OptimizeRx Corp 10-Q

Item 1. Financial Statements Our condensed consolidated financial statements included in this Form 10-Q are as follows: 2 Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 (unaudited); 3 Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited); 4 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited); 5 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited); 6 Notes to Condensed Consolidated Financial Statements (unaudited). 1 OPTIMIZERX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, 2022 December 31, 2021 ASSETS Current Assets Cash and cash equivalents $ 88,954,391 $ 84,681,770 Accounts receivable, net 19,135,824 24,800,585 Prepaid expenses and other 4,609,489 5,630,655 Total Current Assets 112,699,704 115,113,010 Property and equipment, net 137,441 143,818 Other Assets Goodwill 14,740,031 14,740,031 Intangible assets, net 10,548,884 10,975,474 Security deposits and other assets 12,859 12,859 Total Other Assets 25,301,774 25,728,364 TOTAL ASSETS $ 138,138,919 $ 140,985,192 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable – trade $ 600,729 $ 606,808 Accrued expenses 1,718,055 2,902,836 Revenue share payable 3,175,719 4,378,216 Current portion of lease obligations 87,581 90,982 Deferred revenue 1,293,044 1,389,907 Total Current Liabilities 6,875,128 9,368,749 Non-Current Liabilities Lease liabilities, net of current portion 212,946 236,726 Total Liabilities 7,088,074 9,605,475 Commitments and contingencies (See note 8) - - Stockholders’ Equity Preferred stock, $ 0.001 par value, 10,000,000 shares authorized, none issued and outstanding at March 31, 2022 or December 31, 2021 Common stock, $ 0.001 par value, 166,666,667 shares authorized, 17,902,608 and 17,860,975 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively 17,903 17,861 Additional paid-in-capital 170,047,698 166,615,514 Accumulated deficit ( 39,014,756 ) ( 35,253,658 ) Total Stockholders’ Equity 131,050,845 131,379,717 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 138,138,919 $ 140,985,192 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 OPTIMIZERx CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months Ended March 31, 2022 2021 Revenue $ 13,731,530 $ 11,229,211 Cost of revenues 5,629,858 5,104,603 Gross margin 8,101,672 6,124,608 Operating expenses Salaries, Wages, & Benefits 5,305,866 3,580,817 Stock-based compensation 3,174,098 707,153 Other general and administrative expenses 3,382,809 2,474,946 Total operating expenses 11,862,773 6,762,916 Loss from operations ( 3,761,101 ) ( 638,308 ) Other income Interest income 3 931 Loss before provision for income taxes ( 3,761,098 ) ( 637,377 ) Income tax benefit - Net Loss $ ( 3,761,098 ) $ ( 637,377 ) Weighted average number of shares outstanding – basic 17,878,068 16,101,837 Weighted average number of shares outstanding – diluted 17,878,068 16,101,837 Income (loss) per share – basic $ ( 0.21 ) $ ( 0.04 ) Income (loss) per share – diluted $ ( 0.21 ) $ ( 0.04 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 OPTIMIZERx CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (UNAUDITED) Additional Common Stock Paid in Accumulated Shares Amount Capital Deficit Total Balance January 1, 2022 17,860,975 $ 17,861 $ 166,615,514 $ ( 35,253,658 ) $ 131,379,717 Shares issued for stock options exercised 28,006 28 258,100 - 258,128 Stock-based compensation expense 13,627 14 3,174,084 - 3,174,098 Net loss - - - ( 3,761,098 ) ( 3,761,098 ) Balance March 31, 2022 17,902,608 $ 17,903 $ 170,047,698 $ ( 39,014,756 ) $ 131,050,845 Additional Common Stock Paid in Accumulated Shares Amount Capital Deficit Total Balance January 1, 2021 15,223,340 $ 15,223 $ 85,590,428 $ ( 35,631,737 ) $ 49,973,914 Public offering of common shares, net of offering costs 1,523,750 1,524 70,670,012 - 70,671,536 Shares issued as board compensation 2,695 3 124,991 - 124,994 Shares issued for stock options exercised 510,803 511 1,119,500 - 1,120,011 Stock-based compensation expense - - 582,159 - 582,159 Net loss - - - ( 637,377 ) ( 637,377 ) Balance March 31, 2021 17,260,588 $ 17,261 $ 158,087,090 $ ( 36,269,114 ) $ 121,835,237 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 OPTIMIZERx CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 3,761,098 ) $ ( 637,377 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 471,539 496,321 Stock-based compensation 3,174,098 582,159 Stock issued for board service - 124,994 Provision for loss on accounts receivable 21,000 20,000 Changes in: Accounts receivable 5,643,761 3,126,815 Prepaid expenses and other assets 1,021,166 937,083 Accounts payable ( 6,079 ) ( 118,971 ) Revenue share payable ( 1,202,497 ) ( 1,476,063 ) Accrued expenses and other liabilities ( 1,184,781 ) ( 1,550,569 ) Operating leases, net ( 2 ) ( 987 ) Deferred