online services and websites that provide savings on medications and healthcare products, including both commercial
sites and not-for-profit sites. We compete for advertisers and sponsors with: health-related web sites; general purpose consumer web sites that
offer specialized health sub-channels; other high-traffic web sites that include both healthcare-related and non-healthcare-related content and
services; search engines that provide specialized health searches; and advertising networks that aggregate traffic from multiple sites.
● Our healthcare provider portals compete with: providers of healthcare decision-support tools and online health management applications; wellness
and disease management vendors; and health information services and health management offerings of healthcare benefits companies and their
affiliates.
Many of our competitors have greater financial, technical, product development, marketing and other resources than we do. These organizations may be
better known than we are and have more customers or users than we do. We cannot provide assurance that we will be able to compete successfully against
these organizations or any alliances they have formed or may form. Since there are no substantial barriers to entry into the markets in which our public
portals participate, we expect that competitors will continue to enter these markets.
Developments in the healthcare industry could adversely affect our business.
Most of our revenue is derived from the healthcare industry and could be affected by changes affecting healthcare spending. We are particularly dependent
on pharmaceutical, biotechnology and medical device companies for our advertising and sponsorship revenue.
General reductions in expenditures by healthcare industry participants could result from, among other things:
● Government regulation or private initiatives that affect the manner in which healthcare providers interact with patients, payers or other healthcare
industry participants, including changes in pricing or means of delivery of healthcare products and services;
● Government regulation prohibiting the use of coupons by patients covered by federally funded health insurance programs;
● Consolidation of healthcare industry participants;
● Reductions or changes in governmental funding for healthcare;
● Adverse changes in business or economic conditions affecting healthcare payers or providers, pharmaceutical, biotechnology or medical device
companies or other healthcare industry participants; and
● A move to a single-payer healthcare system in the U.S.
Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending
in some or all of the specific market segments that we serve or are planning to serve. For example, use of our solutions and services could be affected by:
● Changes in the design of health insurance plans;
8
● 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 private
initiatives 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
plans with respect to solutions and services of the types we provide.
The healthcare industry has changed significantly in recent years and we expect that significant changes will continue to occur. However, the timing and
impact of developments in the healthcare industry are difficult to predict. We cannot assure you that the markets for our solutions and services will continue
to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those markets.
Future acquisitions may adversely affect our financial condition.
While we currently do not have any immediate arrangements, commitments or understandings regarding any future acquisitions, as part of our strategy for
growth, we may continue to explore acquisitions or strategic alliances, which may not be completed or may not be ultimately beneficial to us. Acquisitions
may pose risks to our operations, including:
● problems and increased costs in connection with the integration of the personnel, operations, technologies, or products of the acquired businesses;
● unanticipated costs;
● failure to achieve anticipated increases in revenues and profitability;
● diversion of management’s attention from our core business;
● adverse effects on business relationships with suppliers and customers and those of the acquired company;
● acquired assets becoming impaired as a result of technical advancements or worse-than-expected performance by the acquired company;
● volatility associated with accounting for earn-outs in a given transaction;
● entering markets in which we have no, or limited, prior experience; and
● adversely affecting our internal control over financial reporting before the acquiree’s complete integration into our control environment.
In addition, in connection with any acquisitions or investments we could:
● issue stock that would dilute our existing shareholders’ ownership percentages;
● incur debt and assume liabilities;
● obtain financing on unfavorable terms, or not be able to obtain financing on any terms at all;
● incur amortization expenses related to acquired intangible assets or incur large and immediate write-offs; and
● reduce the cash that would otherwise be available to fund operations or for other purposes.
9
The failure to successfully integrate any acquisitions in an efficient or timely manner may negatively impact our financial condition and operating results,
or we may not be able to fully realize anticipated savings. In addition, our competitors could try to emulate our acquisition strategy, leading to greater
competition for scarce acquisition targets and could lead to larger competitors if they succeed in emulating our strategy.
The global pandemic may disrupt our business or the business of our customers.
In December 2019, a novel strain of corona virus, which causes the infectious disease known as COVID-19 was reported. The World Health Organization
declared COVID-19 a Public Health Emergency and Global Pandemic. COVID-19 has severely impacted economies around the world. We have taken
steps to mitigate the impact on us, but there can be no assurance that such steps will be successful, or that our business operations, or the operations of our
customers will not be materially and adversely affected by the consequences of the pandemic. This could materially impact our results of operations, cash
flows, and financial condition.
A material weakness in our internal control over financial reporting, if not remediated, could result in material misstatements in our financial
statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended. A material weakness (as defined in Rule 12b-2) is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be
prevented or detected on a timely basis. We have had material weaknesses in the past that have been remediated as of December 31, 2020. There is no
guarantee that material weakness could not arise in the future. If additional material weaknesses were to be identified, it could result in our consolidated
financial statements containing material misstatements in the future.
Our success is dependent in part on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary
rights 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 competitive
advantage to us. Because patent applications in the United States are maintained in secrecy until either the patent application is published, or a patent is
issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our solutions that may block our use of
our intellectual property or may be used in third-party products that compete with our solutions and processes. In the event a competitor or other party
successfully challenges our solutions, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incur
substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual
property at issue, any of which could have a material adverse effect on our business, operating results and financial condition.
We also rely substantially on trade secrets, proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect our
technology, application, design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect our
competitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual agreements for our business will
be adequate, that our competitors will not independently develop or patent substantially equivalent or superior technologies or be able to design around
patents that we may receive, or that our intellectual property will not be misappropriated.
We could be subject to economic, political, regulatory and other risks arising from our international operations.
Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks
that may be different from and incremental to those in the United States. In addition to the risks that we face in the United States, our international
operations, as a result of our acquisitions in 2018 and 2019 wherein we now operate in Israel and Croatia, may involve risks that could adversely affect our
business, including:
● the need to adapt our content and user interfaces for specific cultural and language differences;
● difficulties and costs associated with staffing and managing foreign operations;
10
● management distraction;
● natural or man-made disasters, political, social and economic instability, including wars, terrorism and political unrest, outbreak of disease (such
as the recent outbreak of the novel coronavirus, or COVID-19), boycotts, curtailment of trade, and other business restrictions;
● compliance with United States laws, such as the Foreign Corrupt Practices Act, export controls and economic sanctions, and local laws prohibiting
corrupt payments to government officials;
● unexpected changes in regulatory requirements;
● less favorable foreign intellectual property laws;
● adverse tax consequences such as those related to repatriation of cash from foreign jurisdictions into the United States, non-income related taxes
such as value-added tax or other indirect taxes, changes in tax laws or their interpretations, or the application of judgment in determining our
global provision for income taxes and other tax liabilities given inter-company transactions and calculations where the ultimate tax determination
is uncertain;
● fluctuations in currency exchange rates, which could impact revenues and expenses of our international operations and expose us to foreign
currency exchange rate risk;
● profit repatriation and other restrictions on the transfer of funds;
● differing payment processing systems as well as consumer use and acceptance of electronic payment methods, such as payment cards;
● new and different sources of competition;
● different and more stringent user protection, data protection, privacy and other laws; and
● availability of reliable broadband connectivity and wide area networks in targeted areas for expansion.
Our failure to manage any of these risks successfully could harm our international operations and our overall business, as well as results of our operations.
Our business will suffer if our network systems fail or become unavailable.
A reduction in the performance, reliability and availability of our network infrastructure would harm our ability to distribute our solutions to our users, as
well as our reputation and ability to attract and retain customers. Our systems and operations could be damaged or interrupted by fire, flood, power loss,
telecommunications failure, Internet breakdown, earthquake and similar events. Our systems could also be subject to viruses, break-ins, sabotage, acts of
terrorism, acts of vandalism, hacking, cyber-terrorism and similar misconduct. We might not carry adequate business interruption insurance to compensate
us for losses that may occur from a system outage. Any system error or failure that causes interruption in availability of our solutions or an increase in
response time could result in a loss of potential customers, which could have a material adverse effect on our business, financial condition and results of
operations. If we suffer sustained or repeated interruptions, then our solutions and services could be less attractive to our users and our business would be
materially harmed.
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
depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage
personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our
business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer
demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our
solutions. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our
operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current
or potential customers.
11
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 of
investors and the oversight of companies whose securities are publicly traded. These entities have continued to develop additional regulations and
requirements 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 and administrative costs and a diversion of management time and attention from revenue
generating and other business activities to compliance activities.
Risks Relating to Our Securities
If a market for our common stock is not maintained, shareholders may be unable to sell their shares.
Our common stock is traded under the symbol “OPRX” on the Nasdaq Capital Market. We do not currently have a consistent active trading market. There
can be no assurance that a consistent active and liquid trading market will develop or, if developed, that it will be sustained.
Historically, our securities have been thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the
value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major
fluctuations in the price of the stock.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which
are beyond our control.
Our stock price is subject to a number of factors, including:
● Technological innovations or new solutions and services by us or our competitors;
● Government regulation of our solutions and services;
● The establishment of partnerships with other healthcare companies;
● Intellectual property disputes;
● Additions or departures of key personnel;
● Sales of our common stock;
● Our ability to integrate operations, technology, solutions, 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 price
and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.
12
We do not expect to pay dividends in the foreseeable future and any return on investment may be limited to the value of our common stock.
We do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on
earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. If we do not
pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
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 or
officers 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
limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. Specifically,
Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders or creditors
for any damages 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 to act 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 or a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their potential
liability for monetary damages 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 against our 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 from and 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 an action against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the
lawsuit and any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed
financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely affect prevailing market
prices for our common stock.
13
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 have operating leases with terms greater than 12 months for office space in three multitenant facilities. The lease on our headquarters space in
Rochester, Michigan expires November 30, 2022, with a three-year renewal option through 2025, with monthly rent payable at rates ranging from $6,384 to
$6,688. We have assumed renewal of the lease. We also have a lease on office space in Cranbury, New Jersey, expiring in 2022 with monthly payments
ranging from $3,008 to $3,158, as well as a lease of approximately $1,883 per month in Zagreb, Croatia expiring in 2022. We also lease minor amounts of
space in shared space facilities on a month to month basis as necessary.
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.
14
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
Market Information
Our common stock is traded under the symbol “OPRX” on the Nasdaq Capital Market.
Holders of Our Common Stock
As of March 3, 2021, we had 16,806,637 shares of our common stock issued and outstanding, held by approximately 400 shareholders of record at our
transfer agent, with approximately 7,000 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
we do 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
time to 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, do
prohibit 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 who
have preferential rights superior to those receiving the distribution.
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 best
available personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and to
promote our success. As of December 31, 2020, under the Plan, as amended, we are currently able to issue up to an aggregate total of 3,000,000 incentive
or non-qualified options to purchase our common stock, stock awards and other offerings. In March 2021, our Board of Directors amended the Plan to
increase the number of shares authorized under the plan to 6,000,000 shares.
15
Equity Compensation Plans as of December 31, 2020
Equity Compensation Plans Approved by the Shareholders
2013 Equity Compensation Plan - Options
2013 Equity Compensation Plan – Restricted Stock Awards
Total
Recent Sales of Unregistered Securities
Number
of Securities to
be issued upon
exercise
of outstanding
options or
restricted stock
awards
Weighted-
average
exercise
price of
outstanding
options
Number of
Securities
remaining
available
for future
issuance
under
equity
compensation
plans
1,545,518 $
100,000
1,645,518 $
7.31
N/A
N/A
N/A
N/A
299,461
The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period
which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
In December 2020, we issued 4,010 shares of restricted common stock to our outside Directors as part of our director compensation package for services
rendered in Q4 2020.
From October through December 2020, we issued 125,918 shares of common stock and received proceeds of $1,156,314 in connection with the exercise of
options.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention
to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an
informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates
with the appropriate restrictive legend affixed to the restricted stock.
16
Item 6. Selected Financial Data
Not required under Regulation S-K for “smaller reporting companies.”
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a pioneering digital health company that provides healthcare communications solutions for life science companies to connect and deliver relevant
information to healthcare providers and patients. As the largest digital health network of its kind, the OptimizeRx platform bridges the communication gap
that exists between key stakeholders in healthcare, including pharmaceutical companies, payers, hospitals, physicians, and patients, providing patient
affordability, access, and adherence directly at the point of care through EHRs and e-prescribing systems.
Historically, our revenue was generated primarily through the facilitation of financial messages to health care providers via their EHR and ePrescribe
systems using the OptimizeRx proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives and
healthcare providers that have presented in the rapidly changing healthcare industry. Over time, as the demand for communication of an increasing variety
of different health information between life science companies, providers, and patients continues to rise, our platform has expanded over the years to
encompass additional solutions that enable healthcare providers to access information for patients at the point of care. These solutions include brand
messaging, therapeutic support messaging, brand support, and innovative patient engagement services, all of which now make up a significant portion of
our total revenue.
