What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2022-02-28 compared with 2021-03-08 · 12 added, 462 removed, 0 unchanged (100% of the section changed)

Market for Registrant’s

Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded under the symbol

“OPRX”

on the Nasdaq Capital Market.

Holders of Our Common Stock

As of March 3, 2021, we had

16,806,637 shares of our common stock issued and outstanding, held by approximately 400 shareholders of record at our

transfer agent, with approximately 7,000 additional shareholders holding our shares in street name.

We currently intend to retain future earnings

for the operation of our business.

We have never declared or paid cash dividends on our common stock, and we do not anticipate

paying any cash dividends in the foreseeable future.

In the event that a dividend is declared,

common stockholders on the record date are entitled to share ratably in any dividends that may be declared from time to time on

the common stock by our board of directors from funds legally available.

There are no restrictions in our

articles of incorporation or bylaws that restrict us from declaring dividends.

The Nevada Revised Statutes, however, do prohibit

us from declaring dividends where, after giving effect to the distribution of the dividend:

We would not be able to pay our debts as they become due in the usual course of business;

Our total assets would be less than the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

Securities Authorized for Issuance under Equity Compensation

On June 13, 2013, our Board of Directors adopted

the 2013 Equity Incentive Plan (the “Plan”).

The purpose of the Plan is to attract and retain the best available personnel

for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and

to promote our success.

As of December 31, 2020, under the Plan, as amended, we are currently able to issue up to an aggregate

total of 3,000,000 incentive or non-qualified options to purchase our common stock, stock awards and other offerings.

2021, our Board of Directors amended the Plan to increase the number of shares authorized under the plan to 6,000,000 shares.

Equity Compensation Plans as of December 31, 2020

Equity Compensation Plans Approved by the Shareholders

of Securities to

be issued upon

of outstanding

restricted stock

2013 Equity Compensation Plan - Options

2013 Equity Compensation Plan –

Restricted Stock Awards

Recent Sales of Unregistered Securities

The information set forth below relates

to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not

previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

In December 2020, we issued 4,010 shares

of restricted common stock to our outside Directors as part of our director compensation package for services rendered in Q4 2020.

From October through December 2020, we

issued 125,918 shares of common stock and received proceeds of $1,156,314 in connection with the exercise of options.

These securities were issued pursuant to

Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder.

The holders represented their intention to acquire the

securities for investment only and not with a view towards distribution.

The investors were given adequate information about us

to make an informed investment decision.

We did not engage in any general solicitation or advertising.

We directed our transfer

agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Selected Financial Data

Not required under Regulation S-K for “smaller

reporting companies.”

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

We are a pioneering digital health company that provides healthcare

communications solutions for life science companies to connect and deliver relevant information to healthcare providers and patients.

As the largest digital health network of its kind, the OptimizeRx platform bridges the communication gap that exists between key

stakeholders in healthcare, including pharmaceutical companies, payers, hospitals, physicians, and patients, providing patient

affordability, access, and adherence directly at the point of care through EHRs and e-prescribing systems.

Historically, our revenue was generated primarily through the

facilitation of financial messages to health care providers via their EHR and ePrescribe systems using the OptimizeRx proprietary

network to solve the ever-increasing communication barriers between pharmaceutical representatives and healthcare providers that

have presented in the rapidly changing healthcare industry.

Over time, as the demand for communication of an increasing variety

of different health information between life science companies, providers, and patients continues to rise, our platform has expanded

over the years to encompass additional solutions that enable healthcare providers to access information for patients at the point

These solutions include brand messaging, therapeutic support messaging, brand support, and innovative patient engagement

services, all of which now make up a significant portion of our total revenue.

Our strategic focus remains on growing our existing client base

and generating greater and more consistent revenues in part through our continued shift in our business model toward enterprise

level engagements with recurring revenue streams, while also broadening our platform with innovative proprietary solutions such

as our TelaRep™

virtual communication solution and our AI-powered real-world evidence solution which uses sophisticated proprietary

algorithms to derive additional revenue from our existing network.

In addition, we have continued to expand our team in preparation

for future growth aspirations, which may be supplemented with future acquisitions and other strategic collaborations and investments

to further solidify our market dominance in this space.

Our strategy for driving revenue growth is also expected to

work in tandem with our efforts to increase margin and profitability through the use of the aforementioned recurring revenue models

that have inherently higher margins.

Additionally, as the business continues to scale, operating

expenses are expected to remain relatively consistent given the nature of the Company’s business model, further driving profitability.