revenue ( 96,863 ) 162,345 NET CASH PROVIDED BY OPERATING ACTIVITIES 4,080,244 1,665,750 CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of property and equipment ( 14,480 ) ( 19,871 ) Purchase of intangible assets, including intellectual property rights ( 51,271 ) ( 64,693 ) NET CASH USED IN INVESTING ACTIVITIES ( 65,751 ) ( 84,564 ) CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Proceeds from public offering of common stock, net of offering costs - 70,671,536 Proceeds from exercise of stock options 258,128 1,120,011 Payment of contingent consideration - ( 1,610,813 ) NET CASH PROVIDED BY FINANCING ACTIVITIES 258,128 70,180,734 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,272,621 71,761,920 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 84,681,770 10,516,776 CASH AND CASH EQUIVALENTS - END OF PERIOD $ 88,954,391 $ 82,278,696 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - Lease liabilities arising from right of use assets $ - $ - The accompanying notes are an integral part of these condensed consolidated financial statements. 5 OPTIMIZERx CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2022 NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include OptimizeRx Corporation and its wholly owned subsidiaries (collectively, the “Company”, “we”, “our”, or “us”). 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 60 % of U.S. healthcare providers and millions of their patients through an intelligent technology platform embedded within a proprietary point-of-care network, OptimizeRx helps patients start and stay on their medications. The condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 have been prepared by us without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. In the opinion of management, all adjustments necessary to present fairly our financial position at March 31, 2022, and our results of operations, changes in stockholders’ equity, and cash flows for the three months ended March 31, 2022 and 2021, have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated condensed balance sheet as of December 31, 2021, has been derived from the audited consolidated condensed balance sheet as of that date. Certain information and note disclosures, including a detailed discussion about the Company’s significant accounting policies, normally included in our annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with a reading of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission on February 28, 2022. The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the full year. NOTE 2 – NEW ACCOUNTING STANDARDS 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 Company adopted this standard effective January 1, 2021. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows. Not Yet Adopted ASU Topic 2021-08 Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The standard is effective for the Company’s fiscal year beginning January 1, 2023, with early adoption permitted. The Company is currently evaluating the effect of this pronouncement on its Consolidated Financial Statements, but it is not expected to have a material impact. 6 OPTIMIZERx CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2022 NOTE 3 – REVENUES Under ASC 606, Revenue from Contracts with Customers , we record revenue when earned, rather than when billed. From time to time, we may record revenue based on our revenue recognition policies in advance of being able to invoice the customer, or we may invoice the customer prior to being able to recognize the revenue. Included in accounts receivable are unbilled amounts of $ 2,824,724 and $ 2,110,865 at March 31, 2022, and December 31, 2021, respectively. Amounts billed in advance of revenue recognition are presented as deferred revenue on the condensed consolidated balance sheets. The Company has several signed contracts with customers for the distribution of messaging, or other services, which include payment in advance. The payments are not recorded as revenue until the revenue is earned under its revenue recognition policy. Deferred revenue was $ 1,293,044 and $ 1,389,907 as of March 31, 2022 and December 31, 2021, respectively. The contracts are all short term in nature and all revenue is expected to be recognized within 12 months, or less. Following is a summary of activity for the deferred revenue account for the quarter ended March 31. Balance January 1, 2022 $ 1,389,907 Revenue recognized ( 6,013,181 ) Amount collected 5,916,318 Balance March 31, 2022 $ 1,293,044 The majority of our revenue is earned from life sciences companies, such as pharmaceutical and biotech companies, or medical device makers. A small portion of our revenue is earned from other sources, such as associations and technology companies. A break down is set forth in the