Our strategic focus remains on growing our existing client base and generating greater and more consistent revenues in part through our continued shift in
our business model toward enterprise level engagements with recurring revenue streams, while also broadening our platform with innovative proprietary
solutions such as our TelaRep™ virtual communication solution and our AI-powered real-world evidence solution which uses sophisticated proprietary
algorithms to derive additional revenue from our existing network. In addition, we have continued to expand our team in preparation for future growth
aspirations, which may be supplemented with future acquisitions and other strategic collaborations and investments to further solidify our market
dominance in this space.
Our strategy for driving revenue growth is also expected to work in tandem with our efforts to increase margin and profitability through the use of the
aforementioned recurring revenue models that have inherently higher margins.
Additionally, as the business continues to scale, operating expenses are expected to remain relatively consistent given the nature of the Company’s business
model, further driving profitability.
The following discussion includes an analysis and comparison of the Company’s 2020 and 2019 fiscal year results of operations, liquidity and capital
resources, and critical accounting policies.
COVID-19 Business Update
During the COVID-19 pandemic, we have remained focused on being a leading provider of digital health solutions to life science companies and
connecting healthcare providers and patients along the entire patient journey, while simultaneously expanding our client base, increasing our network of
partners, and maintaining the safety of our employees.
The COVID-19 pandemic has created unprecedented challenges in the healthcare industry which has significantly increased the demand for unique
solutions ranging from access to accurate and timely information to increasing the accessibility of medications and care management. In March 2020,
shortly after the World Health Organization (WHO) declared COVID-19 a global pandemic, we launched a free interactive text message alert program
available to the general public that delivers current, relevant coronavirus information issued by the Centers for Disease Control and Prevention (CDC)
directly to any SMS-enabled mobile device. In April 2020, we launched our TelaRep communications solution to connect life science companies and
healthcare providers treating patients with specialty drug therapies in an environment facing a critical communication gap with restricted face-to-face
interactions. We also leveraged our digital platform to provide telehealth capabilities for healthcare providers to adapt to COVID-19 restrictions.
17
During the beginning of the pandemic and onward, we transitioned our global workforce to working remotely in an effort to maintain the health and safety
of our employees. Governments of cities, states, and countries globally have imposed restrictions on travel and business operations, which has curtailed
various means of performing business and marketing activities such as the attending of health IT conferences. We have been able to continue to achieve our
goals by leveraging innovative technology and existing resources while shifting strategies where necessary in areas such as sales and marketing. As a result
of these practices and initiatives, remote work arrangements and travel restrictions have not had any adverse effects on our ability to maintain operations or
achieve our goals. In addition, we have implemented health and safety policies in our offices to enable our employees to safely return to traditional working
arrangements should it become feasible.
The COVID-19 pandemic did not have an adverse impact on our financial condition and results of operations in 2020, and we currently do not expect the
results of future operations and our near-and-long-term financial position and growth prospects to be negatively impacted by the pandemic given the nature
of the business and the increased demand for digital health solutions. We reported record year over year and quarterly net revenue results in 2020, and we
believe that the markets in which we compete will remain favorable. Additionally, there has been no impact on the accessibility or terms of acquiring
capital; we completed a public offering of common stock in February of 2021.
Information pertaining to risk factors as it relates to the COVID-19 pandemic can be found in Item 1A. Risk Factors.
Results of Operations for the Years Ended December 31, 2020 and 2019
Net Revenue
Our net revenue for the year ended December 31, 2020 was approximately $43.3 million, an increase of 76% from the year ended December 31, 2019. This
increase resulted from a combination of factors, including the shift to enterprise contracts, increased pharmaceutical brands, an increased distribution
network, strong growth in our brand messaging solution, and our acquisition of RMDY Health in late 2019. We expect continued strong revenue growth in
2021 as a result of the foundations laid in 2019 and 2020.
Because the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number of
companies. We have approximately 50 pharmaceutical companies as customers. We have focused our efforts on expanding our customer base and through
our acquisitions, have added medical device manufactures, payers, associations and other entities. In both 2020 and 2019, we had three customers that each
represented slightly over 10% of our revenues, however only one customer exceeded 10% of revenues in both years.
Cost of Revenues
Our total cost of revenues, composed primarily of revenue share expense, increased in the year ended December 31, 2020 compared to the year ended
December 31, 2019 due to the increase in revenues. Our cost of revenues as a percentage of revenue increased from approximately 37% in the year ended
December 31, 2019 to approximately 44% in the year ended December 31, 2020.
This increase in our cost of revenues as a percentage of revenue resulted primarily from solution mix, specifically the increase in our core messaging
revenues that have higher revenue share percentages.
18
Gross Margin
Our gross margin, which is simply the difference between our revenues and our cost of revenues, discussed above, increased from 2019 to 2020 as a result
of the increased revenue. In addition, our gross margin percentage decreased from approximately 63% in 2019 to 56% in 2020 for the reasons discussed
above in the cost of revenues section. We expect our margins to remain in the 56% to 58% range in 2021.
Operating Expenses
Operating expenses increased to approximately $26.2 million for the year ended December 31, 2020, from approximately $19.1 million for the year ended
December 31, 2019, an increase of approximately 37%. The detail by major category is reflected in the table below. Certain 2019 expenses were
reclassified in the table to be comparable to the 2020 presentation.
Salaries, Wages and Benefits
Professional Fees
Acquisition Related Costs
Board Compensation
Investor Relations
Consultants
Advertising and Promotion
Depreciation and Amortization
Research, Development, and Maintenance
Integration Incentives
Office, Facility and Other
Travel
Subtotal
Stock-based Compensation
Total Operating Expense
$
Years Ended December 31
2020
2019
14,538,570 $
1,312,395
-
225,250
132,652
1,053,424
615,923
2,075,888
1,081,137
811,131
932,253
289,277
8,681,042
850,086
799,623
137,000
105,639
425,885
709,006
1,282,786
2,282,143
208,855
695,493
695,283
23,067,900
16,872,841
3,172,840
2,260,298
$
26,240,740 $
19,133,139
The main drivers for the overall increase in operating expenses in 2020 was our focus on staffing and scaling our company to foster, and be able to support,
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 in 2019 and 2020, including related benefits. During 2019, we hired a chief commercial officer, a chief technology officer, five new salespeople, a
human resources manager, as well as other administrative positions at various times throughout the year. We also added 14 employees as a result of our
RMDY acquisition in October 2019. These 2019 additions were there for the entire year in 2020. During 2020, we added to our staff in several key areas,
including a head of product development, additional sales people, and additional IT people, among others. We expect our compensation expense to increase
in 2021, but at a much lower rate than in 2020.
Professional fees increased primarily because of costs associated with our audit, as a result of our change to a larger, national firm, as well as increased
legal costs due to the increased complexity of our contracts. In addition, we incurred costs related to the finalization of our RMDY earnout.
19
Acquisition costs are related to our acquisition of RMDY Health in 2019. These costs include investment banker fees, legal and accounting due diligence,
audit costs associated with RMDY, valuation experts for the purchase price allocation, and other miscellaneous costs.
Board compensation increased slightly from 2019 to 2020 due to both an increase in the size of our board as well as a revision of the board compensation
structure to pay a larger portion in cash and a smaller portion in stock. This represents only the cash portion.
The cost of consultants increased from 2019 to 2020. The primary reason for the increase was related to consultants used in the IT area, primarily in the
patient engagement area, resulting from a full year of activity from the former RMDY Health business as opposed to a partial year in 2019.
Our advertising and promotion costs decreased significantly from 2019 to 2020 as a result of a reduction in the sponsorship of, and attendance at,
conferences as a result of the global pandemic.
Expenses related to research, development, management, and maintenance of our technology decreased in 2020 to more normal levels, as 2019 included
significant nonrecurring research projects.
Integration incentives and exclusivity fees, which are fees paid to accelerate access to new partners and payments for exclusivity, increased in 2020, as we
signed more contracts and contracts with larger payments related to 2020.
Depreciation and amortization increased significantly in 2020 from the 2019 levels. The increased amortization resulting from the acquisition of RMDY
Health, and the resulting intangible assets were amortized for a full year in 2020 as opposed to only part of the fourth quarter in 2019. We expect
depreciation and amortization expense in 2021 to be similar to 2020 levels.
Office, facility, and other costs increased from 2019 to 2020. The main reason for the change related to a higher level of activity with more employees.
Stock based compensation increased by approximately $900,000 from $2.3 million in 2019 to $3.2 million in 2020 primarily because of more employees
and an increase in our stock price. There is a relationship between the price of the stock at the time of the option grant and the value of the option, resulting
in a higher cost when the stock price is higher.
Net Loss
We finished the year ended December 31, 2020 with a net loss of approximately $2.2 million, as compared to a net loss of approximately $3.1 million
during the year ended December 31, 2019. The reasons for specific components are discussed above. Overall, we had an increase in revenue and gross
margin partially offset by increased operating expenses to support future growth. In addition, the income in both periods included significant noncash
items. We had approximately $3.5 million in noncash operating expenses in 2019 and approximately $5.2 million in noncash operating expenses in 2020.
20
Quarterly Financial Information
Following is a table of our quarterly operating results for 2020 for information purposes.
Revenues
Cost of revenues
Gross Profit
Operating Expenses
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total Year
$
7,584,602 $
8,783,230 $
10,519,191 $
16,426,301 $
43,313,324
3,241,763
3,639,016
4,504,844
7,822,280
19,207,903
4,342,839
5,144,214
6,014,347
8,604,021
24,105,421
6,602,091
6,200,027
6,191,069
7,247,553
26,240,740
Income (Loss) from Operations
(2,259,252)
(1,055,813)
(176,722)
1,356,468
(2,135,319)
Other income (expense)
55,321
(21,655)
(106,172)
698
(71,808)
Income (loss) before Taxes
(2,203,931)
(1,077,468)
(282,894)
1,357,166
(2,207,127)
Income tax benefit
Net Income (Loss)
Earnings (loss) per share
Basic
Diluted
-
-
-
-
-
(2,203,931)
(1,077,468)
(282,894)
1,357,166
(2,207,127)
$
$
(0.15) $
(0.15) $
(0.07) $
(0.07) $
(0.02) $
(0.02) $
0.09 $
0.08 $
(0.15)
(0.15)
Sum of four quarterly per share amounts does not equal annual total due to rounding and the mechanics of the weighted average shares outstanding
calculation.
21
Following is a table of our quarterly operating results for 2019 for information purposes.
Revenues
Cost of revenues
Gross Profit
Operating Expenses
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total Year
$
5,209,434 $
7,006,291 $
5,002,767 $
7,379,782 $
24,598,274
1,583,480
2,687,143
1,981,143
2,906,933
9,158,699
3,625,954
4,319,148
3,021,624
4,472,849
15,439,575
3,493,789
3,839,105
5,008,934
6,791,311
19,133,139
Income (Loss) from Operations
132,165
480,043
(1,987,310)
(2,318,462)
(3,693,564)
Other income (expense)
Income (loss) before Taxes
Income tax benefit
Net Income (Loss)
Earnings (loss) per share
Basic
Diluted
Liquidity and Capital Resources
(125,636)
(73,426)
416,368
(564,278)
(346,972)
6,529
406,617
(1,570,942)
(2,882,740)
(4,040,536)
-
-
-
897,960
897,960
6,529
406,617
(1,570,942)
(1,984,780)
(3,142,576)
$
$
0.00 $
0.00 $
0.03 $
0.03 $
(0.11) $
(0.11) $
(0.14) $
(0.14) $
(0.23)
(0.23)
As of December 31, 2020, we had total current assets of approximately $32.9 million, compared with current liabilities of approximately $10.0 million,
resulting in working capital of approximately $22.9 million and a current ratio of approximately 3.3 to 1. This compares with the working capital balance
of approximately $21.0 million and the current ratio of 4.4 to 1 at December 31, 2019. This increase in working capital, as discussed in more detail below,
is primarily the result of the earnings before non-cash expenses.
Following is a table with summary data from the consolidated statement of cash flows for the years ended December 31, 2020 and 2019, as presented.
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net increase in cash and cash equivalents
$
2020
(6,310,386) $
(124,725)
(1,900,793)
2019
(1,660,796)
(10,582,086)
22,181,528
$
(8,335,904) $
9,938,646
Our operating activities used approximately $6.3 million in the year ended December 31, 2020, as compared with approximately $1.7 million used in
operating activities in the year ended December 31, 2019. The cash used in both 2019 and 2020 was the result of our net loss and the increased working
capital required to support higher revenues, partially offset by our non-cash expenses.
We used approximately $125,000 in investing activities in 2020, primarily as the result of purchase of assets. The majority of our approximately $10.6
million in investing in activities in 2019 related to our acquisitions of RMDY Health, Inc., as well as a software purchase.
22
Financing activities provided approximately $22.2 million in the year ended December 31, 2019. The cash provided in 2019 was the result of our
underwritten offering in 2019, as well as from the proceeds of option exercises. We used cash of approximately $1.9 million in 2020 as the result of
proceeds of option exercises, partially offset by the payment of contingent consideration related to previous acquisitions.
