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, 2023
☐ 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)
260 Charles Street Suite 302
Waltham, MA
(Address of principal executive offices)
26-1265381
(I.R.S. Employer
Identification No.)
02453
(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
Trading Symbol
OPRX
Name of each exchange on which registered
NASDAQ Capital Market
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer
☒ 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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. $235,326,034
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.18,183,914 common shares
as of April 12, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant’s definitive proxy statement, in connection with its 2024 Annual Meeting of Shareholders, to be filed with the Securities
and Exchange Commission within 120 days after December 31, 2023, are incorporated by reference into PART III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Information about Our Executive Officers
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 1C.
Item 2.
Item 3.
Item 4.
Item 4.1
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
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Forward-Looking Statements
PART I
This Annual Report on Form 10-K contains statements that relate to future events and expectations and, as such, constitute forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements, other than purely historical information, including
estimates, projections, statements relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating
results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are
identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will
continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to
risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Forward-looking statements are not
guarantees of future performance. Although OptimizeRx believes that the expectations reflected in any forward-looking statements are based on reasonable
assumptions, these expectations may not be attained and it is possible that actual results may differ materially from those indicated by these forward-
looking statements due to a variety of risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.
For a discussion of some of the specific factors that could cause actual results to differ materially from the information contained in this report, see the
following sections of this report: Part I, Item 1A. “Risk Factors,” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” including the disclosures under “Critical Accounting Estimates”. Market projections are subject to the risks discussed in this report
and other risks in the market. OptimizeRx disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to
new information, future events or otherwise, except as required by applicable law.
Unless otherwise specified or the context otherwise requires, when used in this Annual Report on Form 10-K, the terms “we,” “our,” “us,” “OptimizeRx,”
or the “Company” refer to OptimizeRx Corporation and its subsidiaries.
Item 1. Business
General
OptimizeRx is a digital health technology company enabling care-focused engagement between life sciences organizations, healthcare providers, and
patients at critical junctures throughout the patient care journey. Connecting over two million U.S. healthcare providers and millions of their patients
through an intelligent omni-channel technology platform embedded within a proprietary point-of-care network, as well as mass digital communications
channels, OptimizeRx helps life sciences organizations engage and support their customers.
We are a Nevada corporation organized in September 2008. We conduct our operations through our wholly-owned subsidiaries, Healthy Offers, Inc. (d/b/a
Medicx Health or “Medicx Health”), a Nevada corporation, CareSpeak Communications, Inc., a New Jersey corporation, CareSpeak Communications,
d.o.o., a controlled foreign corporation incorporated in Croatia, and Cyberdiet, a controlled foreign corporation incorporated in Israel.
We employ a “land and expand” strategy focused on growing our existing client base and generating greater and more consistent revenues, in part through
the continued shift in our business model toward enterprise level engagements, while also broadening our platform with innovative proprietary solutions
such as our Artificial Intelligence (AI) powered Dynamic Audience and Activation Platform (“DAAP”), expanding on previous iterations of the RWD.AI
technology. which uses sophisticated machine-learning algorithms to find the best audiences in the correct channels at the right time.
1
Industry Background
Life sciences organizations face a challenging commercial landscape. In recent years, they have met increased competition, shrinking market sizes, and
inconsistent access to patients and healthcare professionals - their most important customers. 81% of new drug approvals are specialty medications, leading
to more complex diagnosis criteria, increased utilization management by healthcare payors, and lengthy wait times for patients to begin treatment after care
decisions are made.
As a result, life sciences organizations have increasingly turned to technology solutions to support their commercial strategies. Spending on digital
solutions to facilitate greater access to their end markets accounts for one-third of their collective commercial spend in the United States of approximately
$30 billion.
We believe significant opportunity exists to address the unmet needs of life sciences organizations as they relate to digital solutions, including omnichannel
access to health care professionals, for complex commercial challenges.
2023 Company Highlights
1. Net revenue increased to $71.5 million in 2023, a 15% increase over 2022.
2. Gross profit increased to $42.9 million in 2023 from $39.0 million in 2022 with corresponding gross margins of 60.0% and 62.4%, respectively.
3. Meaningfully increased our DAAP footprint. With 2023 having 24 DAAP deals compared to only six deals in 2022.
4. Acquired Medicx Health, a leading healthcare consumer-focused omnichannel marketing and analytics company that significantly expands our
footprint with consumers and patients.
5. Refocused operations on core solutions to streamline efficiencies and better position the Company to capitalize on synergies with Medicx Health,
focusing on Audience Development, Audience Activation and Media Execution, and Financial Messaging.
Principal Solutions
The Company’s original solution was Financial Messaging - the delivery of treatment-specific financial support information for patients distributed directly
to healthcare prescribers through a combination of our proprietary technology and a network of electronic health record (EHR) and electronic prescribing
(ERx) platforms. Over time, the demand for different types of communication and marketing solutions among life sciences organizations, healthcare
providers, and patients led us to expand upon our initial solution to increase the variety of health-related information we deliver, as well as the platforms,
technology, and audiences through and to which we deliver. Today, we offer diverse tech-enabled marketing solutions through our AI-generated DAAP,
which enables customers to execute traditional marketing campaigns on our proprietary digital point-of-care network, as well as dynamic marketing
campaigns that optimize audiences in real time to increase the value of treatment information for healthcare professionals and patients in response to
clinical care events.
Our principal solutions, available individually or through our DAAP, can be summarized as follows:
Audience Development
● AI-generated dynamic audience creation using predictive analytics via machine learning methods applied to real-world data (RWD) to assist
healthcare providers (HCPs) in identifying patients who may be qualified for specific therapies, raise awareness of patient access pathways, and
identify early indicators of non-adherence among patient populations. This solution has a “patient-first” focus, helping manufacturers identify
which HCPs to engage by first identifying if they currently care for qualified patients, based on where they are in their care journey and disease
state. These AI models provide our clients with the most relevant targets and fuel the deployment of programs across our other solutions.
● Creation of consumer audiences using our privacy-safe and HIPAA-compliant Micro-Neighborhood Targeting® technology available for
traditional media execution through major programmatic Demand-Side Platforms (DSPs)
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Audience Activation and Media Execution
● HCP media execution delivering awareness (brand, therapeutic support, affordability, HUB, limited distribution, and patient support program)
messaging via our HCP omnichannel network including digital point-of-care banners within clinical workflow applications, such as EHR systems
and ERx platforms, programmatic social media, and programmatic display.
● Consumer audience media execution delivering consumer awareness via our consumer omnichannel network including programmatic display,
programmatic connected television (CTV)/over-the-top (OTT), programmatic social media, addressable television (ATV), digital out-of-home
(OOH), programmatic audio (podcasts, apps, radio), and email/direct mail.
Financial Messaging
● Financial Messaging solution providing prescribers visibility to branded copay offers directly within their EHR systems and/or ERx platforms. It
allows prescribers to print, digitally send directly to patients via SMS, and/or digitally send copay offer details electronically to the dispensing
pharmacy. Our solution addresses the fact that many healthcare systems and prescribers are looking for an easier, more effective way to increase
affordable access to their prescribed branded medications.
Sales and Marketing
We employ a sales team of over 20 people, marketing our solutions to new and existing clients. Our sales team drives awareness of the increased value of
our technology stack as an AI tech-enabled marketing platform. Accordingly, our sales efforts are not directed merely at selling individual solutions, but
more broadly towards selling enterprise platform engagements with access to our full set of solutions.
Our sales and marketing teams work closely together to cultivate customer relationships. We use a number of methods to market and promote our solutions,
including digital advertising, industry events, trade shows, conferences, media coverage, social media and email. In 2023, we enhanced our RWD.AI
platform solution to become the premier platform to devise and execute Next-Best-Action marketing strategies within healthcare professional audiences
and branded the platform as DAAP.
Technology
To support our growth and provide maximum security, scalability, and flexibility, all of our systems, including from acquisitions, are now hosted and
integrated in the cloud. Our technology development and systems management core team is in the U.S. and in Croatia, with contractors in India and
Ukraine to provide bench depth, rich skills experience, and business economies. The teams are organized into Centers of Excellence focused on Product
Domains, Quality Assurance, Information Security, Data Warehousing and Business Intelligence, Platform Services, and Internal Systems Support.
Systems enhancements in 2023 included upgrades and documentation of processes and procedures and security implementation for ongoing cybersecurity,
Sarbanes Oxley, HIPAA, and customer security assessments, and in achieving enterprise HITRUST recertification.
Competition
Our solutions 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. Our messaging offerings compete for
pharmaceutical budgets with a variety of other forms of advertising and promotion.
3
Our solutions compete broadly 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, and wide arrays of product offerings and marketing networks. Many of our competitors have
greater financial, technical, product development, marketing and other resources than we do. These companies may be better known than we are and have
more customers or users than we do. As a result, many of these companies may respond more quickly to new or emerging technologies and standards and
changes in customer requirements.
These companies may be able to invest more resources in research and development, strategic acquisitions, and sales and marketing. We generally compete
on the basis of several factors, including size of our network, quality of our service, our ability to target specific customer needs, and to a lesser extent,
price. For more information on risks relating to our competition, see Item 1A. Risk Factors.
Intellectual Property
Historically, we have created intellectual property or obtained intellectual property through commercial relationships and in connection with acquisitions.
We own patents important to our business, and we expect to continue to file patent applications to protect our research and development investments in new
products. As of December 31, 2023, we held five patents and two pending patent applications, including foreign counterpart patents and foreign
applications. For the United States, patents may last 20 years from the date of the patent’s filing, subject to term adjustments made by the patent office.
In addition, we own registered trademarks in the United States and other countries. As of December 31, 2023, OPTIMIZERx, OPTIMIZEMD, CareSpeak,
DIETWATCH, Innovate4Outcomes, SPRx, SPx, RMDY, Specialty Express, TELAREP, Medicx, Micro-Neighborhood, and Geomedical Targeting are our
registered trademarks. We also have several pending trademark applications.
We also have licenses to intellectual property for the use and sale of certain of our solutions. In addition, we obtain other intellectual property rights and/or
licenses used in connection with our business when practical and appropriate.
Government Regulation
The healthcare industry and, in particular, our customers and partners are subject to U.S. federal, state and local laws and regulations, including those
governing fraud, abuse, privacy and security. Many of these laws and regulations are complicated and how they might apply to us, our customers, our
partners, or the specific services and relationships we have with our customers and partners are not always well-defined. Our failure, or perceived failure, to
accurately apply, or comply with, these laws and regulations could subject us to significant fines and liability, result in reputational harm, and adversely
affect our business. Any new or amended laws or regulations that impose significant operational restrictions and compliance requirements may negatively
impact our business. See Item 1A. Risk Factors for more information on the impact of Government Regulations on OptimizeRx.
Employees
As of December 31, 2023, we had 116 full-time employees and 1 part-time employee in the U.S, as well as 19 full-time employees in Croatia. None of our
employees are represented by a labor union or collective bargaining agreement with respect to their employment with us. The majority of our employees
work remotely and are geographically distributed across the United States and Croatia. We supplement our workforce with contractors in the United States
and internationally on an as-needed basis. We consider our relationship with our employees to be good and have not experienced any work stoppages.
We are dedicated to providing a supportive and respectful environment to our employees where everyone feels valued, and we celebrate both the
differences and similarities among our people. We also believe that diversity in all areas, including cultural background, experience and thought, is essential
to bettering a professional environment and in making our Company stronger. Our Diversity, Equity, Inclusion & Belonging Committee (DEI&B) is
actively engaged in improving our culture, hiring practices and training. In 2023, we upheld the Parity Pledge – a commitment made in 2021 to interview
and consider at least one qualified woman and one underrepresented minority for every open role, VP or higher. In addition, the DEI&B Committee
sponsored quarterly events in 2023, including “Historic Women Inventors”, “Mental Health Awareness”, “Step Challenge”, and “Affinity Groups”.
4
We prioritize recruiting, retaining, and incentivizing a highly qualified, diverse workforce as the success of our Company is dependent on the skills,
experience, and efforts of our employees. A skilled workforce not only improves a company’s performance, but also contributes to overall employee
satisfaction and enhances human capital. We have increased our focus on training and development for our current employees and have implemented a
Learning Management System where current and future training modules will be presented and tracked for reporting purposes. We offer other learning and
development opportunities and resources to support our employees in achieving and enhancing their development objectives. We equip our managers with
the skills and tools to provide ongoing coaching and feedback so employees can maximize their performance and potential, delivering success for the
Company and the employee.
We pay our employees competitively and offer a broad range of company-paid benefits, which we believe are competitive with others in our industry.
Moreover, we believe our long-term incentives are structured in a manner to provide time-based vesting schedules that are retentive and we incentivize
select employees through the granting of stock-based awards and cash-based performance bonus awards.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith,
we file reports, proxy and information statements and other information with the Securities and Exchange Commission (the “SEC”). You can read our SEC
filings over the Internet at the SEC’s website at www.sec.gov. Our filings with the SEC are also available free of charge through the investor relations
section of our website at www.optimizerx.com. Reports are available free of charge as soon as reasonably practicable after we electronically file them with,
or furnish them to, the SEC. From time to time, we also use multiple social media channels to communicate with the public about OptimizeRx. It is
possible that the information we post on social media could be deemed to be material information. Therefore, we encourage you to review the information
we post on the social media channels listed on our investor relations website, if any.
Information contained on or accessible through the websites and social media channels referred to above is not incorporated by reference in, or otherwise a
part of, this Annual Report, and any references to these websites and social media channels are intended to be inactive textual references only.
Item 1A. Risk Factors
Risks Relating to Our Business
Because we have historically experienced losses, if we are unable to achieve profitability, our financial condition and company could suffer.
With the exception of 2021, we have historically incurred losses as a result of investing in future growth. We incurred losses in 2023 as a result of our
increased spending to build the organization to support expected future growth – both through additional new hires, as well as through acquisitions. While
we have increased revenues, we have not yet consistently achieved profitability due to these investments and non-cash expenses. Our ability to achieve
consistent profitability depends on our ability to generate sales through our technology platform and advertising model, while maintaining reasonable
expense levels. If we do not achieve sustainable profitability, it may impact our ability to continue our operations.
Seasonal trends in the pharmaceutical brand marketing industry could affect our operating results.
In general, the pharmaceutical brand marketing industry experiences seasonal trends that affect the vast majority of participants in the pharmaceutical
digital marketing industry. Many pharmaceutical companies allocate the largest portion of their brand marketing to the fourth quarter of the calendar year.
As a result, the first quarter tends to reflect lower activity levels and lower revenue, with gradual increases in the following quarters. We generally expect
these seasonality trends to continue and our ability to effectively manage our resources in anticipation of these trends may affect our operating results.
5
Developing and implementing new and updated applications, features and services for our solutions 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 solutions requires us to continue to improve the technology underlying those solutions and to continue to develop new
and updated applications, features and services for those solutions. 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 solutions and related applications,
features and services. Our development and/or implementation of new technologies, applications, features and services may cost more than expected, may
take longer than originally expected, may require more testing than originally anticipated and may require the acquisition of additional personnel and other
resources. There can be no assurance that the revenue opportunities from any new or updated technologies, applications, features or services will justify the
amounts spent.
Any failure to offer high-quality customer support for our solutions may adversely affect our relationships with our customers and harm our financial
results.
Once our solutions are implemented, our customers use our support organization to resolve technical issues relating to our solutions. In addition, we also
believe that our success in selling our solutions is highly dependent on our business reputation and on favorable recommendations from our existing
customers. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could harm our
reputation, adversely affect our ability to maintain existing customers or sell our solutions to existing and prospective customers, and harm our business,
operating results and financial condition.
We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand
for these services, without corresponding revenues, could also increase costs and adversely affect our operating results.
We are dependent on a concentrated group of customers.
Because the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number of
companies. We have approximately 100 pharmaceutical manufacturers as customers, and our revenues are concentrated in these customers. Loss of one or
more of our larger customers could have a negative impact on our operating results. Our top five customers represented approximately 44% of revenue for
the year ended December 31, 2023. In each of 2023 and 2022, we had one customer that each represented over 10% of our revenues.
We expect that we will continue to depend upon a relatively small number of customers for a significant portion of our total revenues for the foreseeable
future. The loss of any of these customers or groups of customers for any reason, or a change of relationship with any of our key customers could cause a
material decrease in our total revenues.
Additionally, mergers or consolidations among our customers in the healthcare industry could reduce the number of our customers and could adversely
affect our revenues and sales. In particular, if our customers are acquired by entities that are not also our customers, that do not use our solutions or that
have more favorable contract terms with competitors and choose to discontinue, reduce or change the terms of their use of our solutions, our business and
operating results could be materially and adversely affected.
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 (“ERx”) platforms and electronic health record (“EHR”) systems to generate a portion
of the revenues received from our customers. Such arrangements subject us to a number of risks, including the following:
● Our ERx and EHR 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 ERx and EHR partners and
may lead to lengthy and expensive litigation or arbitration;
● Significant changes in an ERx and EHR partner’s business strategy may adversely affect a partner’s willingness or ability to satisfy obligations
under any such arrangement;
● An ERx and EHR partner could terminate the partnership arrangement, which could negatively impact our ability to sell our solutions and achieve
revenues; and
● The failure of an ERx or EHR partner to provide accurate and complete financial information to us or to maintain adequate and effective internal
control over its financial reporting may negatively affect our ability to meet our financial reporting obligations as required by the SEC. See Part II,
Item 9A. “Controls and Procedures.”
We generated 36.4% and 31.8% of our revenue through our largest partner in 2023 and 2022, respectively. As such, the inability to maintain these
relationships could adversely impact our business.
Our agreements with ERx and EHR channel partners are subject to audit.
Our agreements with our ERx and EHR channel partners provide for revenue-sharing payments to them based on the revenue we generate through their
platforms and systems. These payments are subject to audit by our channel partners, at their cost, and if there is a dispute as to the calculation, we may be
liable for additional payments. Some agreements would require us to also pay for the cost of the audit if an underpayment is determined to be in excess of a
certain amount.
If we fail to attract new customers or retain and expand existing customers, our business and future prospects may be materially and adversely
impacted.
We currently work with many leading pharmaceutical companies, medical device manufacturers, associations, and other companies. While we have
experienced customer growth, this growth may not continue at the same pace in the future or at all. Achieving growth in our customer base may require us
to engage in increasingly sophisticated and costly sales and marketing efforts that may not result in additional customers. We may also need to modify our
pricing model to attract and retain such customers. If we fail to attract new customers or fail to maintain or expand existing relationships in a cost-effective
manner, our business and future prospects may be materially and adversely impacted.
Actual or perceived failures to comply with applicable laws and regulations that affect the healthcare industry, including data protection, privacy and
security, fraud and abuse laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial
condition.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and
regulations governing the collection, use, disclosure, retention, and security of personal information, including health-related information. This evolution
may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information,
necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with
these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or
foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative
publicity, government investigations and enforcement actions, claims by third parties, and damage to our reputation, any of which could have a material
adverse effect on our operations, financial performance and business.
7
We also may be bound by contractual obligations and other obligations relating to privacy, data protection, and information security that are more stringent
than applicable laws and regulations. The costs of compliance with, and other burdens imposed by, laws, regulations, standards, and other obligations
relating to privacy, data protection, and information security are significant. Although we work to comply with applicable laws, regulations, and standards,
our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent
manner from one jurisdiction to another, and may conflict with another or other legal obligations with which we must comply. Accordingly, our failure, or
perceived inability, to comply with these laws, regulations, standards, and other obligations may limit the use and adoption of our solution, reduce overall
demand for our solution, lead to regulatory investigations, breach of contract claims, litigation, and significant fines, penalties, or liabilities for actual or
alleged noncompliance or slow the pace at which we close sales transactions, any of which could harm our business.
The Health Insurance Portability and Accountability Act of 1996, or HIPAA, and the rules promulgated thereunder require certain entities, referred to as
Covered Entities, to comply with established standards, including standards regarding the privacy and security of protected health information, or PHI.
HIPAA further requires that Covered Entities enter into agreements meeting certain regulatory requirements with their business associates, as such term is
defined by HIPAA, which, among other things, obligate the business associates to safeguard the covered entity’s PHI against improper use and disclosure.
While we are not a Covered Entity, we have contracted as a business associate of our Covered Entity customers and, as such, may be regulated by HIPAA
and have contractual obligations under such agreements, including to enter into business associate agreements with our third-party vendors. We, and our
Covered Entity customers might face significant contractual liability pursuant to such business associate agreements if the business associate breaches the
agreement or causes the Covered Entity to fail to comply with HIPAA.
Certain other laws and regulations such as federal and state anti-kickback and false claims laws may apply to us indirectly through our relationships with
our customers and partners. Violations can result in considerable penalties and sanctions. If we are found to have violated, or to have facilitated the
violation of such laws, we could be subject to significant penalties.
The markets in which we operate are competitive, continually evolving and, in some cases, subject to rapid change.
Our solutions face competition from numerous other companies, both in attracting users and in generating revenue from advertisers and sponsors. We
compete for users with online services and websites that provide savings on medications and healthcare products, including both commercial sites and not-
for-profit sites. We compete for advertisers and sponsors with health-related web sites, general purpose consumer web sites that offer specialized health
sub-channels, other high-traffic web sites that include both healthcare-related and non-healthcare-related content and services, search engines that provide
specialized health searches, and advertising networks that aggregate traffic from multiple sites.
Many of our competitors have greater financial, technical, product development, marketing and other resources than we do. These organizations may be
better known than we are and have more customers or users than we do. We cannot provide assurance that we will be able to compete successfully against
these organizations or any alliances they have formed or may form. Since there are no substantial barriers to entry into the markets in which we participate,
we expect that competitors will continue to enter these markets.
8
Developments in the healthcare industry could adversely affect our business.
Most of our revenue is derived from pharmaceutical manufacturers and could be affected by changes affecting the broader healthcare industry, including
decreased spending in the industry overall.
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 industry participants interact with consumers and the
general public;
● Government regulation prohibiting the use of coupons by patients covered by federally funded health insurance programs;
● Consolidation of healthcare industry participants;
● Reductions in governmental funding for healthcare; and
● Adverse changes in business or economic conditions affecting healthcare industry participants.
Even if general expenditures by industry participants remain the same or increase, developments in the healthcare industry may result in reduced spending
in some or all of the specific market segments that we serve now or may serve in the future. For example, use of our solutions and services could be
affected by:
● A decrease in the number of new drugs or medical devices coming to market; and
● A decrease in marketing expenditures by pharmaceutical or medical device companies.
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 demands 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 the healthcare industry.
If we are unable to manage growth, our operations could be adversely affected.
Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information
systems, and to recruit, train and manage personnel. There can be no assurance that management will be able to manage growth effectively. To manage
growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls to expand, train and manage
our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhance our operational,
financial and management controls, reporting systems and procedures, and to attract and retain sufficient talented personnel.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our
business. Various risks arise when companies grow too quickly. If our business grows too quickly, our ability to meet customer demand in a timely and
efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our solutions. Our failure to
properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly,
could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.
9
We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.
We may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions successfully. We may seek additional
acquisition opportunities, both to further diversify our business and to penetrate or expand important product offerings or markets. There are no assurances,
however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete
proposed acquisitions, successfully integrate acquired businesses, or expand into new markets. Once acquired, operations may not achieve anticipated
levels of revenues or profitability. Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services and products
of the acquired companies and the diversion of management’s attention from other business concerns. Although our management will endeavor to evaluate
the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all such risks. Difficulties encountered with
acquisitions could have a material adverse impact on our business.
Our acquisition activities may disrupt our ongoing business and may involve increased expenses, and we may not realize the financial and strategic
goals contemplated at the time of a transaction.
We have acquired, and may in the future acquire, companies, businesses, products, services and technologies. Acquisitions involve significant risks and
uncertainties, including:
–
our ongoing business may be disrupted, an acquisition may involve increased expenses, and our management’s attention may be diverted by
acquisition, transition, or integration activities;
– we may not further our business strategy as we expected,
– we may not realize any synergies or other anticipated benefits of an acquisition or such synergies or benefits may take longer than anticipated to
be realized;
– we may overpay for our investments, or otherwise not realize the financial returns contemplated at the time of the acquisition;
–
integration with acquired operations or technology may be more costly or difficult than expected and such integration may not be successful;
– we may be unable to retain the key employees, customers and other channel partners of the acquired operation;
– we may not realize the anticipated increases in our revenues from an acquisition; and
–
our use of cash to pay for acquisitions may limit other potential uses of our cash.
Impairment charges for goodwill or other intangible assets may be increased as we shift our focus away from our non-core businesses.
Annually, we evaluate goodwill and long-lived assets to determine if impairment has occurred. Additionally, interim reviews are performed whenever
events or changes to the business could indicate possible impairment. Any future impairment of our goodwill or long-lived assets could require us to record
an impairment charge, which would negatively impact our results of operations. For example, our strategic shift away from non-core business resulted in an
impairment of one or more of our long-lived assets. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operation of the Years Ended December 31, 2023 and 2022 - Operating Expenses.”
10
Market conditions could adversely change and our earnings could decline resulting in charges to impair intangible assets, such as goodwill.
As a result of our various acquisitions, the consolidated balance sheet at December 31, 2023 contains goodwill of approximately $78.4 million and
intangible assets, net of approximately $49.4 million. We evaluate on an ongoing basis whether facts and circumstances indicate any impairment to the
carrying value of indefinite-lived intangible assets such as goodwill. As circumstances after an acquisition can change, we may not realize the value of
these intangible assets. During the year ended December 31, 2023, we recorded impairment charges, related to certain intangible assets, of approximately
$6.7 million. Any future impairment charges related to our goodwill or long-lived assets could require us to record additional impairment charges, which
would negatively impact our results of operations.
Restrictions in our Credit Agreement could adversely affect our business, financial condition, results of operations, ability to make distributions, and
the value of our securities.
Our Credit Agreement contains customary affirmative covenants, including, among others, covenants pertaining to the delivery of financial statements;
certain financial covenants; notices of default and certain other material events; payment of obligations; preservation of corporate existence, rights,
privileges, permits, licenses, franchises and intellectual property; maintenance of property and insurance and compliance with laws, as well as customary
negative covenants, including, among others, limitations on the incurrence of liens and entering into capital leases, investments and indebtedness; mergers
and certain other fundamental changes; dispositions of assets; restricted payments; changes in our line of business; transactions with affiliates and
burdensome agreements. These covenants could affect our ability to operate our business, increase the amount of interest expense we ultimately pay
pursuant to the Credit Agreement, and may limit our ability to take advantage of potential business opportunities as they arise.
Our ability to comply with the covenants and restrictions contained in our Credit Agreement, may be affected by events beyond our control, including
prevailing economic, financial, and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may
be impaired. A failure to comply with these provisions could result in a default or an event of default. Upon an event of default, unless waived, the lenders
could elect to terminate their commitments, cease making further loans, require cash collateralization of letters of credit, cause their loans to become due
and payable in full, foreclose against any assets securing the debt under our Credit Agreement and force us and our subsidiaries into bankruptcy or
liquidation. If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and the holders of our stock could experience
a partial or total loss of their investment.
Servicing debt and funding other obligations requires a significant amount of cash, and our ability to generate sufficient cash depends on many
factors, some of which are beyond our control.
Our ability to make payments on and refinance our indebtedness and to fund our operations and capital expenditures depends on our ability to generate cash
flow and secure financing in the future. Our ability to generate future cash flow depends, among other things, on future operating performance, general
economic conditions, competition, and legislative and regulatory factors affecting our operations and business.
Some of these factors are beyond our control. There is no assurance that our business will generate cash flow from operations or that future debt or equity
financings will be available to us to enable us to pay our indebtedness or to fund other needs. As a result, we may need to refinance all or a portion of our
indebtedness on or before maturity. There is no assurance that we will be able to refinance any of our indebtedness on favorable terms, or at all. Any
inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could have an adverse effect on our financial condition.
11
Our business and growth may suffer if we are unable to attract and retain members of our senior management team and other key employees.
Our success has been largely dependent on the skills, experience and efforts of our senior management team and key employees and the loss of the services
of any of our senior management team or other key employees, without a properly executed transition plan, could have an adverse effect on us. The loss of
any member of our senior management team or any of our other key employees could damage critical customer relationships, result in the loss of vital
knowledge, experience and expertise, lead to an increase in recruitment and training costs, and make it more difficult to successfully operate our business
and execute our business strategy. We may not be able to find qualified potential replacements for these individuals and the integration of potential
replacements may be disruptive to our business.
Furthermore, our business also depends on our ability to attract and retain qualified management, sales and technical personnel. However, competition for
these types of employees is intense due to the limited number of qualified professionals with expertise in our industry. Our ability to meet our business
development objectives will depend in part on our ability to recruit, train, incentivize, and retain top quality people with advanced skills who understand
our industry, technology, and business. Our compensation arrangements, including our equity award programs, are essential to retaining our senior
management team and other key employees, but may not always be successful in attracting new employees or retaining and motivating our existing key
employees for reasons that may include movement in our stock price or our ability to maintain or increase our equity pool. If we are unable to engage,
incentivize, and retain the necessary personnel, our business may be materially and adversely affected.
Geopolitical events may affect our business and our customer base and have a material adverse impact on our sales and operating results.
Our results of operations may be affected by the conditions in the global capital markets and the economy generally, both in the U.S. and elsewhere in the
world. The war between Russia and Ukraine as well as the conflict between Israel and Hamas have caused uncertainty in the credit markets and could cause
our customers and potential customers to postpone or reduce spending on technology products or services or put downward pressure on prices, which could
have an adverse effect on our business.
We could be subject to economic, political, regulatory and other risks arising from our international operations.
Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks
that may be different from, and incremental to, those in the United States. In addition to the risks that we face in the United States, our international
operations in Israel and Croatia, may involve risks that could adversely affect our business, including:
● difficulties and costs associated with staffing and managing foreign operations;
● natural or man-made disasters, political, social and economic instability, including wars, terrorism and political unrest, outbreak of disease,
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;
12
● fluctuations in currency exchange rates, which could impact 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 use and acceptance of electronic payment methods, such as payment cards;
● new and different sources of competition; and
● different and more stringent user protection, data protection, privacy and other laws.
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.
We may in the future be adversely affected by health epidemics and pandemics, including COVID-19, which may significantly harm our business,
prospects, financial condition and operating results.
We face risks related to health epidemics and other outbreaks, including the global outbreak of the novel coronavirus and the disease caused by it, COVID-
19. During 2020, the spread of the novel coronavirus led to disruption and volatility in the global capital markets. If such disruption and volatility recurs,
there could be an increase to our cost of capital and an adverse effect on our ability to access the capital markets. In addition, efforts to contain the COVID-
19 pandemic led to implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home or shelter-
in-place orders, and business shutdowns. The extent to which a pandemic, epidemic or outbreak of an infectious disease impacts our operations will depend
on future occurrences, which are highly uncertain and cannot be predicted with confidence, including the duration of any outbreak and the actions to
contain or treat its impact, among others. We are prepared to take steps to modify our business practices and mitigate the impact of the emergence and
spread of new variants and resurgences, or another pandemic or epidemic; however, there can be no assurance that such steps will be successful, or that our
business operations, or the operations of our customers or partners will not be materially and adversely affected by the consequences of such pandemic or
epidemic, which could materially impact our results of operations, cash flows, and financial condition.
Risks Related to Inflation, Interest Rates, and Other Adverse Economic Conditions
Inflation, the current interest rate environment, and other adverse economic conditions may adversely affect our business, results of operations and
financial condition.
Recently, inflation has increased throughout the U.S. economy. In an inflationary environment, we may experience increases in the prices of labor and other
costs of doing business. Additionally, cost increases may outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted.
If we are unable to successfully manage the effects of inflation, our business, operating results, cash flows and financial condition may be adversely
affected. The occurrence or perception of an economic slowdown or recession, or of a further increase in inflation, may have a negative impact on the
global economy and may reduce customer demand for our products and services.
In addition, macroeconomic effects such as changes in interest rates and other measures taken by central banks and other policy makers could have a
negative effect on overall economic activity that could reduce our customers’ demand for our products and serves. Changing interest rates may have
unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such
interest rates and/or volatility. An adjustment in rates would impact our variable rate debt. If interest rates increase or remain elevated, we could face higher
debt service requirements, which would adversely affect our cash flow and could adversely impact our results of operations. If we are unable to generate
sufficient cash flow to service our debt or to fund our other liquidity needs, we could need to restructure or refinance all or a portion of our debt. Any
refinancing of indebtedness could be at higher interest rates, thereby resulting in an overall increase in interest expense.
Adverse changes in demand could impact our business, collection of accounts receivable and our expected cash flow generation, which may adversely
impact our financial condition and results of operations.
13
Risks Related to Our Intellectual Property and Technology
We are dependent, in part, on our intellectual property. If we are not able to protect our proprietary rights or if those rights are invalidated or
circumvented, our business may be adversely affected.
Our business is dependent, in part, on our ability to innovate, and, as a result, we are reliant on our intellectual property. We generally protect our
intellectual property through patents, trademarks, trade secrets, confidentiality and nondisclosure agreements and other measures to the extent our budget
permits. There can be no assurance that patents will be issued from pending applications that we have filed or that our patents will be sufficient to protect
our key technology from misappropriation or falling into the public domain, nor can assurances be made that any of our patents, patent applications,
trademarks or our other intellectual property or proprietary rights will not be challenged, invalidated or circumvented. In the event a competitor or other
party successfully challenges our solutions, processes, patents or licenses or claims that we have infringed upon their intellectual property, we could incur
substantial litigation costs defending against such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual
property at issue, any of which could have a material adverse effect on our business, operating results and financial condition. We cannot assure that steps
taken by us to protect our intellectual property and other contractual agreements for our business will be adequate, that our competitors will not
independently develop or patent substantially equivalent or superior technologies or be able to design around patents that we may receive, or that our
intellectual property will not be misappropriated.
If we are unable to protect our proprietary rights, we may be at a disadvantage to others who do not incur the substantial time and expense we incur.
Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult. Moreover, it may be difficult or practically impossible
to detect theft or unauthorized use of our intellectual property. Any of the foregoing could have a material adverse effect upon our business, financial
condition and results of operations.
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our
reputation and results of operations.
Global cybersecurity threats can range from uncoordinated individual attempts to gain unauthorized access to our information technology (IT) systems to
sophisticated and targeted measures known as advanced persistent threats. While we employ extensive measures to prevent, detect, address and mitigate
these threats (including access controls, insurance, vulnerability assessments, continuous monitoring of our IT networks and systems, maintenance of
backup and protective systems and user training and education), cybersecurity incidents, depending on their nature and scope, could potentially result in the
misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and
the disruption of business operations. The potential consequences of a material cybersecurity incident include reputational damage, loss of customers, loss
of income, litigation with customers and other parties, loss of trade secrets and other proprietary business data and increased cybersecurity protection and
remediation costs, which in turn could adversely affect our competitiveness and results of operations.
We may be unable to support our technology to further scale our operations successfully.
Our plan is to grow 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.
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.
14
Risks Relating to Our Common Stock
If a market for our common stock is not maintained, shareholders may be unable to sell their shares.
Our common stock is traded under the symbol “OPRX” on the Nasdaq Capital Market. We do not currently have a consistent active trading market. There
can be no assurance that a consistent active and liquid trading market will develop or, if developed, that it will be sustained.
Historically, our securities have been thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the
value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major
fluctuations in the price of the stock.
We may need to raise additional capital to grow our business and may not be able to do so on favorable terms, if at all.
We may need to raise additional capital in the future, including to expand our operations and pursue our growth strategies, to respond to competitive
pressures, or to meet capital needs in response to operating losses or unanticipated working capital requirements. Our inability to raise additional capital on
acceptable terms in the future may limit our ability to continue to operate our business and further expand our operations.
The market price of our common stock may be highly volatile and could fluctuate widely in price in response to various factors, many of which are
beyond our control.
Our stock price is subject to a number of factors, including:
● Technological innovations or new solutions and services by us or our competitors;
● Government regulation of our solutions and services;
● The establishment of partnerships with other healthcare companies;
● Intellectual property disputes;
● Additions or departures of key personnel;
● Sales of our common stock;
● Our ability to execute our business plan;
● Operating results below or exceeding expectations;
● Our operating and financial performance and prospects;
● Loss or addition of any strategic relationship;
● General financial, domestic, international, economic, industry and other market trends or conditions; and
● Period-to-period fluctuations in our financial results.
Our stock price may fluctuate widely as a result of any of the above. In addition, the securities markets have from time to time experienced significant price
and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.
15
We do not expect to pay dividends in the foreseeable future and any return on investment may be limited to the value of our common stock.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and future earnings, if any, to
fund our future growth and do not expect to declare or pay any dividend on shares of our common stock in the foreseeable future. As a result, the success of
an investment in our common stock may depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will
appreciate in value or even maintain the price at which it is purchased.
Anti-takeover provisions may make it more difficult for a third party to acquire control of us, even if the change in control would be beneficial to
shareholders.
The Company is a Nevada corporation. Anti-takeover provisions in Nevada law and our charter and bylaws could make it more difficult for a third party to
acquire control of us. These provisions could adversely affect the market price of the common stock and could reduce the amount that shareholders might
receive if the Company is sold. For example, our charter provides that the board of directors may issue preferred stock without shareholder approval. In
addition, our bylaws provide that shareholders cannot act by written consent and that directors may be removed by shareholders only with the approval of
the holders of not less than two-thirds of the voting power of the issued and outstanding stock entitled to vote at an annual or special meeting of the
shareholders.
Risks Related to Being a Public Company
We have identified a material weakness in our internal control over financial reporting. Failure to remediate the material weakness or any other
material weaknesses that we identify in the future could result in material misstatements in our financial statements.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, our management is required to report on the effectiveness of our internal control
over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are
complex and require significant documentation, testing and possible remediation. Annually, we perform activities that include reviewing, documenting and
testing our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, we will
not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-
Oxley Act of 2002. If we fail to achieve and maintain an effective internal control environment, we could suffer misstatements in our financial statements
and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could result in
significant expenses to remediate any internal control deficiencies and lead to a decline in our stock price.
The Company has identified a material weakness in the Company’s internal control over financial reporting. A material weakness is a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a
company’s annual or interim financial statements will not be prevented or detected on a timely basis. For further discussion of the material weaknesses, see
Item 9A, Controls and Procedures.
We cannot provide assurance that we have identified all, or that we will not in the future have additional, material weaknesses in our internal control over
financial reporting. As a result, we may be required to implement further remedial measures and to design enhanced processes and controls to address
deficiencies. If we do not effectively remediate the material weakness identified by management and maintain adequate internal controls over financial
reporting in the future, we may not be able to prepare reliable financial reports and comply with our reporting obligations under the Exchange Act on a
timely basis. Any such delays in the preparation of financial reports and the filing of our periodic reports may result in a loss of public confidence in the
reliability of our financial statements, which, in turn, could materially adversely affect our business, the market value of our common stock and our access
to capital markets.
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Item 1B. Unresolved Staff comments
None
Item 1C. Cybersecurity
Risk Management and Strategy
Our information security and risk management program is designed to identify, assess, and manage material risks from cybersecurity threats to our
applications, computer networks, third-party hosted services, communications systems, hardware and software, and our critical data, including intellectual
property, confidential information that is proprietary, strategic or competitive in nature, personal information, or PHI (collectively, “Information Systems”).
Our information security program’s basis is a comprehensive set of policies and procedures covering various information security domains (collectively,
“Information Security Policies”), including, but not limited to:
● Access control,
● Endpoint protection,
● Third-party oversight,
● Education, training, and awareness,
● Network security,
● Risk management,
● Incident response,
● Business continuity and disaster recovery,
● Data protection and privacy, and
● Other security domains.
Our risk management process is based on a standard methodology, and risks are identified based on:
● Annual risk assessments,
● Information on past incidents,
● Internal audits,
● Security penetration tests, and
● Other security assessments.
All risks are documented in a central Risk Register and tracked for mitigation and other treatment decisions.
Our information security program is audited annually against a well-known security framework, by an accredited third party. We currently carry a
HITRUST certification, which is a security assessment that targets the healthcare industry and HIPAA compliance. We are currently working towards a
SOC 2 audit and assessment, which has more general applicability and covers the trust services criteria of security, confidentiality, privacy, accessibility,
and processing integrity.
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In 2023, we stored and processed certain PHI on behalf of customers. From a cybersecurity perspective, this data was stored on secure AWS managed
servers in the contiguous United States and encrypted at rest and in transit. End users did not have permission to access PHI unless the end user’s account
had the proper end user role permissions (ie HCPs or hub service providers). These end user roles were assigned according to the customer’s needs to see
the information. At all times, such information was segregated so that one customer could not access records containing PHI that were associated with
another customer. In late 2023, we discontinued PHI processing; however, certain PHI remains stored on the secure AWS managed servers to the extent
information needs to be accessed by a customer.
Our external audits and assessments identify and evaluate material risks from cybersecurity threats against our overall business objectives on a periodic
basis and form the basis of internal reports, which can be shared with the management team, the Audit Committee of the Board of Directors, and the Board
of Directors to evaluate our overall enterprise risk.
Our incident response program consists of an Incident Response Plan document and a cross-functional Incident Response Team, which are defined in our
Information Security Policies. All workforce members are trained on incident reporting procedures, and there is a single point of contact for reporting all
incidents. Incident response training is conducted annually, followed by a tabletop exercise. Our Incident Response Plan instructs personnel on how to
notify our Incident Response Team in case of an incident. The VP of Information Security is the point person for incident responses and coordinates
mitigation and remediation of cybersecurity incidents. We log all incidents and response plans for purposes of internal documentation. We report critical
incidents to the management team, the Audit Committee, and the Board of Directors.
The Company’s VP of Information Security is responsible for implementing Information Security Policies on a day-to-day basis along with the Security
Team (as defined in the Information Security Policies), which includes the VP of Information Security, the Chief Product Officer, the VP of Data
Engineering and Platform Services, and the VP of Technology (Information Technology).
We use third-party service providers to perform a variety of functions throughout our business, including, but not limited to infrastructure support and
maintenance, CRM, contract management, data hosting, and miscellaneous finance and accounting projects. We assess our vendors with respect to
cybersecurity risk according to the services provided, the sensitivity of the Information Systems at issue, and the provider’s identity. In appropriate cases,
we will seek enhanced contractual obligations or guarantees related to cybersecurity on the service provider. Vendor risk assessments are performed before
each vendor is engaged, and annual reviews are conducted to ensure vendors continue to meet security requirements.
We also maintain technical errors and omissions insurance which includes a cyber incident endorsement of up to $20 million with a premium of $60,700.
This endorsement provides coverage for Network Security and Privacy, Privacy Regulation Proceeding, Privacy Event Expense Reimbursement, Extortion
Demand Reimbursement, Data Restoration, Network Restoration, Business Interruption and System Failure. This coverage reimburses the most common
costs for information security incidents, including attorney’s fees, consumer notification costs, and regulatory fines.
The Company has no material incidents to report through the date of this filing.
For more information on risks from cybersecurity threats that may materially affect the Company, see Item 1A. “Risk Factors”.
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Governance
The Board of Directors’ oversight function includes cybersecurity risk management. The Board of Directors has tasked the Audit Committee with
overseeing the Company’s cybersecurity risk management processes and with determining which threats are likely to impact the Company’s strategy,
business operations, and financial condition.
Our cybersecurity risk assessment and management processes are implemented and maintained by our VP of Information Security and the Security Team.
For strategic decisions regarding cybersecurity, the VP of Information Security consults with the Chief Product Officer, the Chief Financial Officer, the
General Counsel and Chief Compliance Officer, and the VP of Compliance.
The VP of Information Security is responsible for hiring appropriate personnel, performing vendor risk assessments, and communicating information
security priorities to relevant personnel, so that we can build cybersecurity risk considerations into our business practices. The VP of Information Security
also plans related budgets, designs cybersecurity processes, and reviews security assessments and related reports.
The Board of Directors has three members with skills and experience in information security and cybersecurity through their experience as current and
former executives of digital technology companies.
Item 2. Properties
Currently, we do not own any real estate. As of December 31, 2023, we have operating leases for office space in four multi-tenant facilities. The leases
include office spaces in Waltham, Massachusetts, Clarkston, Michigan, Scottsdale, Arizona, and Zagreb, Croatia. Our principal executive offices are
located at 260 Charles Street, Waltham, Massachusetts 02453.
The lease in Waltham, Massachusetts expires July 31, 2026, and has a monthly rent with escalating payments of $5,778 to $6,848. The lease in Clarkston,
Michigan expires November 30, 2025, with a three-year renewal option through 2028, and has a monthly rent of $2,445. The lease in Scottsdale, Arizona
expires April 30, 2025, and has a monthly rent with escalating payments of $9,304 to $9,727. The Company entered into a lease for new office space in
Zagreb, Croatia on July 1, 2023, which expires on June 30, 2029, but which grants the tenant the option to terminate the lease with 30-day notice before
each lease anniversary and has a monthly rent of approximately $3,038. The former lease in Zagreb, Croatia, with a monthly rent of approximately $1,883
was terminated effective June 30, 2023.
Item 3. Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently
not a party to any material legal or administrative proceedings, and we are not aware of any pending or threatened material legal or administrative
proceedings against us.
Item 4. Mine Safety Disclosures
Not applicable.
19
Item 4.1 Information About Our Executive Officers
The following information sets forth the names, ages, and positions of our executive officers as of April 15, 2024.
Name
William J. Febbo
Stephen L. Silvestro
Marion Odence-Ford
Edward Stelmakh
Doug Besch
Theresa Greco
Age
55
46
59
58
42
51
Positions and Offices Held
Chief Executive Officer
President
General Counsel and Chief Compliance Officer
Chief Financial Officer and Chief Operations Officer
Chief Product Officer
Chief Commercial Officer
Set forth below is a brief description of the background and business experience of each of our current executive officers.
William J. Febbo
Mr. Febbo joined the Company as Chief Executive Officer and as a director in February 2016. Mr. Febbo founded Plexuus, LLC, a payment processing
business for medical professionals in September 2015 and remained its Chairman from September 2015 to December 2020. From April 2007 to September
2015, Mr. Febbo served as Chief Operating Officer of Merriman Holdings, Inc., an investment banking firm, where he assisted with capital raises in the
tech, biotech, cleantech, consumer and resources industries. Mr. Febbo was a co-founder of, and from September 2013 to September 2015 served as Chief
Executive Officer of, Digital Capital Network, Inc., a transaction platform for institutional and accredited investors. Mr. Febbo was a co-founder of, and
from January 1999 to September 2015 was Chief Executive Officer of, MedPanel, LLC, a provider of market intelligence and communications for the
pharmaceutical, biomedical, and medical device industries. Since 2017, Mr. Febbo has been a faculty member of the Massachusetts Institute of
Technology’s linQ program, which is a collaborative initiative focused on increasing the potential of innovative research to benefit society and the
economy. Mr. Febbo currently serves as a director of LifeMD Inc, a publicly traded provider of virtual primary care that offers telemedicine, laboratory and
pharmacy services and specialized treatment across more than 200 conditions, and as a director of Augmedix, Inc., a publicly traded provider of automated
medical documentation and data services. Previously, Mr. Febbo served as a director of Modular Medical, a publicly traded development stage medical
device company focused on the design, development and eventual commercialization of an innovative insulin pump. In addition, Mr. Febbo has been a
board member of the United Nations Association of Greater Boston, a resource for the citizens of Greater Boston on the broad agenda of critical global
issues addressed by the UN and its agencies, since 2004.
On January 29, 2018, FINRA accepted a Letter of Acceptance, Waiver and Consent (the “Consent”) submitted by William Febbo. Without admitting or
denying the findings, Mr. Febbo consented to the sanctions and to the entry of findings that he permitted Merriman Capital, Inc. to conduct a securities
business while below its net capital requirement. 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. Mr. 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, a 10-business day suspension from acting as FinOp for any FINRA member and required to requalify by examination for the Series 27 license
before again acting in a FinOp capacity.
Stephen L. Silvestro
Mr. Silvestro was appointed the Company’s President as of October 2023. He joined the Company as Chief Commercial Officer in April 2019. Prior to
joining the Company, Mr. Silvestro was with CCH® Tagetik, a Wolters Kluwer company that provides corporate performance management software
solutions for planning, consolidation and reporting, as its Vice President and General Manager from January 2018 until April 2019. From April 2017 to
January 2018, Mr. Silvestro was with Prognos Health, Inc., a healthcare data and analytics company, as its Chief Commercial Officer and, before that, from
September 2007 to April 2017, he was with Decision Resources Group, a multi-national corporation that provides high value global data solutions,
analytics and consulting services to pharmaceutical, biotech, medical device, healthcare provider and payer, and managed care companies, in various
capacities with him last serving as Executive Vice President, Head of Global Sales.
20
Marion Odence-Ford
Ms. Odence-Ford joined the Company as General Counsel & Chief Compliance Officer in February 2021. From April 2013 to June 2020, Ms. Odence-
Ford was Vice President & Deputy General Counsel at Decision Resources Group, a multi-national corporation that provides high value global data
solutions, analytics and consulting services to pharmaceutical, biotech, medical device, healthcare provider and payer, and managed care companies. From
November 2004 to November 2012, Ms. Odence-Ford was Vice President & Associate General Counsel at CRA International, Inc. (dba Charles River
Associates), a global consulting firm that offers economic, financial, and strategic expertise to major law firms, corporations, accounting firms, and
governments around the world. From May 2004 to November 2004, Ms. Odence-Ford was a member of the GTC Law Group, LLP, a law firm specializing
in the business affairs of companies in the high tech and biotech industries. Prior to joining the GTC Law Group, Ms. Odence-Ford worked on the legal
teams of Bank of America Corporation/Fleet Boston Financial Corporation from November 2002 to May 2004, and Akamai Technologies, Inc. from
October 1999 to November 2002. Ms. Odence-Ford began her legal career in private practice at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC, where
she advised public and private companies on corporate matters.
Edward Stelmakh
Mr. Stelmakh joined the Company as Chief Financial Officer and Chief Operating Officer in October 2021. Prior to joining the Company, Mr. Stelmakh
served as Senior Vice President, Chief Financial Officer and Chief Operating Officer of Otsuka America Pharmaceuticals Inc. (“Otsuka”), a US division of
a Japanese global healthcare enterprise, since April 2020. Previously, he held various positions at Otsuka including Senior Vice President and Chief
Financial Officer (December 2017 – March 2020) and Vice President and Chief Financial Officer (December 2015 – November 2017). From March 2010
to December 2015, Mr. Stelmakh worked at Covance, a division of LabCorp, Inc., as Vice President, Finance, Clinical Development and
Commercialization Services. Prior thereto, Mr. Stelmakh held a variety of positions of increasing responsibilities at Johnson & Johnson, Sanofi-Aventis,
Organon/Schering-Plough and Mylan.
Doug Besch
Dr. Besch joined the Company in May 2021 as SVP Product Strategy & Innovation and became the Company’s Chief Product Officer in October 2022.
Prior to joining the Company, from January 2018 to May 2021, Dr. Besch was the Vice President over Payor and Market Access Solutions for Clarivate
(previously Decision Resources Group (DRG)), a multi-national corporation that provides high value global data solutions, analytics and consulting
services to pharmaceutical, biotech, medical device, healthcare provider and payer, and managed care companies. Prior to Clarivate, from January 2012 to
June 2017, Dr. Besch was a co-founder and the Chief Product Officer for Rx Savings Solution, a company which helps members and payers reduce
prescription drug costs through a combination of clinical technology, transparency, member engagement and concierge support. Dr. Besch holds a PharmD
and MBA from Creighton University and practiced as a pharmacist for the Walgreens Boots Alliance corporation from 2007 through 2013.
Theresa Greco
Ms. Greco joined the Company in October 2023 as the Company’s Chief Commercial Officer with the Company’s acquisition of Healthy Offers, Inc.
(“Medicx Health”), where Ms. Greco served as its President since August 2022. Prior to joining Medicx Health, Ms. Greco was at Prognos Health, Inc., a
healthcare data and analytics company, from August 2018 to January 2022 as its Chief Commercial Officer where she led all aspects of product strategy,
marketing, sales, and customer delivery. Prior to Prognos, Ms. Greco held the Chief Commercial Officer position at MediSpend, a global technology
company focused on life sciences compliance solutions. From August 2010 through August 2017, Ms. Greco was with LexisNexis Healthcare through their
acquisition of Health Market Science, where she held a variety of progressive executive positions including in Customer Success, Product Strategy,
Commercial Strategy, and Sales that contributed to revenue growth and profitability that yielded a successful exit. Ms. Greco led the Life Sciences
consulting group providing consultation and technology solutions to life sciences companies for master data management at Computer Sciences
Corporation from April 2008 to August 2010. Prior to 2008, Ms. Greco held various positions at IQVIA and Pfizer.
21
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded under the symbol “OPRX” on the Nasdaq Capital Market. At April 12, 2024, there were approximately 8,453 shareholders of
record of our common stock.
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. Any payment of future dividends will be at the discretion of our board of directors
and will depend upon, among other things, our earnings, financial condition, capital requirements, level of indebtedness, and other factors that our board of
directors deems relevant.
For the information regarding our equity compensation plans, see PART III, Item 12, “Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.”
Issuer Purchases of Equity Securities
On March 14, 2023, we announced that our Board of Directors had authorized the repurchase of up to $15 million of our outstanding common stock. Under
this program, share repurchases may be made from time to time depending on market conditions, share price and availability and other factors at our
discretion. During the quarter ended December 31, 2023, no shares were repurchased under the program. As of December 31, 2023, $7,488,116 of shares
were available for repurchase under the program. This stock repurchase authorization expired on March 12, 2024.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a digital health technology company enabling care-focused engagement between life sciences organizations, healthcare providers, and patients at
critical junctures throughout the patient care journey. Connecting over two million U.S. healthcare providers and millions of their patients through an
intelligent omnichannel technology platform embedded within a proprietary point-of-care network, as well as mass digital communications channels,
OptimizeRx helps life sciences organizations engage and support their customers.
Historically, our revenue was generated primarily through the facilitation of various types of messages to health care providers via their EHR systems and
ERx platforms using the OptimizeRx proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives and
healthcare providers that have presented in the rapidly changing healthcare industry. Over time, as the demand for communication of an increasing variety
of different health information between life science companies, providers, and patients continued to rise, our platform has evolved to provide Audience
Development and Audience Creation and Media Execution across numerous different messaging types that leverage our technology platform and media
distribution channels. In addition, the October 2023 acquisition of Medicx Health provided the Company with a significant footprint for direct-to-consumer
healthcare marketing. We employ a “land and expand” strategy focused on growing our existing client base and generating greater and more consistent
revenues in part through the continued shift in our business model toward enterprise level engagements, while also broadening our platform with
innovative proprietary virtual communication solutions such as our AI-powered DAAP, expanding on previous iterations of the RWD.AI technology, which
uses sophisticated machine-learning algorithms to find the best audiences in the correct channels at the right time. Our strategy for driving revenue growth
is also expected to work in tandem with our efforts to increase margin and profitability as revenue drivers such as DAAP have inherently higher margins
than most other messaging solutions we offer.
22
Customer Concentration
Because the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number of
companies. We have approximately 100 pharmaceutical companies as customers, and our revenues are concentrated in these customers. Loss of one of
more of our larger customers could have a negative impact on our operating results. Our top five customers represented approximately 44% and 39% of our
revenue for the years ended December 31, 2023 and December 31, 2022, respectively. In each of 2023 and 2022, we had one customer that each
represented more than 10% of our revenues.
Seasonality
In general, the pharmaceutical brand marketing industry experiences seasonal trends that affect the vast majority of participants in the pharmaceutical
digital marketing industry. Many pharmaceutical companies allocate the largest portion of their brand marketing to the fourth quarter of the calendar year.
As a result, the first quarter tends to reflect lower activity levels and lower revenue, with gradual increases in the following quarters. We generally expect
these seasonality trends to continue and our ability to effectively manage our resources in anticipation of these trends may affect our operating results.
Impact of Macroeconomic Events
Unfavorable conditions in the economy may negatively affect the growth of our business and our results of operations. For example, macroeconomic
events including rising inflation and the U.S. Federal Reserve raising interest rates have led to economic uncertainty. In addition, high levels of employee
turnover across the pharmaceutical industry as well as a fewer number of U.S. drug approvals could create additional uncertainty within our target customer
markets. Historically, during periods of economic uncertainty and downturns, businesses may slow spending, which may impact our business and our
customers’ businesses. Adverse changes in demand could impact our business, collection of accounts receivable and our expected cash flow generation,
which may adversely impact our financial condition and results of operations.
Key Performance Indicators
We monitor the following key performance indicators to help us evaluate our business, measure our performance, identify trends affecting our business and
make strategic decisions. We have updated the definition of “top 20 pharmaceutical manufacturers” in our key performance indicators to be based upon
Fierce Pharma’s most updated list of “The top 20 pharma companies by 2022 revenue”. We previously used “The top 20 pharma companies by 2020
revenue”. As a result of this change, prior periods have been restated for comparative purposes.
Average revenue per top 20 pharmaceutical manufacturer. Average revenue per top 20 pharmaceutical manufacturer is calculated by taking the total
revenue the company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2022 revenue” over
the last twelve months, divided by the total number of the aforementioned pharmaceutical manufacturers that our solutions helped support over that time
period. The Company uses this metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical and
believe it also provides investors with a transparent way to chart our progress in penetrating this important customer segment. The increase in the average
in 2023 as compared to 2022 is primarily the result of stronger DAAP related revenue streams and the Company’s October 2023 acquisition of Medicx
Health, which added to 2023 revenues and was not included in the 2022 amounts.
Average revenue per top 20 pharmaceutical manufacturer
23
Twelve Months Ended
December 31
2023
2,566,832 $
2022
2,136,746
$
Percent of top 20 pharmaceutical manufacturers that are customers. Percent of top 20 pharmaceutical manufacturers that are customers is calculated
by taking the number of revenue generating customers that are pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by
2022 revenue” over the last 12 months, which is then divided by 20 - which is the number of pharmaceutical manufacturers included in the aforementioned
list. The Company uses this metric to monitor its progress in penetrating key customers within its largest customer vertical and believes it also provides
investors with a transparent way to chart our progress in penetrating this important customer segment.
Percent of top 20 pharmaceutical manufacturers that are customers
Twelve Months Ended
December 31
2023
2022
90%
90%
Percent of total revenue attributable to top 20 pharmaceutical manufacturers. Percent of total revenue attributable to top 20 pharmaceutical
manufacturers is calculated by taking the total revenue the company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top
20 pharma companies by 2022 revenue” over the last twelve months, divided by our consolidated revenue over the same period. The Company uses this
metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical and believes it also provides investors
with a transparent way to chart our progress in penetrating this important customer segment. Our revenue from customers that aren’t top 20 pharmaceutical
manufacturers stayed relatively consistent year over year.
Percent of total revenue attributable to top 20 pharmaceutical manufacturers
Twelve Months Ended
December 31
2023
2022
65%
62%
Net revenue retention. Net revenue retention is a comparison of revenue generated from all customers in the previous twelve-month period to total
revenue generated from the same customers in the following twelve-month period (i.e., excludes new customer relationships for the most recent twelve-
month period). The Company uses this metric to monitor its ability to improve its penetration with existing customers and believes it also provides
investors with a metric to chart our ability to increase our year-over-year penetration and revenue with existing customers. The retention rate in 2023
increased due to stronger DAAP related revenue streams from existing clients and the Company’s 2023 acquisition of Medicx Health.