The following discussion includes an analysis and comparison

of the Company’s 2020 and 2019 fiscal year results of operations, liquidity and capital resources, and critical accounting

C OVID-19 Business Update

During the COVID-19 pandemic, we have remained focused on being

a leading provider of digital health solutions to life science companies and connecting healthcare providers and patients along

the entire patient journey, while simultaneously expanding our client base, increasing our network of partners, and maintaining

the safety of our employees.

The COVID-19 pandemic has created unprecedented challenges in

the healthcare industry which has significantly increased the demand for unique solutions ranging from access to accurate and timely

information to increasing the accessibility of medications and care management.

In March 2020, shortly after the World Health Organization

(WHO) declared COVID-19 a global pandemic, we launched a free interactive text message alert program available to the general public

that delivers current, relevant coronavirus information issued by the Centers for Disease Control and Prevention (CDC) directly

to any SMS-enabled mobile device.

In April 2020, we launched our TelaRep communications solution to connect life science companies

and healthcare providers treating patients with specialty drug therapies in an environment facing a critical communication gap

with restricted face-to-face interactions.

We also leveraged our digital platform to provide telehealth capabilities for healthcare

providers to adapt to COVID-19 restrictions.

During the beginning of the pandemic and onward, we transitioned

our global workforce to working remotely in an effort to maintain the health and safety of our employees.

Governments of cities,

states, and countries globally have imposed restrictions on travel and business operations, which has curtailed various means of

performing business and marketing activities such as the attending of health IT conferences.

We have been able to continue to achieve

our goals by leveraging innovative technology and existing resources while shifting strategies where necessary in areas such as

sales and marketing.

As a result of these practices and initiatives, remote work arrangements and travel restrictions have not

had any adverse effects on our ability to maintain operations or achieve our goals.

In addition, we have implemented health and

safety policies in our offices to enable our employees to safely return to traditional working arrangements should it become feasible.

The COVID-19 pandemic did not have an adverse impact on our

financial condition and results of operations in 2020, and we currently do not expect the results of future operations and our

near-and-long-term financial position and growth prospects to be negatively impacted by the pandemic given the nature of the business

and the increased demand for digital health solutions.

We reported record year over year and quarterly net revenue results in 2020,

and we believe that the markets in which we compete will remain favorable.

Additionally, there has been no impact on the accessibility

or terms of acquiring capital;

we completed a public offering of common stock in February of 2021.

Information pertaining to risk factors as it relates to the

COVID-19 pandemic can be found in Item 1A.

Risk Factors.

Results of Operations for the Years

Ended December 31, 2020 and 2019

Our net revenue for the year ended December

31, 2020 was approximately $43.3 million, an increase of 76% from the year ended December 31, 2019.

This increase resulted from

a combination of factors, including the shift to enterprise contracts, increased pharmaceutical brands, an increased distribution

network, strong growth in our brand messaging solution, and our acquisition of RMDY Health in late 2019.

We expect continued strong

revenue growth in 2021 as a result of the foundations laid in 2019 and 2020.

Because the pharmaceutical industry is

dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number of companies.

approximately 50 pharmaceutical companies as customers.

We have focused our efforts on expanding our customer base and through

our acquisitions, have added medical device manufactures, payers, associations and other entities.

In both 2020 and 2019, we had

three customers that each represented slightly over 10% of our revenues, however only one customer exceeded 10% of revenues in

Cost of Revenues

Our total cost of revenues, composed primarily

of revenue share expense, increased in the year ended December 31, 2020 compared to the year ended December 31, 2019 due to the

increase in revenues.

Our cost of revenues as a percentage of revenue increased from approximately 37% in the year ended December

31, 2019 to approximately 44% in the year ended December 31, 2020.

This increase in our cost of revenues as

a percentage of revenue resulted primarily from solution mix, specifically the increase in our core messaging revenues that have

higher revenue share percentages.

Our gross margin, which is simply the difference

between our revenues and our cost of revenues, discussed above, increased from 2019 to 2020 as a result of the increased revenue.

In addition, our gross margin percentage decreased from approximately 63% in 2019 to 56% in 2020 for the reasons discussed above

in the cost of revenues section.

We expect our margins to remain in the 56% to 58% range in 2021.

Operating Expenses

Operating expenses increased to approximately

$26.2 million for the year ended December 31, 2020, from approximately $19.1 million for the year ended December 31, 2019, an increase

of approximately 37%.

The detail by major category is reflected in the table below.

Certain 2019 expenses were reclassified in

the table to be comparable to the 2020 presentation.