With our cash on hand, we have sufficient cash to operate our business for more than the next 12 months and we have raised approximately $71 million in
February 2021 that will enable us to continue to expand our business and accelerate revenue growth. We do not anticipate the need to raise any additional
cash.
Off Balance Sheet Arrangements
As of December 31, 2020, 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’s
most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Our accounting policies are discussed in detail in the footnotes to our financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2020; however, we consider our critical accounting policies to be those related to revenue recognition, calculation of revenue share expense
(cost of revenues), stock-based compensation, capitalization and related amortization of intangible assets and impairment of assets. Following is a summary
of those policies.
Revenue Recognition
Recognition of revenue requires evidence of a contract, probable collection of proceeds, and completion of substantially all performance obligations. We
use a 5-step model to recognize revenue. These steps are: identify the contract with a customer, identify the performance obligations in the contract,
determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when or as the
performance obligations are satisfied.
Revenues are primarily generated from content delivery activities in which we deliver financial, clinical, or brand messaging through a distribution network
of eprescribers and electronic health record technology providers (channel partners), directly to consumers, or from reselling services that complement the
business. This content delivery for a customer is referred to as a program. Unless otherwise specified, revenue is recognized based on the selling price to
customers.
Our contracts are generally all less than one year and the primary performance obligation is delivery of messages or other forms of content, but the contract
may contain additional services. Additional services may include program design, which is the design of the content delivery program, set up, and
reporting. We consider set up and reporting services to be complimentary to the primary performance obligation and recognized through performance of the
delivery of content. We consider these design of the programs and related consulting services to be performance obligations separate from the delivery of
messages.
As the content is distributed through the platform and network of channel partners (a transaction), these transactions are recorded, and revenue is
recognized, over time as the distributions occur. Revenue for transactions can be realized based on a price per message, a price per redemption, as a flat fee
occurring over a period of time, or upon completion of the program, depending on the client contract. We recognize setup fees that are required for
integrating client offerings and campaigns into the rule-based content delivery system and network over the life of the initial program, based either on time,
or units delivered, depending upon which is most appropriate in the specific situation. Should a program be cancelled before completion, the balance of set
up revenue is recognized at the time of cancellation, as set up fees are nonrefundable. Additionally, we also recognizes revenue for providing program
performance reporting and maintenance, either by our company directly delivering reports or by providing access to its online reporting portal that the
client can utilize. This reporting revenue is recognized over time as the messages are delivered. Program design, which is the design of the content delivery
program, and related consulting services are recognized as services are performed.
23
We do not disaggregate our revenue as virtually all types of revenue are generated through the same core group of customers and generally all involve the
delivery of content. Different types of revenue are not impacted by economic factors that affect the nature, amount, timing, or uncertainty of revenues or
cash flows.
In some instances, we also resell messaging solutions that are available through channel partners that are complementary to the core business and client
base. These partner specific solutions are frequently similar to our own solutions and revenue recognition for these programs is the same as described
above. In instances where we sell solutions on a commission basis, net revenue is recognized based on the commission-based revenue split that we receive.
There were only minor immaterial programs recorded on a net basis in the years presented. In instances where we resell these messaging solutions and have
all financial risk and significant operation input and risk, we record the revenue based on the gross amount sold and the amount paid to the channel partner
as a cost of sales.
Cost of Revenues
The primary cost of revenue is revenue share expense. Based on the volume of transactions that are delivered through the channel partner network, we
provide a revenue share to compensate the partner for their promotion of the campaign. Revenue shares are a negotiated percentage of the transaction fees
and can also be specific to special considerations and campaigns. In addition, we pay revenue share to ConnectiveRx (formerly LDM/PDR) as a result of a
2014 legal settlement in an amount equal to the greater of 10% of financial messaging distribution revenues generated through our integrated network, or
$0.37 per financial message distributed through our integrated network. The contractual amount due to the channel partners is recorded as an expense at the
time the message is distributed.
Intangible Assets
Intangible assets are stated at cost. Finite-lived assets are being amortized over their estimated useful lives of 15 to 17 years for patents, 8 to 15 years for
customer relationships, 2 to 4 years for covenants not to compete, 10 years for technology, and 3 to 4 years for software and websites, all using the straight-
line method. These assets, 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. We determined there
was no impairment as goodwill had a fair value comfortably in excess of its carrying value.
Stock-based Compensation
We use the fair value method to account for stock-based compensation. The fair value of the equity instrument is charged directly to compensation expense
and additional paid-in capital over the period during which services are rendered. The fair value of each award is estimated on the date of each grant. For
restricted stock, the fair market value is based on the market value of the stock granted on the date of the grant. For options, it is estimated using the Black-
Scholes option pricing model that uses the following assumptions. Estimated volatilities are based on the historical volatility of our stock over the same
period as the expected term of the options. The expected term of options granted represents the period of time that options granted are expected to be
outstanding. We use 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. We have never paid dividends and do 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 no
vesting restrictions and are fully transferable. These option valuation models require the input of, and are highly sensitive to, subjective assumptions
including the expected stock price volatility. Our stock options have characteristics significantly different from those of traded options, and changes in the
subjective input assumptions could materially affect the fair value estimate.
24
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model that requires measurement and recognition of
expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and available for sale debt
securities. ASU 2016-13 was effective for us on January 1, 2020. The adoption of this standard did not have a material effect on our financial position,
results of operations, or cash flows.
In August 2019, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for
Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements and became effective for us on January 1, 2020.
The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-
04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. The second step measures a
goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-
04, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 will be applied
prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is
permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard did not have a
material effect on our financial position, results of operations, or cash flows.
Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is
intended to improve consistent application and simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles
in Topic 740 and clarifies and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 15,
2020, with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position, results of operations,
or cash flows.
25
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements:
F-1
F-4
F-5
F-6
F-7
F-8
F-9
Reports of Independent Registered Public Accounting Firms;
Consolidated Balance Sheets as of December 31, 2020 and 2019;
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019;
Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2020;
Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2019;
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019; and
Notes to Consolidated Financial Statements
26
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
OptimizeRx Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of OptimizeRx Corporation and Subsidiaries (the “Company”) as of December 31, 2020,
and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis
for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated
financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which they related.
F-1
To the Shareholders and Board of Directors of
OptimizeRx Corporation
Page Two
Critical Audit Matter - Revenue Recognition
As disclosed in Note 2 to the consolidated financial statements, the Company recognizes revenue upon transfer of control of promised products or services
to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
Significant judgment is excised by the Company in determining revenue recognition for these customer agreements, and includes the following: (1)
determining whether services are considered distinct performance obligations that should be accounted for separately versus together (2) the pattern and
timing of delivery for each distinct performance obligation, and (3) identification and treatment of contract terms that may impact the timing and amount of
revenue recognized.
How the Critical Audit Matter Was Addressed in the Audit
The audit procedures we performed to address this critical audit matter included the following: (1) obtaining an understanding of the design and
implementation of controls related to identifying distinct performance obligations, determining the timing of revenue recognition and any estimation of
variable consideration, (2) selection of a sample of customer agreements and testing management’s identification and treatment of contract terms, and
testing the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial
statements.
We have served as the Company’s auditor since 2020.
/s/ UHY LLP
Sterling Heights, Michigan
March 8, 2021
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
OptimizeRx Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of OptimizeRx Corporation and Subsidiaries (the “Company”) as of December 31, 2019,
and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's
internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated March 26, 2020, expressed an adverse opinion
on the effectiveness of the Company’s internal control over financial reporting because of the existence of material weaknesses.
Adoption of New Accounting Standards
As discussed in Note 2 to the financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No. 2016-
02, Leases (Topic 842), as amended, effective January 1, 2019, using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We served as the Company’s auditor from 2019 to 2020.
New York, NY
March 26, 2020
F-3
OPTIMIZERx CORPORATION
Consolidated Balance Sheets
ASSETS
Current Assets
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses
Total Current Assets
Property and equipment, net
Other Assets
Goodwill
Technology assets, net
Patent rights, net
Right of use assets, net
Other intangible assets, net
Security deposits and other assets
Total Other Assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable – trade
Accrued expenses
Revenue share payable
Current portion of lease liabilities
Contingent purchase price payable
Deferred revenue
Total Current Liabilities
Non-current Liabilities
Lease liabilities, net of current portion
Contingent purchase price payable, net of current portion
Total Non-Current Liabilities
Total Liabilities
Commitments and contingencies (See Note 15)
Stockholders’ Equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding at December 31, 2020
and 2019,
Common stock, $0.001 par value, 166,666,667 shares authorized, 15,223,340 and 14,609,579 shares issued and
outstanding at December 31, 2020 and 2019, respectively
Additional paid-in-capital
Accumulated deficit
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
The accompanying notes are an integral part of these financial statements.
F-4
December 31,
2020
December 31,
2019
$
10,516,776 $
17,885,705
4,456,611
32,859,092
148,854
18,852,680
7,418,025
871,043
27,141,748
176,014
$
$
14,740,031
5,251,822
2,349,570
445,974
4,519,552
12,859
27,319,808
60,327,754 $
14,740,031
6,238,453
2,550,587
559,863
5,151,102
80,727
29,320,763
56,638,525
618,250 $
2,420,361
4,969,868
123,220
1,610,813
285,795
10,028,307
492,995
1,800,635
1,618,438
115,431
1,500,000
580,014
6,107,513
325,533
-
325,533
10,353,840
-
448,753
5,220,000
5,668,753
11,776,266
-
-
-
15,223
85,590,428
(35,631,737)
49,973,914
60,327,754 $
14,601
78,272,268
(33,424,610)
44,862,259
56,638,525
$
OPTIMIZERx CORPORATION
Consolidated Statements of Operations
Revenue
Cost of revenues
Gross margin
Operating expenses
Stock-based compensation
Depreciation and amortization
Other general and administrative expenses
Total operating expenses
Loss from operations
Other income (expense)
Interest income
Change in fair value of contingent consideration
Total other expense
Loss before provision for income taxes
Income tax benefit
Net loss
Weighted average number of shares outstanding – basic
Weighted average number of shares outstanding – diluted
Loss per share – basic
Loss per share – diluted
For the
year ended
December 31,
2020
For the
year ended
December 31,
2019
$
43,313,323 $
19,207,902
24,105,421
24,598,274
9,158,699
15,439,575
3,172,840
2,075,888
20,992,012
26,240,740
(2,135,319)
68,582
(140,390)
(71,808)
(2,207,127)
-
(2,207,127) $
14,827,923
14,827,923
(0.15) $
(0.15) $
2,260,298
1,282,787
15,590,054
19,133,139
(3,693,564)
288,028
(635,000)
(346,972)
(4,040,536)
897,960
(3,142,576)
13,387,863
13,387,863
(0.23)
(0.23)
$
$
$
The accompanying notes are an integral part of these financial statements.
F-5
OPTIMIZERx CORPORATION
Consolidated Statement of Stockholders’ Equity for the Year
Ended December 31, 2020
Balance, January 1, 2020
Stock-based compensation expense
Options
Restricted Stock
Issuance of common stock:
For board compensation
For stock options exercised
For contingent purchase price and escrow hold back
Net loss for the year
Balance, December 31, 2020
Common
Stock
Shares
Common
Stock
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
14,600,579 $
14,601 $
78,272,268 $ (33,424,610) $
44,862,259
84,746
28,809
414,705
94,501
84
29
415
94
1,884,202
838,430
450,095
2,487,979
1,657,454
15,223,340 $
15,223 $
(2,207,127)
85,590,428 $ (35,631,737) $
1,884,202
838,514
450,124
2,488,394
1,657,548
(2,207,127)
49,973,914
The accompanying notes are an integral part of these financial statements.
F-6
OPTIMIZERx CORPORATION
Consolidated Statement of Stockholders’ Equity for the Year
Ended December 31, 2019
Balance, January 1, 2019
Cumulative effect of change in accounting principle related to
lease accounting
Shares issued in 2019 for restricted stock awards granted and
expensed in 2018
Stock-based compensation expense
Options
Restricted Stock
Issuance of common stock:
For board compensation
For cash
For stock options exercised
Shares issued for acquisition
Net loss for the year
Balance, December 31, 2019
Common
Stock
Shares
Common
Stock
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
Equity
12,038,618, $
12,039 $
48,725,211 $ (30,278,805) $
18,458,445
(3,229)
(3,229)
130,001
130
(130)
1,687,745
125,160
33,344
1,769,275
246,448
382,893
33
1,769
247
383
447,360
21,302,057
877,455
5,107,410
14,600,579 $
14,601 $
(3,142,576)
78,272,268 $ (33,424,610) $
-
1,687,745
125,160
447,393
21,303,826
877,702
5,107,793
(3,142,576)
44,862,259
The accompanying notes are an integral part of these financial statements.
F-7
OPTIMIZERx CORPORATION
Consolidated Statements of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Noncash lease expense
Increase in bad debt reserve
Stock-based compensation
Income tax benefit
Change in fair value of contingent consideration
Changes in:
Accounts receivable
Prepaid expenses and other assets
Accounts payable
Revenue share payable
Accrued expenses and other
Change in operating lease liabilities
Deferred revenue
NET CASH USED IN OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Acquisition of intangible assets, including intellectual property rights
Capitalized software development costs
Cash paid in acquisition, net of cash acquired
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of offering costs
Proceeds from exercise of stock options
Payment of contingent consideration
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
NET INCREASE (DECREASE IN) CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS – END OF PERIOD
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for income taxes
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Lease liabilities arising from right of use assets
Acquisition liabilities paid in stock
Shares issued in connection with acquisitions
Non-cash effect of cumulative adjustments to accumulated deficit
For the
year ended
December 31,
2020
For the
year ended
December 31,
2019
$
(2,207,127) $
(3,142,576)
1,971,083
104,805
200,000
3,172,840
-
140,390
(10,667,680)
(3,517,700)
125,255
3,351,430
1,416,884
(106,347)
(294,219)
(6,310,386)
1,175,131
107,656
80,000
2,260,298
(897,960)
635,000
(628,830)
(343,838)
(46,249)
(290,178)
(432,075)
(106,564)
(30,611)
(1,660,796)
(68,041)
(11,932)
(44,752)
-
(124,725)
(87,717)
(1,500,000)
-
(8,994,369)
(10,582,086)
-
2,488,394
(4,389,187)
(1,900,793)
(8,335,904)
18,852,680
10,516,776 $
21,303,826
877,702
-
22,181,528
9,938,646
8,914,034
18,852,680
- $
- $
-
-
-
1,657,548 $
- $
- $
207,559
-
5,107,793
3,229
$
$
$
$
$
$
The accompanying notes are an integral part of these financial statements.
F-8
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
OptimizeRx is a digital health company that provides communications solutions for life science companies, physicians and patients. Connecting over half
of healthcare providers in the U.S. and millions of patients through a proprietary network, the OptimizeRx digital health platform helps patients afford and
stay on medications. The platform unlocks new patient and physician touchpoints for life science companies along the patient journey, from point-of-care,
to retail pharmacy, through mobile patient engagement.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America
and are presented in US dollars.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Estimates and assumptions have been made in determining the carrying value of assets, depreciable and amortizable
lives of tangible and intangible assets, the carrying value of liabilities, the valuation allowance for the deferred tax asset, the timing of revenue recognition
and related revenue share expenses, and inputs used in the calculation of stock based compensation. Actual results could differ from these estimates.
Principles of Consolidation
The financial statements reflect the consolidated results of OptimizeRx Corporation, a Nevada corporation, and its wholly owned subsidiaries: OptimizeRx
Corporation, a Michigan corporation, RMDY Health, Inc., a Delaware corporation, CareSpeak Communications, Inc., a New Jersey corporation, Cyberdiet,
a controlled foreign corporation incorporated in Israel, and CareSpeak Communications D.O.O., a Controlled Foreign Corporation incorporated in Croatia.
Together, these companies are referred to as “OptimizeRx” and “the Company.” All material intercompany transactions have been eliminated.
Reclassifications
Certain items in the previous year financial statements have been reclassified to match the current year presentation.
Cash and Cash Equivalents
For purposes of the accompanying financial statements, the Company considers all highly liquid instruments, consisting of money market accounts, with an
initial maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market
participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based
on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of
liabilities should include consideration of non-performance risk including our own credit risk.
F-9
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In addition to defining fair value, the disclosure requirements around fair value establish a fair value hierarchy for valuation inputs, which is expanded. The
hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair
value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in
its entirety. These levels are:
Level 1 – Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 – Inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar
instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can
be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the
asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models,
and similar techniques. The Company’s stock options and warrants are valued using level 3 inputs.
The following tables present the fair values and carrying values of the Company’s financial assets and liabilities measured on a recurring basis as of
December 31, 2020 and 2019 and the valuation techniques used by the Company to determine those fair values.
Level 1
Level 2
Level 3
Fair Value
Carrying
Value
2020
Liabilities
Contingent Purchase Price Payable (1)
$
- $
- $
1,610,813 $
1,610,813 $
1,610,813
Level 1
Level 2
Level 3
Fair Value
Carrying
Value
2019
Liabilities
Contingent Purchase Price Payable (1)
$
- $
- $
6,720,000 $
6,720,000 $
6,720,000
(1) The contingent consideration is based off achieving certain revenue milestones in each of the next two years. The Geometric-Brownian motion
analysis was used to generate spot prices for use in an option pricing model. For 2019, the hypothetical spot prices were simulated using a Monte
Carlo simulation utilizing 2020 and 2021 projected revenue as a base and revenue volatility of 40%. The risk-free rate of return and terms utilized
were 1.4 % and 1-2 years, respectively, and expected volatility was 40%. For 2020, the final payout has been determined and is payable in 2021.
F-10
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table provides a summary of changes in fair value of the Company’s Level 3 financial instruments for the years ended December 31, 2020
and 2019.
Balance December 31, 2018
Contingent consideration liability recorded as the result of the RMDY Health, Inc. acquisition (see note 3)
Increase in the value of the CareSpeak Communication consideration
Balance December 31, 2019
Increase in fair value of the RMDY Health, Inc. contingent consideration
Payment of CareSpeak Communication contingent consideration
Payment of RMDY Health, Inc. contingent consideration
Balance December 31, 2020
Amount
2,365,000
3,720,000
635,000
6,720,000
140,390
(1,389,187)
(3,860,390)
1,610,813
$
$
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related
revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors,
including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process
related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which
may impact the collectability of these receivables or reserve estimates. Because the Company’s customers are primarily large well-capitalized companies,
historically there has been very little bad debt expense. Bad debt expense was $200,000 for the year ended December 31, 2020 and $80,000 for the year
ended December 31, 2019. The allowance for doubtful accounts was $158,163 and $80,000 as of December 31, 2020 and 2019, respectively. From time to
time, we may record revenue based on our revenue recognition policies described below in advance of being able to invoice the customer. These amounts
are included in accounts receivable and are immaterial, representing substantially less than 1% of the accounts receivable balance at December 31, 2020.
Property and Equipment
Property and equipment are stated at cost and are being depreciated over their estimated useful lives of three to five years for office equipment and three
years for computer equipment using the straight-line method of depreciation for book purposes. Maintenance and repair charges are expensed as incurred.
Intangible Assets
Intangible assets are stated at cost. Finite-lived assets are being amortized over their estimated useful lives of fifteen to seventeen years for patents, eight
years for customer relationships, fifteen years for tradenames, four years for covenants not to compete, and three to four years for software and websites, all
using the straight-line method. These assets are evaluated when there is a triggering event. There was no impairment of our intangible assets in either year
presented.
Goodwill
We evaluate goodwill for impairment during our fiscal fourth quarter, or more frequently if an event occurs or circumstances change. Our analysis
determined that there was no impairment of our goodwill.
F-11
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Recognition of revenue requires evidence of a contract, probable collection of proceeds, and completion of substantially all performance obligations. We
use a 5-step model to recognize revenue. These steps are: identify the contract with a customer, identify the performance obligations in the contract,
determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when or as the
performance obligations are satisfied.
Revenues are primarily generated from content delivery activities in which the Company delivers financial, clinical, or brand messaging through a
distribution network of eprescribers and electronic health record technology providers (channel partners), directly to consumers, or from reselling services
that complement the business. This content delivery for a customer is referred to as a program. Unless otherwise specified, revenue is recognized based on
the selling price to customers.
The Company’s contracts are generally all less than one year and the primary performance obligation is delivery of messages, or content, but the contract
may contain additional services. Additional services may include program design, which is the design of the content delivery program, set up, and
reporting. We consider set up and reporting services to be complimentary to the primary performance obligation and recognized through performance of the
delivery of content. We consider program design and related consulting services to be performance obligations separate from the delivery of messages.
As the content is distributed through the platform and network of channel partners (a transaction), these transactions are recorded, and revenue is
recognized, over time as the distributions occur. Revenue for transactions can be realized based on a price per message, a price per redemption, as a flat fee
occurring over a period of time, or upon completion of the program, depending on the client contract. The Company recognizes setup fees that are required
for integrating client offerings and campaigns into the rule-based content delivery system and network over the life of the initial program, based either on
time, or units delivered, depending upon which is most appropriate in the specific situation. Should a program be cancelled before completion, the balance
of set up revenue is recognized at the time of cancellation, as set up fees are nonrefundable. Additionally, the Company also recognizes revenue for
providing program performance reporting and maintenance, either by the Company directly delivering reports or by providing access to its online reporting
portal that the client can utilize. This reporting revenue is recognized over time as the messages are delivered. Program design, which is the design of the
content delivery program, and related consulting services are recognized as services are performed.
The Company does not disaggregate its revenue as virtually all types of revenue are generated through the same core group of customers and generally all
involve the delivery of content. Different types of revenue are not impacted by economic factors that affect the nature, amount, timing, or uncertainty of
revenues or cash flows.
In some instances, the Company also resells messaging solutions that are available through channel partners that are complementary to the core business
and client base. These partner specific solutions are frequently similar to our own solutions and revenue recognition for these programs is the same as
described above. In instances where the Company sells solutions on a commission basis, net revenue is recognized based on the commission-based revenue
split that the Company receives. There were only minor immaterial programs recorded on a net basis in the years presented. In instances where the
Company resells these messaging solutions and has all financial risk and significant operation input and risk, the Company records the revenue based on
the gross amount sold and the amount paid to the channel partner as a cost of sales.
F-12
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cost of Revenues
The primary cost of revenue is revenue share expense. Based on the volume of transactions that are delivered through the channel partner network, the
Company provides a revenue share to compensate the partner, or others, for their promotion of the campaign. Revenue shares are a negotiated percentage
of the transaction fees and can also be specific to special considerations and campaigns.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax basis of assets and liabilities and are measured using the currently enacted tax
rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by
the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. It is the Company’s policy to include interest and penalties related to tax positions as a component of
income tax expense.
Concentration of Credit Risks
The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial
difficulties. As of December 31, 2020, and 2019 the Company had $9,936,806 and $18,047,903, respectively, in cash balances in excess of federally
insured limits, primarily at Bank of America/Merrill Lynch.
Research and Development
The Company expenses research and development expenses as incurred. Research and development expense was $0 and $1,604,195 in 2020 and 2019,
respectively.
Stock-based Compensation
The Company uses the fair value method to account for stock-based compensation. The fair value of the equity instrument is charged directly to
compensation expense and additional paid-in capital over the period during which services are rendered. The fair value of each award is estimated on the
date of each grant. For restricted stock, the fair market value is based on the market value of the stock granted on the date of the grant. For options, it is
estimated using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Estimated volatilities are based on the
historical volatility 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 of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise behavior, forfeitures, and
to determine this term. Historically forfeitures have been negligible and immaterial, so the impact of forfeitures are recorded at the time of forfeiture. The
risk-free rate used is based on the U.S. Treasury yield curve in effect at the time of the grant using a time period equal to the expected option term. The
Company has never paid dividends and does not expect to pay any dividends in the future.
F-13
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Expected dividend yield
Risk free interest rate
Expected option term
Turnover/forfeiture rate
Expected volatility
2020
2019
0%
0.16% - 1.63%
3.5 years
0%
65 % - 71%
0%
1.51% - 2.37%
3.5 years
0%
64% - 67%
The Black-Scholes option valuation model and other existing models were developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. These option valuation models require the input of, and are highly sensitive to, subjective assumptions
including the expected stock price volatility. The Company’s stock options have characteristics significantly different from those of traded options, and
changes in the subjective input assumptions could materially affect the fair value estimate.
Loss Per Common and Common Equivalent Share
The computation of basic (loss) earnings per common share is computed using the weighted average number of common shares outstanding during the
year. The computation of diluted (loss) earnings per common share is based on the basic weighted average number of shares outstanding during the year
plus common stock equivalents, which would arise from the exercise of options and warrants outstanding using the treasury stock method and the average
market price per share during the year. The number of common shares potentially issuable upon the exercise of certain options that were excluded from the
diluted loss per common share calculation in 2019 was 891,224 related to options, and 59,918 related to restricted stock, for a total of 951,142 because they
are anti-dilutive, as a result of a net loss for the year ended December 31, 2019. The number of common shares potentially issuable upon the exercise of
certain options that were excluded from the diluted loss per common share calculation in 2020 was 820,059 related to options, and 91,667 related to
restricted stock, for a total of 911,726 because they are anti-dilutive, as a result of a net loss for the year ended December 31, 2020.