table below. Three Months Ended March 31, 2022 2021 Revenue from: Life Science Companies $ 13,717,930 $ 10,862,041 Other 13,600 367,170 Total Revenue $ 13,731,530 $ 11,229,211 NOTE 4 – LEASES We have operating leases for office space in two multitenant facilities with lease terms greater than 12 months, which are recorded as assets and liabilities on our condensed consolidated balance sheets. These leases include our corporate headquarters, located in Rochester, Michigan, and a technical facility in Zagreb, Croatia. We also had a lease on office space in Cranbury, New Jersey, which expired in January 2022. We did not renew the New Jersey lease. For leases that contain renewal options, we have only assumed renewal for the headquarters lease. Lease-related assets, or right-of-use assets, are recognized at the lease commencement date at amounts equal to the respective lease liabilities, adjusted for prepaid lease payments, initial direct costs, and lease incentives received. Lease-related liabilities are 7 OPTIMIZERx CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2022 NOTE 4 – LEASES (continued) recognized at the present value of the remaining contractual fixed lease payments, discounted using our incremental borrowing rate. Amortization of the right of use assets is recognized as non-cash lease expense on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Short term lease costs include month to month leases and occasional rent for transient meeting and office spaces in shared office space facilities. For the three months ended March 31, 2022 and 2021, the Company’s lease cost consists of the following components, each of which is included in operating expenses within the Company’s condensed consolidated statements of operations: Three Months Ended March 31, 2022 Three Months Ended March 31, 2021 Operating lease cost $ 26,718 $ 33,365 Short-term lease cost 8,092 15,924 Total lease cost $ 34,810 $ 49,289 The table below presents the future minimum lease payments to be made under operating leases as of March 31, 2022: As of March 31, 2022 2022 74,220 2023 98,961 2024 80,334 2025 70,224 Total 323,739 Less: discount 23,212 Total lease liabilities $ 300,527 The weighted average remaining lease term at March 31, 2022 for operating leases is 3.4 years and the weighted average discount rate used in calculating the operating lease asset and liability is 4.5 %. Cash paid for amounts included in the measurement of lease liabilities was $ 24,493 and $ 30,846 for the three months ending March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022 and 2021, payments on lease obligations were $ 27,898 and $ 35,657 , respectively, and amortization on the right of use assets was $ 28,023 and $ 29,859 , respectively. NOTE 5 – STOCKHOLDERS’ EQUITY During the quarter ended March 31, 2022, we issued a total of 28,006 shares of our common stock and received total proceeds of $ 258,128 in connection with the exercise of stock options under our 2013 Incentive Plan. We also issued 13,627 shares in connection with the vesting of restricted stock units under the same plan. During the quarter ended March 31, 2021, we issued a total of 510,803 shares of our common stock in connection with the exercise of stock options under our 2013 Incentive Plan. A total of 368,329 shares were issued in a cashless transaction related to 394,739 expiring options using the net settled method whereby 26,410 options were used to pay the purchase price. The remaining 116,064 shares issued in connection with the exercise of options were all issued for cash for total proceeds of $ 1,120,011 . 8 OPTIMIZERx CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2022 NOTE 5 – STOCKHOLDERS’ EQUITY (continued) During the quarter ended March 31, 2021, in an underwritten primary offering, we issued 1,523,750 shares of our common stock for gross proceeds of $ 75,425,625 . In connection with this transaction, we incurred equity issuance costs of $ 4,754,089 related to payments to the underwriter, advisors and legal fees associated with the transaction, resulting in net proceeds to the Company of $ 70,671,536 . During the quarter ended March 31, 2021, we issued 2,695 shares of our common stock to our independent directors in connection with our Director Compensation Plan. These shares were valued at $ 124,994 at the day of issuance. NOTE 6 – STOCK BASED COMPENSATION We use the fair value method to account for stock-based compensation, including both options and restricted stock units. We recorded $ 905,743 and $ 391,318 in compensation expense in the three months ended March 31, 2022 and 2021, respectively, related to options issued under our equity compensation plans. This includes expense related to options issued in prior years for which the requisite service period for those options includes the current period as well as options issued in the current period. The fair value of these instruments was calculated using the Black-Scholes option pricing model. There is $ 10,390,172 of remaining expense related to unvested options to be recognized in the future over a weighted average period of 2.4 years. The total intrinsic value of outstanding options at March 31, 2022 was $ 8,474,053 . We recorded $ 2,268,355 and $ 190,841 in compensation expense related to restricted stock units in the three months ended March 31, 2022 and 2021, respectively. These units vest both over time and based on market conditions. Of the $ 2,268,355 recorded in compensation expense, $ 1,503,359 is related to market-based equity grants. The expense related to the market-based grants was calculated using a Monte Carlo simulation. There is $ 19,175,194 of remaining expense related to unvested restricted stock units to be recognized in the future over a weighted average period of 2.3 years. NOTE 7 – EARNINGS (LOSS) PER SHARE Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. The number of shares related to options and restricted stock units included in diluted EPS is based on the “Treasury Stock Method” prescribed in ASC 260-10, Earnings per Share. This method assumes the theoretical repurchase of shares using proceeds of the respective stock options exercised, and for restricted stock units, the amount of compensation cost attributed to future services which have not yet been recognized, and the amount of current and deferred tax benefit, if any, that would be credited to additional paid in capital upon the vesting of the restricted stock units, at a price equal to the issuer’s average stock price during the related earnings period. Accordingly, the number of shares includable in the calculation of EPS in respect of the stock options and restricted stock units is dependent on this average stock price and will increase as the average stock price increases. 9 OPTIMIZERx CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 2022 NOTE 7 – EARNINGS (LOSS) PER SHARE (continued) The following table sets forth the computation of basic and diluted net loss per share. Three Months Ended March 31, 2022 2021 Numerator Net Loss $ ( 3,761,098 ) $ ( 637,377 ) Denominator Weighted average shares outstanding used in computing net loss per share Basic 17,878,068 16,101,837 Effect of dilutive stock options, warrants, and stock grants - - Diluted 17,878,068 16,101,837 Net Loss per share Basic $ ( 0.21 ) $ ( 0.04 ) Diluted $ ( 0.21 ) $ ( 0.04 ) No calculation of diluted earnings per share is included for 2022 or 2021 as the effect of the calculation would be anti-dilutive. The number of common shares potentially issuable upon the exercise of certain options that were excluded from the diluted loss per common share calculation in 2022 was 221,251 related to options, and 77,446 related to restricted stock units, for a total of 298,697 shares. The number of common shares potentially issuable upon the exercise of certain options that were excluded from the diluted loss per common share calculation in 2021 was 846,441 related to options, and 137,304 related to restricted stock units, for a total of 983,745 shares. NOTE 8 – CONTINGENCIES Litigation The Company is not currently involved in any legal proceedings. NOTE 9 – INCOME TAXES As discussed in our annual report on Form 10-K for the year ended December 31, 2021, we had net operating loss carry-forwards for federal income tax purposes of $ 26.4 million as of December 31, 2021. Accordingly, no federal income tax expense or benefit is recorded in the current period. NOTE 10 – SUBSEQUENT EVENTS In April 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. This strategic acquisition allows us to help patients get access to the drugs they need by simplifying the prescribing process for specialty products. The consideration was comprised of $ 2 million in cash and the issuance of 240,741 shares of common stock. 185,185 shares of common stock were issued at the closing of the acquisition and 55,556 shares of common stock were issued but held back to secure potential adjustments to the purchase price that may result from the indemnification obligations of EvinceMed and the EvinceMed shareholder indemnitors. The shares were valued at $ 9,374,455 based on the closing price of $ 38.94 per share on the date of acquisition. The holdback amount will be released 12 months from the closing, subject to any adjustments for the payment by EvinceMed and the shareholder indemnitors for its and their indemnification obligations. It is impractical to disclose a preliminary purchase price allocation of these assets at this time as we are currently in the process of completing that analysis. 10