Years Ended December 31

Salaries, Wages and Benefits

Professional Fees

Acquisition Related Costs

Board Compensation

Investor Relations

Advertising and Promotion

Depreciation and Amortization

Research, Development, and Maintenance

Integration Incentives

Office, Facility and Other

Stock-based Compensation

Total Operating Expense

The main drivers for the overall increase

in operating expenses in 2020 was our focus on staffing and scaling our company to foster, and be able to support, accelerated

revenue growth.

Within the operating expenses, there were

a variety of increases, the largest of which was in salaries, wages and benefits, as a result of additional staff added in 2019

and 2020, including related benefits.

During 2019, we hired a chief commercial officer, a chief technology officer, five new salespeople,

a human resources manager, as well as other administrative positions at various times throughout the year.

We also added 14 employees

as a result of our RMDY acquisition in October 2019.

These 2019 additions were there for the entire year in 2020.

we added to our staff in several key areas, including a head of product development, additional sales people, and additional IT

people, among others.

We expect our compensation expense to increase in 2021, but at a much lower rate than in 2020.

Professional fees increased primarily because

of costs associated with our audit, as a result of our change to a larger, national firm, as well as increased legal costs due

to the increased complexity of our contracts.

In addition, we incurred costs related to the finalization of our RMDY earnout.

Acquisition costs are related to our acquisition

of RMDY Health in 2019.

These costs include investment banker fees, legal and accounting due diligence, audit costs associated

with RMDY, valuation experts for the purchase price allocation, and other miscellaneous costs.

Board compensation increased slightly from

2019 to 2020 due to both an increase in the size of our board as well as a revision of the board compensation structure to pay

a larger portion in cash and a smaller portion in stock.

This represents only the cash portion.

The cost of consultants increased from

2019 to 2020.

The primary reason for the increase was related to consultants used in the IT area, primarily in the patient engagement

area, resulting from a full year of activity from the former RMDY Health business as opposed to a partial year in 2019.

Our advertising and promotion costs decreased

significantly from 2019 to 2020 as a result of a reduction in the sponsorship of, and attendance at, conferences as a result of

the global pandemic.

Expenses related to research, development,

management, and maintenance of our technology decreased in 2020 to more normal levels, as 2019 included significant nonrecurring

research projects.

Integration incentives and exclusivity

fees, which are fees paid to accelerate access to new partners and payments for exclusivity, increased in 2020, as we signed more

contracts and contracts with larger payments related to 2020.

Depreciation and amortization increased

significantly in 2020 from the 2019 levels.

The increased amortization resulting from the acquisition of RMDY Health, and the resulting

intangible assets were amortized for a full year in 2020 as opposed to only part of the fourth quarter in 2019.

We expect depreciation

and amortization expense in 2021 to be similar to 2020 levels.

Office, facility, and other costs increased

from 2019 to 2020.

The main reason for the change related to a higher level of activity with more employees.

Stock based compensation increased by approximately

$900,000 from $2.3 million in 2019 to $3.2 million in 2020 primarily because of more employees and an increase in our stock price.

There is a relationship between the price of the stock at the time of the option grant and the value of the option, resulting in

a higher cost when the stock price is higher.

We finished the year ended December 31,

2020 with a net loss of approximately $2.2 million, as compared to a net loss of approximately $3.1 million during the year ended

December 31, 2019.

The reasons for specific components are discussed above.

Overall, we had an increase in revenue and gross margin

partially offset by increased operating expenses to support future growth.

In addition, the income in both periods included significant

noncash items.

We had approximately $3.5 million in noncash operating expenses in 2019 and approximately $5.2 million in noncash

operating expenses in 2020.

Quarterly Financial Information

Following is a table of our quarterly operating results for

2020 for information purposes.

Cost of revenues

Operating Expenses

Income (Loss) from Operations

Other income (expense)

Income (loss) before Taxes

Income tax benefit

Net Income (Loss)

Earnings (loss) per share

Sum of four quarterly per share amounts

does not equal annual total due to rounding and the mechanics of the weighted average shares outstanding calculation.

Following is a table of our quarterly operating results for

2019 for information purposes.

Cost of revenues

Operating Expenses

Income (Loss) from Operations

Other income (expense)

Income (loss) before Taxes

Income tax benefit

Net Income (Loss)

Earnings (loss) per share

Liquidity and Capital Resources

As of December 31, 2020, we had total current

assets of approximately $32.9 million, compared with current liabilities of approximately $10.0 million, resulting in working capital

of approximately $22.9 million and a current ratio of approximately 3.3 to 1.