Net revenue retention
Twelve Months Ended
December 31
2023
2022
105%
90%
Revenue per average full-time employee. We define revenue per average full-time employee as total revenue over the last twelve months divided by the
average number of employees over the last twelve months (i.e., the average between the number of FTEs at the end of the reported period and the number
of FTEs at the end of the same period of the prior year). The Company uses this metric to monitor the productivity of its workforce and its ability to scale
efficiently over time and believes the metric provides investors with a way to chart our productivity and scalability. Our revenue rate per employee stayed
relatively consistent year over year.
Revenue per average full-time employee
24
Twelve Months Ended
December 31
2023
2022
$
586,242 $
606,312
Results of Operations for the Years Ended December 31, 2023 and 2022
The following table sets forth, for the periods indicated, the dollar value and percentage of total return represented by certain items in our consolidated
statements of operations:
(in thousands, except percentage data)
Total Revenue
Cost of Revenues
Gross margin
Operating expenses
Loss from operations
Other income
Loss before provision for income taxes
Income tax benefit
Net loss
2023
71,522
28,622
42,900
69,302
(26,402)
1,238
(25,164)
7,598
(17,566)
$
$
Years Ended December 31,
100.0% $
40.0%
60.0%
96.9%
(36.9)%
1.7%
(35.2)%
10.6%
(24.6)% $
2022
62,450
23,483
38,967
51,258
(12,291)
852
(11,438)
—
(11,438)
100.0%
37.6%
62.4%
82.1%
(19.7)%
1.4%
(18.3)%
—%
(18.3)%
* Balances and percentage of total revenue information may not add due to rounding
Net Revenue
Our net revenue increased 15% to $71.5 million for the year ended December 31, 2023 from $62.5 million for the year ended December 31, 2022. Of the
15% increase, 7.3% resulted from the acquisition of Medicx Health, in October, with the remaining increase due to stronger DAAP related sales.
Cost of Revenues
Our total cost of revenues, composed primarily of revenue-share expense paid to our network partners, increased in the year ended December 31, 2023,
compared to the year ended December 31, 2022. Our cost of revenues as a percentage of revenue increased to approximately 40% in the year ended
December 31, 2023, from approximately 38% in the year ended December 31, 2022. This increase in our cost of revenues as a percentage of revenue
resulted primarily due to an unfavorable channel partner mix.
Gross Margin
Our gross margin, which is the difference between our revenues and our cost of revenues, increased from 2022 to 2023 but our gross margin percentage
decreased to 60.0% in 2023 from 62% in 2022 We had higher revenues in 2023, which increased gross margin but during 2023, there was a decrease in the
percentage of activity flowing through our lower cost channels compared with 2022.
Operating Expenses
Total operating expenses increased to $69.3 million for the year ended December 31, 2023, from $51.3 million for the year ended December 31, 2022, an
increase of approximately 35%. The increase includes approximately $6.7 million, related to impairment charges, approximately $4.5 million of transaction
costs associated with the purchase of Medicx Health, and a loss on the disposal of a business of $2.1 million.
The detail by major category is reflected in the table below.
(in thousands)
Stock-based compensation
Depreciation and amortization
Impairment charges
Loss on disposal of a business
Transaction costs
Other sales, general, and administrative expense
Total operating expense
Years Ended
December 31
2023
2022
13,717 $
2,402
6,738
2,142
4,482
39,820
69,302 $
15,746
2,022
—
—
—
33,490
51,258
$
$
Stock-based compensation decreased to $13.7 million for the year ended December 31, 2023, from $15.7 million for the year ended December 31, 2022, as
a result of the lower grant date fair value of awards due to declines in the Company’s stock price.
25
Depreciation and amortization increased to $2.4 million for the year ended December 31, 2023, from $2.0 million for the year ended December 31, 2022,
as a result of the amortization associated with the identifiable intangibles arising from the Medicx Health acquisition.
The impairment charges recorded during 2023 relate to intangible assets, primarily technology and patent and trademarks relating to certain non-core
products. The Company determined that the carrying value of these long-lived assets was not recoverable on an undiscounted basis and accordingly, an
impairment charge was recognized to the extent fair value exceeds carrying value. The fair value of the assets was determined based on various estimates
and assumptions including internal estimates of cash flows directly attributable to the assets, the useful life of the assets and residual value, if any.
The loss on disposal of a business is discussed in Part II, Item 8. Financials Statements and Supplementary Data; Note 7 - Goodwill and Intangibles.
Transaction related costs arose due to the acquisition of Medicx Health, discussed in Part II, Item 8. Financials Statements and Supplementary Data; Note 3
- Acquisitions.
Other sales, sales general, and administrative expense increased to $39.8 million for the year ended December 31, 2023 from $33.5 million for the year
ended December 31, 2022. The acquisition of Medicx Health increased Operating expense, primarily compensation and amortization, by approximately
$2.5 million year on year. In addition, within the other sales, general and administrative expenses, there were a variety of increases, the largest of which
was in compensation, which increased by $3.3 million from $20.8 million in 2022 to $24.1 million in 2023. The increase is due to the addition of Medicx
Health employees since the acquisition date and higher severance, employee benefit and commission costs.
Other income (expense)
Other Income (Expense) was comprised of the following:
(in thousands)
Other income (expense)
Interest expense
Other income
Interest income
Years Ended
December 31
2023
2022
$
$
(1,454) $
500
2,192
1,238 $
—
—
852
852
Interest expense represents interest charges on our Term Loan, which was raised during the year to partially fund the acquisition of Medicx Health, together
with the amortization of the related issuance costs, (see Part II, Item 8. Financials Statements and Supplementary Data; Note 12 - Long Term Debt for
further details concerning our Term loan).
Other income represents the net proceeds from the sale of customer assets, primarily contracts, relating to two non-core products.
Interest income represents interest earned on our short-term investments, which were realized during 2023 in order to partially fund the acquisition of
Medicx Health. Interest earned in 2022 reflects the shorter period and lower average balance on amounts held in short-term investments during that period.
26
Income tax benefit
The income tax benefit recorded in 2023 represents the partial reversal of our valuation allowance, previously recorded against the value of our net
operating loss (“NOL”) carryforwards. In evaluating our ability to recover our deferred tax assets, in full or in part, we consider all available positive and
negative evidence, including our past operating results, the impact of the Medicx Health transaction on our consolidated tax returns, and our forecast of
future earnings, future taxable income and prudent and feasible tax planning strategies.
The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates we are using to
manage the underlying businesses. Actual operating results in future years could differ from our current assumptions, judgments and estimates.
Net Income (Loss)
We finished the year ended December 31, 2023 with a net loss of $17.6 million, compared to $11.4 million during the year ended December 31, 2022. The
reasons for specific components are discussed above. Overall, we had an increase in revenue and gross margin partially offset by increased operating
expenses. In addition, the loss in both periods included significant noncash items. We had $25.0 million in noncash operating expenses in 2023 compared
to $17.8 million in noncash operating expenses in 2022.
Liquidity and Capital Resources
Historically, our primary sources of liquidity have been cash receipts from customers and proceeds from equity offerings. On October 11, 2023, we entered
into a financing agreement that provided for a $38 million term loan (the “Term Loan”), the proceeds of which were to fund, in part, the acquisition of
Medicx Health. See Part II, Item 8. Financials Statements and Supplementary Data; Note 12 - Long Term Debt.
As of December 31, 2023, we had total current assets of $54.3 million, compared with current liabilities of $17.9 million, resulting in working capital of
$36.4 million and a current ratio of 3.0 to 1. This compares with a working capital balance of $90.2 million and a current ratio of 11.7 to 1 at December 31,
2022. This decrease in working capital, as discussed in more detail below, is primarily the result of our common stock buyback program and the acquisition
of Medicx Health, which was funded from a combination of cash on hand, short-term investments and the Term Loan.
We believe that funds generated from operations, together with existing cash and cash equivalents, will be sufficient to finance our current operations and
planned growth for the next twelve months. We do not anticipate the need to raise any additional cash to support operations. However, we could require
additional debt or equity financing if we were to make any significant acquisitions for cash during that period. In addition, we believe we can generate the
cash needed to operate beyond the next 12 months from operations.
Contractual Obligations
The Company’s contractual obligations and cash commitments at December 31, 2023, consisted of long term debt, operating lease liabilities, and payments
to partners to acquire minimum amounts of media, data or messaging capabilities as follows:
● Long-term debt: Total obligations under the Term Loan were $38.3 million, with $2.0 million due over the next twelve months. For details
regarding long-term obligations, see Part II, Item 8. Financial Statements and Supplementary Data; Note 12 – Long Term Debt in the Consolidated
Financial Statements.
● Lease liabilities: Total obligations under short- and long-term operating leases were $0.7 million, with $0.3 million due over the next twelve
months. For details regarding short- and long-term operating lease liabilities, see Part II, Item 8. Financial Statements and Supplementary Data;
Note 13 – Leases in the Consolidated Financial Statements.
● Partner payment obligations: Total obligations for partner payments were $25.1 million, with $11.0 million due over the next twelve months. For
details regarding the Company’s future payments to partners to acquire minimum amounts of media, data or messaging capabilities, see Part II,
Item 8. Financial Statements and Supplementary Data; Note 16 – Commitments.
27
Term Loan
On October 11, 2023 (the “Loan Date”), in connection with the acquisition of Medicx Health, we entered into a financing agreement that provided for a
$40.0 million term loan.
The outstanding principal amount of the Term Loan is repayable in quarterly installments on the last business day of each fiscal quarter commencing on
December 31, 2023, in an amount equal to 1.25% of the principal amount. The outstanding unpaid principal amount of the Term Loan, and all accrued and
unpaid interest thereon, shall be due and payable on the earliest of (i) the fourth anniversary of the closing of the financing agreement and funding of the
Term Loan and (ii) the date on which the Term Loan is declared due and payable pursuant to the terms of the financing agreement. The Term loan bears a
variable interest rate which is currently priced at 14.1%.
We incurred debt issuance costs of approximately $2.3 million, in connection with this Term Loan and made repayments of approximately $1.7 million.
We are subject to market risks arising from changes in interest rates which relate primarily to the Term Loan our term loan, which is variable rate debt. (see
Part II, Item 8. Financials Statements and Supplementary Data; Note 12 - Long Term Debt). Our potential additional interest expense over one year that
would result from a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate on all of our variable rate obligations would
be approximately $0.4 million on a pre-tax basis.
See Part II, Item 8. Financials Statements and Supplementary Data; Note 12 - Long Term Debt for additional information regarding the Term Loan.
Cash Flows
Following is a table with summary data from the consolidated statement of cash flows for the years ended December 31, 2023 and 2022, as presented.
(in thousands)
Net cash (used in) / provided by operating activities
Net cash used in investing activities
Net cash provided / (used in) by financing activities
Net decrease in cash and cash equivalents
2023
2022
(7,239) $
(25,337)
28,220
(4,356) $
10,654
(58,176)
(18,951)
(66,473)
$
$
Our operating activities used $7.2 million in the year ended December 31, 2023, as compared with approximately $10.7 million provided by operating
activities in the year ended December 31, 2022. We had a net loss of $17.6 million for 2023, and a net increase in working capital of $7.9 million, notably
accounts receivable, which increased as a result of higher fourth quarter billings, which was partially offset by non-cash expenses of $25.0 million.
The cash provided in 2022 was the result of our net loss of $11.4 million offset by non-cash expenses of $17.8 million and a decrease in net working capital
of $4.0 million, generated by the collection of receivables.
Investing activities used $25.3 million in 2023, compared with $58.2 million in 2022. In addition to the cash payment, net of cash acquired of $82.9 million
related to the acquisition of Medicx Health, we purchased $162.8 million and redeemed $218.7 million in Treasury bills during 2023. We also incurred
capitalized software development costs of $0.8 million, and purchased $0.1 million of tangible property, primarily personal computers and received $2.5
million from the disposal of our Access products (see Part II, Item 8. Financials Statements and Supplementary Data; Note 7 - Goodwill and Intangibles).
28
During 2022, we made a $2.0 million investment in EvinceMed technology, purchased $55.9 million in Treasury bills and incurred $0.2 million and $0.1
million, respectively related to capitalized software development and tangible property.
Financing activities provided $28.2 million in 2023 and used $19.0 million in 2022. During 2023, we raised $38 million pursuant to the Term Loan to
partially fund the acquisition of Medicx Health. In connection with the Term Loan we incurred debt issuance costs of approximately $2.3million, and have
made repayments of approximately $1.7 million. In addition, during 2023, we repurchased 526,999 shares of common stock for $7.5 million.
The cash used in 2022, related to the repurchase of 1,214,398 shares of common stock for $20.0 million, partially offset by $1.1 million from the exercise
of stock options.
Off Balance Sheet Arrangements
As of December 31, 2023, there were no off-balance sheet arrangements.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the Consolidated Financial Statements, which have been
prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates,
judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues
and expenses during the periods presented. Actual results could differ from those estimates and assumptions. See Part II, Item 8. Financial Statements and
Supplementary Data; Note 2 - Summary of Significant Accounting Policies, for a discussion of significant accounting policies. Actual results may differ
materially from these estimates due to different assumptions or conditions. The following areas all require the use of subjective or complex judgments,
estimates and assumptions:
Business Combination
Business combinations are accounted for under the acquisition method. Assets acquired and liabilities assumed as part of a business acquisition are
generally recorded at their estimated fair value at the date of acquisition. The excess of purchase price over the amount allocated to the assets acquired and
liabilities assumed is recorded as goodwill. In determining the fair value of assets acquired, including intangible assets, the Company uses a variety of
methods. The method used to estimate the fair values of intangible assets incorporates significant estimates and assumptions regarding the estimates a
market participant would make in order to evaluate an asset, including a market participant's use of the asset, future cash inflows and outflows, probabilities
of success, asset lives, and the appropriate discount rates. This judgement and determination effects the amount of consideration paid that is allocated to
assets acquired and liabilities assumed in the business purchase transaction. The Company engages third-party appraisal firms to assist in determining fair
value of assets acquired and liabilities assumed when appropriate.
During the remeasurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the
carrying value of the assets acquired and liabilities assumed with a corresponding offset to goodwill.
Revenue Recognition
Recognition of revenue requires evidence of a contract, probable collection of proceeds, and completion of substantially all performance obligations. We
use a 5-step model to recognize revenue. These steps are: identify the contract with a customer, identify the performance obligations in the contract,
determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when or as the
performance obligations are satisfied.
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 the 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 recognize revenue for providing program
performance reporting and maintenance, either by our company directly delivering reports or by providing access to our 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.
29
In some instances, we license certain of our software applications in arrangements that do not include other performance obligations. In those instances, we
record license revenue when the software is delivered for use to the license. In instances where our contracts included Software as a Service, the revenue is
recognized over the subscription period as services are delivered to the customer.
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.
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 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. As our solution mix has expanded and our revenues have grown, financial messaging has become a
smaller percentage of our revenues and these payments to ConnectiveRx, a smaller portion of our revenue-share. The contractual amount due to the channel
partners is recorded as an expense at the time the message is distributed. Additionally, within the cost of revenues is data acquisition costs which are
amortized over the period for which we have access to the data.
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, two to four years for covenants not to compete, and three to ten years for software and
websites, all using the straight-line method.
Intangible assets are reviewed whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment
of assets with definite-lives is generally determined by comparing projected undiscounted cash flows expected to be generated by the asset, or asset groups,
to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted basis, an impairment is recognized to
the extent fair value exceeds carrying value. Determining the extent of impairment, if any, typically requires various estimates and assumptions including
cash flows directly attributable to the asset, the useful life of the asset and residual value, if any. When necessary, the Company uses internal cash flow
estimates, quoted market prices and appraisals, as appropriate, to determine fair value. Actual results could vary from these estimates. In addition, the
remaining useful life of the impaired asset is revised, if necessary.
We recorded impairment charges of $6.7 million against the value of our intangible assets during the year ended December 31, 2023. No events or
circumstances were noted that would be indicative of potential impairment during the year ended December 31, 2022.
Goodwill
We evaluate goodwill for impairment during our fiscal fourth quarter, or more frequently if an event occurs or circumstances change.
For both the years ended December 31, 2023 and 2022 our annual reviews determined there was no impairment as our single reporting unit had a fair value
in excess of its carrying value. During the year ended December 31, 2023, following the disposal of the Access business, we performed an interim review
of our goodwill balance and also determined that there was no impairment due the fair value of our single reporting unit being in excess of its carry value.
30
The use of different assumptions, estimates or judgments in the goodwill impairment testing process may significantly increase or decrease the estimated
fair value of a reporting unit. Generally, changes in DCF estimates would have a similar effect on the estimated fair value of the reporting unit.
Goodwill impairment charges may be recognized in future periods to the extent changes in factors or circumstances occur, including deterioration in the
macro-economic environment or in the equity markets, including the market value of the Company’s common shares, deterioration in its performance or its
future projections, or changes in its plans for one or more reporting units.
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 time-based options, fair value is estimated using the Black-Scholes option pricing model that uses the following assumptions. Estimated volatilities are
based on the historical volatility of 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.
For restricted stock units, the fair value is based on the market value of the Company’s common stock on the date of grant. For market based restricted
stock units, fair value is estimated using a Monte Carlo simulation model. This valuation technique includes estimating the movement of stock prices and
the effects of volatility, interest rates and dividends.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) No. 2023-07 (“ASU 2023-07”),
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires annual and interim disclosures that are expected
to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The provisions of ASU 2023-07
are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early
adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07.
In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU
2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related
to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax
disclosures. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are
currently evaluating the impact of adopting ASU 2023-09.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
See section “Term Loan” under Liquidity and Capital Resources above.
31
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
Report of Independent Registered Public Accounting Firm (PCAOB id 1195);
Consolidated Balance Sheets as of December 31, 2023 and 2022;
Consolidated Statements of Operations for the years ended December 31, 2023 and 2022;
Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2023;
Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2022;
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022; and
Notes to Consolidated Financial Statements
32
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of OptimizeRx Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of OptimizeRx Corporation and Subsidiaries (the “Company”) as of December 31, 2023
and 2022, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes
(collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years
then ended, in conformity with accounting principles generally accepted in the United Sates 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 audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. 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 audits, 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 audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis
for our opinion.
F-1
To the Stockholders and Board of Directors of OptimizeRx Corporation
Page Two
Critical Audit Matters
The critical audit matters communicated below are matters 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 matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they related.
Critical Audit Matter - Revenue Recognition
As disclosed in Note 2 to the consolidated financial statements, the Company recognizes revenue upon transfer of control of promised products or services
to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services.
The principal considerations for our determination that performing procedures relating to revenue recognition is a critical audit matter is that significant
judgment is exercised by the Company in determining revenue recognition for 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 estimating any
variable consideration, (2) selecting of a sample of customer agreements and testing management’s identification and treatment of contract terms, (3)
testing the mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the consolidated financial
statements, (4) confirming data utilized to recognize revenue with third-party service providers to ensure completeness and accuracy of the data used to
recognize revenue, and (5) confirming with the Company’s customers the contract terms and conditions of agreements and completion of the Company’s
performance obligations under the contract.
Critical Audit Matter – Business Combination and Valuation of Intangible Assets
As disclosed in Notes 3 and 7 to the consolidated financial statements, on October 24, 2023, the Company completed the acquisition of Healthy Offers, Inc.
(d/b/a Medicx Health or “Medicx”) for total consideration of approximately $95.9 million. Of the acquired intangible assets, $34 million of customer
relationships and $8.3 million of technology solutions were recorded. The valuation methods used to determine the estimated fair value of these intangible
assets included the multi-period excess earnings approach for customer relationships and the relief from royalty method for technology solutions. Several
significant assumptions and estimates were involved in the application of these valuation methods, including forecasted revenues, royalty rates, gross
margins, discount rates, and attrition rates.
The principal considerations for our determination that performing procedures relating to the valuation of customer relationships and developed technology
acquired in the acquisition of Medicx is a critical audit matter are (i) the significant judgment used by management when developing the fair value estimate
of the customer relationships and developed technology acquired, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures
and evaluating management’s significant assumptions related to the forecasted revenues, gross margins, discount rate, and attrition rate for customer
relationships and forecasted revenues, royalty rate, and discount rate for developed technology acquired, and (iii) the audit effort involved the use of
professionals with specialized skill and knowledge.
F-2
To the Stockholders and Board of Directors of OptimizeRx Corporation
Page Three
How the Critical Audit Matter Was Addressed in the Audit
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included (i) obtaining an understanding of the design and implementation of controls relating to the acquisition
accounting, including controls over management’s valuation of the customer relationships and developed technology acquired, (ii) reading the purchase
agreement, (iii) testing management’s process for developing the fair value estimate of the customer relationships and developed technology acquired, (iv)
evaluating the appropriateness of the multi-period excess earnings and relief from royalty methods used by management, (v) testing the completeness and
accuracy of the underlying data used in the multi-period excess earnings and relief from royalty methods, and (vi) evaluating the reasonableness of the
significant assumptions used by management related to forecasted revenues, gross margins, discount rate, and attrition rate for customer relationships and
forecasted revenues, royalty rate, and discount rate for developed technology acquired.
Evaluating the reasonableness of the significant assumptions used by management related to the forecasted revenues and gross margins for customer
relationships and developed technology involved considering (i) the current and past performance of the Medicx business and (ii) whether the assumptions
were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i)
the appropriateness of the multi-period excess earnings and relief from royalty methods and (ii) the reasonableness of the discount rate, royalty rate, and
attrition rate assumptions for customer relationships and the royalty rate assumptions for developed technology acquired.
We have served as the Company’s auditor since 2020.
/s/ UHY LLP
Sterling Heights, Michigan
April 15, 2024
F-3
OPTIMIZERx CORPORATION
Consolidated Balance Sheets
Current Assets
ASSETS
Cash and cash equivalents
Short-term investments
Accounts receivable, net of allowance for credit losses of $239,172 and $352,043 at December 31, 2023 and 2022,
$
13,852,456 $
—
18,208,685
55,931,821
December 31,
2023
December 31,
2022
respectively
Taxes receivable
Prepaid expenses and other
Total Current Assets
Property and equipment, net
Other Assets
Goodwill
Patent rights, net
Technology assets, net
Tradename and customer relationships, net
Operating lease right-of-use assets
Security deposits and other assets
Total Other Assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt
Accounts payable – trade
Accrued expenses
Revenue share payable
Current portion of lease liabilities
Deferred revenue
Total Current Liabilities
Non-current Liabilities
Long-term debt, net
Lease liabilities, net of current portion
Deferred tax liabilities, net
Total Liabilities
Commitments and contingencies (See Note 16)
Stockholders’ Equity
36,253,214
1,035,754
3,189,468
54,330,892
149,407
22,155,301
—
2,280,828
98,576,635
137,448
78,357,074
6,184,742
9,012,756
34,198,084
572,895
568,048
128,893,599
22,673,820
1,940,178
7,702,895
3,379,838
235,320
5,051
35,937,102
$ 183,373,898 $ 134,651,185
$
2,000,000 $
2,227,177
7,754,781
5,505,701
221,625
171,841
17,881,125
34,230,737
371,438
4,337,424
56,820,724
—
1,549,979
2,601,246
3,990,440
89,902
164,309
8,395,876
—
144,532
—
8,540,408
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding at December 31, 2023
and 2022, respectively
—
—
Common stock, $0.001 par value, 166,666,667 shares authorized, 19,899,679 and 18,288,571 shares issued at
December 31, 2023 and 2022, respectively
Treasury stock, $0.001 par value,1,741,397 and 1,214,398 purchased at December 31, 2023 and 2022, respectively
Additional paid-in-capital
Accumulated deficit
Total Stockholders’ Equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
19,899
(1,741)
18,289
(1,214)
190,792,980 172,785,800
(46,692,098)
(64,257,964)
126,553,174 126,110,777
$ 183,373,898 $ 134,651,185
The accompanying notes are an integral part of these financial statements.
F-4
OPTIMIZERx CORPORATION
Consolidated Statements of Operations
Net revenue
Cost of revenues, exclusive of depreciation and amortization presented separately below
Gross margin
Operating Expenses
Stock-based compensation
Loss on disposal of a business
Impairment charges
Depreciation and amortization
Other sales, general and administrative expenses
Total operating expenses
Loss from operations
Other income (expense)
Interest expense
Other income
Interest income
Total other income (expense), net
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
The accompanying notes are an integral part of these financial statements.
F-5
For the
year ended
December 31,
2023
For the
year ended
December 31,
2022
$
71,521,506 $
28,621,589
42,899,917
62,450,156
23,483,336
38,966,820
13,717,333
2,142,319
6,737,580
2,401,628
44,302,771
69,301,631
(26,401,714)
15,745,822
—
—
2,022,029
33,489,707
51,257,558
(12,290,738)
(1,453,764)
500,001
2,191,689
1,237,926
(25,163,788)
7,597,922
—
—
852,298
852,298
(11,438,440)
—
$ (17,565,866) $ (11,438,440)
17,783,992
17,783,992
(0.64)
(0.64)
17,124,801
17,124,801
(1.03) $
(1.03) $
$
$
Balance, January 1, 2023
Stock-based compensation expense
18,288,571 $
18,289
—
—
—
—
24,668
1,444,581
25
1,444
Options
Restricted stock
Issuance of common stock:
For stock options exercised
For acquisition
For restricted stock units vested,
net of cancelled units
Repurchase of common stock
Net loss for the year
Balance, December 31, 2023
OPTIMIZERx CORPORATION
Consolidated Statement of Stockholders’ Equity for the Year
Ended December 31, 2023
Common Stock
Treasury Stock
Shares
Amount
Shares
(1,214,398) $
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
(1,214) $ 172,785,800 $ (46,692,098) $ 126,110,777
—
—
—
—
—
—
5,925,416
7,791,917
—
—
5,925,416
7,791,917
181,081
—
— 12,089,698
181,106
—
— 12,091,142
141,859
—
—
19,899,679 $
141
—
—
19,899
—
(526,999)
—
(1,741,397) $
—
(527)
—
(459,033)
(7,521,899)
(458,892)
(7,522,426)
— (17,565,866) (17,565,866)
(1,741) $ 190,792,980 $ (64,257,964) $ 126,553,174
—
—
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, 2022
Common Stock
Treasury Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulate
Deficit
Total
Balance, January 1, 2022
Stock-based compensation expense
17,860,975 $
17,861 $
— $
— $ 166,615,514 $ (35,253,658) $ 131,379,717
Options
Restricted stock
Issuance of common stock:
For stock options exercised
For acquisition
For restricted stock units vested,
net of cancelled units
Repurchase of common stock
Net loss for the year
Balance, December 31, 2022
—
—
156,910
240,741
—
—
157
241
—
—
—
—
—
4,956,619
— 10,789,203
—
4,956,619
— 10,789,203
—
—
1,205,724
9,374,214
—
—
1,205,881
9,374,455
29,945
—
—
18,288,571 $
30
—
—
18,289
—
(1,214,398)
—
(1,214,398) $
—
(132,430)
(1,214) (20,023,044)
—
(132,400)
— (20,024,258)
— (11,438,440) (11,438,440)
(1,214) $ 172,785,800 $ (46,692,098) $ 126,110,777
—
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) / provided by operating activities:
Depreciation and amortization
Asset impairment charges
Loss on disposal of business
Increase in bad debt expense
Stock-based compensation
Amortization of debt issuance costs
Change in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable
Prepaid expenses and other assets
Accounts payable
Revenue share payable
Accrued expenses and other liabilities
Deferred tax liabilities
Deferred revenue
NET CASH (USED IN) / PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment
Proceeds from sale of property and equipment
Cash paid for acquisitions, net of cash acquired
Proceeds from sale of business
Purchase of short-term investments
Redemptions of short-term investments
Capitalized software development costs and other
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS (USED IN ) / PROVIDED BY FINANCING ACTIVITIES:
Proceeds from long-term debt, net of issuance costs
Repayment of long-term debt
Repurchase of common stock
Proceeds from exercise of stock options, net of cash paid for withholding taxes
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES
NET 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
ROU assets obtained in exchange for lease obligations
Reduction of EvinceMed purchase price for amounts previously paid
Shares issued in connection with acquisition
Cash paid for income taxes
For the
year ended
December 31,
2023
For the
year ended
December 31,
2022
$ (17,565,866) $ (11,438,440)
2,401,628
6,737,580
2,142,319
665,973
13,717,333
210,737
(8,712,954)
(573,333)
(1,320,150)
1,515,262
1,305,164
(7,695,374)
(67,472)
(7,239,153)
2,022,029
—
—
363,512
15,745,822
—
2,281,773
2,650,951
943,171
(387,776)
(301,366)
—
(1,225,598)
10,654,078
(87,073)
10,000
(82,947,264)
2,540,000
(162,777,510)
218,709,331
(784,349)
(25,336,865)
(81,005)
—
(2,000,000)
—
(55,931,821)
—
(163,560)
(58,176,386)
37,730,000
(1,710,000)
(7,522,426)
(277,785)
28,219,789
(4,356,229)
18,208,685
13,852,456 $
—
—
(20,024,258)
1,073,481
(18,950,777)
(66,473,085)
84,681,770
18,208,685
1,212,619 $
459,580 $
— $
12,091,142 $
48,222 $
—
—
708,334
9,374,455
—
$
$
$
$
$
$
The accompanying notes are an integral part of these financial statements.
F-8
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
OptimizeRx is a digital health technology company enabling care-focused engagement between life sciences organizations, healthcare providers, and
patients at critical junctures throughout the patient care journey. Connecting over two million U.S. healthcare providers and millions of their patients
through an intelligent technology platform embedded within a proprietary point-of-care network, as well as mass digital communications channels,
OptimizeRx helps life sciences organizations engage and support their customers.
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 allowance for credit losses, carrying value of assets,
fair values assigned to acquired long-lived assets, depreciable and amortizable lives of tangible and intangible assets, the carrying value of liabilities, the
valuation allowance for deferred tax assets, 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, Healthy Offers, Inc., a Nevada 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.
Segment reporting
We operate in one reportable segment and use consolidated net income as its measure of segment profit and loss. Overall, our business involves connecting
life science companies to patients and providers. We have a common customer base for all of our solutions, which are primarily all communications with
healthcare providers or patients on behalf of life science customers. Our customers are geographically located in the U.S., although we have two technology
centers located internationally. We do not prepare separate internal income statements by solution as our focus is on selling enterprise arrangements
covering multiple solutions that span the entire patient journey with a specific brand.
Reclassifications
Certain items in the previous year financial statements have been reclassified to match the current year presentation.
F-9
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency
The Company’s functional currency is the U.S. dollar, however it pays certain expenses related to its two foreign subsidiaries in the local currency, which is
the shekel for its subsidiary in Israel and the euro for its Croatian subsidiary. All transactions are recorded at the exchange rate at the time of payment. If
there is a time lag between the time of recording the liability and the time of payment, a gain or loss is recorded in the Consolidated Statement of
Operations due to any fluctuations in the exchange rate.
Cash and Cash Equivalents
For purposes of the accompanying financial statements, the Company considers all highly liquid instruments, consisting of money market accounts, with an
initial maturity of three months or less to be cash equivalents.
Investments
We account for marketable securities in accordance with ASC 320, “Investments - Debt Securities”, which require that certain debt securities be classified
into one of three categories: held-to-maturity, available-for-sale, or trading securities, and depending upon the classification, value the security at amortized
cost or fair market value.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market
participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based
on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of
liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the disclosure requirements around fair value establish a fair value hierarchy for valuation inputs, which is expanded. The
hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair
value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in
its entirety. These levels are:
Level 1 – Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 – Inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar
instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can
be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the
asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models,
and similar techniques. The Company’s stock options and warrants are valued using level 3 inputs.
The Company’s carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, accounts payable, and other current
liabilities approximate their fair values due to their short maturities.
F-10
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable and Allowance for Credit Losses
Accounts receivable are reported at realizable value, net of allowances for credit losses, which is estimated and recorded in the period the related revenue is
recorded. The Company does not seek collateral to secure its accounts receivable and amounts billed are are generally due within a short period of time
based on terms and conditions normal for our industry. 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. If current or expected future economic
trends, events, or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of
those balances and the allowance is adjusted accordingly. Past-due receivable balances are written off when the Company’s collection efforts have been
exhausted.
The Company’s customers are primarily large well-capitalized companies, and historically there has been very little bad debt expense. Bad debt expense
was $665,973 and $363,512 for the years ended December 31, 2023 and 2022, respectively. The allowance for credit losses was $239,172 and $352,043 as
of December 31, 2023 and 2022, respectively.
The changes in the allowance for credit losses in each of the years ended December 31, 2023 and 2022, were as follows:
Balance at beginning of year
Bad debt expense
Write-offs
Balance at end of year
2023
2022
352,043 $
665,973
(778,844)
239,172 $
241,219
363,512
(252,688)
352,043
$
$
From time to time, we may record revenue based on our revenue recognition policies described below in advance of being able to invoice the customer.
Included in accounts receivable are unbilled amounts of $4,198,312, and $3,582,735, at December 31, 2023, and 2022, respectively.
Property and Equipment
Property and equipment are stated at cost and are being depreciated over their estimated useful lives of three to five years for office equipment and three
years for computer equipment using the straight-line method of depreciation for book purposes. Maintenance and repair charges are expensed as incurred.
Leases
Lease-related assets, or Operating lease right-of-use (“ROU”) 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. The Company reviews all options to extend,
terminate, or purchase its ROU assets at the commencement of the lease and on an ongoing basis and accounts for these options when they are reasonably
certain of being exercised.
Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred.
The short-term lease recognition exemption is applied for leases with terms at commencement of not greater than 12 months.
F-11
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, two to four years for covenants not to compete, and three to ten years for software and
websites, all using the straight-line method. These assets are evaluated when there is a triggering event.
Long-lived assets, such as property and equipment and amortizing intangible assets are reviewed whenever events or changes in circumstances indicate that
the related carrying amounts may not be recoverable. Impairment of assets with definite-lives is generally determined by comparing projected undiscounted
cash flows expected to be generated by the asset, or asset groups, to its carrying value. If the carrying value of the long-lived asset or asset group is not
recoverable on an undiscounted basis, an impairment is recognized to the extent fair value exceeds carrying value. Determining the extent of impairment, if
any, typically requires various estimates and assumptions including cash flows directly attributable to the asset, the useful life of the asset and residual
value, if any. When necessary, the Company uses internal cash flow estimates, quoted market prices and appraisals, as appropriate, to determine fair value.
Actual results could vary from these estimates. In addition, the remaining useful life of the impaired asset is revised, if necessary.
We recorded impairment charges of $6.7 million against the value of our intangible assets during the year ended December 31, 2023. No events or
circumstances were noted that would be indicative of any potential impairment during the year ended December 31, 2022.
Goodwill
Goodwill represents the excess of the purchase price over the far value assigned to the net tangible and identifiable intangible assets of an acquired
business.
Goodwill is assessed for impairment at least annually as of December 31, of each year, or more frequently if an event occurs or circumstances change that
would reduce the fair value of a reporting unit below its carrying value.
A qualitative assessment can be performed to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying
value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value.
The fair value of a reporting unit is calculated using the income approach (including Discounted Cash Flow (“DCF”) and validated using a market
approach with the involvement of a third-party valuation specialist. The income approach uses expected future cash flows for the reporting unit and
discounts those cash flows to present value. Expected future cash flows are estimated using management assumptions of growth rates, including long-term
growth rates, capital expenditures and cost efficiencies. Future acquisitions or divestitures are not included in the expected future cash flows. The Company
uses a discount rate based on a calculated weighted average cost of capital which is adjusted for company specific risk premiums. The market approach
compares the valuation multiples of similar companies to that of the associated reporting unit. The Company then reconciles the calculated fair values to its
market capitalization. The fair value is then compared to its carrying value including goodwill. If the fair value is in excess of its carrying value, the related
goodwill is not impaired. If the fair value is less than carrying value, an impairment charge is recognized, equivalent to the amount that the carrying value
exceeds the fair value.
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.
F-12
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenues are primarily generated from content delivery activities in which the Company delivers financial, clinical, or brand messaging through a
distribution network of eprescribers and electronic health record technology providers (channel partners), directly to consumers, or from reselling services
that complement the business. This content delivery for a customer is referred to as a program. Unless otherwise specified, revenue is recognized based on
the selling price to customers.
The Company’s contracts are generally all less than one year and the primary performance obligation is delivery of messages, or content, but the contract
may contain additional services. Additional services may include program design, which is the design of the content delivery program, set up, and
reporting. We consider set up and reporting services to be complimentary to the primary performance obligation and recognized through performance of the
delivery of content. We consider program design and related consulting services to be performance obligations separate from the delivery of messages. The
net contract balance for contracts in progress at December 31, 2023 and 2022 was $2.0 million and $5.4 million, respectively. The outstanding performance
obligations are expected to be satisfied during the year ended December 31, 2024.
In certain circumstances, the Company will offer sales rebates to customers based on spend volume. Rebates are typically contracted based on a quarterly
or annual spend amount based on a volume threshold or tiered model. At the beginning of the year, the rebate percentage is estimated based on input from
the sales team and analysis of prior year sales. Thereafter, the open contract balance for the customer is assessed quarterly to ensure the estimated rebate
percentage being used for the rebate accrual remains reasonable. The estimated amount of variable consideration will be included in the transaction price
only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. For the year ended 2023, there were three contracts with customers that included a
rebate clause.
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.
Disaggregation of Revenue
Consistent with ASC Topic 606, we have disaggregated our revenue by timing of revenue recognition. The majority of our revenue is recognized over time
as solutions are provided. A small portion of our revenue related to program development, solution architect design, and other solutions is recognized at a
point in time upon delivery to customers. A break down is set forth in the table below.
Revenue recognized over time
Revenue recognized at a point in time
Total Revenue
2023
63,527,477 $
7,994,029
71,521,506 $
2022
55,437,418
7,012,738
62,450,156
$
$
F-13
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In some instances, we license certain of our software applications in arrangements that do not include other performance obligations. In those instances, we
record license revenue when the software is delivered for use to the license. In instances where our contracts included Software as a Service, the revenue is
recognized over the subscription period as services are delivered to the customer.
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. In instances where the Company resells these messaging solutions and has all financial risk and significant operation input
and risk, the Company records the revenue based on the gross amount sold and the amount paid to the channel partner as a cost of sales.
Cost of Revenues
Cost of Revenues include revenue-share expense and costs associated with licensing data from third parties. Cost of revenues does not include depreciation
and amortization which is listed separately on the statements of operations. 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.
Significant judgments are required in order to determine the realizability of these deferred tax assets. In assessing the need for a valuation allowance, the
Company evaluates all significant available positive and negative evidence, including historical operating results, estimates of future taxable income and
the existence of prudent and feasible tax planning strategies. Changes in the expectations regarding the realization of deferred tax assets could materially
impact income tax expense in future periods.
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, 2023 and 2022 the Company had $13,260,816 and $15,669,837, respectively, in cash balances in excess of federally
insured limits, primarily at Bank of America.
F-14
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development
The Company expenses research and development expenses as incurred. There was no research and development expense for the years ended
December 31, 2023 and 2022.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs, included in Other general and administrative expenses were $775,548 and
$743,975, for the years ended December 31, 2023 and 2022, 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 awards, the fair value is based on the market value of the Company’s common stock on the date of grant. For market based restricted
stock units, the fair value was estimated using a Monte Carlo simulation model. This valuation technique included estimating the movement of stock prices
and the effects of volatility, interest rates and dividends. At the year ended December 31, 2023 there are no market based restricted stock units outstanding.
For options, fair value is estimated using the Black-Scholes option pricing model that uses the following assumptions. Estimated volatilities are based on
the historical volatility of the Company’s common stock over the same period as the expected term of the options. The expected term of options granted
represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise behavior
and to determine this term. The risk-free rate used is based on the U.S. Treasury yield curve in effect at the time of the grant using a time period equal to the
expected option term. The Company has never paid dividends and do not expect to pay any dividends in the future.
Expected dividend yield
Risk free interest rate
Expected option term
Turnover/forfeiture rate
Expected volatility
Weighted average grant date fair value
2023
2022
0%
0%
3.76% - 4.74% 0.82% - 4.38%
3.5 years
0%
67% - 72 %
$
6.58
3.5 years
0%
68% - 71 %
12.82
$
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 awards that were excluded from the
diluted loss per common share calculation in 2023 and 2022 was 31,727 and 93,626 related to options, and 52,607 and 170,859 related to restricted stock
units, for a total of 84,334 and 264,485, respectively, because they are anti-dilutive, as a result of the net losses incurred in each of the years ended
December 31, 2023 and 2022.
F-15
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the years ended December 31, 2023 and
2022 consisted of the following:
Basic EPS
Effect of dilutive securities
Diluted EPS
Basic EPS
Effect of dilutive securities
Diluted EPS
Recently Issued Accounting Guidance
Year ended December 31, 2023
Net (Loss)
$ (17,565,866)
—
$ (17,565,866)
Shares
17,124,801 $
—
17,124,801 $
Per Share
Amount
(1.03)
—
(1.03)
Year ended December 31, 2022
Net Income
$
(11,438,440)
—
(11,438,440)
$
Shares
17,783,992 $
—
17,783,992 $
Per Share
Amount
(0.64)
—
(0.64)
ASU Topic 2021-08 Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which
requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in
accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The standard was effective for the Company’s
fiscal year beginning January 1, 2023. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash
flows.
Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures. ASU 2023-07 requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through
enhanced disclosures about significant segment expenses. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023,
and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of
adopting ASU 2023-07.
In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU
2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related
to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax
disclosures. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are
currently evaluating the impact of adopting ASU 2023-09.
F-16
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 3 – ACQUISITIONS
On October 24, 2023, the Company acquired 100% of the issued and outstanding preferred and common stock of Healthy Offers, Inc., a Nevada
corporation d/b/a Medicx Health. Medicx Health is a healthcare consumer-focused omnichannel marketing and analytics company. The acquisition of
Medicx Health is expected to enhance and expand the Company’s technology offerings, providing additional opportunities for revenue growth.
The acquisition date fair value of consideration transferred was calculated as follows:
Net cash transferred
Fair value of common stock transferred
Fair value of consideration transferred
$
$
83,888,239
12,091,142
95,979,381
The goodwill balance reflects the benefits associated with future iterations of the technology platforms, new customer relationships anticipated as a result
of the transaction and market participant synergies from economies of scale and is not deductible for tax purposes.
In addition, the Company is required to remit, upon collection from the appropriate authorities, approximately $1.0 million related to certain state and
federal income tax receivables which were included on Medicx Health’s balance sheet at the date of acquisition. The Company has recorded $1.0 million in
Taxes receivable, to reflect the receivables due to the Company and $1.0 million in Accrued expenses, to reflect the total amount due to the former
stockholders of Medicx Health.
The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the acquisition date:
Assets Acquired
Cash
Accounts receivable
Taxes receivable
Prepaid expenses and other
Property and equipment
Customer relationships intangible
Trademark and patent intangible
Technology intangibles
Operating lease right-of-use assets
Deposits
Liabilities Assumed
Accounts payable
Accrued expenses
Lease liabilities
Deferred revenue
Deferred tax liabilities
Net assets acquired
Goodwill
$
940,974
6,028,048
1,035,754
912,719
33,476
34,000,000
5,700,000
8,300,000
145,075
9,727
57,105,773
1,997,348
3,848,403
166,098
75,003
12,032,798
18,119,650
38,986,123
56,993,258
Fair value of consideration transferred
$
95,979,381
F-17
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 3 – ACQUISITIONS (CONTINUED)
The Company used a third-party valuation specialist to value the intangible assets acquired. The identifiable intangibles are being amortized on a straight
line basis over the following estimated useful lives:
Customer relationship intangible
Trademark and patent intangible
Technology intangibles
15 years
10 years
4 to 10 years
The Company recognized $4.3 million of acquisition related costs that were expensed in the current period. These costs are included in the consolidated
statement of operations in the line item entitled “Other sales, general and administrative expenses.”
The results of operations of Medicx Health have been included in the consolidated statement of operations since the date of acquisition.
The amounts of revenue and net income of Medicx Health included in the Company’s consolidated statement of operations for the period from the
acquisition date until December 31, 2023, are as follows:
Revenue
Net income
$
4,546,497
314,082
The following represents the pro-forma consolidated statement of operations as if Medicx Health had been included in the consolidated results of the
Company for the full years ended December 31, 2023, and 2022:
Pro-forma consolidated statement of operations
Revenue
Net loss
Year ended
December 31, 2022
$
2023
97,066,241 $
(18,616,303)
2022
90,521,236
(16,157,521)
These amounts have been calculated after applying the Company’s accounting policies, adjusting Medicx Health results to reflect the additional
amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2022, full year interest
expense associated with the term loan and elimination of interest income on short-term investments that were used to fund the acquisition, one time
transaction related items, including the amounts incurred by the Company, discussed above and $9.6 million in transaction related expenses incurred by
Medicx Health.
On April 14, 2022, we completed the acquisition of substantially all of the assets of EvinceMed Corp., a privately held leading provider of delivering end-
to-end automation for specialty pharmaceutical transactions. We completed the acquisition to expand the breadth of the solutions we offer our customers,
particularly where specialty medications are involved, The acquisition included the full Market Access Management Platform for supporting pharma
manufacturers, hub providers and pharmacies to improve patient access, speed to therapy and activation of affordability programs.
The consideration was comprised of $2.0 million in cash, the issuance of 240,741 shares of common stock valued at $9,374,455, and $708,334 of amounts
previously paid. The total purchase price was $12,082,789. Of the 240,741 shares of common stock, 185,185 were issued at closing and 55,556 were issued
but held back to secure potential adjustments to the purchase price that may result from the indemnification obligations of and the EvinceMed shareholder
indemnitors. The holdback amount will be released twelve months from the closing, subject to any adjustments for the payment by EvinceMed and the
shareholder indemnitors for its and their indemnification obligations. The purchase price was allocated to acquired technology totaling $4,149,000 with an
estimated useful life of 8 years and the remaining $7,933,789 was allocated to goodwill. Goodwill represents the processes and synergies expected by
integrating those processes with our own. The full amount of goodwill will be deductible for tax purposes using a 15 year life. The increase in goodwill for
the period is fully accounted for by this acquisition. We determined pro forma data was immaterial for financial reporting purposes.
Acquisition costs of approximately $19,739 were expensed as incurred.
F-18
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 4 – INVESTMENT SECURITIES
There were no investment securities held at December 31, 2023.
At December 31, 2022 the Company held $55.9 million in U.S. government and agency securities. All securities had maturity dates of less than one year.
The Company reported these securities at amortized cost. The amortized cost approximates fair value at December 31, 2022 due to the short nature of the
securities.
Proceeds from the maturities of these securities during 2023 were used to partially fund the acquisition of Medicx Health. See Note 3 - Acquisitions.
NOTE 5 – PREPAID EXPENSES
Prepaid expenses consisted of the following as of December 31, 2023 and 2022:
Revenue share and exclusivity payments
Software
Insurance
Data
Other
Total prepaid expenses
NOTE 6 – PROPERTY AND EQUIPMENT
2023
1,495,127 $
407,480
369,504
513,244
404,113
3,189,468 $
2022
1,025,000
408,063
221,580
152,533
473,652
2,280,828
$
$
The Company owned equipment recorded at cost, which consisted of the following as of December 31, 2023 and 2022:
Computer equipment
Furniture and fixtures
Less accumulated depreciation
Property and equipment, net
2023
2022
266,370 $
33,899
300,269
150,862
149,407 $
230,467
38,500
268,967
131,519
137,448
$
$
Depreciation expense was $99,849 and $85,725 for the years ended December 31, 2023 and 2022, respectively.
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
Goodwill
Our goodwill is related to the acquisitions of Medicx Health in 2023, EvinceMed in 2022, RMDY Health, Inc. in 2019 and CareSpeak Communications in
2018. Goodwill is not amortizable for financial statement purposes.
The Company performed its annual goodwill impairment review in the fourth quarters of each of the years ended December 31, 2023 and 2022, and also
performed an interim impairment review as of November 30, 2023, following the completion of the transaction with Mercalis, Inc., which is discussed
below. In both cases it was determined that the fair value of the Company’s single reporting unit was greater than its carrying value.
F-19
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
The fair value of any reporting units, used in the annual assessments in 2023 and 2022, is classified as Level 3 measurements within the fair value
hierarchy due to significant unobservable inputs such as discount rates, projections of revenue, cost of revenue and operating expense growth rates, long-
term growth rates and income tax rates.
Changes in the carrying amount of goodwill on the consolidated balance sheet consist of the following:
Balance at January 1, 2022
Acquisitions
Impairments
Balance January 1, 2023
Acquisitions
Disposal of business
Impairments
Balance December 31, 2023
$
$
$
14,740,031
7,933,789
—
22,673,820
56,993,258
(1,310,004)
—
78,357,074
During the year ended December 31, 2023, we entered into various agreements, including a Product License Agreement and Platform Assets Purchase
Agreement, with Mercalis, Inc.(“Mercalis”), collectively the “Transaction”. Under the terms of the Transaction, Mercalis agreed to purchase certain
customer contract assets and liabilities related to the Company’s Access and Patient Engagement technologies. In addition, Mercalis was granted a
perpetual license to the Access products and a non-exclusive two-year term license to the Patient Engagement products. Total consideration due for the
Transaction was $3,740,000 including $2,540,000 related to the Access products.
The Access products portion of the Transaction was deemed to be the disposal of a business for accounting purposes and accordingly the Company
recorded a loss on disposal of $2,142,319 including the allocation of a portion of the Company’s goodwill balance of $1,310,004 and the net book value of
the underlying technology assets of $3,327,844.
Intangible Assets
Intangible assets included on the consolidated balance sheets consist of the following:
Patent rights
Technology assets
Other intangible assets
Tradename
Non-compete agreements
Customer relationships
Total Tradename and customer relationships
Total intangible assets
Gross
Carrying
Amount
December 31, 2023
Accumulated
Amortization
$
7,163,729 $
12,387,622
978,987 $
3,374,866
Weighted
Average Life
Remaining
8.8
6.6
Net
6,184,742
9,012,756
134,000
1,093,000
34,923,000
36,150,000
55,701,351 $
—
1,093,000
858,916
1,951,916
6,305,769 $
134,000
—
34,064,084
34,198,084
49,395,582
10.7
—
14.6
$
F-20
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS (CONTINUED)
Patent rights
Technology assets
Other intangible assets
Tradename
Non-compete agreements
Customer relationships
Total other
Total intangible assets
Gross
Carrying
Amount
December 31, 2022
Accumulated
Amortization
$
3,364,729 $
12,859,660
1,424,551 $
5,156,765
Weighted
Average Life
Remaining
8.5
5.1
Net
1,940,178
7,702,895
3,586,000
1,093,000
923,000
5,602,000
21,826,389 $
776,966
1,093,000
352,196
2,222,162
8,803,478 $
2,809,034
—
570,804
3,379,838
13,022,911
$
11.7
—
7.4
During the year ended December 31, 2023, we recorded asset impairment charges of $6,737,580 relating to Technology assets patent rights and tradenames
that were not considered to be core solutions on a go forward basis, resulting in lower projected revenues for these solutions, as well as the outcome of the
disposal of the Access products discussed above.
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 years
3 – 10 years
The Company recorded amortization expense of $2,301,779 and $1,936,304 in the years ended December 31, 2023 and 2022, respectively. Expected future
amortization expense of the intangibles assets as of December 31, 2023 is as follows:
Year ended December 31,
2024
2025
2026
2027
2028
Thereafter
Total
$
$
4,202,841
4,128,899
4,079,117
3,972,613
3,724,330
29,287,782
49,395,582
F-21
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 8 – 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
$171,841 and $164,309 as of December 31, 2023 and 2022, 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, 2023.
Balance January 1, 2023
Revenue recognized
Amount collected
Amount acquired
Balance December 31, 2023
Following is a summary of activity in the deferred revenue account for the year ended December 31, 2022.
Balance January 1, 2022
Revenue recognized
Amount collected
Balance December 31, 2022
NOTE 9 – RELATED PARTY TRANSACTIONS
$
$
164,309
(12,358,640)
12,291,169
75,003
171,841
$
$
1,389,907
(13,455,253)
12,229,655
164,309
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 Chief Executive Officer (“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, 2023.
Jim Lang, one of our Board Members, is the CEO of Eversana, a leading global provider of services to the life sciences industry. Eversana is similar to
other customers we generate revenue from, such as agencies or resellers. During the years ended December 31, 2023 and 2022, we have recognized
$335,897 and $401,972, respectively, in revenue from contracts engaged with Eversana. These contracts were sourced by Eversana on behalf of life science
customers of theirs. The contracts are at market rates and were generated in the normal course of business.
NOTE 10 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company had 10,000,000 shares of preferred stock, $0.001 par value per share, authorized as of December 31, 2023. No shares were issued or
outstanding in either 2022 or 2023.
Common Stock
The Company had 166,666,667 shares of common stock, $0.001 par value per share, authorized as of December 31, 2023. There were 18,158,282 and
17,074,173 shares of common stock outstanding, net of shares held in treasury, at December 31, 2023 and 2022, respectively.
We issued 24,668 shares of common stock and received proceeds of $181,106 in 2023 in connection with the exercise of options under our 2013 Equity
Incentive Plan. We also issued 156,910 shares of common stock and received proceeds of $1,205,881 in 2022 in connection with the exercise of options
under our 2013 Equity Incentive Plan.
F-22
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED)
We issued 141,859 shares of common stock in 2023 and 29,945 shares of common stock in 2022 in connection with the vesting of restricted stock units
under our 2013 and 2021 Equity Incentive Plans and discussed in greater detail in Note 11, Stock Based Compensation. Some of the participants utilized a
net withhold settlement method, in which shares were surrendered to cover payroll withholding taxes. Of the shares issued to participants during the year
ended December 31, 2023 and 2022, respectively, 42,489 and 8,416 shares, valued at $458,892 and $132,400, were surrendered and subsequently
cancelled.
Treasury Stock
During the quarter ended March 31, 2023, the Board authorized a share repurchase program, under which the Company may repurchase up to $15 million
of its outstanding common stock. This stock repurchase authorization expires on the earlier of March 12, 2024, or when the repurchase of $15 million of
shares of its common stock has been reached. Through December 31, 2023, the Company repurchased 526,999 shares of our common stock for a total of
$7,522,426, including commissions paid on repurchases. At December 31, 2022, the Company repurchased 1,214,398 shares of our common stock for a
total of $20,021,830, including commissions paid on repurchases. These shares were recorded as Treasury Shares using the par value method.
During the year ended December 31, 2022, the Board authorized a share repurchase program, under which the Company may repurchase up to $20.0
million of its outstanding common stock. Through December 31, 2022, we repurchased 1,214,398 shares of our common stock for a total of $20,024,258,
including commissions paid on repurchases. These shares were recorded as Treasury Shares using the par value method.
NOTE 11 – STOCK BASED COMPENSATION
The Company sponsors two stock-based incentive compensation plans.
The first plan is known as the 2013 Incentive Plan (the “2013 Plan”) and was established by the Board of Directors of the Company in June 2013. The 2013
Plan, as amended, authorized the issuance of 3,000,000 shares of Company common stock. The amended plan was approved by shareholders. A total of
345,435 shares of common stock underlying options and 111,628 shares of common stock underlying restricted stock unit awards were outstanding at
December 31, 2023. In connection with the adoption of a new plan in 2021, the Company froze the 2013 Plan. At December 31, 2023, there were no shares
available for grant under the 2013 Plan.
In 2021, the Company adopted a new plan known as the 2021 Equity Incentive Plan (“2021 Plan”). The plan was established by the Board of Directors and
approved by shareholders in August 2021. A total of 2,500,000 shares are authorized for issuance under the 2021 Plan. A total of 1,209,626 shares of
common stock underlying options and 631,581 shares of common stock underlying restricted stock unit awards were outstanding at December 31, 2023. At
December 31, 2023, 276,844 shares were available for grant under the 2021 Plan.
F-23
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
The 2021 Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock
units, performance awards and other stock-based awards. Incentive stock options may only be granted to persons who are regular full-time employees of
the Company at the date of the grant of the option. Non-qualified options may be granted to any person, including, but not limited to, directors, officers,
employees and consultants, who the Company’s Board or Compensation Committee determines. The exercise price of options granted under the 2021 Plan
must be equal to at least 100% of the fair market value of our common stock as of the date of the grant of the option. Options granted under the 2021 Plan
are exercisable as determined by the Compensation Committee and specified in the applicable award agreement. In no event will an option be exercisable
after ten years from the date of grant.
Stock Options
The compensation cost that has been charged against income related to options for the years ended December 31, 2023 and 2022, was $5,925,416 and
$4,956,619, respectively. No income tax benefit was recognized in the consolidated statements of income and no compensation was capitalized in any of
the years presented. During the year ended December 31, 2023, we granted certain performance based options, the expense for which will be recorded over
time once the achievement of the performance is deemed probable. There was no expense related to these options recorded during the period. The fair value
of these instruments was calculated using the Black-Scholes option pricing model.
During 2022, the Company granted certain performance based stock options, the expense for which will be recorded over time once the achievement of the
performance is deemed probable. There was no expense related to these options recorded during the period.
The Company had the following option activity during the year ended December 31, 2023 and 2022:
Outstanding at January 1, 2022
Granted
Exercised
Expired or forfeited
Outstanding at December 31, 2022
Granted
Exercised
Expired or forfeited
Outstanding, December 31, 2023
Exercisable, December 31, 2023
Number of
Options
Weighted
average
exercise price
Weighted
average
remaining
contractual
life (years)
Aggregate
intrinsic
value $
783,547 $
862,938 $
(156,910) $
(182,705) $
1,306,870 $
426,703 $
(24,668) $
(153,844) $
1,555,061 $
586,274 $
34.17
25.43
7.69
37.13
31.14
12.50
7.34
30.70
26.38
33.10
2.7 $
1,537,752
3.4 $
2.6 $
1,046,481
239,110
F-24
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
The table below reflects information for the total options outstanding at December 31, 2023
Range of Exercise Prices
$4.20 to $10.00
$10.00 to $20.00
$20.00 to $40.00
$40.00 to $60.00
$60.00 to $96.70
Total
The table below reflects information for the vested options outstanding at December 31, 2023.
Range of Exercise Prices
$4.20 to $10.00
$10.00 to $20.00
$20.00 to $40.00
$40.00 to $60.00
$60.00 to $96.70
Total
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
4.3 $
3.8 $
2.7 $
2.6 $
2.7 $
3.4 $
8.02
14.35
33.91
48.30
75.54
26.38
Number of
Options
108,044
851,751
247,284
247,723
100,259
1,555,061
Weighted
average
remaining
contractual
life (years)
Weighted
average
exercise
price
1.1 $
2.9 $
2.4 $
2.5 $
2.7 $
2.6 $
7.54
14.34
31.79
49.36
75.80
33.58
Number of
Options
15,667
222,707
143,670
138,776
65,454
586,274
A summary of the status of the Company’s non-vested options as of December 31, 2023, and changes during the year ended December 31, 2023, is
presented below.
Nonvested Options
Nonvested at January 1, 2022
Granted
Vested
Forfeited
Nonvested at December 31, 2023
Weighted
average
exercise
price
30.51
12.50
31.61
52.07
22.03
Options
1,056,187 $
426,703 $
(381,992) $
(132,111) $
968,787 $
There is $8,956,198 of expense remaining to be recognized over a period of approximately 1.77 years related to options outstanding at December 31, 2023.