The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the years ended December 31, 2020 and
2019 consisted of the following:
Year ended December 31, 2020
Basic EPS
Diluted EPS
Year ended December 31, 2019
Basic EPS
Diluted EPS
Net Loss
Shares
Per Share
Amount
$
(2,207,127)
14,827,923 $
$
(2,207,127)
14,827,923 $
(0.15)
(0.15)
Net Loss
Shares
Per Share
Amount
$
(3,142,576)
13,387,863 $
$
(3,142,576)
13,387,863 $
(0.23)
(0.23)
F-14
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets
The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable.
When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the
carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the
carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Segment reporting
We operate in one reportable segment. Overall, our business involves connecting life science companies to patients and providers. We have a common
customer base for all of our solution, which are primarily all communications with healthcare providers or patients on behalf of life science customers. Our
customers are geographically located in the U.S although we have two technology centers located internationally. We do not prepare separate internal
income statements by solution as our focus is on selling enterprise arrangements covering multiple solutions that span the entire patient journey with a
specific brand.
Recently Issued Accounting Guidance
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model that requires measurement and recognition of
expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and available for sale debt
securities. ASU 2016-13 was effective for the Company on January 1, 2020. The adoption of this standard did not have a material effect on our financial
position, results of operations, or cash flows.
In August 2019, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for
Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements and became effective for the Company on
January 1, 2020. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-
04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. The second step measures a
goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-
04, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 will be applied
prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is
permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard did not have a
material effect on our financial position, results of operations, or cash flows.
F-15
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Not Yet Adopted
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is
intended to improve consistent application and simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles
in Topic 740 and clarifies and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 15,
2020, with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position, results of operations,
or cash flows.
NOTE 3 – ACQUISITIONS
On October 4, 2019, we acquired RMDY Health, Inc. (“RMDY”), a Delaware corporation and technology solutions company engaged in developing and
marketing digital health SAAS solutions across a range of healthcare and life science initiatives, used by pharmaceutical companies, payers, medtech
companies, and medical associations nationwide to improve medication adherence and care coordination. The total purchase price was $17,822,162.
Acquisition costs of approximately $799,623 were expensed as incurred.
The purchase price contains a contingent element that will be paid only if the Company achieves certain revenues related to the legacy RMDY business in
2020 and 2021. The total contingent payment may be up to $30.0 million, with a minimum payment of $1.0 million each year. The contingent payment was
paid in 2020. No remaining liability exists at December 31, 2020.
The purchase price of the RMDY acquisition was allocated as follows:
Purchase Price
Cash paid
Common stock issued
Contingent payment
Total
Allocation
Current assets
Accounts receivable
Prepaid Expense
Property and equipment
Intangibles
Goodwill, including assembled workforce in place
Web technology
Tradename
Non-compete agreements
Customer relationships
Current liabilities assumed
Accounts payable
Accrued expenses
Deferred tax liability
Total
F-16
$
$
$
$
8,994,369
5,107,793
3,720,000
17,822,162
411,354
12,139
19,173
11,061,518
5,125,000
2,604,000
116,000
431,000
(128,234)
(931,828)
(897,960)
17,822,162
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 3 – ACQUISITIONS (CONTINUED)
As described in greater detail in Note 6, the amortizable intangible assets acquired have estimated useful lives ranging from 2 to 15 years. We determined
the estimated fair value of the identifiable intangible assets acquired primarily by using the income approach.
As of December 31, 2019, $800,000 was included in accrued expenses as part of an indemnification provision against potential future claims. This balance
was paid via the issuance of common stock during the year ended December 31, 2020.
We began consolidating the results of RMDY operations and cashflows after October 3, 2019, the date of that acquisition. The unaudited Pro forma results
of operations as the acquisition had occurred January 1, 2019 are presented in the following table:
Revenues
Net Loss
Loss per common share:
Basic
Diluted
NOTE 4 – PREPAID EXPENSES
Prepaid expenses consisted of the following as of December 31, 2020 and 2019:
Insurance
Prepaid revenue share and exclusivity payments
EHR access fees
Other
Total prepaid expenses
F-17
2019
As Reported
$
24,598,278 $
(3,142,576)
Pro Forma
26,118,278
(3,869,577)
$
$
$
$
(0.23) $
(0.23) $
(0.29)
(0.29)
2020
2019
77,887 $
3,750,000
317,726
310,998
4,456,611 $
69,250
201,114
313,121
287,558
871,043
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 5 – PROPERTY AND EQUIPMENT
The Company owned equipment recorded at cost, which consisted of the following as of December 31, 2020 and 2019:
Computer equipment
Furniture and fixtures
Less accumulated depreciation
Property and equipment, net
2020
2019
169,247 $
198,665
367,912
219,058
148,854 $
137,763
187,167
324,930
148,916
176,014
$
$
Depreciation expense was $95,202 and $80,206 for the years ended December 31, 2020 and 2019, respectively.
NOTE 6 – INTANBIGLE ASSETS
Goodwill
The goodwill is related to the acquisition of RMDY Health, Inc. in 2019 and CareSpeak Communications in 2018 and is primarily related to expected
improvements and technology performance and functionality, sales growth from future solutions and service offerings and new customers, together with
certain intangible assets that do not qualify for separate recognition, such as the assembled workforce in place. Goodwill is generally not amortizable for
tax purposes and is not amortizable for financial statement purposes.
Intangible Assets
Intangible assets included on the consolidated balance sheet consist of the following:
December 31, 2020
Patent rights
Technology Assets
Other intangible assets
Tradename
Non-compete agreements
Customer relationships
Total other
Total Intangibles
$
$
$
$
F-18
Gross
Carrying
Amount
Accumulated
Amortization
991,818
2,932,943
3,341,388 $
8,184,765 $
Net
2,349,570
5,251,822
3,586,000 $
1,093,000
923,000
5,602,000
17,128,153 $
298,833
611,885
171,730
1,082,448
5,007,209
3,287,167
481,115
751,270
4,519,552
12,120,944
Weighted
Average Life
Remaining
11.5
7.7
13.7
1.6
9.8
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 6 – INTANBIGLE ASSETS (CONTINUED)
Patent rights
Technology assets
Other intangible assets
Tradename
Non-compete agreements
Customer relationships
Total other
Total Intangibles
Gross
Carrying
Amount
December 31, 2019
Accumulated
Amortization
3,329,457 $
8,140,013 $
778,870 $
1,901,560 $
Net
2,550,587
6,238,453
3,586,000 $
1,093,000
923,000
5,602,000
17,071,470 $
59,767 $
309,635
81,496
450,898
3,131,328 $
3,526,233
783,365
841,504
5,151,102
13,940,142
$
$
$
$
Weighted
Average Life
Remaining
11.7
8.0
14.5
2.7
10.5
Intangibles are being amortized on a straight-line basis over the following estimated useful lives.
Patents
Tradenames
Non-compete agreements
Customer relationships
Technology assets
15 – 17 years
15 years
2 – 4 years
8 – 15 years
3 – 10 years
The Company recorded amortization expense of $1,875,882 and $1,094,924 in the years ended December 31, 2020 and 2019, respectively. Expected future
amortization expenses of the intangibles assets as of December 31, 2020 is as follows:
Year ended December 31,
2021
2022
2023
2024
2025
Thereafter
Total
$
$
1,859,840
1,459,427
1,057,728
1,057,728
1,057,728
5,628,494
12,120,945
In addition to the technology assets acquired in connection with the RMDY acquisition, the Company also acquired software with a cost of $1.5 million in
2019.
F-19
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
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
$285,795 and $580,014 as of December 31, 2020 and 2019, respectively. These contracts are all short term in nature and all revenue is expected to be
recognized within 12 months, or less. Following is a summary of activity in the deferred revenue account for the year ended December 31, 2020.
Balance January 1, 2020
Revenue recognized
Amount collected
Balance December 31, 2020
NOTE 8 – RELATED PARTY TRANSACTIONS
$
$
580,014
(16,260,166)
15,680,152
285,795
During the year ended December 31, 2010, the Company acquired the technical contributions and assignment of all exclusive rights to and for a key patent
in process at the time from a former CEO in exchange for a total payment in shares of common stock and options valued at $930,000 at the time of the
acquisition, and recorded the patent at that cost. That patent remains in Patents on the consolidated balance sheet as of December 31, 2020.
NOTE 9 – CONTINGENT PURCHASE PRICE
Our purchase of CareSpeak Communications contained a contingent element that would be paid only if the Company achieved certain patient engagement
revenues in 2019 and 2020. The total contingent payment could have been up to $3.0 million. The target patient engagement revenues were achieved in
both 2019 and in 2020. The calculated fair value of the contingent payment was $3,000,000 at December 31, 2019 and $1,610,813 at December 31, 2020.
Our purchase of RMDY Health, Inc. also contained a contingent element that would be paid only if the Company achieves certain revenues in 2020 and
2021 related to the RMDY business. The total contingent payment may be up to $30.0 million. The minimum payment was $1.0 million in each of the two
years. The calculated fair value of the contingent payment was $3,720,000 at December 31, 2019. We determined the fair value of the Contingent Purchase
Price Payable at December 31, 2019 using a Geometric-Brownian motion analysis of the expected revenue and resulting earnout payment using inputs that
include the spot price, a risk free rate of return of 1.4%, a term of 1-2 years, and volatility of 40%. During 2020, we reached agreement with the former
shareholders of RMDY to fix the liability at $3.75 million, payable in a combination of cash and stock. Because of the change in the share price between
the date of agreement and the date of payment, the amount recorded for the stock amount varied from the agreed amount. The liability was paid $3.0
million in cash and the remainder in the common stock.
The total fair value of contingent purchase price payable at December 31, 2020 is as follows.
CareSpeak Communications, Inc.
RMDY Health
Total
Current
Long-Term
$
$
1,610,813
-
1,610,813 $
- $
-
- $
Total
1,610,813
-
1,610,813
F-20
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 10 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has 10,000,000 shares of preferred stock, $.001 par value per share, authorized as of December 31, 2020. No shares were issued or
outstanding in either 2019 or 2020.
Common Stock
The Company had 166,666,667 shares of common stock, $.001 par value per share, authorized as of December 31, 2020. There were 15,223,340 and
14,600,579 shares of common stock issued and outstanding at December 31, 2020 and 2019, respectively.
During 2019, in an underwritten public offering, we issued 1,769,275 shares of our common stock for gross proceeds of $23,000,575. In connection with
this transaction, we incurred equity issuance costs of $1,696,749 related to payments to the underwriter, advisors and legal fees associated with the
transaction, resulting in net proceeds to the Company of $21,303,826.
The Company has a Director Compensation plan covering its independent non-employee Directors. A total of 28,809 and 33,344 shares were granted and
issued in the years ended December 31, 2020 and 2019, respectively, in connection with this compensation plan. These shares were valued at $450,124 and
$447,393, respectively.
We issued 414,705 shares of common stock and received proceeds of $2,488,394 in 2020 in connection with the exercise of options. We also issued
246,448 shares of common stock and received proceeds of $877,702 in 2019 in connection with the exercise of options.
During 2019, we issued 382,893 shares of common stock, valued at $5,107,793, to the former shareholders of RMDY Health, Inc. in connection with the
acquisition of RMDY in 2019. We also issued 94,501 shares of common stock in 2020, valued at $1,657,548 to the former shareholders of RMDY Health,
Inc. in connection with the escrow holdback from the initial transaction and finalization of the earnout amount due.
We adopted the new lease accounting standard ASC 842 as of January 1, 2019, which resulted in a charge of $3,229 to Retained Earnings on that date.
F-21
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 11 – STOCK COMPENSATION
The Company sponsors a stock-based incentive compensation plan known as the 2013 Equity Compensation Plan (the “Plan”), which was established by
the Board of Directors of the Company in June 2013. The Plan was amended several times since then to eventually increase the authorized shares to
3,000,000 as of December 31, 2020. The amended plan has been approved by shareholders. A total of 1,545,518 shares of common stock underlying
options and 100,000 shares of common stock underlying restricted stock awards were outstanding at December 31, 2020. The Company had 299,461
remaining shares available to grant under the Plan at December 31, 2020.
The Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, or restricted stock. The incentive
stock options 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
incentive stock 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 be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Board
or Compensation Committee believes have contributed, or will contribute, to the success of the Company. Non-qualified options may be issued at option
prices of less than fair market 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 determined by 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 a change in control, as defined in the Plan.
The compensation cost that has been charged against income related to options for the years ended December 31, 2020 and 2019, was $1,884,202 and
$1,687,745, 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 year ended December 31, 2020:
Outstanding, January 1, 2019
Granted
Exercised
Expired or forfeited
Outstanding at December 31, 2019
Granted
Exercised
Expired or forfeited
Outstanding, December 31, 2020
Exercisable, December 31, 2020
Weighted
average
exercise
price
Weighted
average
remaining
contractual
life (years)
Aggregate
intrinsic
value $
4.63
12.28
3.73
12.55
6.27
11.39
6.45
13.09
7.31
4.64
2.6 $
7,925,643
2.3 $
1.5 $
36,862,947
30,666,752
Number of
Options
1,554,700 $
410,134 $
(251,063) $
(89,550 $
1,624,221 $
467,549 $
(420,586) $
(125,666) $
1,545,518 $
1,214,512 $
The exercise price of outstanding options ranges from $2.46 per share to $28.48 per share.
A summary of the status of the Company’s nonvested options as of December 31, 2020, and changes during the year ended December 31, 2020, is
presented below.
Nonvested Options
Nonvested at January 1, 2020
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Options
Weighted-Average
Exercise Price
480,584 $
467,549
(531,461)
(85,666)
331,006 $
10.72
11.39
9.95
12.48
12.44
There is $1,787,888 of expense remaining to be recognized over a period of approximately 2.5 years related to options outstanding at December 31, 2020.
The Company granted restricted stock awards of 94,746 and 90,000 shares in 2020 and 2019, respectively, and valued at $850,985 and $938,700,
respectively. These awards vest over a period of 1 to 5 years. The Company recognized expense of $838,514 and $125,160 in 2020 and 2019, respectively
related to this award. A total of $826,010 remains to be recognized at December 31, 2020 over a period of 3.2 years.
Restricted Stock Awards
Outstanding at January 1, 2020
Granted
Vested and issued
Outstanding at December 31, 2020
F-22
Weighted-Average
Grant Date Fair
Value
Shares
90,000 $
94,746
(84,746)
100,000 $
10.43
8.98
7.54
11.51
NOTE 12 – LEASES
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on leases. The accounting standard, effective
January 1, 2019, requires virtually all leases to be recognized on the balance sheet. Effective January 1, 2019, we adopted the standard using the modified
retrospective method, under which we elected the package of practical expedients and transition provisions allowing us to bring our existing operating
leases onto the consolidated balance sheet without adjusting comparative periods, but recognizing a cumulative-effect adjustment to the opening balance of
accumulated deficit on January 1, 2019. Under the guidance, we have also elected not to separate lease and non-lease components in recognition of the
lease-related assets and liabilities, as well as the related lease expense.
We have operating leases with terms greater than 12 months for office space in three multitenant facilities, which are recorded as assets and liabilities. The
lease on our headquarters space in Rochester, Michigan expires November 30, 2022, with a three-year renewal option through 2025, with monthly rent
payable at rates ranging from $6,384 to $6,688. We have assumed renewal of the lease. We also have a lease on office space in Cranbury, New Jersey,
expiring in 2022 with monthly payments ranging from $3,008 to $3,158, as well as a lease of approximately $1,883 per month in Zagreb, Croatia expiring
in 2022.
Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities, adjusted for
prepaid lease payments, initial direct costs, and lease incentives received. Lease-related liabilities are recognized at the present value of the remaining
contractual fixed lease payments, discounted using our incremental borrowing rate. Operating lease expense is recognized on a straight-line basis over the
lease term, while variable lease payments are expensed as incurred.
Upon adoption of the standard on January 1, 2019, we recorded approximately $462,000 of right of use assets and $465,000 of lease-related liabilities, with
the difference recorded in accumulated deficit as the cumulative effect of change in accounting principle at that date.
For the year ended December 31, 2020, the Company’s lease cost consisted of the following components, each of which is included in operating expenses
within the Company’s consolidated statements of operations:
Operating lease cost
Short-term lease cost (1)
Total lease cost
(1) Short-term lease cost includes any lease with a term of less than 12 months.
F-23
Year Ended
December 31,
2020
Year Ended
December 31,
2019
$
$
119,954 $
130,216
250,170 $
132,020
84,935
216,955
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 12 – LEASES (CONTINUED)
The table below presents the future minimum lease payments to be made under operating leases as of December 31, 2020:
For the year ending December 31,
2021
2022
2023
2024
2025
Total
Less: present value discount
Total lease liabilities
$
$
140,367
102,367
99,209
80,375
70,224
492,452
43,789
448,753
The weighted average remaining lease term for operating leases is 4.3 years and the weighted average discount rate used in calculating the operating lease
asset and liability is 4.5%. Cash paid for amounts included in the measurement of lease liabilities was $115,431. For the year ended December 31, 2020,
payments on lease obligations were $138,019 and amortization on the right of use assets was $104,805. For the year ended December 31, 2019, payments
on lease obligations were $132,867 and amortization on the right of use assets was $107,656.
NOTE 13 – MAJOR CUSTOMERS AND VENDORS
The Company had the following customers that accounted for 10% or greater of revenue in either 2020 or 2019. No other customers accounted for more
than 10% of revenue in either year presented.
Customer A
Customer B
Customer C
Customer D
Customer E
2020
2019
$
%
$
%
5,469,126
5,037,888
4,824,454
3,551,241
1,113,599
12.6
11.6
11.1
8.2
2.6
1,349,214
1,032,377
3,883,589
2,533,766
2,801,748
5.5
4.2
15.8
10.3
11.4
F-24
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 13 – MAJOR CUSTOMERS AND VENDORS (CONTINUED)
Our accounts receivable includes 4 entities, included agencies that represent multiple customers that individually make up more than 10% of our accounts
receivable at December 31, 2020 in the percentages of 19.7%, 16.2%, 15.8% and 14.4%.
The Company generates its revenues through its EHR and ePrescribe partners. It had two key partners and/or vendors through which 10% or greater of its
revenue was generated in either 2020 or 2019 as set forth below. The amounts in the table below reflect the amount of revenue generated through those
partners.
Partner A
Partner B
NOTE 14 – INCOME TAXES
2020
2019
$
%
$
%
22,813,574
7,092,477
52.7
16.4
9,210,347
4,051,217
37.4
16.5
As of December 31, 2020, the Company had net operating loss carry-forwards for federal income tax purposes of approximately $19.3 million, consisting
of pre-2018 losses in the amount of approximately $13.3 million that expire from 2020 through 2037, and post-2017 losses in the amount of approximately
$6 million that never expire. These net operating losses are available to offset future taxable income. The Company was formed in 2006 as a limited
liability company and changed to a corporation in 2007. Activity prior to incorporation is not reflected in the Company’s corporate tax returns. In the
future, the cumulative net operating loss carry-forward for income tax purposes may differ from the cumulative financial statement loss due to timing
differences between book and tax reporting.
The provision for Federal income tax consists of the following for the years ended December 31, 2020 and 2019:
Federal income tax benefit (expense) attributable to:
Current operations
Acquisition costs
Change in fair value of contingent consideration
Other permanent items
Deferred adjustment
Other adjustments
NOLs expiring
Valuation allowance
Net provision for federal income tax
Current tax benefit (expense) - Federal
Deferred tax benefit (expense) - Federal
Adjustment of valuation allowance from business combination
Total tax benefit (expense) on income
F-25
2020
2019
463,000 $
-
(29,000)
200,000
(913,000)
104,000
(209,000)
(529,000)
- $
848,000
(143,000)
(133,000)
29,000
(913,000)
-
-
1,209,960
897,960
2020
2019
- $
-
-
- $
-
-
897,960
897,960
$
$
$
$
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
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, 2020
and 2019:
Deferred tax asset attributable to:
Net operating loss carryover
Stock compensation
Operating lease liability
Other
Deferred tax asset
Deferred tax liabilities attributable to:
Fixed assets
Intangibles
Operating lease right of use assets
Other
Deferred tax liability
Valuation allowance
Net deferred tax asset
2020
2019
4,057,000 $
353,000
94,000
44,000
4,548,000 $
3,839,000
320,000
-
36,000
4,195,000
- $
(2,181,000)
(94,000)
(16,000)
(2,291,000) $
2,257,000) $
(13,000)
(2,438,000)
-
(16,000)
(2,467,000)
(1,728,000)
- $
-
$
$
$
$
$
$
The ultimate realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient taxable income during the periods in which
the net operating losses expire and the temporary differences become deductible. The Company has determined that there is significant uncertainty that the
results of future operations and the reversals of existing taxable temporary differences will generate sufficient taxable income to realize the deferred tax
assets; therefore, a valuation allowance has been recorded. In making this determination, the Company considered historical levels of income, projections
for future periods, and the significant amount of tax deductions to be generated from the future exercise of stock options.
The tax years 2017 to 2020 remain open for potential audit by the Internal Revenue Service. There are no uncertain tax positions as of December 31, 2019
or December 31, 2020, and none are expected in the next 12 months. The Company’s foreign subsidiaries are cost centers that are primarily reimbursed for
expenses, as a result they generate an immaterial amount of income or loss. Pretax book income (loss) is all from domestic operations. Up to four years of
returns remain open for potential audit in foreign jurisdictions, however any audits for periods prior to ownership by the Company are the responsibility of
the previous owners.
Under certain circumstances issuance of common shares can result in an ownership change under Internal Revenue Code Section 382, which limits the
Company’s ability to utilize carry-forwards from prior to the ownership change. Any such ownership change resulting from stock issuances and
redemptions could limit the Company’s ability to utilize any net operating loss carry-forwards or credits generated before this change in ownership. These
limitations can limit both the timing of usage of these laws, as well as the loss of the ability to use these net operating losses. It is likely that fundraising
activities have resulted in such an ownership change.
F-26
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020
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 we
generate for eCoupons distributed through their networks. These contracts grant audit rights related to the payments to our partners, and, in some cases
would require us to pay for the audit if the audit determined there was an underpayment and the underpayment meets certain thresholds, such as 10%. From
time to time the Company enters into arrangements with a partner to acquire minimum amounts of messaging capabilities. As of December 31, 2020, the
Company had commitments for future minimum payments of $7.5 million that will be reflected in cost of revenues during the years from 2021 through
2022. Minimum payments are due in 2021 and 2022, in the amounts of $6.25 million and $1.5 million, respectively.
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
of the plan, the Company matches 100% of the first 3% of payroll contributed by the employee and 50% of the next 2% of payroll contributed by the
employee to a maximum of 4% of an employee’s payroll. There was expense of $373,027 and $126,557 recorded in 2020 and 2019, respectively, for
company contributions to the plan.
NOTE 17 – SUBSEQUENT EVENTS
During February 2021, in an underwritten public offering, we issued 1,523,750 shares of our common stock for gross proceeds of $75,425,625. In
connection with this transaction, we incurred equity issuance costs of $4,744,652 related to payments to the underwriter, advisors, legal fees, and other
costs associated with the transaction, resulting in net proceeds to the Company of approximately $70,680,973.
In 2021, the Company issued 59,547 shares and received proceeds of $495,288 in connection with the exercise of options. In March 2021, the Company’s
Board of Directors amended the 2013 Equity Compensation Plan to increase the number of shares authorized under the plan to 6.0 million shares.
F-27
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
On June 22, 2020, the Company engaged UHY LLP as the Company’s independent registered public accounting firm and dismissed Marcum LLP as the
Company’s independent registered public accounting firm. There were no disagreements or reportable events required to be disclosed under Item 304(b) of
Regulation S-K.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rules 13a-15I or 15d-15I under the Securities Exchange Act of 1934, as amended) are designed to
ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be
disclosed is accumulated 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 and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15I and 15d-15I under
the Exchange Act were effective as of December 31, 2020.
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 financial
reporting 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) provide
reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of
effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Based on this assessment as of December 31, 2020, management concluded that there were no material weaknesses. As part of the assessment at December
31, 2019, management identified the following material weaknesses which caused management to conclude that our disclosure controls and procedures
were not effective at that date: (i) inadequate information technology general controls (ITGCs) in the areas of user access security, change management, IT
operations and third-party management over its key financial information technology (IT) systems; and (ii) inadequate controls to ensure that data received
from third parties is complete and accurate. Those weaknesses have been remediated as of December 31, 2020.
The material weaknesses in 2019 did not result in any identified misstatements to the financial statements, and there were no changes to previously released
financial results.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal controls over
financial reporting as of December 31, 2020 because we became a smaller reporting company under Section 404 of the Sarbanes-Oxley Act of 2002
pursuant to the provisions of Section 989G(a) set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted into federal law in July
2010.
Changes in Internal Control Over Financial Reporting
During 2020, the Company improved its information technology general controls and the documentation of those controls to address the material
weaknesses identified in 2019. It also implemented new controls to ensure that the data received from third parties is complete and accurate. Other than the
changes to internal controls described above, there has been no material changes in our internal control over financial reporting during the most recently
completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
27
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The following information sets forth the names, ages, and positions of our current directors and executive officers.
Name
William J. Febbo
Stephen L. Silvestro
Miriam J. Paramore
Marion Odence-Ford
Douglas P. Baker
Gus D. Halas
Patrick Spangler
Lynn Vos
James Lang
Greg Wasson
Age
52
43
57
56
64
70
65
65
56
Positions and Offices Held
Chief Executive Officer and Director
Chief Commercial Officer
President and Chief Strategy Officer
General Counsel and Chief Compliance Officer
Chief Financial Officer
Chairperson and Director
Director
Director
Director
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 and Director on February 22, 2016. Mr. Febbo brings more than 20 years of experience in
building and managing health services and financial businesses. From 2007 to 2015, he worked with Merriman Holdings, Inc., an investment banking firm.
There he served as Chief Operating Officer and assisted with capital raises in the tech, biotech, cleantech, consumer and resources industries. Prior to
Merriman, Mr. Febbo was CEO 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.
Mr. Febbo holds a Bachelor of Arts in International Studies from Dickinson College, in Pennsylvania. Febbo serves on the board of The United Nations of
Greater Boston, a non-profit focused on building global citizens within inner-city schools in Massachusetts, is faculty on the MIT linq program and
currently serves as a board member of Modular Medical (MODD).
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 of
securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered 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 financial
businesses.
Stephen L. Silvestro
Mr. Silvestro joined the company as Chief Commercial Officer on April 29, 2019. Mr. Silvestro was with CCH® Tagetik as its Vice President and General
Manager from January 2018 until he joined us. From April 2017 to January 2018, Mr. Silvestro was with Prognos as its Chief Commercial Officer and,
before that, from September 2007 to April 2017, he was with Decision Resources Group in various capacitates with him last serving as Executive Vice
President, Head of Global Sales.
28
Aside from that provided above, Mr. Silvestro does not hold and has not held over the past five years any other directorships in any company with a class
of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
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-
ups to large divisions of public and private companies. Her early career was spent at Ernst & Young, as a Healthcare Management Consultant. She has
since occupied executive level and director positions at several healthcare companies. Most recently, from April 2016 to April 2017, Ms. Paramore served
as COO and CTO of Lucro, Inc., a privately held company located in| Nashville, Tennessee focused on the healthcare sector. From March 2015 to February
2016, she served as Executive Vice President of PDX a privately held company in Fort Worth, Texas that provides health information technology for
pharmacies. From May 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
of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
Marion Odence-Ford
Ms. Odence-Ford joined the company as General Counsel and Chief Compliance Officer in February 2021. She is a corporate lawyer with over 20 years of
large firm and in-house experiences in a broad range of industries including life sciences, high tech, business consulting, professional services, banking,
and finance companies. From April 2013 to June 2020, she was a senior member of the legal team at Decision Resources Group, a multi-national
corporation that provides global data solutions, analytics and consulting services to pharmaceutical, biotech, medical device, healthcare provider and payer,
and managed care companies.
Aside from that provided above, Ms. Odence-Ford does not hold and has not held over the past five years any other directorships in any company with a
class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment Company Act of 1940.
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 has
extensive business experience including 9 years in public accounting with Plante Moran, four years as CFO of a privately held printing company, 5 years in
a variety of divisional financial roles at MascoTech, Inc., a Fortune 500 automotive supplier, and from 1996 to 2014 as Chief Financial Officer of Applied
Nanotech Holdings, Inc., (“APNT”) a publicly held nanotechnology research and licensing company. Mr. Baker was also a member of the Board of
Directors of APNT from 2006 through 2014. He was a member of the Board Directors of Total Health Care, Inc., a Detroit based Health Maintenance
Organization from 1987 through January 2020, including his latest role as Chairman of the Board, until it was acquired by Priority Health, a Michigan
based HMO in January 2020. He became a member of the Priority Health Board in January 2020.
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 of
securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
29
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 and
President of the Central Operating Companies at Central Garden & Pet Company from April 2011 through May 2013. Mr. Halas was President and Chief
Executive Officer of T-3 Energy Services, Inc. from May 2003 to March 2009 and also served as Chairman of 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 of Clore Automotive, Inc. He also serves as a
director for Triangle Petroleum Corp.
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 of
securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered 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 runs VosHealth, LLC. She was the President and CEO of the Muscular Dystrophy Association from October 2017 through November 2020. Prior
to that, Ms. Vos had been chief executive officer of ghg | 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 nTelos Wireless, a NASDAQ listed company, the Jed Foundation, a leading nonprofit dedicated to protecting
the emotional health of college students, and was a founding 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 of
securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered 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 healthcare
industry.
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 business
services. Mr. Lang is the CEO of Eversana, a leading independent provider of global commercial services to the life science industry, and also presently
serves as an executive advisor to Water Street, a strategic private equity firm focused exclusively on building market-leading companies in healthcare. In
that capacity, he currently serves as Board Chairman to The Access Group, Health Strategies Group, Alliance Life Sciences, and Dohmen Life
Science Services. He is also on the of BioVie (Nasdaq:BIVI) 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 healthcare
industry analysis and insights, where he helped transform the company into an industry leader. Earlier, he was president of Strategic Decisions Group, a
premier global strategy consultancy, and he expanded the life sciences practice and later sold it to IMS Health. He is an active private investor and advisor
with 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 of
securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
30
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
Patrick Spangler has over 32 years of experience in IPO’s, mergers and acquisitions, operations and financial management experience in the medical device
and health care IT industries. As a transformational leader he has been responsible for driving high-performance emerging growth firms as well as large
publicly traded companies and has also served in the private equity sector successfully improving operational results and exit strategies with a broad array
of portfolio companies. He currently serves as Chief Financial Officer of On Target Laboratories which has developed fluorescent markers to target and
illuminate cancer during surgery.
Prior to On Target Laboratories, Mr. Spangler served as Chief Financial Officer of MHC Software supplying document automation software to a variety of
industries. Previous to MHC, Mr. Spangler served as Chief Financial Officer of Vigilanz Corporation, Chief Financial Officer of Healthland Inc, SVP and
CFO for Epocrates (EPOC), SVP and CFO of ev3 Inc. (EVVV), and Executive Vice President and Chief Financial Officer and Assistant Secretary for
EMPI Inc (EMPI). Prior to joining EMPI Inc. Mr. Spangler served for over eleven years in various senior finance leadership positions at Medtronic, Inc
(MDT).
Mr. Spangler holds a Bachelor of Science in Accounting from the University of Minnesota, a Master of Business Taxation from the University of
Minnesota and a Master of Business Administration from University of Chicago and also serves on the Board of Directors of Lifespace Communities Inc,
and previously served on the board of Urologix Inc (ULGX) a leader in less invasive in office BPH treatment.
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
of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered 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 his
finance experience.
Greg Wasson
Mr. Wasson, age 62, joined the Board in July 2020. Mr. Wasson is the former President and CEO of Walgreens Boots Alliance. While president and CEO of
Walgreens, Wasson led the company to record sales of $76.4 billion in 2014. He created significant shareholder value by completing game-changing
mergers and acquisitions, leading complex organizational and structural change, assembling a diverse and high-performance senior leadership team, and
establishing Walgreens as an industry leader. Wasson is largely credited for transforming the iconic 114-year-old domestic company into the first global
pharmacy-led, health, well-being, and beauty enterprise via the successful merger with European-based Alliance Boots in 2015.
Prior to being appointed president and CEO of the combined companies, Walgreens Boots Alliance, Wasson had risen through the ranks through a number
of positions of increasing responsibility and executive leadership, starting as an intern at Walgreens in 1980.
Aside from that provided above, Mr. Wasson does not hold and has not held over the past five years any other directorships in any company with a class of
securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
Mr. Wasson is qualified to serve on our Board of Directors because of his extensive executive skills and background in the healthcare industry.
31
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 six (6)
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 in
accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board, subject to their respective
employment agreements.
Significant Employees
We have no significant employees.
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 executive
officers.
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
in any 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 appointed
by 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 of
such 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 minor
offenses);
3. Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily 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 transaction
merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan
association 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 State
securities laws or Federal commodities laws;
4. Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or
otherwise limiting for more than 60 days the right of such person to engage in any type of business regulated by the Commodity Futures Trading
Commission, securities, investment, insurance or banking activities, or to be associated with persons engaged in any such activity;
32
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 in
such 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 Federal
commodities 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
or vacated, 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
of disgorgement 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 in
Section 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 a member.
On January 29, 2018, FINRA accepted a Letter of Acceptance, Waiver and Consent (No. 2015044865501) (the “Consent”) submitted by William Febbo.
From August 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 inaccurate
because of the method by which Merriman calculated net capital and that, when corrected, it was retroactively determined that Merriman had operated
below its 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 for any 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
this review, the Board of Directors considers transactions and relationships between our company, on the one hand, and each director, members of the
director’s immediate 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, of such transactions or relationships were inconsistent with a determination that the director is independent under Nasdaq rules. As a result of this
review, the Board of Directors has determined that each of our directors other than Mr. Febbo is an “independent director” within the meaning of applicable
Nasdaq listing standards.
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) Nominating
and Governance Committee; (2) Audit Committee and (3) Compensation Committee. Each committee acts pursuant to a written charter adopted by the
Board of Directors. Each committee’s charter is available on our corporate website at http://www.optimizerx.com. (The information contained in our
website is not incorporated into this Annual Report on Form 10-K.) All of the committees are comprised solely of non-employee, independent directors as
defined by Nasdaq market listing standards.
33
Nominating and Governance Committee
The Board of Directors has established a Nominating and Governance Committee. In 2020, the committee members were Directors Vos (Chair), Lang, and
Halas. The Nominating and Corporate Governance Committee held 4 meetings during the fiscal year ended December 31, 2020. The Nominating and
Corporate Governance Committee’s responsibilities, which are discussed in detail in its charter, include the responsibility 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 December
31, 2020, and held other informal discussions as needed. In 2020, the Committee was composed of Directors Halas, Spangler, Wasson, and Lang, and is
chaired by Director Lang. 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 of
our compensation programs;
● Recommend the base salary, incentive compensation and any other compensation for our Chief Executive Officer to the Board of Directors and
review 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 of
those 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.
34
Audit Committee
In 2020, the Audit Committee was comprised of Directors Halas, Spangler and Vos, and is chaired by Director Spangler. The Audit Committee held four
meetings during the fiscal year ended December 31, 2020 and held informal discussions as necessary.
The Audit Committee approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues
related to financial reporting. In addition, the Audit Committee reviews the scope and results of the audit with the independent accountants, reviews with
management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures, including our
internal control over financial reporting, and considers other auditing and accounting matters including fees to be paid to the independent auditor and the
performance of the independent auditor.
For the fiscal year ending December 31, 2020, the Audit Committee:
1. Reviewed and discussed the audited financial statements with management, and
2. 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
statements for the year ended December 31, 2020 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 rules
and 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
class of 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
equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with
copies of all 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, no persons 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, 2020, other than the Company was late in filing Form 4s related to its quarterly grant of shares to independent directors in one
instance for directors, Lang, Wasson, Vos, Halas, and Spangler. In addition, director Lang had an additional late Form 4 and Director Wasson had a late
Form 3 – both related to issues with filing codes. AWM Investment Company, Inc., was late in one instance in filing its Form 4 obligation.
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
Exhibit 14.1.
35
Item 11. Executive Compensation
The table below summarizes all compensation awarded to, earned by, or paid to our current named executive officers for the fiscal years ended December
31, 2020 and 2019.
Name and principal position
William J. Febbo (1)
CEO, Director
Stephen L. Silvestro
Chief Commercial Officer
Miriam Paramore (2)
President
Year
2020
2019
2020
2019
2020
2019
Salary
($)
350,000
300,000
300,000
188,821
275,000
250,000
Bonus
($)
261,187
126,990
185,562
82,678
136,812
70,550
Stock
Awards
($)
638,985
391,800
380,628
938,700
228,370
130,600
Option
Awards
($)
All Other
Compensation
($)
-
-
-
-
15,400
15,200
-
-
11,400
11,200
Total
($)
1,265,572
833,990
866,190
1,210,199
651,582
462,350
Narrative Disclosure to the Summary Compensation Table
(1) Amounts reflected in All Other Compensation column for Mr. Febbo in 2019 is composed of $11,200 employer matching contributions to the
Company’s retirement plan and $4,000 for a term life policy. The 2020 amounts are $11,400 employer matching contributions to the Company’s
retirement plan and the balance for a term life policy.
(2) Amount reflected in All Other Compensation for Ms. Paramore for both years reflects employer matching contributions to the Company’s
retirement plan.
Mr. Febbo joined the Company as CEO on February 22, 2016. In March 2020, the Board of Directors amended his contract to provide a base salary of
$350,000 per year in 2020 and $400,000 per year in 2021. In addition, he is eligible to participate in the Company’s executive bonus plan with a target
bonus of 60% of his annual salary. He is also eligible for vacation, sick days, insurance, to participate in the Company’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 term life insurance policy. Mr. Febbo’s
contract calls for 12 months of severance if he is terminated without cause.
In February 2019, the Board of Directors granted Mr. Febbo an additional 30,000 shares of restricted common stock if the Company achieves certain
targeted stretch revenue goals in 2019. Those goals were not achieved, so the shares did not vest. In March 2020, the Board of Directors granted Mr. Febbo
an additional 84,786 shares of restricted common stock that vested over the course of 2020. In January 2021, the Board of Directors granted Mr. Febbo an
additional 28,883 shares of restricted stock that vest annually over a 3 year period starting on the date of grant.
Mr. Silvestro joined the Company as Chief Commercial Officer on April 29, 2019. Under the terms of his employment agreement, he received an annual
base salary of $280,000 and a signing bonus of $30,000, paid in two installments of $15,000 in 2019. In March 2020, the Board of Directors amended his
contract to increase his base salary to $300,000 for 2020. In January 2021, the Board increased his base salary to $330,000 per year, effective January 1,
2021. In addition, he was eligible to participate in the Company’s executive bonus plan with a target bonus of 40% of his annual salary. In March 2020, the
Board increased his target bonus percentage to 50% of his base salary. He is also eligible for vacation, sick days, insurance, to participate in the Company’s
401k plan, and other benefits covering all employees. Mr. Silvestro’s contract also calls for 12 months of severance if he is terminated without cause.
Mr. Silvestro also received a grant of 90,000 shares of restricted common stock at the time of his employment. The grant vests all at one time upon
completion of five years of employment. In March 2020, the Board of Directors granted Mr. Silvestro 105,993 options, which vest quarterly throughout
2020, to purchase shares of common stock at a price of $7.51 per share. In January 2021, the Board of Directors granted Mr. Silvestro 38,511 options,
which vest annually over a three-year period beginning on the date of the grant, with an exercise price of $37.50 per share.
Ms. Paramore joined the Company as President on August 1, 2017. On September 10, 2018 Ms. Paramore signed a new employment agreement calling for
a base salary of $250,000. In March 2020, the Board of Directors amended her contract to increase her base salary to $275,000 for 2020. In January 2021,
the Board of Directors amended her contract to increase her base salary to $290,000 annually, effective January 1, 2021. In February 2021, the Board of
Directors increased her annual base salary to $300,000. 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’s contract also calls for 12 months of severance if she is terminated without cause.
In February 2019, the Board of Directors granted Ms. Paramore 10,000 shares of restricted common stock that would vest if the Company achieves certain
targeted stretch revenue goals in 2019. Those goals were not achieved, so the shares did not vest. In March 2020, the Board of Directors granted Ms.
Paramore 63,558 options, which vested quarterly through 2020, to purchase shares of common stock at a price of $7.51 per share. In January 2021, the
Board of Directors granted Ms. Paramore 24,093 options, which vest annually over a three-year period beginning on the date of the grant, with an exercise
price of $37.50 per share.
For all three named executive officers, the executive bonus plan contains a provision whereby each officer could receive a bonus ranging from $0 to $1.0
million if a change of control transaction occurs prior to December 31, 2021, depending up on the transaction price.
36
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officers as of
December 31, 2020.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS
STOCK AWARDS
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Number of
Shares
or Units
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares
or Units
of Stock
That Have
Not Vested
($)
Option
Exercise
Price
($)
Option
Expiration
Date
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Name
Will Febbo
Steve Silvestro
Miriam
Paramore
394,739
105,993
-
-
100,000
63,558
66,667
-
- $
- $
- $
- $
3.21
7.51
02/21/21
03/11/25
90,000
3.15
7.51
07/27/22
03/11/25
Director Compensation
The table below summarizes all compensation of our directors as of December 31, 2020:
Name
Gus D. Halas
James Lang
Patrick Spangler
Lynn Vos
Greg Wasson
37
Fees
Earned
or Paid
in Cash
($)
Option
Awards
($)
Stock
Awards
($)
80,000 100,026 -
-
40,000 100,026
-
45,000 100,026
-
40,000 100,026
-
20,000 50,019
All Other
Compensation
($)
Total
($)
- 180,026
- 140,026
- 145,026
- 140,026
- 70,019
Narrative Disclosure to the Director Compensation Table
Pursuant to our Director Compensation Plan, independent directors (“Outside Directors”) received:
(a) an annual cash retainer for Board and Committee service in 2020 as set forth in the table below, payable in equal quarterly installments, and
(b) reimbursement for expenses related to Board meeting attendance and any committee participation.
Basic Director Fee
Board Chair
Audit Committee Chair
Annual Fee
($)
40,000
40,000
5,000
In addition, Outside Directors also each received $100,000 of Common Stock per year, payable in equal quarterly installments, which vested immediately
upon issuance. Directors that are also employees of our company shall not receive additional compensation for serving on the Board. Both the cash retainer
and stock awards are prorated for partial quarters of service when a new Director joins the Board.
Directors are expected to attend four meetings per year as well as spend an additional 10 – 20 hours per month on company matters.
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% or
more of our outstanding common stock as of March 3, 2021. For the purposes of this Annual Report, beneficial ownership of securities is defined in
accordance with the rules of the SEC to mean generally the power to vote or dispose of securities, 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
Common
BlackRock, Inc.(1)
55 East 52nd Street
New York, NY 10055
Ronald L. Chez(2)
55 East Monroe Street, Suite 3700
Chicago, IL 60603
(1) As stated in a Schedule 13G/A filed with the Securities and Exchange Commission on January 29, 2021.
(2) As stated in a Schedule 13D/A filed with the Securities and Exchange Commission on September 27, 2019.
38
Common
Shares
Owned
Percentage
of Class
978,200
5.8%
858,500
5.1%
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is certain information with respect to beneficial ownership of our common stock as of March 3, 2021, by each director, each named
executive officer, and by the directors and all executive officers as a group. Unless otherwise indicated, each person or member of the group listed has sole
voting and investment power with respect to the shares of common stock listed.
Name(1)
William J. Febbo
Steve Silvestro
Miriam Paramore
Lynn Vos
Gus D. Halas
Patrick Spangler
James Lang
Greg Wasson
All Executive Officers and Directors as a group (10 persons)
*
Less than 1%
Options
Included
in Beneficial
Ownership (2)
Restricted
Stock
Awards (3)
Common
Shares
Owned
Common
Stock
Beneficial
Ownership
Percentage
of Class
394,739
105,933
163,558
-
-
-
-
756,908
-
293,278
-
24,079
31,944
63,882
21,389
31,714
16,985
573,491
688,017
105,933
187,637
31,944
63,882
21,389
31,714
16,985
1,330,339
4.0%
*
1.1%
*
*
*
*
*
7.6%
(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 3, 2021 and are included in common stock beneficial
ownership pursuant to Rule 13d-3(d)(1) of the Exchange Act.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than the transactions described under the heading “Executive Compensation” (or with respect to which such information is omitted in accordance
with SEC regulations), there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be
a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for
the last two completed fiscal years, and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of
the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation paid in the normal
course of business to executive officers.
39
Item 14. Principal Accounting Fees and Services
Below are tables of Audit Fees (amounts in US$) billed by our auditors in connection with the audit of the Company’s annual financial statements and
review of the quarterly financial statements for the years indicated below: Our 2020 financial statements were audited by UHY LLP. Our 2019 financial
statements were audited by Marcum, LLP.
UHY, LLP
Financial Statements for the Year Ended December 31
2020
2019
Marcum, LLP
Financial Statements for the Year Ended December 31
2020
2019
40
Audit Services
$
$
164,900 $
- $
Audit Related
Fees
Tax Fees
Other Fees
- $
- $
49,345 $
9,625 $
-
-
Audit Services
$
$
19,570 $
439,641 $
Audit Related
Fees
Tax Fees
Other Fees
- $
- $
- $
- $
-
-
Item 15. Exhibits, Financial Statements Schedules
(a) Financial Statements and Schedules
PART IV
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) Exhibits
Exhibit
Number
3.1
3.2
3.3
10.1
10.2
10.3
10.4
10.5
14.1
21.1**
23.1**
23.2**
31.1**
31.2**
32.1**
101**
Description
Articles of Incorporation of OptimizeRx Corporation (the “Company”)1
Amended and Restated Bylaws of the Company2
Certificate of Correction, dated April 30, 20183
Fourth Amended and Restated 2013 Equity Incentive Plan4
Amendment to Employment Agreement with William Febbo, dated March, 10, 20205
Amendment to Employment Agreement with Stephen Silvestro, dated March, 10, 20205
Amendment to Employment Agreement with Miriam Paramore, dated March, 10, 20205
Employment agreement with Marion Odence-Ford dated February 8, 20216
Code of Business Conduct and Ethics7
List of Subsidiaries
Consent of Marcum LLP
Consent of UHY LLP
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 formatted in Extensible
Business Reporting Language (XBRL).
1
2
3
4
5
6
7
Incorporated by reference to the Form S-1, filed by the Company with the Securities and Exchange Commission on November 12, 2008.
Incorporated by reference to the Form 8-K, filed by the Company with the Securities and Exchange Commission on July 16, 2010.
Incorporated by reference to the Form 10-K, filed by the Company with the Securities and Exchange Commission on March 12, 2019,
Incorporated by reference to the Form 8-K filed by the Company with the Securities and Exchange Commission on March 12, 2020.
Incorporated by reference to the Form 10-K, filed by the Company with the Securities and Exchange Commission on March 26, 2020.
Incorporated by reference to the Form 8-K, filed by the Company with the Securities and Exchange Commission on February 11, 2021
Incorporated by reference to the Form 10-K filed by the Company with the Securities and Exchange Commission on March 8, 2018.
** provided herewith
41
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNATURES
OptimizeRx Corporation
By:
/s/ William J. Febbo
William Febbo
Chief Executive Officer, Principal Executive Officer
March 8, 2021
By:
/s/ Douglas P. Baker
Douglas P. Baker
Title: Chief Financial Officer, Principal Financial Officer
and Principal Accounting Officer
Date: March 8, 2021
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 registrant
and in the capacities and on the dates indicated.
By:
/s/ William J. Febbo
William J. Febbo
Title: Chief Executive Officer, Principal Executive Officer
and Director
Date: March 8, 2021
By:
/s/ James Lang
James Lang
Title: Director
Date: March 8, 2021
By:
/s/ Gus D. Halas
Gus D. Halas
Title: Chairman and Director
Date: March 8, 2021
By:
/s/ Patrick Spangler
Patrick Spangler
Title: Director
Date: March 8, 2021
By:
/s/ Lynn Vos
Lynn Vos
Title: Director
Date: March 8, 2021
By:
/s/ Greg Wasson
Greg Wasson
Title: Director
Date: March 8, 2021
42
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.
RMDY Health, Inc., A Delaware corporation
Cyberdiet, a controlled foreign corporation located in Israel
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statements of OptimizeRx Corporation on Form S-3 (File No. 333-252844) and Form S-8
(File Nos. 333-237630, 333-230212, 333-210653, and 333-189439) of our report dated March 26, 2020, with respect to our audit of the consolidated
financial statements of OptimizeRx Corporation as of December 31, 2019 and for the year then ended which report is included in this Annual Report on
Form 10-K of OptimizeRx Corporation for the year ended December 31, 2020.
Our report on the consolidated financial statements refers to a change in the Company’s method of accounting for leases in 2019 due to the adoption of
ASU No. 2016-02, Leases (Topic 842), as amended, effective January 1, 2019, using the modified retrospective approach.
Exhibit 23.1
/s/ Marcum LLP
Marcum LLP
New York, NY
March 8, 2021
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement of OptimizeRx Corporation on Form S-3 (File No. 333-252844) and Form S-8
(File Nos. 333-237630; 333-230212; 333-210653 and 333-189439) of our report dated March 8, 2021, with respect to our audit of the consolidated
financial statements of OptimizeRx Corporation and Subsidiaries as of December 31, 2020 and for the year then ended, which is included in this Annual
Report on Form 10-K of OptimizeRx Corporation for the year ended December 31, 2020.
/s/ UHY LLP
Sterling Heights, Michigan
March 8, 2021
Exhibit 31.1
I, William J. Febbo, certify that;
CERTIFICATIONS
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 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 the
statements 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 the
financial 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
Exchange Act 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 the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that 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;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (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 the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 8, 2021
/s/ William J. Febbo
By: William J. Febbo
Title: Chief Executive Officer, Principal Executive Officer
Exhibit 31.2
I, Douglas P. Baker, certify that;
CERTIFICATIONS
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2020 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 the
statements 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 the
financial 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
Exchange Act 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 the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that 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;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (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 the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 8, 2021
/s/ Douglas P. Baker
By: Douglas P. Baker
Title: Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the annual Report of OptimizeRx Corp (the “Company”) on Form 10-K for the year ended December 31, 2020 filed with the Securities
and Exchange Commission (the “Report”), I, William J. Febbo, Chief Executive Officer of the Company, and I, Douglas P. Baker, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
By:
Name:
Title:
Date:
By:
Name:
Title:
Date:
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates
presented and the consolidated result of operations of the Company for the periods presented.
/s/ William J. Febbo
William J. Febbo
Chief Executive Officer, Principal Executive Officer
March 8, 2021
/s/ Doug Baker
Doug Baker
Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer
March 8, 2021
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.