This compares with the working capital balance of

approximately $21.0 million and the current ratio of 4.4 to 1 at December 31, 2019.

This increase in working capital, as discussed

in more detail below, is primarily the result of the earnings before non-cash expenses.

Following is a table with summary data

from the consolidated statement of cash flows for the years ended December 31, 2020 and 2019, as presented.

Net cash used in operating activities

$ (6,310,386 )

$ (1,660,796 )

Net cash used in investing activities

(10,582,086 )

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

$ (8,335,904 )

Our operating activities used approximately

$6.3 million in the year ended December 31, 2020, as compared with approximately $1.7 million used in operating activities in the

year ended December 31, 2019.

The cash used in both 2019 and 2020 was the result of our net loss and the increased working capital

required to support higher revenues, partially offset by our non-cash expenses.

We used approximately $125,000 in investing

activities in 2020, primarily as the result of purchase of assets.

The majority of our approximately $10.6 million in investing

in activities in 2019 related to our acquisitions of RMDY Health, Inc., as well as a software purchase.

Financing activities provided approximately

$22.2 million in the year ended December 31, 2019.

The cash provided in 2019 was the result of our underwritten offering in 2019,

as well as from the proceeds of option exercises.

We used cash of approximately $1.9 million in 2020 as the result of proceeds

of option exercises, partially offset by the payment of contingent consideration related to previous acquisitions.

With our cash on hand, we have sufficient

cash to operate our business for more than the next 12 months and we have raised approximately $71 million in February 2021 that

will enable us to continue to expand our business and accelerate revenue growth.

We do not anticipate the need to raise any additional

Off Balance Sheet Arrangements

As of December 31, 2020, there were no

off-balance sheet arrangements.

Critical Accounting Policies

A “critical accounting policy”

is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s

most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that

are inherently uncertain.

Our accounting policies are discussed in

detail in the footnotes to our financial statements included in this Annual Report on Form 10-K for the year ended December 31,

however, we consider our critical accounting policies to be those related to revenue recognition, calculation of revenue

share expense (cost of revenues), stock-based compensation, capitalization and related amortization of intangible assets and impairment

Following is a summary of those policies.

Revenue Recognition

Recognition of revenue requires evidence

of a contract, probable collection of proceeds, and completion of substantially all performance obligations.

We use a 5-step model

to recognize revenue.

These steps are:

identify the contract with a customer, identify the performance obligations in the contract,

determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue

when or as the performance obligations are satisfied.

Revenues are primarily generated from content

delivery activities in which we deliver financial, clinical, or brand messaging through a distribution network of eprescribers

and electronic health record technology providers (channel partners), directly to consumers, or from reselling services that complement

the business.

This content delivery for a customer is referred to as a program.

Unless otherwise specified, revenue is recognized

based on the selling price to customers.

Our contracts are generally all less than

one year and the primary performance obligation is delivery of messages or other forms of content, but the contract may contain

additional services.

Additional services may include program design, which is the design of the content delivery program, set up,

and reporting.

We consider set up and reporting services to be complimentary to the primary performance obligation and recognized

through performance of the delivery of content.

We consider these design of the programs and related consulting services to be

performance obligations separate from the delivery of messages.

As the content is distributed through the

platform and network of channel partners (a transaction), these transactions are recorded, and revenue is recognized, over time

as the distributions occur.

Revenue for transactions can be realized based on a price per message, a price per redemption, as a

flat fee occurring over a period of time, or upon completion of the program, depending on the client contract.

We recognize setup

fees that are required for integrating client offerings and campaigns into the rule-based content delivery system and network over

the life of the initial program, based either on time, or units delivered, depending upon which is most appropriate in the specific

Should a program be cancelled before completion, the balance of set up revenue is recognized at the time of cancellation,

as set up fees are nonrefundable.

Additionally, we also recognizes revenue for providing program performance reporting and maintenance,

either by our company directly delivering reports or by providing access to its online reporting portal that the client can utilize.

This reporting revenue is recognized over time as the messages are delivered.

Program design, which is the design of the content

delivery program, and related consulting services are recognized as services are performed.

We do not disaggregate our revenue as virtually

all types of revenue are generated through the same core group of customers and generally all involve the delivery of content.

Different types of revenue are not impacted by economic factors that affect the nature, amount, timing, or uncertainty of revenues

or cash flows.

In some instances, we also resell messaging

solutions that are available through channel partners that are complementary to the core business and client base.