F-25
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
Restricted Stock Units
The Company had the following restricted stock unit (“RSU”) activity during the years ended December 31, 2023 and 2022:
Outstanding at January 1, 2022
Granted
Forfeited
Shares issued
Withheld and cancelled
Outstanding at December 31, 2022
Granted
Forfeited
Vested and issued
Withheld and cancelled
Outstanding at December 31, 2023
Weighted
average
grant date
fair value
Weighted
average
remaining
contractual
life (years)
52.99
25.69
44.06
59.41
68.69
36.95
12.30
58.18
31.38
32.47
18.62
2.0
1.7
Number of
RSUs
399,738 $
467,043 $
(39,346) $
(29,945) $
(8,416) $
789,074 $
383,406 $
(244,923) $
(141,859) $
(42,489) $
743,209 $
The Company granted restricted stock units of 383,406 and 467,043 units in 2023 and 2022, respectively, and valued at $4,714,564 and $11,996,111,
respectively. These restricted stock units vest over a period of 1 year to 5 years. The Company recognized expense of $7,791,917 and $10,789,203 in 2023
and 2022, respectively, related to these restricted stock units. A total of $11,106,405 remains to be recognized at December 31, 2023 over a period of 1.95
years.
In the year ended December 31, 2023, certain participants utilized a net withhold settlement method, in which shares were surrendered to cover payroll
withholding tax. Of the shares issued to participants during the year ended December 31, 2023 and 2022, respectively, 42,489 and 31,243 shares, valued at
$458,892 and $100,290, were surrendered and subsequently cancelled.
During 2022, the Company granted certain performance based restricted stock units, the expense for which will be recorded over time once the
achievement of the performance is deemed probable. There was no expense related to these restricted stock units recorded during the period.
Non-employee Directors Compensation
The director’s compensation program calls for the grant of restricted stock units with a one year vesting period. The Company granted 26,470 restricted
stock units to its non-employee directors, valued at $750,130 in 2022. These restricted stock units vested in 2023. There were 50,305 restricted stock units,
valued at $750,050 granted to the non-employee directors in 2023 that will vest in 2024, 12 months from the grant dates.
Equity Award Modification
On April 16, 2023, the Compensation Committee approved a grant to the CEO of 86,685 restricted stock units and 161,698 stock options with a grant date
fair value of $2.5 million to vest over a three-year period. Concurrently, the CEO forfeited his October 2021 grant of 182,398 market-based restricted stock
units. The forfeiture and accompanying grant are considered an equity modification according to ASC 718, Compensation-Stock Compensation. The
additional compensation value created by the termination and issuance of new equity awarded, as measured using a Monte Carlo simulation, was
approximately $1.9 million in total. Under ASC 718 this results in a non-cash expense in current and future periods to be recognized over a three-year
period. These expense values are reflected and included in the option and restricted stock expense values discussed above.
F-26
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 12 – LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 2023 and 2022:
Term loan, due in 2027
Less: current portion of long-term debt
Less: unamortized issuance costs
Long-term debt, net
2023
38,290,000 $
(2,000,000)
(2,059,263)
34,230,737 $
$
$
2022
—
—
—
—
On October 11, 2023, the Company entered into a Financing Agreement (the “Financing”) which provided for a term loan (the “Term Loan”) of $40
million, the net proceeds of which were used to partially finance the Medicx Health transaction described in Note 3 “Acquisitions”. In connection with the
Financing the Company incurred issuance costs of approximately $2.3 million, which were capitalized and are being amortized to interest expense over the
life of the Term Loan. Amortization of debt issuance costs for the year ended December 31, 2023, was $210,737.
The Company’s obligations under the Financing are secured by all of the Company’s and its subsidiaries’ assets (including a pledge of all of the capital
stock and equity interests of its subsidiaries).
The Term Loan is repayable in quarterly installments, beginning December 31, 2023, equivalent to 1.25% or $500,000, of the original principal amount,
with the outstanding unpaid principal and all accrued but unpaid interest due and payable on the earlier of (i) the fourth anniversary of the closing date of
the Term Loan or (ii) the date on which the Term Loan is declared due and payable pursuant to the terms of the Financing.
The Company may prepay, subject to an Applicable Premium, 3% if the prepayment is made on a date that is up to and including the first anniversary of
closing, 2%, if the prepayment is made up to and including the second anniversary, 1% if the prepayment is made up to and including the third anniversary
and zero thereafter, all or a portion of the Term Loan and, under certain circumstances, including certain asset disposals and the raising of indebtedness not
permitted under the Financing is required to make mandatory prepayments of the principal balance. If the prepayment occurs within 12 months of the date
of the loan, the Company is also required to pay lost interest from the prepayment date to one year from the loan funding date.
In addition, the Company is required to make a mandatory prepayment on March 31, of each year, commencing with 2025, equivalent to Excess Cash Flow
multiplied by a percentage factor of 25%, if the leverage ratio is 3.60 to 1.00 or less, 50% if the leverage ratio is greater than 3.60 to 1 or less than or equal;
to 4.10 to 1.00 and 75%, if the leverage ratio is greater than 4.10 to 1.00. Excess Cash Flow is defined in the Financing as Consolidated EBITDA for the
previous fiscal year less scheduled principal and interest payments, capital expenditure, cash taxes and any cash expenses/gains added back to net income
in the calculation of Consolidated EBITDA, adjusted for any increase/decrease in working capital during the fiscal year.
F-27
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 12 – LONG-TERM DEBT (CONTINUED)
During the year ended December 31, 2023, the Company made total principal repayments of $1.7 million, including a mandatory prepayment of $1.2
million as a result of an asset sale completed during the year.
At the Company’s option the Term Loan, or any portion thereof bears interest at either:
a. The greater of (a) 4.00% per annum, (b) the Federal Funds Rate plus 0.50% per annum, (c) the one month Secured Funds Overnight Rate
(“SOFR”), plus an adjustment of 26.161 basis point and 1.00% per annum, and (d) the rate last quoted by The Wall Street Journal as the “Prime
Rate”, plus an Applicable Margin of 7.5%; or
b. Three-month SOFR plus an adjustment of 26.161 basis points and an Applicable Margin of 8.5%
As of December 31, 2023, the Loan bears interest at 14.1% per annum, with the effective interest rate for the year ended December 31, 2023, including the
amortization of debt issuance costs and Applicable Premium and interest penalties of $181,895 associated with the prepayment during the year ended
December 31, 2023, was 19.6%.
The Financing requires the Company to maintain the following financial covenants:
a. A maximum leverage ratio, as defined in the Financing as follows:
Fiscal Quarter End
March 31, 2024
June 30, 2024
September 30, 2024
December 31, 2024
March 31, 2025
June 30, 2025
September 30, 2025, and thereafter
Leverage
ratio
4.50 to 1.00
4.00 to 1.00
3.50 to 1.00
3.00 to 1.00
2.50 to 1.00
2.25 to 1.00
2.00 to 1.00
b. Liquidity, as defined in the Financing, of at least $5.0 million.
The Company was in compliance with its financial covenants as of December 31, 2023, and received a waiver from its lender to extend the date for
providing the Company's audited financial statements from March 31, 2024, to April 15, 2024.
The Financing contains customary events of default, which include, (subject to, in certain circumstances to grace and cure periods), non-payment of
principal and interest, non-compliance with certain covenants, commencement of bankruptcy proceedings and a change in control.
Payments due on the Loan in each of the next four years subsequent to December 31, 2023, are as follows:
For the year ending December 31,
2024
2025
2026
2027
$
$
2,000,000
2,000,000
2,000,000
32,290,000
38,290,000
F-28
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 13 – LEASES
In February 2016, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance on leases. The accounting standard, effective
January 1, 2019, requires virtually all leases to be recognized on the balance sheet. Under the guidance, we have elected not to separate lease and non-lease
components in recognition of the lease-related assets and liabilities, as well as the related lease expense.
We had operating leases with terms greater than 12 months for office space in four multi-tenant facilities, which are recorded as ROU assets and Operating
lease liabilities.
For the years ended December 31, 2023 and 2022, 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
2023
2022
$
$
95,765 $
38,850
134,615 $
100,771
75,784
176,555
(1) Short-term lease cost includes any lease with a term of less than 12 months.
The table below presents the future minimum lease payments to be made under operating leases as of December 31, 2023:
For the year ending December 31,
2024
2025
2026
2027
2028
Total
Less: present value discount
Total lease liabilities
$
$
260,016
178,082
113,802
65,866
45,160
662,926
69,863
593,063
The weighted average remaining lease term for operating leases is 3.17 and the weighted average discount rate used in calculating the operating lease asset
and liability is 6.7%. Cash paid for amounts included in the measurement of lease liabilities was $78,875. For the year ended December 31, 2023, payments
on lease obligations were $91,228 and amortization on the right of use assets was $94,564. For the year ended December 31, 2022, payments on lease
obligations were $101,405 and amortization on the right of use assets was $101,433.
F-29
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 14 – MAJOR CUSTOMERS AND VENDORS
The Company had the following customers that accounted for 10% or greater of revenue in either 2023 or 2022. No other customers accounted for more
than 10% of revenue in either year presented.
Customer A
Customer B
2023
2022
$
%
$
%
5,825,151
10,275,210
8.1
14.4
6,817,682
3,876,580
10.9
6.2
Our accounts receivable included two agencies, that represented multiple customers, that individually made up more than 10% of our accounts receivable at
December 31, 2023 in the percentages of 28.3% and 14.1%. As of December 31, 2022, our accounts receivable included two entities, including one agency
that represented multiple customers that individually made up more than 10% of our accounts receivable in the percentages of 13.3% and 10.8%.
The Company generates a portion of its revenues through its EHR and ePrescribe partners. There were three key partners and/or vendors through which
10% or greater of its revenue was generated in either 2023 or 2022 as set forth below. The amounts in the table below reflect the amount of revenue
generated through those partners.
Partner A
Partner B
Partner C
NOTE 15 – INCOME TAXES
2023
2022
$
%
$
%
26,035,135
13,955,426
6,498,694
36.4
19.5
9.1
19,882,511
12,494,227
6,578,661
31.8
20.0
10.5
As of December 31, 2023, the Company had net operating loss (“NOLs”) carry-forwards for federal income tax purposes of approximately $16.7 million,
consisting of pre-2018 losses in the amount of approximately $3.3 million that expire from 2033 through 2037, and post-2017 losses in the amount of
approximately $13.4 million that will never expire. These net operating losses are available to offset future taxable income. The Company was formed in
2008 as a Nevada Corporation. 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.
F-30
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 15 – INCOME TAXES (CONTINUED)
The provision for Federal income tax consists of the following for the years ended December 31, 2023 and 2022:
Federal income tax benefit (expense) attributable to:
Current operations
State tax effect, net of federal benefit
Option exercise benefits (expenses), net of Section 162M limitations
Transaction costs
Other adjustments
Valuation allowance
Income tax benefit
Current tax benefit (expense) - Federal
Current tax benefit (expense) - State
Total current (expense)
Deferred tax benefit (expense) - Federal
Deferred tax benefit (expense) - State
Total deferred benefit
Total tax benefit on loss
F-31
2023
2022
5,284,000 $
569,000
(3,100,000)
(360,000)
44,922
5,160,000
7,597,922 $
2,402,000
545,000
(268,000)
—
221,000
(2,900,000)
—
2023
2022
— $
(97,452)
(97,452)
6,488,661
1,206,713
7,695,374
7,597,922 $
—
—
—
—
—
—
—
$
$
$
$
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 15 – 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, 2023
and 2022:
Deferred tax assets attributable to:
Net operating loss carryover
Stock compensation
Operating lease liability
Section 174 capitalized expenses
Fixed assets
Other
Deferred tax assets
Deferred tax liabilities attributable to:
Intangibles
Operating lease right-of-use assets
Goodwill
Other
Deferred tax liabilities
Net deferred tax (liability) asset
Valuation allowance
Net deferred tax liabilities
2023
2022
$
$
4,864,000 $
3,744,000
115,000
2,533,000
—
103,000
11,720,000 $
5,545,000
3,953,000
63,000
789,000
126,000
16,000
10,492,000
$ (12,393,000) $
(110,000)
—
(198,424)
(12,701,424)
(981,424) $
(3,356,000)
(4,337,424) $
$
$
(2,102,000)
(63,000)
(106,000)
(59,000)
(2,330,000)
8,162,000
(8,162,000)
—
The valuation allowance decreased $4,806,000, during the year ended December 31, 2023, as we determined that a portion of the deferred tax assets
associated with historical NOL's were realizable. 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 2020 to 2023 remain open for potential audit by the Internal Revenue Service. There are no uncertain tax positions as of December 31, 2022
or December 31, 2023, 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. The Company had an
ownership change as described in IRC Section 382 on March 18, 2014. The Company NOL’s generated up until March 18, 2014, have been fully released.
F-32
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023
NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES
Legal
From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are
currently not a party to any material legal or administrative proceedings, and we are not aware of any pending or threatened material legal or administrative
proceedings against us.
Commitments
From time to time, the Company enters into arrangements with partners to acquire minimum amounts of media, data or messaging capabilities. As of
December 31, 2023, the Company had commitments for future minimum payments of $24.7 million that will be reflected in cost of revenues during the
years from 2024 through 2028. Minimum payments are due in 2024, 2025, 2026, 2027 and 2028 in the amounts of $10.6 million, $8.3 million, $3.3
million, $2.4 million and $0.1 million, respectively.
NOTE 17 – 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 $726,660 and $489,780 recorded in 2023 and 2022, respectively, for the
Company’s contributions to the plan.
NOTE 18 – SUBSEQUENT EVENTS
None.
F-33
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation, as of the end of the
period covered by this report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based
on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, due
to a material weakness in our internal control over financial reporting, our disclosure controls and procedures, as defined in Rule 13a-15(e), were not
effective at the reasonable assurance level.
To address the material weakness referenced above, the Company performed additional analysis and performed other procedures in order to prepare the
audited consolidated financial statements in accordance with generally accepted accounting principles (GAAP). Accordingly, management believes that the
consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of
operations and cash flows for the periods presented.
Management’s Report on Internal Control Over Financial Reporting.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act
Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of
America. The Company’s internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
Company;
● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and
● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, any system of internal control over financial reporting, no matter how well defined, may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control — Integrated Framework (2013). Based on this assessment using those criteria, management identified the
following material weaknesses existed as of December 31, 2023: inadequate controls to ensure that data received from third-party service organizations is
complete and accurate. As a result, based on the COSO criteria, the Company’s management has concluded that we did not maintain effective internal
control over financial reporting as of December 31, 2023.
33
Plan for Remediation of Material Weakness
Management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness identified above.
Management intends to implement the following remediation steps:
a. The Company will require each third-party service organization to provide a SOC-1, Type 2 report to us.
b.
c.
If a SOC-1, Type 2 report is not available, the Company will evaluate each third-party’s relevant system(s) and reporting directly through inquiry
and substantive testing of such third-party’s control environment.
If we are unable to obtain a valid SOC-1 Type 2 report or perform substantive testing of such third-party's control environment, the Company will
implement a channel partner qualification and program triaging process, which would include modifying customer contracts, limiting the volume
of activity with those third-parties and establishing other controls to ensure the completeness and accuracy of information received from those
third-parties, such as performing tagging procedures where possible.
Management believes the measures described above will remediate the material weakness that we have identified. During the quarter ended December 31,
2023, the Company continued to engage with the third-party service organizations to discuss the reporting requirements. As management continues to
evaluate and improve our disclosure controls and procedures and internal control over financial reporting, the Company may decide to take additional
measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures
identified.
Changes in Internal Controls Over Financial Reporting.
Except as noted above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), that
occurred during the quarter ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
Adoption of 10b5-1 Trading Plan
During the year ended December 31, 2023, certain of our officers and directors adopted Rule 10b5-1 trading arrangements as follows:
On June 15, 2023, Mr. William J. Febbo, the Chief Executive Officer of the Company, adopted a written plan for the purchase or sale of our securities that
was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (the “Febbo Rule 10b5-1 Trading Plan). The Febbo 10b5-1 Trading Plan,
which has a term of one year, provides for the sale of up to 300,000 shares of common stock pursuant to the terms therein.
On June 15, 2023, Ms. Marion Odence-Ford, the General Counsel & Chief Compliance Officer of the Company, adopted a written plan for the purchase or
sale of our securities that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (the “Odence-Ford Rule 10b5-1 Trading Plan). The
Odence-Ford 10b5-1 Trading Plan, which has a term of one year, provides for the sale of up to 7,000 shares of common stock pursuant to the terms therein.
34
William Febbo’s Employment Agreement
On April 12, 2024, the Company entered into an amended and restated employment letter agreement with William J. Febbo (the “Febbo Employment
Agreement”) which updates and supersedes in its entirety his prior employment agreement, as amended (the “Febbo Prior Employment Agreement”) to,
among other things, eliminate the single trigger cash severance which was payable to Mr. Febbo in connection with a change in control, remove the
Company’s 280G tax gross-up payment obligation afforded to Mr. Febbo under the Febbo Prior Employment Agreement, and provide for an equity grant to
Mr. Febbo of 90,000 restricted stock units which vest over three years. In connection with the Febbo Employment Agreement, the Compensation
Committee amended the OptimizeRx Corporation Executive Severance Plan to make Mr. Febbo a participant of such plan (as described below). As a result,
all of Mr. Febbo’s prior rights to severance and change in control benefits under the Febbo Prior Employment Agreement were removed from the Febbo
Employment Agreement. Mr. Febbo’s amended severance and/or change in control benefits are now set forth in full in the Amended Severance Plan (as
defined below).
The foregoing summary of Mr. Febbo’s Employment Agreement is not complete and is qualified in its entirety by reference to the complete text of the
Febbo Employment Agreement, a copy of which is filed as Exhibit 10.26 to this Form 10-K and is incorporated herein by reference.
Stephen Silvestro’s Employment Agreement
On April 12, 2024, the Company entered into an amended and restated employment letter agreement with Stephen Silvestro (the “Silvestro Employment
Agreement”) which updates and supersedes in its entirety his prior employment agreement, as amended (the “Silvestro Prior Employment Agreement”) to,
among other things, remove the Company’s 280G tax gross-up payment obligation afforded to Mr. Silvestro under the Silvestro Prior Employment
Agreement.
The foregoing summary of Mr. Silvestro’s Employment Agreement is not complete and is qualified in its entirety by reference to the complete text of the
Silvestro Employment Agreement, a copy of which is filed as Exhibit 10.27 to this Form 10-K and is incorporated herein by reference.
Amended Executive Severance Plan
On April 12, 2024, the Compensation Committee amended the OptimizeRx Corporation Executive Severance Plan (the “Amended Severance Plan”) to
include Mr. Febbo as a participant in the Amended Severance Plan, to remove former and add new executive management team members, and to increase
the Severance Benefits (as defined below) payable to Mr. Silvestro.
The Amended Severance Plan provides that if Mr. Febbo or Mr. Silvestro is terminated without cause or resigns for Good Reason, he will be paid (i) an
amount equal to 1.5 times his base salary, paid in installments over 18 months, (ii) an amount equal to his target annual bonus in effect at the time of
termination, paid in a lump sum, and (iii) payment by the Company of COBRA premiums for such executive and his spouse and eligible dependents for up
to 12 months following termination (the payments in (i), (ii) and (iii) collectively referred to as “Severance Benefits”).
The Amended Severance Plan also provides Change in Control termination and death benefits to executive management team members. Mr. Silvestro’s
benefits under such provisions were not changed in connection with the Amended Severance Plan. The Amended Severance Plan provides that if Mr.
Febbo is terminated without cause or resigns for Good Reason three months prior to or 24 months following a Change in Control, in addition to the
Severance Benefits, Mr. Febbo will be paid a lump sum payment equal to 5.0 times his then current base salary. The Severance Plan also provides that if
Mr. Febbo is terminated due to death or disability, he (or his estate) will be paid an amount equal to his target annual bonus in effect at the time of
termination, paid in a lump sum. Terms not otherwise defined herein have the meanings assigned to them in the Amended Severance Plan.
The foregoing description of the Amended Severance Plan is not complete and is qualified in its entirety by reference to the complete text of the Amended
Severance Plan, a copy of which is filed as Exhibit 10.28 to this Form 10-K and is incorporated herein by reference.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None
35
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Except for the information provided in PART I, Item 4.1, “Information About Our Executive Officers” and as set forth below, the required information is
incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not necessarily limited to, the
sections entitled “Proposal No. 1 Election of Directors, “Committees of the Board of Directors” and “Information Regarding Security Holders Delinquent
Section 16(a) Reports.”
We have a Code of Business Conduct and Ethics (the “Code”) that applies to our directors, officers, and employees. Only the Board may grant a waiver of
any provision for a director, executive officer, or any other principal financial officer, and any such waiver, or any amendment to the Code, will be
promptly disclosed as required at www.optimizerx.com. The Code can be found on the Company’s website at www.optimizerx.com under “Investor
Relations - Governance.” The information on the website is not and should not be considered part of this Form 10-K and is not incorporated by reference in
this Form 10-K.
Item 11. Executive Compensation
The required information is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not
necessarily limited to, the sections entitled “Director Compensation” and “Executive Compensation”.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Except for the information set forth below, the required information is incorporated by reference from our definitive proxy statement for our 2024 Annual
Meeting of Shareholders, including, but not necessarily limited to, the section entitled “Information Regarding Security Holders.”
36
Equity Compensation Plan Information
The following table details information regarding our existing equity compensation plans as of December 31, 2023:
Number of
securities to
be
issued upon
exercise of
outstanding
options,
warrants
and rights
(a)
Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
(b)
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
345,435
111,628
1,209,626
631,581
0
2,298,270
33.43
N/A
23.80
N/A
N/A
0
0
276,844
0
0
276,844
Plan Category
Equity compensation plans approved by security holders
2013 Equity Compensation Plan – Options
2013 Equity Compensation Plan – Restricted Stock Units
2021 Equity Incentive Plan – Options
2021 Equity Incentive Plan – Restricted Stock Units
Equity compensation plans not approved by security holders
Total
Item 13. Certain Relationships and Related Transactions, and Director Independence
The required information is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not
necessarily limited to, the sections entitled “Certain Relationships and Related Transactions” and “Corporate Governance - Director Independence.”
Item 14. Principal Accounting Fees and Services
The required information is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not
necessarily limited to, the sections entitled “Ratification of UHY LLP as Independent Registered Public Accounting Firm – Independent Registered Public
Accountant Fee Information” and “Ratification of UHY LLP as Independent Registered Public Accounting Firm – Pre-Approval Policies and Procedures.”
37
Item 15. Exhibits and Financial Statements Schedules
PART IV
(a) The consolidated financial statements and exhibits listed below are filed as part of this Annual Report on Form 10-K.
(1) The Company’s consolidated financial statements, the notes thereto and the report of the Independent Registered Public Accounting Firm are
included in PART II, Item 8. “Financial Statements and Supplementary Data.”
(2) Financial statement schedules have been omitted because they are not applicable, not required, or the required information is included in the
Consolidated Financial Statements or Notes thereto.
(3) Exhibits. Reference is made to Item 15(b) below.
(b) Exhibits. The Exhibit Index, which immediately precedes the signature page, is incorporated by reference into this Annual Report on Form 10-K.
(c) Financial Statement Schedules. Reference is made to Item 15(a)(2) above.
Item 16. Form 10-K Summary
None
Exhibit
Number
3.1
3.2
3.3
4.1
10.1†
10.2†
10.3†
10.4†
10.5†
EXHIBIT INDEX
Description
Articles of Incorporation of OptimizeRx Corporation (the “Company”) Incorporated by reference to Exhibit 3.1 to the Company’s
Registration Statement on Form S-1 (Registration No. 333-155280) filed on November 12, 2008.
Certificate of Correction, dated April 30, 2018. Incorporated by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 2018.
Third Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2022.
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. Incorporated by
reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Fourth Amended and Restated 2013 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on March 12, 2020.
OptimizeRx 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
August 25, 2021.
Form of Stock Option Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference to
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
Form of Performance Stock Option Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
Form of Restricted Stock Unit Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference
to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
38
10.6†
10.7†
10.8†
10.9†
Form of Performance Restricted Stock Unit Award for grants under the OptimizeRx Corporation 2021. Incorporated by reference to Exhibit
10.5 to the Company’s Current Report on Form 8-K filed on August 25, 2021
Amended Employment Agreement by and between the Company and William J. Febbo. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on February 26, 2019.
Amendment to the Employment Agreement with William Febbo. Incorporated by reference to Exhibit 10.4 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019.
Addendum to the Employment Agreement with William J. Febbo. Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2021.
10.10*†
Third Addendum to the Employment Agreement with William J. Febbo. Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on October 19, 2021.
10.11†
Employment Agreement by and between the Company and Stephen Silvestro. Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on May 3, 2019.
10.12†
Amendment to the Employment Agreement with Stephen Silvestro. Incorporated by reference to Exhibit 10.5 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2019.
10.13†
Amendment to Employment Agreement by and between the Company and Stephen Silvestro dated February 28, 2022. Incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 4, 2022.
10.14†
Employment Agreement with Marion Odence-Ford. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-
K filed on February 11, 2021.
10.15†
Amendment to Employment Agreement by and between the Company and Marion Odence-Ford dated February 28, 2022. Incorporated by
reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 4, 2022.
10.16*†
Offer Letter by and between the Company and Edward Stelmakh. Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on September 30, 2021.
10.17†
OptimizeRx Corporation 2022 Cash Bonus Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on March 4, 2022.
10.18†
OptimizeRx Corporation Executive Severance Plan. Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form
10-K filed on March 10, 2023.
10.19†
Fourth Addendum to the Employment Agreement with William J. Febbo. Incorporated by reference to Exhibit 10.19 to the Company’s
10.20
10.21
10.22
10.23
10.24
10.25
Annual Report on Form 10-K filed on March 10, 2023.
Agreement and Plan of Merger dated as of October 11, 2023 by and among OptimizeRx Corporation, Healthy Offers, Inc., the
securityholders of Healthy Offers, Inc. who are party to the Agreement, and Michael Weintraub, not in his individual capacity, but solely in
his capacity as the representative, agent and attorney-in-fact of the Securityholders. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on October 16, 2023.
Support Agreement, dated as of October 11, 2023 by and among the stockholders party thereto, OptimizeRx Corporation and Healthy
Offers, Inc. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 16, 2023.
Financing Agreement, dated as of October 11, 2023, by and among OptimizeRx Corporation, the lenders from time to time party thereto,
and Blue Torch Finance, LLC, as collateral agent and administrative agent. Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on October 16, 2023.
Letter Agreement, dated as of October 11, 2023, OptimizeRx Corporation and Blue Torch Finance, LLC. Incorporated by reference to
Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 16, 2023.
Common Stock Purchase Agreement dated October 24, 2023 by and among the Company and the Management Investors. Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 25, 2023.
Amendment No. 1 to Financing Agreement, dated March 29, 2024. Incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on April 2, 2024.
10.26*†**
Amended and Restated Employment Agreement by and between the Company and William J. Febbo dated April 12, 2024.
39
10.27*†**
10.28†**
14.1
Amended and Restated Employment Agreement by and between the Company and Stephen Silvestro dated April 12, 2024.
Amended OptimizeRx Corporation Executive Severance Plan dated April 12, 2024.
Code of Business Conduct and Ethics Incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K filed on
June 25, 2021.
19.1**
21.1**
23.1**
31.1**
OptimizeRx Corporation Insider Trading Policy
List of Subsidiaries
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
31.2**
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
32.1**
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
OptimizeRx Corporation Clawback Policy
97.1**
101.INS**
Inline XBRL Instance Document
101.SCH** Inline XBRL Schema Document
101.CAL** Inline XBRL Calculation Linkbase Document
101.DEF** Inline XBRL Definition Linkbase Document
101.LAB** Inline XBRL Label Linkbase Document
Inline Presentation Linkbase Document
101.PRE**
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
104
† Management Contracts and Compensatory Plans, Contracts or Arrangements.
*
Exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted
exhibit to the SEC upon request.
** Provided herewith.
40
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
Title: Chief Executive Officer
Date: April 15, 2024
By:
/s/ Edward Stelmakh
Edward Stelmakh
Title: Chief Financial Officer
Chief Operations Officer
Date: April 15, 2024
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.
Signature
Title
/s/ William J. Febbo
William J. Febbo
/s/ Edward Stelmakh
Edward Stelmakh
/s/ Lynn O’Connor Vos
Lynn O’Connor Vos
/s/ Gus D. Halas
Gus D. Halas
/s/ Patrick Spangler
Patrick Spangler
/s/ James Lang
James Lang
/s/ Greg Wasson
Greg Wasson
/s/ Catherine Klema
Catherine Klema
Chief Executive Officer and Director
(principal executive officer)
Chief Financial Officer and Chief Operations Officer
(principal financial and accounting officer)
Chairperson
Director
Director
Director
Director
Director
41
Date
April 15, 2024
April 15, 2024
April 15, 2024
April 15, 2024
April 15, 2024
April 15, 2024
April 15, 2024
April 15, 2024
Exhibit 10.26
March 6, 2024
William J. Febbo
142 Calle Violeta
San Juan, Puerto Rico 00927
Dear Will,
On behalf of OptimizeRx Corporation (the “Company”), we are excited to make this amended and restated employment offer to you for the full-time,
exempt position of Chief Executive Officer and member of the Company Board of Directors (this “Amended and Restatement Employment Agreement”),
effective upon execution of this Amended and Restatement Employment Agreement (the “Effective Date”). For purposes of determining employment
tenure, February 22, 2016 shall be recognized as your start date of employment.
Base Salary. You will be entitled to receive an annual base salary of $450,000.00 at the rate of $18,750.00 per semi-monthly pay period, representing
payment for all hours worked, with such increases (but no decreases, unless mutually agreed) as may be determined by the Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”) from time to time (as increased from time to time, the “Base Salary”). Your Base Salary is
payable in accordance with the Company’s regular payroll practices and subject to customary and required withholdings and deductions.
Annual Bonus. In addition to the Base Salary, you will be eligible to receive annual cash bonuses under the Company’s 2022 Cash Bonus Plan and/or any
other cash incentive plan maintained by the Company (such plan, the “Bonus Plan”), as determined by the Compensation Committee in its sole discretion
within the parameters, and subject to the terms and conditions, of the Bonus Plan, with a target bonus of 100% of your Base Salary. Any bonus payments
paid to you is entirely at the discretion of the Compensation Committee and will be subject to the Company’s and your personal performance achievements
and to customary tax deductions.
Equity. The Compensation Committee has authorized the Company to grant you sixty thousand (60,000) restricted stock units (“RSUs”). Subject to the
Board of Directors’ approval, the grant date will be April 15, 2024. The RSUs shall vest in equal one-third increments over a three (3) year period,
commencing on the first anniversary of the grant date.
Following the Effective Date, you may receive additional grants of equity awards under the Company’s 2021 Equity Incentive Plan and/or any other
equity-related incentive plan maintained by the Company (such plan, the “Equity Plan”), as determined by the Compensation Committee in its sole
discretion within the parameters, and subject to the terms and conditions, of the Equity Plan. The treatment of any equity awards held by you under the
Equity Plan in connection with the termination of your employment shall be determined under the Equity Plan and/or award agreement relating to such
award.
Consistent with the foregoing, any equity granted to you, whether restricted stock units (“RSUs”) or options to purchase the Company’s common stock
(“Options”) will be granted to you pursuant to the terms of the Equity Plan, as may be amended from time to time, attached hereto as Exhibit A, and the
applicable award agreements in substantially similar forms to those attached hereto as Exhibit B, and the Options for the awards shall be at an exercise
price equal to the fair market value of the underlying common stock as determined by the closing trading price of the Company’s common stock on the
Nasdaq Stock Exchange on the grant date.
Additional Compensation. You shall be eligible to receive such other compensation as may from time to time be awarded to you by the Compensation
Committee, in its sole discretion.
Severance Pay. If you undergo a Covered Termination as defined by the Company’s 2023 Executive Severance Plan (the “Severance Plan”), as amended,
and attached hereto as Exhibit C, you shall receive severance benefits within the parameters, and subject to the terms and conditions, of the Severance
Plan, including your continued compliance with the terms and conditions of this Agreement, your Business Protection Agreement, and execution of the
Company Separation Agreement, waiver and release.
Employee Benefits. In addition to your compensation, you will continue to have the opportunity to participate in various Company benefit programs
offered to employees, pursuant to the terms and conditions of such programs, including a 401(k) plan, group medical, dental and vision insurance as well as
life, AD&D insurance, short and long-term disability benefits. Our 401k plan includes a company match of up to 4%, based on individual contribution. You
will also be eligible to participate in our flexible Paid Time Off (PTO) policy. Please note that the Company reserves the right to change or discontinue any
of our benefits, plans, providers, and policies, at any time.
Job Responsibilities. As CEO, your responsibilities will be as outlined by the Board of Directors and relayed to you from time to time. You shall devote
substantially all of your business time (excluding periods of vacation and other approved leaves of absence) to the performance of your duties with the
Company, provided the foregoing shall not prevent you from participating in charitable, civic, educational, professional, community or industry affairs or,
with prior written approval of the Board in accordance with the Company’s Corporate Governance Guidelines, serving on the board of directors or advisory
boards of other companies. If at any time service on any board of directors or advisory board would, in the good faith judgment of the Board, conflict with
your fiduciary duty to the Company or create any appearance thereof, you shall, as soon as reasonably practicable considering any fiduciary duty to the
other entity, resign from such other board of directors or advisory board after written notice of the conflict is received from the Board. Service on the
boards of directors or advisory boards disclosed by you to the Company on which you are serving as of the Effective Date are hereby approved.
Expense Reimbursement. We will reimburse you for all approved business expenditures including travel costs incurred by you pursuant to the terms of the
Company travel policy.
At-Will Employment. Please note that you are not being offered employment for a definite period of time, and that either you or the Company may
terminate your employment at any time for any reason, with or without cause or notice, except as prohibited by law. Nothing in this Amended and
Restatement Employment Agreement should be interpreted as creating anything other than an at-will employment relationship.
2
Business Protection Agreement. The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely
important. The Business Protection Agreement you executed on March 5, 2024, and as attached hereto as Exhibit D shall remain in full force and effect.
Certifications. As a condition of your employment, you certify and reaffirm to the Company that you are free to enter into and fully perform the duties of
your position, and that you are not subject to any employment, confidentiality, non-competition or other agreement that would restrict your performance for
the Company. If you are subject to any such agreement, please forward it to the Company as soon as possible.
Additionally, as a condition of your employment, you certify and reaffirm that you will not disclose to or use for the benefit of the Company any trade
secret or confidential or proprietary information of any previous employer. You further certify and reaffirm that you have not divulged or used any such
information for the benefit of the Company, and that you have not and will not misappropriate any such information from any former employer.
Entire Agreement. This Amended and Restatement Employment Agreement and your signed Business Protection Agreement, states the terms of your
employment and supersedes and cancels any prior oral or written representations, offers or promises made by the Company and any understandings or
agreements, whether written or oral, between the Company and you, including but not limited to the employment offer made to you on February 12, 2016,
as amended on March 10, 2020, September 24, 2020, October 15, 2021, and March 8, 2023 (the “Original Febbo Employment Agreement”). Upon
execution of this Amended and Restatement Employment Agreement, the Original Febbo Employment Agreement shall terminate in its entirety and the
terms set forth therein shall be null and void.
If you have any questions, please do not hesitate to call me to discuss. Please sign and date below and return one copy of this letter to the Company.
With best regards,
/s/ Marion Odence-Ford
Marion Odence-Ford
General Counsel & Chief Compliance Officer
Acknowledged and agreed:
William J. Febbo
Printed Name
/s/ William J. Febbo
Signature
April 12, 2024
Date
3
OptimizeRx Corporation
2021 Equity Incentive Plan
4
Exhibit A
OptimizeRx Corporation
2021 Equity Incentive Plan
Forms of Award Agreements
5
Exhibit B
OptimizeRx Corporation
2023 Executive Severance Plan
6
Exhibit C
Febbo Business Protection Agreement
7
Exhibit D
Exhibit 10.27
March 1, 2024
Stephen Silvestro
41 Fletcher Lane
Hollis, NH 03049
Dear Steve,
On behalf of OptimizeRx Corporation (the “Company”), we are excited to make this amended and restated employment offer to you for the full-time,
exempt position of President (this “Amended and Restatement Employment Agreement”), effective upon execution of this Amended and Restatement
Employment Agreement (the “Effective Date”). For purposes of determining employment tenure, April 29, 2019 shall be recognized as your start date of
employment.
Base Salary. You will be entitled to receive an annual base salary of $400,000.00 at the rate of $16,666.66 per semi-monthly pay period, representing
payment for all hours worked, with such increases (but no decreases, unless mutually agreed) as may be determined by the Compensation Committee of the
Company’s Board of Directors (the “Compensation Committee”) from time to time (as increased from time to time, the “Base Salary”). Your Base Salary is
payable in accordance with the Company’s regular payroll practices and subject to customary and required withholdings and deductions.
Annual Bonus. In addition to the Base Salary, you will be eligible to receive annual cash bonuses under the Company’s 2022 Cash Bonus Plan and/or any
other cash incentive plan maintained by the Company (such plan, the “Bonus Plan”), as determined by the Compensation Committee in its sole discretion
within the parameters, and subject to the terms and conditions, of the Bonus Plan, with a target bonus of 60% of your Base Salary. Any bonus payments
paid to you is entirely at the discretion of the Compensation Committee and will be subject to the Company’s and your personal performance achievements
and to customary tax deductions.
Equity. Following the Effective Date, you may receive grants of equity awards under the Company’s 2021 Equity Incentive Plan and/or any other equity-
related incentive plan maintained by the Company (such plan, the “Equity Plan”), as determined by the Compensation Committee in its sole discretion
within the parameters, and subject to the terms and conditions, of the Equity Plan. The treatment of any equity awards held by you under the Equity Plan in
connection with the termination of your employment shall be determined under the Equity Plan and/or award agreement relating to such award.
Consistent with the foregoing, any equity granted to you, whether restricted stock units (“RSUs”) or options to purchase the Company’s common stock
(“Options”) will be granted to you pursuant to the terms of the Equity Plan, as may be amended from time to time, attached hereto as Exhibit A, and the
applicable award agreements in substantially similar forms to those attached hereto as Exhibit B, and the Options for the awards shall be at an exercise
price equal to the fair market value of the underlying common stock as determined by the closing trading price of the Company’s common stock on the
Nasdaq Stock Exchange on the grant date.
Additional Compensation. You shall be eligible to receive such other compensation as may from time to time be awarded to you by the Compensation
Committee, in its sole discretion.
Severance Pay. If you undergo a Covered Termination as defined by the Company’s 2023 Executive Severance Plan (the “Severance Plan”), as amended,
and attached hereto as Exhibit C, you shall receive severance benefits within the parameters, and subject to the terms and conditions, of the Severance
Plan, including your continued compliance with the terms and conditions of this Agreement, your Business Protection Agreement, and execution of the
Company Separation Agreement, waiver and release.
Employee Benefits. In addition to your compensation, you will continue to have the opportunity to participate in various Company benefit programs
offered to employees, pursuant to the terms and conditions of such programs, including a 401(k) plan, group medical, dental and vision insurance as well as
life, AD&D insurance, short and long-term disability benefits. Our 401k plan includes a company match of up to 4%, based on individual contribution. You
will also be eligible to participate in our flexible Paid Time Off (PTO) policy. Please note that the Company reserves the right to change or discontinue any
of our benefits, plans, providers, and policies, at any time.
Job Responsibilities. As President, your responsibilities are outlined in the job description attached hereto as Exhibit D. You shall devote substantially all
of your business time (excluding periods of vacation and other approved leaves of absence) to the performance of your duties with the Company, provided
the foregoing shall not prevent you from participating in charitable, civic, educational, professional, community or industry affairs.
Expense Reimbursement. We will reimburse you for all approved business expenditures including travel costs incurred by you pursuant to the terms of the
Company travel policy.
At-Will Employment. Please note that you are not being offered employment for a definite period of time, and that either you or the Company may
terminate your employment at any time for any reason, with or without cause or notice, except as prohibited by law. Nothing in this Amended and
Restatement Employment Agreement should be interpreted as creating anything other than an at-will employment relationship.
Business Protection Agreement. The Company considers the protection of its confidential information, proprietary materials and goodwill to be extremely
important. The Business Protection Agreement you executed on March 25, 2019, and as attached hereto as Exhibit E shall remain in full force and effect.
2
Certifications. As a condition of your employment, you certify and reaffirm to the Company that you are free to enter into and fully perform the duties of
your position, and that you are not subject to any employment, confidentiality, non-competition or other agreement that would restrict your performance for
the Company. If you are subject to any such agreement, please forward it to the Company as soon as possible.
Additionally, as a condition of your employment, you certify and reaffirm that you will not disclose to or use for the benefit of the Company any trade
secret or confidential or proprietary information of any previous employer. You further certify and reaffirm that you have not divulged or used any such
information for the benefit of the Company, and that you have not and will not misappropriate any such information from any former employer.
Entire Agreement. This Amended and Restatement Employment Agreement and your signed Business Protection Agreement, states the terms of your
employment and supersedes and cancels any prior oral or written representations, offers or promises made by the Company and any understandings or
agreements, whether written or oral, between the Company and you, including the employment offer made to you on March 18, 2019, as amended on
March 10, 2020 and February 28, 2022 (the “Original Silvestro Employment Agreement”). Upon execution of this Amended and Restatement Employment
Agreement, the Original Silvestro Employment Agreement shall terminate and the terms set forth therein shall be null and void.
If you have any questions, please do not hesitate to call me to discuss. Please sign and date below and return one copy of this letter to the Company.
With best regards,
/s/Marion Odence-Ford
Marion Odence-Ford
General Counsel & Chief Compliance Officer
Acknowledged and agreed:
Stephen Silvestro
Printed Name
/s/ Stephen Silvestro
Signature
April 12, 2024
Date:
3
OptimizeRx Corporation
2021 Equity Incentive Plan
4
Exhibit A
OptimizeRx Corporation
2021 Equity Incentive Plan
Forms of Award Agreements
5
Exhibit B
OptimizeRx Corporation
2023 Executive Severance Plan
6
Exhibit C
OptimizeRx Corporation
President Job Description
7
Exhibit D
Silvestro Business Protection Agreement
8
Exhibit E
OPTIMIZERX CORPORATION
EXECUTIVE SEVERANCE PLAN*
Plan Document/Summary Plan Description
Exhibit 10.28
OptimizeRx Corporation (the “Company”) has adopted this OptimizeRx Corporation Executive Severance Plan (the “Plan”) for the benefit of
certain employees of the Company and its subsidiaries (hereinafter referred to as the “Company Group”), on the terms and conditions hereinafter stated,
effective as of the Effective Date.
The Plan is not intended to be an “employee pension benefit plan” or “pension plan” within the meaning of Section 3(2) of ERISA. Rather, the
Plan is intended to be a “welfare benefit plan” within the meaning of Section 3(1) of ERISA and to meet the descriptive requirements of a plan constituting
a “severance pay plan” within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations, Section 2510.3-
2(b). Accordingly, any benefits paid pursuant to the terms of the Plan are not deferred compensation for purposes of ERISA, and no Participant shall have a
vested right to such benefits. To the extent applicable, it is intended that portions of the Plan either comply with or be exempt from the provisions of
Section 409A of the Code. The Plan shall be administered in a manner consistent with this intent and any provision that would cause the Plan to fail to
either constitute a welfare benefit plan under ERISA or comply with or be exempt from Section 409A of the Code, as the case may be, shall have no force
and effect. This document serves as both the plan document as required under Section 402 of ERISA as well as a summary plan description as required
under Section 104(b) of ERISA.
1. Definitions. Capitalized terms used in this Plan shall have the meanings ascribed to such terms in Appendix A.
2. Eligibility.
Except as otherwise provided under the Plan, each Participant is eligible to receive severance pay and severance benefits under the Plan if such
Participant:
(a) remains in the employ of the Employer through the date of a Covered Termination, death or Disability;
(b) fulfills the normal responsibilities of such Participant’s position, including, but not limited to, meeting regular attendance, specific transitional
activities, workload and other standards of the Employer,
(c) executes and does not revoke the Release Agreement; and
(d) complies with and, during the term of the Severance Period (and in some instances, for some period following the expiration of the Severance
Period in accordance with the terms of the BPA), remains compliant with, all the terms of such BPA.
*Amended April 12, 2024
3. Termination of Employment.
(a) Payments on Covered Termination. If a Participant designated on Appendix B hereto undergoes a Covered Termination, in addition to any
Accrued Obligations, subject to such Participant’s execution, delivery to the Company, and non-revocation of a Release Agreement, as contemplated in
subsection (e) below, and continued compliance with the BPA during the Severance Period (and in some instances, for some period following the
expiration of the Severance Period in accordance with the terms of the BPA), such Participant shall be entitled to the following payments and benefits:
(i) the Target Bonus, which will be payable to the Participant in a lump sum within 60 days following the date of termination, and
(ii) (A) the applicable Cash Severance Amount set forth on Appendix B, payable in substantially equal installments as continuous pay in
accordance with the Company’s payroll practices as in effect from time to time over the applicable number of months set forth on Appendix B,
commencing on the 60th day following the date of termination, provided that the first such payment shall include all amounts that would have been paid to
the Participant in accordance with the Company’s payroll practices if such payments had begun on the date of the Participant’s Covered Termination; and
(B) the COBRA Payment, payable in monthly installments during the Subsidized COBRA Period (or apply such amount to the payment of such
continuation coverage), commencing on the 60th day following the date of termination, provided that the first such payment shall include all amounts that
would have been paid or provided to Participant in accordance with the Company’s payroll practices if such payments had begun on the date of the
Participant’s Covered Termination.
(b) Payments on Change in Control Covered Termination. If a Participant undergoes a Change in Control Covered Termination, subject to such
Participant’s execution, delivery to the Company, and non-revocation of a Release Agreement, as contemplated in subsection (e) below, and continued
compliance with the BPA during the Severance Period (and in some instances, for some period following the expiration of the Severance Period in
accordance with the terms of the BPA), such Participant shall be entitled to the following payment in addition to the payments and benefits set forth in
Section 3(a): a lump-sum cash payment equal to the applicable CIC Covered Termination Payment Amount set forth on Appendix C, payable within 60
days following the later of (A) the date of the Participant’s Change in Control Covered Termination or (B) the closing date of the applicable Change in
Control.For the avoidance of doubt, if a Participant’s name is not set forth on Appendix C hereto, such Participant is ineligible to receive any payments
under this Section 3(b).
Payments and benefits described under subsections (a) and (b) may be made by the Company or any other member of the Company Group, as determined
by the Company in its sole discretion, including, without limitation, the Employer.
(c) Payments on Death or Disability. In the event a Participant’s employment with the Employer is terminated due to such Participant’s death or
Disability, in addition to any Accrued Obligations, the Participant (or the Participant’s estate, as applicable) shall receive the Target Bonus, payable in a
lump sum within 60 days following the date of termination; provided, however, in the case of the Participant’s termination due to Disability, the Participant
must execute, deliver to the Company, and not revoke the Release Agreement, as contemplated in subsection (e) below, and continue to comply with the
BPA during the Severance Period (and in some instances, for some period following the expiration of the Severance Period in accordance with the terms of
the BPA).
*Amended April 12, 2024
2
(d) Other Termination Events. If a Participant’s employment is terminated for any reason other than pursuant to a Covered Termination, death or
Disability, such Participant shall not be entitled to the Severance Pay or other benefits under the Plan.
(e) Release Agreement. Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to
this Section 3 (other than the Accrued Obligations) shall be conditioned upon a Participant’s execution, delivery to the Company, and non-revocation of the
Release Agreement (and the expiration of any revocation period contained in such Release Agreement) within 60 days following the date of a Covered
Termination. If a Participant fails to execute the Release Agreement in such a timely manner or timely revokes his or her acceptance of such release
following its execution, such Participant shall not be entitled to Severance Pay or any other benefits under the Plan. Further, to the extent that any of the
payments hereunder constitute “nonqualified deferred compensation” for purposes of Section 409A of the Code, any payment of any amount or provision
of any benefit otherwise scheduled to occur prior to the 60th day following the date of such Covered Termination, but for the condition of executing the
Release Agreement as set forth herein, shall not be made until the first regularly scheduled payroll date following such 60th day, after which any remaining
payments shall thereafter be provided to the Participant according to the applicable schedule set forth herein.
(f) Clawback/Forfeiture. Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to
subsections (a) or (b) above (other than the Accrued Obligations) shall be conditioned upon and subject to the Clawback Policy.
4. Treatment of Awards.
Any outstanding Awards granted to the Participant under (i) the Stock Plan shall vest in accordance with the terms of the Stock Plan and the
applicable award agreement, or (ii) the Company’s 2013 Equity Incentive Plan, as amended, shall vest in accordance with the terms of the 2013 Equity
Incentive Plan, as amended, and the applicable award agreement.
5. Additional Terms.
(a) Taxes. Severance and other payments and benefits under the Plan will be subject to all required federal, state and local taxes and may be
affected by any legally required withholdings. Payments under the Plan are not deemed “compensation” for purposes of the retirement plans, savings plans,
and incentive plans of the Company Group. Accordingly, no deductions will be taken for any retirement and savings plan and such plans will not accrue
any benefits attributable to payments under the Plan.
(b) Set-Off; Mitigation. The Company’s obligation to pay the Participant the amounts provided and to make the arrangements provided hereunder
shall not be subject to set-off, counterclaim, or recoupment of amounts owed by the Participant to the Company or its Affiliates. The Participant shall not
be required to mitigate the amount of any payment provided pursuant to the Plan by seeking other employment or otherwise, and the amount of any
payment provided for pursuant to the Plan shall not be reduced by any compensation earned as a result of the Participant’s other employment or otherwise.
*Amended April 12, 2024
3
(c) Specified Employees. Notwithstanding anything herein to the contrary, if (i) at the time of a Participant’s Covered Termination, such
Participant is a “specified employee” as defined in Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise
payable hereunder as a result of such termination of employment is necessary in order to prevent the imposition of any accelerated or additional tax under
Section 409A of the Code, then the commencement of the payment of any such payments or benefits hereunder will be deferred (without any increase or
decrease in such payments or benefits ultimately paid or provided to the Participant) until the date that is six months following such Participant’s Covered
Termination (or the earliest date that is permitted under Section 409A of the Code), and (ii) any other payments of money or other benefits due to the
Participant hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall
be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits
shall be restructured, to the extent possible, in a manner, determined by or at the direction of the Committee, that does not cause such an accelerated or
additional tax or result in additional cost to the Company. The Company shall consult with its legal counsel and tax advisors in good faith regarding the
implementation of this Section 5(c); provided, however, that none of the Company any other member of the Company Group, or any of their respective
employees or representatives, shall have any liability to the Participant with respect thereto.
6. Termination or Amendment of the Plan.
The Plan may be amended, terminated or discontinued in whole or in part, at any time and from time to time at the discretion of the Board or the
Committee; provided, however, that no such amendment, termination or discontinuance shall, without a Participant’s consent, adversely affect any
Participant that has undergone a Covered Termination prior to the effective date of any such amendment, termination or discontinuance; provided further,
that following (x) the date the Company has entered into an agreement the consummation of which would result in a Change in Control (until such time as
the Change in Control occurs or such agreement is terminated) or (y) a Change in Control, the Plan may not be amended, terminated or discontinued in
whole or in part, at any time prior to the second anniversary of the date of such Change in Control without the written consent of each affected Participant.
7. Limitation of Certain Payments.
Except as otherwise provided in an individual employment agreement, in the event that any payments and/or benefits due to a Participant under
the Plan and/or any other arrangements are determined by the Company to constitute “excess parachute payments” as defined under Section 280G of the
Code, any cash severance payable under the Plan shall be reduced by the minimum amount necessary, subject to the last sentence of this paragraph, such
that the present value of such “parachute payments” (as defined under Section 280G of the Code) is below 300% of such Participant’s “base amount” (as
defined under Section 280G of the Code), and by accepting participation in the Plan. Notwithstanding the foregoing, no payments or benefits shall be
reduced under this Section 7 unless (a) the net amount of such payments and benefits, as so reduced (and after subtracting the net amount of federal, state
and local income taxes on such reduced payments and after taking into account the phase out of itemized deductions and personal exemptions attributable
to such reduced payments and benefits), is greater than or equal to (b) the net amount of such payments without such reduction (but after subtracting the net
amount of federal, state and local income taxes on such payments and benefits and the amount of excise tax imposed under Section 4999 of the Code as to
which such Participant would be subject in respect of such unreduced payments and benefits and after taking into account the phase out of itemized
deductions and personal exemptions attributable to such unreduced payments). For purposes hereof, (i) the order in which any amounts are deemed to be
reduced, if applicable, is (A) cash payments, (B) other non-cash forms of benefits, and (C) equity-based payments and acceleration of vesting, and (ii)
within any such category of payments and benefits (that is, (i)(A), (i)(B) or (i)(C) above), (A) a reduction shall occur first with respect to amounts that are
not “deferred compensation” within the meaning of Section 409A of the Code and then with respect to amounts that are and (B) to the extent that any such
amounts are to be made over time (e.g., in installments, etc.), then the amounts shall be reduced in reverse
*Amended April 12, 2024
4
8. Miscellaneous.
(a) No Right to Continued Employment. Nothing contained in the Plan shall confer upon any Participant any right to continue in the employ of
any member of the Company Group nor interfere in any way with the right of the Company Group to terminate his or her employment, with or without
Cause.
(b) Plan Not Funded. Amounts payable under the Plan shall be payable from the general assets of the Company, and no special or separate reserve,
fund or deposit shall be made to assure payment of such amounts. No Participant, beneficiary or other Person shall have any right, title or interest in any
fund or in any specific asset of the Company by reason of participation hereunder. Neither the provisions of the Plan, nor the creation or adoption of the
Plan, nor any action taken pursuant to the provisions of the Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship
between the Company and any Participant, beneficiary or other Person. To the extent that a Participant, beneficiary or other Person acquires a right to
receive payment under the Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. Notwithstanding the
foregoing, the Company shall have the right to implement or set aside funds in a grantor trust, subject to the claims of the Company’s creditors or
otherwise, to discharge its obligations under the Plan.
(c) Non-Transferability of Benefits and Interests. All amounts payable under the Plan are non-transferable, and no amount payable under the Plan
shall be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. This Section 9(c) shall not apply to an
assignment of a contingency or payment due (i) after the death of a Participant to the deceased Participant’s legal representative or beneficiary, or (ii) after
the disability of a Participant to the disabled Participant’s personal representative.
(d) Discretion of Company, Board and Committee. Any decision made or action taken by, or inaction of, the Company, the Board, or the
Committee arising out of or in connection with the creation, amendment, construction, administration, interpretation and effect of the Plan that is within its
authority hereunder or applicable law shall be within the absolute discretion of such entity and shall be conclusive and binding upon all Persons.
*Amended April 12, 2024
5
(e) Indemnification. Neither the Board nor the Committee, nor any employee of the Company, nor any Person acting at the direction thereof (each
such Person an “Affected Person”), shall have any liability to any Person (including without limitation, any Participant), for any act, omission,
interpretation, construction or determination made in connection with the Plan (or any payment made under the Plan). Each Affected Person shall be
indemnified and held harmless by the Company against and from any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon
or incurred by such Affected Person in connection with or resulting from any action, suit or proceeding to which such Affected Person may be a party or in
which such Affected Person may be involved by reason of any action taken or omitted to be taken under the Plan and against and from any and all amounts
paid by such Affected Person, with the Company’s approval, in settlement thereof, or paid by such Affected Person in satisfaction of any judgment in any
such action, suit or proceeding against such Affected Person; provided, that the Company shall have the right, at its own expense, to assume and defend any
such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such
defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Affected Person to the extent that a court
of competent jurisdiction in a final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of
such Affected Person giving rise to the indemnification claim resulted from such Affected Person’s bad faith, fraud or willful wrongful act or omission. The
foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Affected Persons may be entitled under the
Company’s organizational documents, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Person or hold
them harmless.
(f) Section 409A. Notwithstanding any provision of the Plan to the contrary, if any benefit provided under the Plan is subject to the provisions of
Section 409A of the Code, the provisions of the Plan will be administered, interpreted and construed in a manner necessary to comply with Section 409A of
the Code or an exception thereto. Notwithstanding any provision of the Plan to the contrary, in no event shall the Company (or its employees, officers or
directors) have any liability to any Participant (or any other Person) due to the failure of the Plan to satisfy the requirements of Section 409A of the Code or
any other applicable law. For purposes of the application of Section 409A of the Code, each payment in a series of payments under this Plan will be
deemed a separate payment.
(g) No Duplication; Treatment of Other Severance Arrangements. In no event shall any Participant receive the severance benefits provided for
herein in addition to severance benefits provided for under any Other Severance Arrangement; provided, that if such Participant is covered by any Other
Severance Arrangement, such Participant shall only be entitled to receive the greater of (x) the payments and benefits set forth in this Plan and (y) the
payments and benefits set forth in, and subject to the terms, conditions and restrictions of, the Other Severance Arrangement.
*Amended April 12, 2024
6
(h) Governing Law. All questions pertaining to the construction, regulation, validity and effect of the provisions of the Plan shall be determined in
accordance with the laws of the State of Nevada.
(i) Notice. Any notice or other communication required or which may be given pursuant to the Plan shall be in writing and shall be deemed to
have been duly given when delivered by hand or overnight courier or two days after it has been mailed by United States express or registered mail, return
receipt requested, postage prepaid, addressed to the Company at the address set forth below, or to the Participant at his or her most recent address on file
with the Company.
OptimizeRx Corporation
260 Charles Street, Suite 302
Waltham, MA 02453
c/o General Counsel
(j) Captions. Captions and headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such
captions and headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
(k) Successors. The Plan shall inure to the benefit of and be binding upon the Company and its successors.
*Amended April 12, 2024
7
Appendix A
Definitions
1. Definitions.
(a) “Accrued Obligations” means (i) all accrued but unpaid Base Salary through the date of a Covered Termination, (ii) any unpaid or
unreimbursed expenses incurred in accordance with the policies of the Employer, and (iii) any benefits provided under the employee benefit plans and
programs of the Company Group in which the Participant participates immediately prior to, and is due upon or continues after, a termination of
employment, including rights with respect to Company equity.
(b) “Affiliate” means any entity which, at the time of reference, directly, or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, the Company.
(c) “Annual Bonus Program” means the annual cash incentive bonus program in which the Participant participates as of the date of such
Participant’s Covered Termination, if any.
(d) “Anticipatory Termination” means a Covered Termination occurring within the three months prior to the occurrence of a Change in Control;
provided, that it is reasonably demonstrated that such termination (A) was at the request of a third party who has taken steps reasonably calculated or
intended to effect the Change in Control (and such transaction is actually consummated) or (B) otherwise arose in connection with or in anticipation of the
Change in Control (and such transaction is actually consummated).
(e) “Asset Sale” means a Change in Control resulting from the consummation of a sale or other disposition of all or substantially all of the assets
of the Company.
(f) “Award” has the meaning set forth in the Stock Plan.
(g) “Base Salary” means the Participant’s then current annual base salary rate immediately prior to his or her Covered Termination (or, if higher,
the annual base salary immediately prior to an event that constitutes Good Reason hereunder).
(h) “Board” means the Board of Directors of the Company.
(i) “Business Protection Agreement” or “BPA” shall mean the Business Protection Agreement executed by Participant, as may be updated or
amended from time to time to reflect changes in law and/or differences in applicable state law. BPA shall mean the agreement substantially in the form
attached hereto as Exhibit A, as may be updated or amended from time to time to reflect changes in law and/or differences in applicable state law.
(j) “Cash Severance Amount” means, with respect to any Participant, the “Cash Severance Amount,” as set forth on Appendix B, as attached
hereto, as applicable.
*Amended April 12, 2024
8
(k) “Cause” means the occurrence of any of the following as determined by the Committee:
(i) the Participant’s conviction of, or plea of guilty or nolo contendere to, (1) a felony under federal law or the law of the state in which
such action occurred or (2) any other crime involving moral turpitude;
(ii) the Participant’s willful and continued failure to perform the Participant’s employment duties (other than any such failure resulting
from the Participant’s incapacity due to a Disability); provided, however, that the Company shall have provided the Participant with written notice that such
actions are occurring and, where practical, the Participant has been afforded at least 15 days to cure same;
(iii) the Participant’s willfully engaging in misconduct in the performance of the Participant’s duties for the Employer (including, but not
limited to, theft, fraud, embezzlement and securities law violations, a violation of the Company’s “Code of Ethics and Business Conduct” or other written
policies, or a material breach of the Business Protection Agreement or any other restrictive covenants to which the Participant is subject) that is materially
injurious to the Company, or, in the good faith determination of the Committee, is potentially materially injurious to the Company, monetarily or otherwise.
For purposes of this Section 1(j), no act, or failure to act, on the part of the Participant shall be considered “willful,” unless done, or omitted to be done, by
the Participant in bad faith and without a reasonable belief that the Participant’s action or omission was in, or not opposed to, the best interests of the
Company (including reputationally). Prior to any termination for Cause, the Participant will be given five business days written notice specifying the
alleged Cause event. After providing the notice in foregoing sentence, the Board or the Chief Executive Officer of the Company may suspend the
Participant with full pay and benefits until a final determination has been made.
(l) “Change in Control” has the meaning set forth in the Stock Plan.
(m) “Change in Control Covered Termination” means a (i) a Covered Termination occurring during the two-year period commencing on the date
of a Change in Control or (ii) an Anticipatory Termination.
(n) “CIC Covered Termination Payment Amount” means, with respect to any Participant, the “CIC Covered Termination Payment Amount,” as set
forth on Appendix C, as attached hereto, as applicable.(o) “Clawback Policy” means any clawback, forfeiture or other similar policy adopted by the Board
or the Committee from time to time.
(o) “COBRA Payment” means, provided the Participant validly elects continuation coverage under COBRA or similar state law for the
Participant, his spouse and/or dependents, an amount equal to the monthly COBRA premium for continued health insurance coverage payable in monthly
installments over the number of months in the Subsidized COBRA Period set forth on Appendix B, as attached hereto, as applicable.
*Amended April 12, 2024
9
(p) “Code” means the Internal Revenue Code of 1986, as amended, and the rules, regulations or other interpretative guidance promulgated
thereunder, as well as any successor laws in replacement thereof.
(q) “Committee” means the Compensation Committee of the Board.
(r) “Covered Termination” means a Participant’s termination of employment with the Employer by the Employer without Cause or by the
Participant for Good Reason; provided, however, that no such termination shall be considered a Covered Termination if such Participant’s employment with
the Employer is terminated:
(i) solely by reason of a transfer to the employ of another member of the Company Group;
(ii) upon the expiration of a leave of absence by reason of his or her failure to return to work at such time unless, at such time, there is not
an available position for which such Participant is qualified; or
(iii) in connection with an Asset Sale if either (A) in connection with such Asset Sale such Participant was offered employment with the
purchaser or an Affiliate thereof in an Asset Sale (I) within a 25-mile radius of such Participant’s current work site for a comparable position and (II) with
the same or greater Base Salary, and with comparable annual bonus and equity compensation opportunity, and the Participant fails to accept such
employment offer, or (B) notwithstanding the comparable terms and conditions of employment being available within a 25-mile radius, such Participant
voluntarily elected not to participate in the selection process for employment with the purchaser or an Affiliate thereof in an Asset Sale.
(s) “Disability” means a Participant’s substantial inability to perform Participant’s duties due to partial or total disability or incapacity resulting
from a mental or physical illness, injury or other health-related cause for a period of 90 consecutive days or 180 non-consecutive days in any 12 months
period.
(t) “Effective Date” means March 8, 2023, as amended on March 1, 2024.
(u) “Eligible Employee” means each non-union, salaried, full-time employee of the Company Group. Eligible Employees shall, in no event,
include: (i) independent contractors, (ii) temporary employees, (iii) individuals treated other than as employees for federal income and employment tax
purposes at the time such individual performs services, (iv) employees who are regularly scheduled to work less than 20 hours per week, and (v)
individuals who the Company designates as “non-benefits eligible.”
(v) “Employer” means, with respect to any Participant, the member of the Company Group by which such Participant is employed.
(w) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules, regulations or other interpretive guidance
promulgated thereunder, as well as any successor laws in replacement thereof.
*Amended April 12, 2024
10
(x) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules, regulations or other interpretive guidance promulgated
thereunder, as well as any successor laws in replacement thereof.
(y) “Good Reason” means the occurrence of any of the following events without the Participant’s consent:
(i) a material diminution in the Participant’s title, authorities, duties or responsibilities;
(ii) any reduction in the Participant’s Base Salary, other than a reduction of not more than 15% implemented in connection with an
across-the-board reduction affecting all similarly-situated executive employees of the Company;
and responsibilities;
(iii) the assignment to the Participant of duties or responsibilities which are materially inconsistent with any of the Participant’s duties
(iv) the failure of any purchaser (or an Affiliate thereof) in an Asset Sale by agreement in writing, to expressly, absolutely and
unconditionally assume and agree to perform the Plan, in the same manner and to the same extent that the Company would be required to perform the Plan
if no such Asset Sale had taken place; or
(v) upon or within twenty-four (24) months following a Change in Control, (A) a reduction in the Participant’s Base Salary in effect
immediately prior to the Change in Control or (B) a material reduction in the sum of (1) the Participant’s Target Bonus for the last completed fiscal year
immediately prior to the Change in Control plus (2) the grant date fair value of equity or equity-based awards granted to the Participant under the Stock
Plan for the last completed fiscal year immediately prior to the Change in Control;
provided, that any of the events described in clauses (i) – (iii) and (v) above shall constitute Good Reason only if the Participant provides the Company (or
applicable employer following a Change in Control) with written objection to the event or condition within 90 days following the occurrence thereof, the
Company (or applicable employer following a Change in Control) does not reverse or otherwise cure the event or condition within 30 days of receiving that
written objection, and the Participant resigns employment within 30 days following the expiration of that cure period.
(z) “Other Severance Arrangements” means any plans, policies, guidelines, arrangements, agreements, letters and/or other communication,
whether formal or informal, written or oral sponsored by the Company or any of its Affiliates and/or entered into by any representative of the Company or
any of its Affiliates that might otherwise provide severance benefits upon a Covered Termination.
(aa) “Participant” means an Eligible Employee who is designated as a Participant by the Committee, subject to the requirements of Section 2. For
purposes hereof, the Committee shall be permitted to (i) designate groups of Eligible Employees by category, job title or other classification it deems
appropriate as Participants without the need to identify any individual Participant by name, provided that the Committee may determine in its sole
discretion that any one or more Eligible Employees within a designated group shall not be a Participant in the Plan and (ii) delegate to Company
management the authority to determine whether specific individuals qualify as Participants within the parameters set forth by the Committee.
*Amended April 12, 2024
11
(bb) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
(cc) “Release Agreement” means a release and/or waiver of claims in the form customarily provided by the Company Group to terminated
employees, pursuant to which a Participant may be required to (i) acknowledge the receipt of the severance payment and other benefits, and (ii) release the
Company and its Affiliates (including the Employer and its Affiliates) and other Persons designated by the Company from any and all claims and liabilities,
whether known or unknown, or suspected or unsuspected, from the beginning of time until Participant’s execution of the Release Agreement, including
without limitation, those arising from his or her employment or termination thereof (other than with respect to the Participant’s rights under the Plan).
(dd) “Severance Pay” means the Cash Severance Amount set forth on Appendix B for each Participant, payable in substantially equal installments
in accordance with the Company’s payroll practices as in effect from time to time over the applicable number of months set forth on Appendix B.
(ee) “Severance Period” means the number of months set forth on Appendix B indicating the time the Cash Severance Amount will be paid to each
Participant for a Covered Termination.
(ff) “Stock Plan” means the OptimizeRx Corporation 2021 Equity Incentive Plan, as amended from time to time (or any successor plan thereto
adopted by the Company for the purpose of providing equity and other incentive compensation to the employees and other service providers of the
Company or its Affiliates).
(gg) “Subsidized COBRA Period” means, with respect to any Participant, the period set forth on Appendix B, as attached hereto, as applicable.
(hh) “Target Bonus” means the Participant’s target annual bonus under the Annual Bonus Program.
*Amended April 12, 2024
12
Appendix B
Severance Payments on Covered Termination
Participant
Subsidized COBRA Period
Cash Severance Amount
William Febbo
From the date of the Covered Termination until the earliest of (x) 12 months thereafter, (y) the
date the Participant becomes eligible for coverage under a subsequent employer’s health plan, or
(z) the date the Participant and/or the Participant’s beneficiary(ies) cease to be eligible under
COBRA.
1.5 times the Participant’s Base
Salary, paid in equal
installments over 18 months
Stephen Silvestro
From the date of the Covered Termination until the earliest of (x) 12 months thereafter, (y) the
date the Participant becomes eligible for coverage under a subsequent employer’s health plan, or
(z) the date the Participant and/or the Participant’s beneficiary(ies) cease to be eligible under
COBRA.
1.5 times the Participant’s Base
Salary, paid in equal
installments over 18 months
Edward Stelmakh
From the date of the Covered Termination until the earliest of (x) 12 months thereafter, (y) the
date the Participant becomes eligible for coverage under a subsequent employer’s health plan, or
(z) the date the Participant and/or the Participant’s beneficiary(ies) cease to be eligible under
COBRA.
1.0 times the Participant’s Base
Salary, paid in equal
installments over 12 months
Marion Odence-Ford
From the date of the Covered Termination until the earliest of (x) 12 months thereafter, (y) the
date the Participant becomes eligible for coverage under a subsequent employer’s health plan, or
(z) the date the Participant and/or the Participant’s beneficiary(ies) cease to be eligible under
COBRA.
1.0 times the Participant’s Base
Salary, paid in equal
installments over 12 months
Douglas Besch
From the date of the Covered Termination until the earliest of (x) 6 months thereafter, (y) the date
the Participant becomes eligible for coverage under a subsequent employer’s health plan, or (z)
the date the Participant and/or the Participant’s beneficiary(ies) cease to be eligible under
COBRA.
0.5 times the Participant’s Base
Salary, paid in equal
installments over 6 months
Theresa Greco
From the date of the Covered Termination until the earliest of (x) 6 months thereafter, (y) the date
the Participant becomes eligible for coverage under a subsequent employer’s health plan, or (z)
the date the Participant and/or the Participant’s beneficiary(ies) cease to be eligible under
COBRA.
0.5 times the Participant’s Base
Salary, paid in equal
installments over 6 months
*Amended April 12, 2024
13
Appendix C
Payments on Change in Control Covered Termination
Participant
CIC Covered Termination Payment Amount
William Febbo
Stephen Silvestro
Edward Stelmakh
Marion Odence-Ford
Douglas Besch
Theresa Greco
*Amended April 12, 2024
5.0 times the Participant’s Base Salary
2.0 times the Participant’s Base Salary
2.0 times the Participant’s Base Salary
2.0 times the Participant’s Base Salary
1.0 times the Participant’s Base Salary
1.0 times the Participant’s Base Salary
14
Exhibit A
OPTIMIZERX CORPORATION
BUSINESS PROTECTION AGREEMENT
In consideration of my employment with OptimizeRx Corporation, a Nevada corporation with its principal place of business in Waltham,
Massachusetts, (the “Company”), and in recognition that (i) as an employee of the Company I will have access to Confidential Information (defined in
Section 9 below), customers and corporate opportunities of Company, and (ii) if I become employed or affiliated with a Competing Organization (defined
in Section 9 below), Company will be at risk, I agree with Company as follows:
1. Confidential Information.
a. No Unauthorized Disclosure or Use. While employed by Company and thereafter, I shall not, directly or indirectly, use or disclose to anyone
outside of Company any Confidential Information other than pursuant to my employment by and for the benefit of Company.
b. Ownership of Confidential Information. I agree that all originals and all copies of manuscripts, letters, notes, notebooks, reports, models,
computer files and other materials containing, representing, evidencing, recording, or constituting any Confidential Information (created by myself or
others) shall be the sole property of Company or the property of third parties who lawfully disclosed the Confidential Information under obligations of
confidentiality.
c. Third Party Confidential Information. I understand that Company from time to time has in its possession information which is claimed by others
to be proprietary or confidential and which Company has agreed or is under an obligation to keep confidential. I agree that all such information shall be
Confidential Information for purposes of this Agreement.
2. Developments.
a. Ownership. I agree that all Developments (defined in Section 9 below) created during the period of my employment with Company (whether or
not made on Company’s premises, during work hours or disclosed by me to Company), together with all products or services which embody these
Developments, shall be the sole property of Company.
b. Assignment and Cooperation. I agree, for all Developments created during the period of my employment with Company or during the six month
period following termination of my employment with Company, (i) to make and maintain adequate and current written records of all Developments, and to
disclose all Developments promptly, fully and in writing to Company immediately upon development of the same and at any time upon request, (ii) that I
hereby assign and will assign to Company all my right, title and interest in and to all Developments and to anything tangible which evidences, incorporates,
constitutes, represents or records any Developments, (iii) to cooperate and assist Company in obtaining and maintaining any governmental protection it
may seek for Developments, and to execute all documents that may be required therefor, and (iv) if any Developments constitute works made for hire under
the laws of the United States, they shall be exclusive property of the Company, and should any Developments be held by a court of competent jurisdiction
not to be a ‘work made for hire’, I hereby and will assign to Company all copyrights, patents and other proprietary rights I may have in any Developments,
together with rights to file for and own wholly without restriction United States and foreign copyrights, patents, and trademarks with respect thereto. In the
event the Company is unable to secure my signature on any application for patent, copyright or other analogous protection relating to any Development,
whether because of my physical or mental incapacity or for any other reason whatsoever, I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents as my agent and attorney-in-fact (which designation and appointment shall be (i) deemed coupled with an interest and
(ii) irrevocable, and shall survive my death or incapacity), to act for and in my behalf and stead to execute and file any application and to do all other
lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other analogous protections with the same legal force and effect as
if executed by me.
*Amended April 12, 2024
15
c. Prior Developments. I agree that the foregoing assignment covers all results, outputs and products of my work for Company prior to the date
hereof (whether as an employee or as a consultant), and that all related copyrights, patents and other intellectual property rights, and that all such results,
output and products are Developments and the sole property of Company.
3. Exceptions to this Agreement. I understand that Company does not desire to acquire from me any trade secrets or confidential business
information that I may have acquired from others. I have informed Company, in the space below, of any (i) continuing obligations that I may have to any
previous employers which require me not to disclose information to Company or compete with any such previous employers; and (ii) confidential
information or developments which I claim as my own or otherwise intend to exclude from this Agreement because it was developed by me prior to the
date of this Agreement. I understand that after execution of this Agreement I shall have no right to exclude confidential information or developments from
this Agreement.
(If there are none, please enter the word “None”; attach additional pages as necessary)
Note: For obligations not to disclose information to Company or compete with any such previous employers, give the date of each obligation,
identify the parties owed each obligation and the nature of any restriction. Please attach any such agreement(s) to this Agreement.
4. Employee’s Obligation to Cooperate. At any time upon the request of Company, I shall execute all documents and perform all acts which
Company considers necessary or advisable to secure its rights hereunder and to carry out the intent of this Agreement.
5. Return of Property. At any time upon the request of Company, and in any event upon cessation of employment, I shall return promptly to
Company all Company property, including all Confidential Information and Developments and any copies thereof.
6. Employment At-Will. Nothing in this Agreement shall require that Company employ me for any period of time. I understand that I am an
employee-at-will and that my employment relationship with Company may be terminated by Company or me at any time for any reason, with or without
prior notice. I further understand that the employment-at-will relationship between me and Company cannot be modified by oral or written statements from
supervisors, managers or others at Company; the at-will nature of my employment with Company can only be modified by a written agreement signed by
the CEO of Company.
*Amended April 12, 2024
16
7. Restrictive Covenants.
a. I acknowledge and agree that Company has invested substantial time, money and resources in the development of its Confidential Information
and the development and retention of its customers, clients, collaborators, and employees. I further acknowledge that during the course of my employment,
I may be introduced to customers, clients, and collaborators of Company, and agree that any “goodwill” associated with any customer, client, or
collaborator belongs exclusively to Company. In recognition of the foregoing, I specifically acknowledge and agree that while I am employed by Company
and for a period of one (1) year after termination of such employment (for any reason, whether voluntary or involuntary) I will not directly or indirectly in
any position or capacity engage in the following activities for myself or for any other person, business, corporation, partnership or other entity:
(i) call upon, solicit, divert, or accept, or attempt to solicit or divert any of Company’s business or prospective business from any of Company’s
customers, clients, or collaborators, or prospective customers, clients, or collaborators with whom I had contact or whose dealings with Company I
coordinated or supervised or about whom I obtained Confidential Information, unless I obtain prior written consent of Company;
(ii) refer, request, solicit, induce, hire (or attempt or assist in doing any of these actions) any employee or other persons (including consultants)
who may have performed work or services for Company within one (1) year prior to the termination of my employment with Company to perform work or
services for any person or entity other than Company; or
(iii) become employed by, associated with or render services to any Competing Organization in connection with any Competing Product anywhere
in the world where Company does business or is planning to do business. I understand and agree that this covenant not to compete is reasonable in that I
can continue my chosen profession when I leave the employment of Company so long as I do not work for companies that are Competing Organizations in
connection with Competing Products and so long as I do not disclose confidential, proprietary and trade secret information of Company. I understand and
agree that it does not impose an unnecessary restraint because of the nature of the confidential, proprietary and trade secret information of Company related
to the Competing Products which mandates protection in the geographical areas described above. I also understand and agree that the covenant is necessary
to protect the goodwill and confidential, proprietary and trade secret information of Company.
I ACKNOWLEDGE THAT THESE RESTRICTIONS SHALL APPLY AND BE BINDING REGARDLESS OF CHANGES IN MY POSITION,
DUTIES, GEOGRAPHIC LOCATION, RESPONSIBILITIES OR COMPENSATION DURING MY EMPLOYMENT.
b. Confirmation of Post-Employment Status. I agree to inform Company, for a period of one year following the termination of my employment, of
every place of employment and every affiliation I have in a company or business enterprise, directly or indirectly, as an employee, owner, manager,
stockholder, consultant, director, officer, or partner. If I fail to so inform Company, and I have violated the obligations set forth in this Section 7, the one-
year period shall run from the date that Company first learned of my activity.
c. Small Ownership Exemption. The provisions of this Section 7 shall not apply to ownership of less than one percent (1%) of the stock of any
publicly traded corporation.
8. Corporate Compliance. I agree that I will abide by all policies and procedures that Company may have in effect from time to time, including
without limitation, the Code of Conduct, Acceptable Use Policy, or any other corporate compliance programs or polices. I further acknowledge that failure
to abide by policies and procedures may result in discipline, including immediate termination of my employment. Nothing herein limits my at-will
employment with Company, pursuant to paragraph six (6) above.
*Amended April 12, 2024
17
9. Definitions. The following terms, as used in this Agreement, shall have the meanings set forth below:
a. “Competing Organization” shall mean persons, organizations, or any other entity, including myself, engaged in, or considering to become
engaged in, research or development, production, distribution, marketing, providing or selling of a Competing Product.
b. “Competing Product” shall mean products, processes, or services of any person, organization, or entity other than Company, in existence or
under development, which are substantially similar, may be substituted for, or applied to substantially similar end use of the products, processes or services
with which I worked on in any capacity, including a sales or marketing capacity, at any time during my employment with Company or about which I
acquired Confidential Information through my work with Company.
c. “Confidential Information” shall mean all trade secrets, proprietary information, and other data or information (and any tangible evidence,
record or representation thereof), whether prepared, conceived or developed by an employee of Company (including myself) or received by Company from
an outside source, which is in the possession of Company (whether or not the property of Company) and which is maintained in confidence by Company,
including, but not limited to: (i) technical and business information; (ii) information relating to the design, manufacture, application, know-how, research
and development of Company’s products and services including Developments; (iii) sources of supply and material; (iv) operating and other cost data; (v)
information relating to present, past or prospective customers, customer relationships, customer proposals, price lists and data relating to pricing of
products or services; (vi) patient medical records and all other information relating to patients; and (vii) any other information not generally known in the
industry, including specifically, all information contained in manuals, memoranda, formulae, plans, drawings and designs, specifications, supply sources,
and records of Company whether or nor legended or otherwise identified by Company as “Confidential Information.” Notwithstanding the foregoing, the
term Confidential Information shall not apply to information which senior management of Company has voluntarily disclosed to the public without
restriction or which has otherwise lawfully entered the public domain.
d. “Developments” shall mean all Confidential Information and all other discoveries, inventions, ideas, concepts, research and other information,
processes, products, methods and improvements, or parts thereof (including, without limitation, all computer programs, algorithms, subroutines, source
codes, object codes, designs, and improvements), conceived, developed, or otherwise made by me, alone or jointly with others and in any way relating to
the Corporation’s present or proposed services, programs or products or to tasks assigned to me during the course of my employment, whether or not
patentable or subject to copyright protection and whether or not reduced to tangible form or reduced to practice.
e. “Company” includes OptimizeRx and all other companies or entities currently or which in the future are related or affiliated with OptimizeRx.
*Amended April 12, 2024
18
10. Miscellaneous Provisions.
a. Entire Agreement and Amendment. This Agreement contains the entire and only agreement between Company and me respecting the subject
matter hereof, and it supersedes all prior agreements and representations with regard to the subject matter hereof; provided however, to the extent I have a
prior written agreement with Company regarding confidentiality, noncompetition, nonsolicitation, and/or developments, that agreement shall remain in full
force and effect, as applicable. In the event of any inconsistency between this Agreement and any other contract between Company and me, the provisions
of this Agreement shall prevail (unless such other contract expressly supersedes this Agreement). No modification of this Agreement shall be binding upon
me or Company unless made in writing and signed by an authorized officer of Company.
b. Survival and Waivers. This Agreement will remain in effect if I am transferred, promoted, or reassigned to work on functions other than my
present functions anywhere within Company. My obligations under this Agreement shall survive the termination of my employment with Company
regardless of the manner of or reasons for such termination, and regardless of whether such termination constitutes a breach of any other agreement I may
have with Company. This Agreement shall inure to the benefit of, and be binding upon, Company and me and our respective heirs, legal representatives,
successors and assigns. This Agreement may be assigned by Company for no additional consideration and without my consent to any successor entity in
the event of a merger, acquisition, change of control, or sale of all or a part of the business or assets of Company. I acknowledge that the term “Company,”
as used in this Agreement, shall also mean any such successor entity as the context requires. Failure by Company to insist upon strict compliance with any
term of this Agreement shall not be deemed a waiver of that or any other right.
c. Interpretation. In the event that any provision of this Agreement shall be determined to be unenforceable by any court of competent jurisdiction
by reason of its extending for too great a period of time or over too large a geographic area or over too great a range of activities, it shall be interpreted to
extend only over the maximum period of time, geographic area or range of activities as to which it may be enforceable. If after application of the
immediately preceding sentence, any provision of this Agreement shall be determined to be invalid, illegal or otherwise unenforceable by any court of
competent jurisdiction, the validity, legality and enforceability of the other provisions of this Agreement shall not be affected. Except as otherwise provided
in this paragraph, any invalid, illegal or unenforceable provision of this Agreement shall be severable and all other provisions hereof shall remain in full
force and effect.
d. Equitable Relief. I acknowledge and agree that (i) the provisions set forth in this Agreement are necessary and reasonable to protect Company’s
Confidential Information and goodwill; (ii) the specific time, geography and scope provisions set forth in Section 7 are reasonable and necessary to protect
Company’s business interests; and (iii) in the event of my breach of any of the agreements set forth in this Agreement, Company would suffer substantial
irreparable harm and that Company would not have an adequate remedy at law for such breach. In recognition of the foregoing, I agree that in the event of
a breach or threatened breach of any of these covenants, in addition to such other remedies as Company may have at law, without posting any bond or
security, Company shall be entitled to seek and obtain equitable relief, in the form of specific performance, or temporary, preliminary or permanent
injunctive relief, or any other equitable remedy which then may be available.
e. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the state of
Nevada without regard to its principles of conflicts of laws, and shall be deemed to be effective as of the first day of my employment by Company. Both
parties further agree that any action, demand, claim or counterclaim relating to this Agreement shall be resolved by a judge alone, and both parties hereby
waive and forever renounce the right to a trial before a civil jury.
*Amended April 12, 2024
19
BY PLACING MY SIGNATURE HEREUNDER, I ACKNOWLEDGE THAT I HAVE HAD ADEQUATE OPPORTUNITY TO REVIEW
THESE TERMS AND CONDITIONS AND TO REFLECT UPON AND CONSIDER THE TERMS AND CONDITIONS OF THIS AGREEMENT. I
FURTHER ACKNOWLEDGE THAT I FULLY UNDERSTAND ITS TERMS AND THAT I VOLUNTARILY EXECUTED THIS AGREEMENT.
Date:
Date:
*Amended April 12, 2024
EMPLOYEE:
By:
Print Name:
ACCEPTED:
OPTIMIZERx CORPORATION
By:
Name:
Its:
20
OPTIMIZERX CORPORATION
INSIDER TRADING POLICY
Exhibit 19.1
This Insider Trading Policy (“Policy”) provides the standards of OptimizeRx Corporation (“OptimizeRx” or the “Company”) with respect to transactions in
securities of the Company and the handling of confidential information about OptimizeRx and the companies with which OptimizeRx does business. The
federal securities laws prohibit insider trading. Insider trading occurs when a person uses material non-public information obtained through involvement
with the Company to make decisions to engage in transactions in the Company’s securities or transmits such information to any other person who may
trade on the information. Please note that this insider trading policy supplements the restrictions set forth in the Company’s Code of Business Conduct and
Ethics.
This Policy applies to all transactions in the Company’s securities, including common stock, options and any other securities that the Company may issue,
such as preferred stock, notes, bonds and convertible securities, as well as to derivative securities relating to any of the Company’s securities, whether or
not issued by the Company (referred to in this Policy as the “Company’s securities”). The term “transactions” or “trading” means broadly any purchase,
sale or other transaction to acquire, transfer or dispose of securities, including market option exercises, gifts or other contributions, exercises of stock
options granted under the Company’s equity plans, sales of stock acquired upon the exercise of options and the vesting of restricted stock and restricted
stock units and trades made under an employee benefit plan.
Section 1 hereof applies to all of the directors, officers and employees of the Company and its subsidiaries. Section 1 of this Policy also applies to such
persons’ family members, other members of such persons’ households and entities controlled by such persons, as described in more detail below. The
Company may also determine that other persons should be subject to Section 1 of this Policy, such as contractors or consultants. Section 2 hereof applies to
all directors and Officers of the Company and the employees described in Appendix A hereto. Section 2 of this Policy also applies to such persons’ family
members, other members of such persons’ households and entities controlled by such persons, as described in more detail below. Section 3 hereof sets forth
additional requirements applicable to directors and Officers of the Company.
If this Policy applies to you, it also applies to family members who reside with you (including a spouse, a child, a child away at college, stepchildren,
grandchildren, parents, stepparents, grandparents, siblings, in-laws and adoptive relationships) or are financially dependent on you, and also includes other
family members whose transaction in securities are directed by you or are subject to your influence or control (collectively referred to as “Family
Members”). This Policy also applies to any other person who lives in your household and to any legal entities (such as a corporation, partnership or trust)
that are influenced or controlled by you (collectively referred to as “Controlled Entities”).
Transactions by your Family Members, household members and Controlled Entities should be treated for the purposes of this Policy as if they were for
your own account. Accordingly, all references to you with regard to all trading restrictions and pre-clearance procedures in this Policy also apply to
your Family Members, household members and Controlled Entities. You are personally responsible for the actions of your Family Members, household
members and Controlled Entities.
The Company has established a “Compliance Committee,” consisting of the Company’s General Counsel, Chief Financial Officer and Chief Executive. All
determinations and interpretations by a member of the Compliance Committee shall be final and not subject to further review.
Any violation of this Policy may result in immediate dismissal and may subject you to both civil and criminal penalties. This is an extremely
important matter, and we urge you to read the following with care. If you have any questions about this Policy, including its application to any
proposed transaction, you may obtain additional guidance from a member of the Compliance Committee. Do not try to resolve uncertainties on
your own, as the rules relating to insider trading are often complex, not always intuitive and carry severe consequences.
Section 1: Trading Restrictions and Guidelines
Section 1 of this Policy applies to all of the directors, officers and employees of the Company and its subsidiaries. Section 1 of this Policy also applies to
such persons’ Family Members, household members and Controlled Entities. All references to you with regard to all trading restrictions in this Policy
also apply to your Family Members, household members and Controlled Entities. The Company may also determine that other persons should be subject
to Section 1 of this Policy, such as contractors or consultants.
A.
General Policy - Prohibition Against Trading On or Tipping Material Non-Public Information
While in the possession of material non-public information relating to OptimizeRx, you may not directly or indirectly through family members or other
persons or entities:
1.
2.
3.
Engage in transactions in Company securities, except as otherwise specified in this Policy under the heading “Certain Exceptions to the
Trading Restrictions in this Policy.”
Recommend the purchase or sale of any Company securities; or
Communicate material non-public information concerning OptimizeRx to any other person (including relatives, friends or business
associates), except to the extent necessary to perform authorized work for OptimizeRx or as required or specifically permitted by law or
legal process. Nor should such information be discussed with any person within OptimizeRx under circumstances where it could be
overheard. Written information should be appropriately safeguarded and should not be left where it may be seen by persons not entitled to
the information.
In addition, if, in the course of employment with the Company or the performance of services on the Company’s behalf, you learn material non-public
information about another company with which the Company proposes to, or does, business, including a vendor, customer or supplier of the Company, you
may not (i) trade in that company’s securities until the information becomes public or is no longer material, or (ii) communicate that information or make
any recommendation relating to the buying or selling of securities of such company to any other person, including family and friends, business associates,
or in any consulting capacity.
There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent reasons (such
as the need to raise money for an emergency expenditure), or small transactions, are not excepted from this Policy. The securities laws do not recognize any
mitigating circumstances, and, in any event, even the appearance of an improper transaction must be avoided to preserve the Company’s reputation for
adhering to the highest standards of conduct. This means that you may have to forgo a proposed transaction in the Company’s or another company’s
securities even if you planned to make the transaction before learning the material non-public information and even though you believe that waiting may
cause you to suffer an economic loss or not realize anticipated profit.
2
This Policy continues to apply to transactions in Company securities even after termination of service to OptimizeRx. If an individual is in possession of
material non-public information when his or her service terminates, that individual may not trade in Company securities until that information has become
public or is no longer material. Unless notified otherwise by the Company, persons who leave during a blackout period will continue to be subject to such
blackout period after termination of service to OptimizeRx. The pre-clearance procedures specified in Section 2 will cease to apply to transactions in
Company securities upon the expiration of any blackout period or other Company-imposed trading restrictions applicable at the time of the termination of
service.
B.
Definitions
Material Information. Material information is any information that a reasonable investor would consider important in determining whether to buy,
sell or hold securities. Positive or negative information may be material to investors. A determination as to whether information is material depends on all
of the related facts and circumstances. Material information is not limited to historical facts but may also include projections and forecasts. Materiality is
based on an assessment of all the facts and circumstances and is often evaluated by courts and enforcement authorities with the benefit of hindsight.
Information that you should consider material includes, but is not limited to:
● earnings information and quarterly results;
● financial forecasts, including earnings estimates;
● changes in previously released forecasts;
● significant merger, acquisition or divestiture proposals or agreements;
● major customer wins or losses;
● changes in auditors;
● significant changes in the Company’s prospects;
● significant or unusual borrowing or liquidity issues;
● equity or debt offerings;
● purchases or redemptions of securities;
● change in management or the Company’s board of directors;
● significant related party transactions;
● development of a significant new product or service;
● pending or threatened significant litigation, or the resolution of such litigation; and
● significant cybersecurity incidents.
Non-public Information. Information that has not been disclosed to the public is generally considered to be non-public information. Information is
considered to be public when it has been released in a manner that is reasonably designed to provide broad, non-exclusionary distribution (e.g., by means of
a press release or an SEC filing) and after enough time has elapsed to permit the investment market to absorb and evaluate the information. As a general
rule, information should not be considered fully absorbed by the market until after the second business day after the day on which the information is
released. Note that the information disseminated must be some form of “official” announcement. In other words, the fact that rumors, speculation, or
statements attributed to unidentified sources are public is insufficient to be considered broadly distributed even when the information is accurate.
Officer. Officer means the individuals classified by the Company as officers for purposes of SEC rules under Section 16 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
3
C.
Trading Blackout Periods
Quarterly Blackout Periods. You cannot engage in transactions in Company securities during a blackout period. OptimizeRx has established four
routine quarterly blackout periods (“Quarterly Blackout Periods”). Each Quarterly Blackout Period begins at the close of trading on the 15th day of the final
month of each fiscal quarter (i.e. March 15th, June 15th, September 15th, and December 15th) and ends on the commencement of trading on Nasdaq on the
third trading day following the day on which OptimizeRx makes a public news release of its quarterly or annual earnings for the prior fiscal quarter or
fiscal year, as the case may be.
Under certain very limited circumstances, a person subject to this restriction may be permitted to trade during a Quarterly Blackout Period, but only if the
Compliance Committee concludes that the person does not in fact possess material non-public information. Persons wishing to trade during a Quarterly
Blackout Period must contact the Compliance Committee for approval at least two business days in advance of any proposed transaction involving
Company securities. Such request may be granted in the sole discretion of the Compliance Committee. Exceptions to the Quarterly Blackout Periods are
granted infrequently and only in exceptional circumstances. All exception requests should be emailed to the Compliance Committee at
preclearance@optimizerx.com.
Event-Specific Blackout Periods. In addition to the Quarterly Blackout Periods, the Compliance Committee may issue instructions from time to
time advising some or all personnel that they may not engage in transactions in Company securities for certain periods, or that our securities may not be
traded without prior approval (an “Event-Specific Blackout Period”). Due to the confidential nature of the events that may trigger these sorts of blackout
periods, the Compliance Committee may find it necessary to inform affected individuals of a blackout period without disclosing the reason. If you are made
aware of such a blackout period, do not disclose its existence to anyone. Exceptions will not be granted during an Event-Specific Blackout Period.
D.
Certain Exceptions to the Trading Restrictions in this Policy
The trading restrictions in this Policy (including the blackout period restrictions) do not apply in the case of the following transactions, except as
specifically noted:
Exercise of Stock Options. The trading restrictions in this Policy do not apply to the exercise of an employee stock option acquired pursuant to the
Company’s equity plans, or to the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject
to an option to satisfy tax withholding requirements. The trading restrictions in this Policy do apply, however, to any sale of stock as part of a broker-
assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.
Vesting of Restricted Stock Awards and Restricted Stock Unit Awards. The trading restrictions in this Policy do not apply to the vesting of
restricted stock or restricted stock units, or the exercise of a tax withholding right pursuant to which you elect to have the Company withhold shares of
stock to satisfy tax withholding requirements upon the vesting of any restricted stock or restricted stock unit. The trading restrictions in this Policy do
apply, however, to any market sale of restricted stock and shares of stock received upon the vesting of restricted stock units.
Rule 10b5-1 Trading Plan. The trading restrictions in this Policy do not apply to purchases or sales of the Company’s securities pursuant to a pre-
approved Rule 10b5-1 trading program (a “Rule 10b5-1 Plan”). Implementation of a Rule 10b5-1 Plan under the Exchange Act provides an affirmative
defense (which must be proven) from insider trading liability under Rule 10b-5. A Rule 10b5-1 Plan must be entered into at a time when the person
entering into the plan is not aware of material non-public information. Once the plan is adopted, the person must not exercise any influence over the
amount of securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and
timing of transactions in advance or delegate discretion on these matters to an independent third party. Entry into a Rule 10b5-1Plan must comply with the
requirements set forth in “Rule 10b5-1 Plans” below.
4
E.
Rule 10b5-1 Plans
Entry into a Rule 10b5-1 Plan requires the prior written approval of the Compliance Committee (which approval may include an email confirmation). Any
Rule 10b5-1 Plan must be submitted for approval five days prior to the entry into the Rule 10b5-1 Plan. All pre-clearance submissions should be emailed to
the Compliance Committee at preclearance@optimizerx.com. No further pre-approval of transactions conducted pursuant to the Rule 10b5-1 Plan will be
required. You may not adopt a Rule 10b5-1 Plan during any Quarterly Blackout Period or Event-Specific Blackout Period, or at a time when you are aware
of material non-public information. The following requirements apply to all Rule 10b5-1 Plans:
·
·
·
·
·
·
directors and Officers may not commence sales under a Rule 10b5-1 plan until the later of (i) 90 days following the date of adoption or
modification of such plan; or (ii) two business days following the disclosure of the Company’s financial results in a Form 10-K or Form 10-Q
relating to the fiscal quarter in which the Rule 10b5-1 plan was adopted or modified (but not to exceed 120 days following plan adoption or
modification);
all persons other than directors and Officers, may not commence sales under a Rule 10b5-1 plan until 30 days following the date of adoption
or modification of such plan;
directors and Officers must provide a representation in the Rule 10b5-1 plan certifying that, on the date of adoption or modification of the
plan, they (i) are not aware of material nonpublic information about the Company or its securities; and (ii) are adopting or modifying the plan
in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5;
subject to the limited exceptions set forth in Rule 10b5-1, you may not maintain multiple, overlapping plans;
subject to the limited exceptions set forth in Rule 10b5-1, you can utilize only one single-trade plan (i.e. a plan designed to effect only a single
transaction) during any 12 month period; and
you must act in good faith with respect to the Rule 10b5-1 plan, not just in connection with entering into the plan.
The Company may impose additional restrictions on Rule 10b5-1 Plans, including without limitation:
● requiring that all plans be managed by an administrator selected by the Company;
● restrictions on termination or modification of plans;
● prohibition on entry into new plans for extended periods following termination of an existing plan; and
● prescribed periods during which persons may enter into plans.
Modification or termination of Rule 10b5-1 Plans are generally discouraged absent compelling circumstances. Any modification to any Rule 10b5-1 Plan is
treated as the entry into a new plan and must comply with all of the above requirements.
5
F.
Violations of Insider Trading Laws
Penalties for trading on or communicating material non-public information can be severe, both for individuals involved in such unlawful conduct and their
employers and supervisors, and may include jail terms, criminal fines, civil penalties and civil enforcement injunctions. Given the severity of the potential
penalties, compliance with this Policy is absolutely mandatory. Individuals also may be prohibited from serving as directors or officers of the Company or
any other public company. Keep in mind that there are no limits on the size of a transaction that will trigger insider trading liability; relatively small trades
have in the past occasioned SEC investigations and lawsuits.
Legal Penalties. A person who violates insider trading laws by engaging in transactions in a company’s securities when he or she has material
non-public information can be sentenced to a substantial jail term and required to pay a penalty of several times the amount of profits gained or losses
avoided.
In addition, a person who tips others may also be liable for transactions by the tippees to whom he or she has disclosed material non-public information.
Tippers can be subject to the same penalties and sanctions as the tippees, and the SEC has imposed large penalties even when the tipper did not profit from
the transaction. The SEC can also seek substantial penalties from any person who, at the time of an insider trading violation, “directly or indirectly
controlled the person who committed such violation,” which would apply to the Company and/or management and supervisory personnel.
Company-imposed Penalties. An individual who violates this Policy may be subject to disciplinary action by the Company, including dismissal or
removal for cause.
G.
Additional Guidelines
The Company considers it improper and inappropriate for those employed by or associated with the Company to engage in short-term or speculative
transactions in the Company’s securities or in other transactions in the Company’s securities that may lead to inadvertent violations of the insider trading
laws. It therefore is the Company’s policy that any persons covered by this Policy may not engage in any of the following transactions (even if they do not
possess material non-public information):
Short Sales. You may not engage in short sales of the Company’s securities (sales of securities that are not then owned), including a “sale against
the box” (a sale with delayed delivery). Short sales of Company securities may evidence an expectation on the part of the seller that the securities will
decline in value, and therefore have the potential to signal to the market that the seller lacks confidence in the Company’s prospects. In addition, short sales
may reduce a seller’s incentive to seek to improve the Company’s performance. For these reasons, short sales of Company securities are prohibited.
Publicly Traded Options. You may not engage in transactions in publicly traded options related to the Company’s securities, such as puts, calls and
other derivative securities, on an exchange or in any other organized market. Given the relatively short term of publicly traded options, transactions in
options related to the Company’s securities may create the appearance that you are trading based on material non-public information and focus your
attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in publicly traded options related to
the Company’s securities on an exchange or in any other organized market are prohibited by this Policy.
Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including through
the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging transactions may permit you to
continue to own Company securities obtained through employee benefit plans or otherwise, but without the full risks and rewards of ownership. When that
occurs, you may no longer have the same objectives as the Company’s other stockholders. Therefore, you are prohibited from engaging in any such
transactions.
6
Margin Accounts and Pledges. Securities held in a margin account or pledged as collateral for a loan may be sold without your consent by the
broker if you fail to meet a margin call or by the lender in foreclosure if you default on the loan. A margin or foreclosure sale that occurs when you are
aware of material non-public information may, under some circumstances, result in unlawful insider trading. Therefore, you are prohibited from holding
Company securities in margin accounts or pledging Company securities as collateral for a loan.
Section 2: Additional Restrictions Applicable to Directors, Officers and Designated Employees
Section 2 of this Policy imposes additional restrictions and applies to all directors and Officers of the Company and the employees described in Appendix
A hereto (“Designated Employees”). This section of the Policy also applies to such persons’ Family Members, household members and Controlled Entities.
A.
Pre-Clearance
OptimizeRx requires that all directors, Officers and Designated Employees, as well as their respective Family Members, household members and
Controlled Entities, obtain prior written approval from the Compliance Committee (which approval may include an email confirmation) before engaging in
any transaction in Company securities. A request for pre-clearance should be submitted to the Compliance Committee at least two business days in advance
of the proposed transaction. The Compliance Committee is under no obligation to approve a transaction submitted for pre-clearance, and may determine
not to permit the transaction. If a person seeks pre-clearance and permission to engage in the transaction is denied, then he or she should refrain from
initiating any transaction in Company securities, and should not inform any other person of the restriction. If approved, the transaction must be completed
within five business days, but in no event after the commencement of a blackout period. If the transaction does not occur during the five business day
period, pre-clearance of the transaction must be re-requested. A form of “Request for Approval” is attached as Appendix B hereto and should be used to
request approval hereunder, unless otherwise notified by a member of the Compliance Committee. All pre-clearance requests should be emailed to the
Compliance Committee at preclearance@optimizerx.com.
The Compliance Committee’s approval of a transaction submitted for pre-clearance does not constitute legal advice, does not constitute confirmation that
you do not possess material non-public information and does not relieve you of any of your legal obligations.
A member of the Compliance Committee may not trade in our securities unless another member of the Compliance Committee has approved the trade(s) in
accordance with this Policy’s procedures.
B.
Use of Rule 10b5-1 Plans
Directors, Officers and Designated Employees, as well as their respective Family Members, household members and Controlled Entities, who wish to trade
in Company securities are strongly encouraged to trade such securities pursuant to a Rule 10b5-1 Plan. See Section 1E above.
7
Section 3: Additional Requirements Applicable to Directors and Officers
Directors and Officers of the Company (the “Section 16 Insiders”) are also subject to the reporting and short-swing profit rules under Section 16 of the
Exchange Act.
A.
Reporting Requirements
Section 16(a) requires the directors and Officers of the Company to file reports with the SEC that identify their beneficial ownership of the Company’s
equity securities and any transactions they make in those securities. A Form 3 must be filed no later than the tenth (10th) calendar day after an individual
becomes a director or Officer of the Company, and any subsequent change in beneficial ownership by a Section 16 Insider must, unless exempt from
reporting or eligible for deferred reporting, be reported on a Form 4 filed within two business days. These reports must be filed with the SEC via EDGAR
and are therefore immediately publicly available upon filing. Section 16(a) imposes the obligation to file ownership reports with the SEC on the individual
insiders, not on the Company. However, the Company must disclose any delinquent Section 16 filers in its annual proxy statement and identify the trading
information that was not properly filed. While it is not the Company’s obligation to do so, it is the Company’s practice to assist each of its Section 16
Insiders in filing their Section 16(a) reports. In order to facilitate timely compliance, a Section 16 Insider (or his or her broker) must immediately report (no
later than the same day such Section 16 Insider engages in the transaction) detailed trade information, in writing, to Company’s General Counsel and Chief
Financial Officer for all transactions made in Company securities by such insider, any family members, household members and entities that such insider
controls. Although it is the individual responsibility and legal obligation of each director and Officer to comply with the reporting requirements described
herein, the Compliance Officers will, upon being advised of a transaction, endeavor to prepare and, pursuant to a power of attorney, timely file Section
16(a) reports on behalf of each Section 16 Insider. A power of attorney (the “POA”) that authorizes Company personnel to prepare, complete and file
Section 16(a) reports, and otherwise act on a Section 16 Insider’s behalf regarding Section 16(a) reports, is attached hereto as Appendix C. Section 16
Insiders who would like the Company to assist them with their Section 16(a) reports should sign the POA and return it to the Company’s General Counsel
and Chief Financial Officer.
In addition to the disclosure requirements imposed by Section 16 of the Exchange Act, directors and Officers of the Company are required to file a Form
144 before making an open market sale of OptimizeRx securities. Form 144 notifies the SEC of your intent to sell OptimizeRx securities. This form is
generally prepared and filed by your broker.
B.
Short-Swing Profit Rules
Section 16(b) provides for the recovery of “short-swing” profits from a Section 16 Insider resulting from certain transactions in Company securities
“beneficially owned” by them. Specifically, a Section 16 Insider is required by law to turn over to the Company any “profit” realized upon a purchase
followed by a sale, or a sale followed by a purchase, of any equity security of the Company that is beneficially owned by him or her and made within a
period of less than six months. A profit may result even if the purchase and sale involve different types of equity securities. Moreover, any sale or purchase
may be matched with any purchase or sale within the period such that there may be recoverable “profit” even if there has been no economic benefit to the
individual in question. The good faith of a director or Officer is irrelevant to whether recovery is required under Section 16.
Transactions in the Company’s securities by persons related to a Section 16 Insider (e.g., spouse, children, grandchildren and in-laws), or by entities in
which he or she may have an indirect interest (e.g., partnerships, corporations and trusts) may be attributed to the Section 16 Insider. Accordingly, such
related persons or entities should be advised not to engage in trades within six months of trades engaged in by the Section 16 Insider, or engaged in by each
other, without considering the implications of the short-swing profit rules.
Approved and adopted: June 22, 2021
Amended: March 7, 2023
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Appendix A
DESIGNATED EMPLOYEES
Our current Designated Employees for purposes of our Insider Trading Policy are on file with the Compliance Committee. The Compliance Committee
may alter the list of Designated Employees at any time, in which case the Compliance Committee will provide written notice to any individuals added or
removed from such list.
A-1
Appendix B
REQUEST FOR APPROVAL TO TRADE COMPANY SECURITIES
Number of Securities (e. g., shares): _____________________________
Type of Security [check all applicable boxes]
□ Common stock
□ Restricted stock
□ Stock Option
□ Debt Securities
□ Other _________________________
Type of Transaction [check all applicable boxes]
□ Stock option exercise (must complete applicable exercise form)
□ Purchase
□ Sale
□ Gift (Name of Donnee)
□ Rule lOb5-1 Plan (attach a copy of the 10b5-1 Plan to this request form)
□ Sale under benefit plans
□ Other _________________________
Broker Contact Information
Company Name_____________________________________
Contact Name_______________________________________
Telephone__________________________________________
Fax_______________________________________________
Account Number____________________________________
Social Security or other Tax Identification Number_________________________________
Status (check all applicable boxes and complete blanks)
□ Employee – Citizenship___________, Country in which you are based __________________
□ Board Member
I am not currently in possession of any material non-public information relating to OptimizeRx Corporation. I hereby certify that the statements made on
this form are true and correct. I have also discussed any questions I had with respect to OptimizeRx’s insider trading policy and its applicability to the
transactions contemplated hereby with a member of the Compliance Committee.
Signature_______________________________ Print Name__________________________________
Date:__________________________________ Telephone Number ___________________________
_____________________________________________________________________________________
(office use only)
Request Approved (transaction must be completed within 5 business days after approval)
Request Denied
Request Approved with the following modification: _____________________________________________________________
Signature & Date_____________________________________________________________
B-1
Appendix C
POWER OF ATTORNEY
Know all by these presents, that the undersigned hereby constitutes and appoints each of Marion Odence-Ford and Ed Stelmakh, individually, with full
power of substitution, the undersigned’s true and lawful attorney-in-fact to:
(1) execute for and on behalf of the undersigned, in the undersigned’s capacity as an officer and/or director of OptimizeRx Corporation (the
“Company”), Forms 3, 4, and 5 in accordance with Section 16(a) of the Securities Exchange Act of 1934 and the rules thereunder;
(2) do and perform any and all acts for and on behalf of the undersigned which may be necessary or desirable to complete and execute any such Form 3,
4, or 5, complete and execute any amendment or amendments thereto, and timely file such form with the U.S. Securities and Exchange Commission and
any stock exchange or similar authority; and
(3) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of benefit to, in
the best interest of, or legally required by, the undersigned, it being understood that the documents executed by such attorney-in-fact on behalf of the
undersigned pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditions as such attorney-in-fact may approve in
such attorney-in-fact’s discretion.
The undersigned hereby grants to each such attorney-in-fact, individually, full power and authority to do and perform any and every act and thing
whatsoever requisite, necessary, or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as
the undersigned might or could do if personally present, with full power of substitution or revocation, hereby ratifying and confirming all that each such
attorney-in-fact, or each such attorney-in-fact’s substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the
rights and powers herein granted. The undersigned acknowledges that each such attorney-in-fact, in serving in such capacity at the request of the
undersigned, is not assuming, nor is the Company assuming, any of the undersigned’s responsibilities to comply with Section 16 of the Securities Exchange
Act of 1934.
This Power of Attorney shall remain in full force and effect until the undersigned is no longer required to file Forms 3, 4, and 5 with respect to the
undersigned’s holdings of and transactions in securities issued by the Company, unless earlier revoked by the undersigned in a signed writing delivered to
the foregoing attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this day of , 20___.
Signature
Print Name
C-1
OptimizeRx Corporation
List of Subsidiaries
● Healthy Offers, Inc. (d/b/a Medicx Health), a Nevada corporation
● CareSpeak Communications, Inc., a New Jersey corporation
● CareSpeak Communications, d.o.o., a controlled foreign corporation incorporated in Croatia
● Cyberdiet, a controlled foreign corporation incorporated in Israel
Exhibit 21.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following registration statements on Forms S-8 (File Nos. 333-259218; 333-237630; 333-230212; 333-
210653; and 333-189439) of OptimizeRx Corporation and Subsidiaries (the “Company”) of our report dated April 15, 2024, with respect to the
consolidated financial statements of the Company as of December 31, 2023 and 2022 and for the years then ended, which is included in this Annual Report
on Form 10-K of the Company.
/s/ UHY LLP
Sterling Heights, Michigan
April 15, 2024
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, William J. Febbo, certify that;
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2023, 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) 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;
b) 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;
c) 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
d) 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) 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
b) 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: April 15, 2024
/s/ William J. Febbo
By: William J. Febbo
Title: Chief Executive Officer, Principal Executive Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Edward Stelmakh, certify that;
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2023, 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) 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;
b) 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;
c) 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
d) 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) 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
b) 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: April 15, 2024
/s/ Edward Stelmakh
By:
Title: Chief Financial Officer, Principal Financial Officer
Edward Stelmakh
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, 2023 filed with the Securities
and Exchange Commission (the “Report”), I, William J. Febbo, Chief Executive Officer of the Company, and I, Edward Stelmakh, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the
dates presented and the consolidated result of operations of the Company for the periods presented.
/s/ William J. Febbo
By:
Name: William J. Febbo
Title: Chief Executive Officer, Principal Executive Officer
Date: April 15, 2024
/s/ Edward Stelmakh
By:
Name: Edward Stelmakh
Title: Chief Financial Officer, Principal Financial Officer
and Principal Accounting Officer
Date: April 15, 2024
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
OPTIMIZERX CORPORATION
CLAWBACK POLICY
Exhibit 97.1
The Board of Directors (the “Board”) of OptimizeRx Corporation (the “Company”) has determined that it is in the best interests of the Company to adopt
this Clawback Policy (this “Policy”), which provides for the recovery of certain incentive compensation in the event of an Accounting Restatement (as
defined below). This Policy is designed to comply with, and shall be interpreted to be consistent with, Section 10D of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1”) and Nasdaq Listing Rule 5608.
1. Definitions
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.
“Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material noncompliance
with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued
financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected
in the current period or left uncorrected in the current period.
“Clawback Period” means the three completed fiscal years immediately preceding the date on which the Company is required to prepare an
Accounting Restatement, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following those
three completed fiscal years (except that a transition period that comprises a period of at least nine months shall count as a completed fiscal year). The“date
on which the Company is required to prepare an Accounting Restatement” is the earlier to occur of (a) the date the Board, a committee of the Board, or the
officer or officers of the Company authorized to take such action if the Board action is not required, concludes, or reasonably should have concluded, that
the Company is required to prepare an Accounting Restatement; or (b) the date a court, regulator or other legally authorized body directs the Company to
prepare an Accounting Restatement.
“Erroneously Awarded Compensation” means, in the event of an Accounting Restatement, the amount of Incentive-Based Compensation
previously received that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on
the restated amounts in such Accounting Restatement, and must be computed without regard to any taxes paid by the relevant Executive Officer; provided,
however, that for Incentive-Based Compensation based on stock price or total stockholder return, where the amount of Erroneously Awarded Compensation
is not subject to mathematical recalculation directly from the information in an Accounting Restatement: (i) the amount of Erroneously Awarded
Compensation must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon which
the Incentive-Based Compensation was received; and (ii) the Company must maintain documentation of the determination of that reasonable estimate and
provide such documentation to The Nasdaq Stock Market (“Nasdaq”).
“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting
officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or
finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company. An
executive officer of the Company’s parent or subsidiary is deemed an “Executive Officer” if the executive officer performs such policy making functions
for the Company.
“Financial Reporting Measure” means any measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures; provided, however, that a Financial
Reporting Measure is not required to be presented within the Company’s financial statements or included in a filing with the U.S. Securities and Exchange
Commission (“SEC”) to qualify as a “Financial Reporting Measure.” For purposes of this Policy, Financial Reporting Measures include, but are not limited
to, stock price and total stockholder return.
“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a
Financial Reporting Measure. Incentive-Based Compensation is “received” for purposes of this Policy in the Company’s fiscal period during which the
Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of such Incentive-Based
Compensation occurs after the end of that period.
2. Policy Application.
This Policy applies to Incentive-Based Compensation received by an Executive Officer (a) after beginning services as an Executive Officer; (b) if that
person served as an Executive Officer at any time during the performance period for such Incentive-Based Compensation; and (c) while the Company had a
listed class of securities on a national securities exchange.
3. Policy Recovery Requirement.
In the event the Company is required to prepare an Accounting Restatement, the Company shall reasonably promptly recoup the amount of any
Erroneously Awarded Compensation received by any Executive Officer during the Clawback Period. In the event of an Accounting Restatement, the Board
shall determine, in its sole discretion, the amount of any Erroneously Awarded Compensation for each Executive Officer in connection with such
Accounting Restatement.
4. Method of Recoupment.
The Board shall determine, in its sole discretion, the timing and method for promptly recouping such Erroneously Awarded Compensation, which may
include without limitation: (a) seeking reimbursement of all or part of any cash or equity-based award, (b) cancelling prior cash or equity-based awards,
whether vested or unvested or paid or unpaid, (c) cancelling or offsetting against any planned future cash or equity-based awards, (d) forfeiture of deferred
compensation, subject to compliance with Section 409A of the Internal Revenue Code and the regulations promulgated thereunder and (e) any other
method authorized by applicable law or contract. Subject to compliance with any applicable law, the Board may affect recovery under this Policy from any
amount otherwise payable to the Executive Officer, including amounts payable to such individual under any otherwise applicable Company plan or
program, including base salary, bonuses or commissions and compensation previously deferred by the Executive Officer.
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The Company is authorized and directed pursuant to this Policy to recoup Erroneously Awarded Compensation in compliance with this Policy unless the
Compensation Committee has determined that recovery would be impracticable solely for the following limited reasons, and subject to the following
procedural and disclosure requirements:
● The direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before concluding that it
would be impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement, the Company must
make a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to recover and provide
that documentation to Nasdaq;
● Recovery would violate home country law of the Company where that law was adopted prior to November 28, 2022. Before concluding that it
would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law of the
Company, the Company must obtain an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a
violation, and must provide such opinion to Nasdaq; or
● Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the
Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
5. No Indemnification of Executives Officers.
Notwithstanding the terms of any indemnification or insurance policy or any contractual arrangement with any Executive Officer that may be interpreted to
the contrary, the Company shall not indemnify any Executive Officers against the loss of any Erroneously Awarded Compensation, including any payment
or reimbursement for the cost of third-party insurance purchased by any Executive Officers to fund potential clawback obligations under this Policy.
6. Required Policy-Related Filings.
The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the federal securities laws, including disclosures
required by SEC filings.
7. Acknowledgement.
Each Executive Officer shall sign and return to the Company within thirty (30) calendar days following the later of (i) the effective date of this Policy set
forth below or (ii) the date such individual becomes an Executive Officer, the Acknowledgement Form attached hereto as Appendix A, pursuant to which
the Executive Officer agrees to be bound by, and to comply with, the terms and conditions of this Policy.
8. Administration
This Policy shall be administered by the Board or, if so designated by the Board, the Compensation Committee, in which case references herein to the
Board shall be deemed references to the Compensation Committee. Any determinations made by the Board shall be final and binding on all affected
individuals.
3
9. Policy Not in Limitation
The Board intends that this Policy shall be applied to the fullest extent of the law. Any right of recoupment under this Policy is in addition to, and not in
lieu of, any other remedies or rights of recoupment that may be available to the Company under applicable law or pursuant to the terms of any similar
policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.
Nothing contained in this Policy, and no recoupment or recovery as contemplated by this Policy, shall limit any claims, damages or other legal remedies the
Company or any of its affiliates may have against an Executive Officer arising out of or resulting from any actions or omissions by the Executive Officer.
10. Amendment; Termination.
The Board may amend, modify, supplement, rescind or replace all or any portion of this Policy at any time and from time to time in its discretion, and shall
amend this Policy as it deems necessary to comply with applicable law or any rules or standards adopted by a national securities exchange on which the
Company’s securities are listed.
11. Successors.
This Policy is binding and enforceable against all Executive Officers and their beneficiaries, heirs, executors, administrators or other legal representatives.
12. Effective Date.
This Policy shall be effective as of October 2, 2023. The terms of this Policy shall apply to any Incentive-Based Compensation that is received by
Executive Officers on or after October 2, 2023, even if such Incentive-Based Compensation was approved, awarded or granted to Executive Officers prior
to such date.
Approved and adopted: November 10, 2023
4
Appendix A
OPTIMIZERX CORPORATION
CLAWBACK POLICY
ACKNOWLEDGEMENT FORM
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the OptimizeRx Corporation (the
“Company”) Clawback Policy (the “Policy”).
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and
that the Policy will apply both during and after the undersigned’s employment or service with the Company. Further, by signing below, the undersigned
agrees to abide by the terms of the Policy, including, without limitation, by returning any Erroneously Awarded Compensation (as defined in the Policy) to
the Company to the extent required by, and in a manner consistent with, the Policy.
EXECUTIVE OFFICER
Signature
Print Name
Date
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