These partner

specific solutions are frequently similar to our own solutions and revenue recognition for these programs is the same as described

In instances where we sell solutions on a commission basis, net revenue is recognized based on the commission-based revenue

split that we receive.

There were only minor immaterial programs recorded on a net basis in the years presented.

In instances where

we resell these messaging solutions and have all financial risk and significant operation input and risk, we record the revenue

based on the gross amount sold and the amount paid to the channel partner as a cost of sales.

Cost of Revenues

The primary cost of revenue is revenue

share expense.

Based on the volume of transactions that are delivered through the channel partner network, we provide a revenue

share to compensate the partner for their promotion of the campaign.

Revenue shares are a negotiated percentage of the transaction

fees and can also be specific to special considerations and campaigns.

In addition, we pay revenue share to ConnectiveRx (formerly

LDM/PDR) as a result of a 2014 legal settlement in an amount equal to the greater of 10% of financial messaging distribution revenues

generated through our integrated network, or $0.37 per financial message distributed through our integrated network.

The contractual

amount due to the channel partners is recorded as an expense at the time the message is distributed.

Intangible Assets

Intangible assets are stated at cost.

assets are being amortized over their estimated useful lives of 15 to 17 years for patents, 8 to 15 years for customer relationships,

2 to 4 years for covenants not to compete, 10 years for technology, and 3 to 4 years for software and websites, all using the straight-line

These assets, as well as our indefinite-lived asset, are evaluated annually in our fiscal fourth quarter for impairment.

We evaluate goodwill for impairment during

our fiscal fourth quarter, or more frequently if an event occurs or circumstances change.

We determined there was no impairment

as goodwill had a fair value comfortably in excess of its carrying value.

Stock-based Compensation

We use the fair value method to account

for stock-based compensation.

The fair value of the equity instrument is charged directly to compensation expense and additional

paid-in capital over the period during which services are rendered.

The fair value of each award is estimated on the date of each

For restricted stock, the fair market value is based on the market value of the stock granted on the date of the grant.

For options, it is estimated using the Black-Scholes option pricing model that uses the following assumptions.

Estimated volatilities

are based on the historical volatility of our stock over the same period as the expected term of the options.

The expected term

of options granted represents the period of time that options granted are expected to be outstanding.

We use historical data to

estimate option exercise behavior and to determine this term.

The risk-free rate used is based on the U.S.

Treasury yield curve

in effect at the time of the grant using a time period equal to the expected option term.

We have never paid dividends and do not

expect to pay any dividends in the future.

The Black-Scholes option valuation model

and other existing models were developed for use in estimating the fair value of traded options that have no vesting restrictions

and are fully transferable.

These option valuation models require the input of, and are highly sensitive to, subjective assumptions

including the expected stock price volatility.

Our stock options have characteristics significantly different from those of traded

options, and changes in the subjective input assumptions could materially affect the fair value estimate.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting

Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments.

ASU 2016-13 provides for a new impairment model that requires measurement and recognition of expected

credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and available

for sale debt securities.

ASU 2016-13 was effective for us on January 1, 2020.

The adoption of this standard did not have a material

effect on our financial position, results of operations, or cash flows.

In August 2019, the FASB issued ASU 2018-13,

Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

2018-13 modifies the disclosure requirements on fair value measurements and became effective for us on January 1, 2020.

of this standard did not have a material effect on our financial position, results of operations, or cash flows.

In January 2017, the FASB issued ASU 2017-04,

Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

ASU 2017-04 simplifies the subsequent

measurement of goodwill by eliminating the second step of the goodwill impairment test.

The second step measures a goodwill impairment

loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.

ASU 2017-04, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its

ASU 2017-04 will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal

years beginning after December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests performed

on testing dates after January 1, 2017.

The adoption of this standard did not have a material effect on our financial position,

results of operations, or cash flows.

Not Yet Adopted

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

ASU 2019-12 is intended to improve consistent application

and simplify the accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and

clarifies and amends existing guidance.

ASU 2019-12 is effective for annual and interim reporting periods beginning after December

15, 2020, with early adoption permitted.

The adoption of this standard is not expected to have a material effect on our financial

position, results of operations, or cash flows.

Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

common stock is traded under the symbol “OPRX” on the Nasdaq Capital Market.

At February 24, 2022, there were

approximately 400 shareholders of record of our common stock.

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.

the information regarding our equity compensation plans, see PART III, Item 12, “Security Ownership of Certain Beneficial

Owners and Management and Related Stockholder Matters.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity