What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-10 compared with 2022-02-28 · 354 added, 371 removed, 22 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

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.

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 continued to rise, our

platform has expanded 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.

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.

Our strategy for driving revenue growth is also expected to work in tandem with our efforts to increase

margin and profitability using the aforementioned recurring revenue models that have inherently higher margins.

the business continues to grow, operating expenses are expected to increase much more slowly than revenue.

following discussion includes an analysis and comparison of the Company’s 2021 and 2020 fiscal year results of operations, liquidity

and capital resources, and critical accounting policies.

Business Update

COVID-19 pandemic created unprecedented challenges in the healthcare industry which increased the demand for unique solutions ranging

from access to accurate and timely information to increasing the accessibility of medications and care management.

We also leveraged

our digital platform to provide telehealth capabilities for healthcare providers to adapt to COVID-19 restrictions.

the beginning of the pandemic, we transitioned our global workforce to working remotely to maintain the health and safety of our employees.

Governments of cities, states, and countries globally imposed restrictions on travel and business operations, which curtailed various

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

We are conducting business with

certain modifications to employee travel and employee work locations.

In addition, we have implemented health and safety policies in

our offices to enable our employees to safely return to traditional working arrangements.

We will continue to actively monitor the situation

and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we

determine are in the best interests of our employees, customers, and shareholders.

COVID-19 pandemic did not have an adverse impact on our financial condition and results of operations in 2021, 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.

pertaining to risk factors as it relates to the COVID-19 pandemic can be found in Item 1A.

Risk Factors.

Performance Indicators

developed a number of key performance indicators, and intend to monitor these going forward, to evaluate our business, measure our performance,

identify trends affecting our business and make strategic decisions.

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 2020 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 2021 as compared to 2020 is primarily the result of our

focus on signing larger and more comprehensive deals.

Average revenue

per top 20 pharmaceutical manufacturer

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 2020 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.

The increase from 2020 to 2021 reflects continued penetration into this core customer base and reflects

two new top 20 pharma customers in 2021.

Percent of top

20 pharmaceutical manufacturers that are customers

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 2020 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 this core group of customers grew slightly faster than our overall revenue, enabling

us to maintain a similar percentage of revenues from this group.

Percent of total

revenue attributable to top 20 pharmaceutical manufacturers

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 2020 was increased as a result of unplanned disruption to the industry caused by the Covid-19

Our customers shifted funds previously designated for in-person events to digital marketing throughout 2020.

By 2021, while

the pandemic continued, there was less disruption and customers shifted some funds back to traditional channels.

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.

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 continued to rise, our platform has expanded to encompass additional

solutions that enable healthcare providers to access information for patients at the point of care.

These solutions include brand messaging,

therapeutic support messaging, brand support, and innovative patient engagement services, all of which now make up a significant portion

of our total revenue.

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 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.

strategy for driving revenue growth is also expected to work in tandem with our efforts to increase margin and profitability using the

aforementioned recurring revenue models that have inherently higher margins.

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 39% of our revenue for the year ended December 31, 2022.

In each of 2022 and 2021, we had one customer that each represented more than 10% of our revenues.

In general, the pharmaceutical brand marketing

industry experiences seasonal trends that affect the vast majority of participants in the pharmaceutical digital marketing industry.

pharmaceutical companies allocate the largest portion of their brand marketing to the fourth quarter of the calendar year.

the first quarter tends to reflect lower activity levels and lower revenue, with gradual increases in the following quarters.

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 the COVID-19

pandemic, 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 fewer number of U.S.

drug approvals could create

additional certainty 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.

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 2020 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.

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.

decrease in the average in 2022 as compared to 2021 is primarily the result of the convergence of numerous macroeconomic factors that

resulted in our customers slowing their rate of spend, particularly for large and/or new implementations, which we believe prolonged sales

cycles with the top 20 pharmaceutical manufacturers that were existing customers.

Twelve Months Ended

Average revenue per top 20 pharmaceutical manufacturer

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 2020

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.

The decrease in 2022 was due to the Company not supporting programs for a smaller revenue customer from 2021 in 2022.

Twelve Months Ended

Percent of top 20 pharmaceutical manufacturers that are customers

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 2020 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.

from customers that aren’t top 20 pharmaceutical manufacturers increased faster than our overall revenue, decreasing the percentage of

our overall revenues from top 20 pharmaceutical manufacturers.

Twelve Months Ended

Percent of total revenue attributable to top 20 pharmaceutical manufacturers

Net revenue retention.

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 grew more quickly than our increase in the number of employees, allowing us to achieve more productivity.

We were able to do this by taking advantage of the expandable technology infrastructure that we have built over the years.

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).

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 2022

decreased due to the convergence of numerous macroeconomic factors that resulted in our customers slowing their rate of spend, particularly

for large and/or new implementations, which we believe prolonged sales cycles.

Twelve Months Ended

Net revenue retention

Revenue per average full-time employee.

of Operations for the Years Ended December 31, 2021 and 2020

net revenue increased 42% to $61.3 million for the year ended December 31, 2021 from $43.3 million for the year ended December 31, 2020.

This increase resulted from a combination of factors, including the shift to enterprise contracts, increased pharmaceutical brands, an

increased distribution network, and growth in our messaging solutions.

We expect continued revenue growth in 2022 as a result of the

foundations laid in 2020 and 2021.

the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number

of companies.

We have approximately 50 pharmaceutical companies as customers.

However, we had only one and three customers that individually

represented more than 10% of our revenues in 2021 and 2020, respectively.

total cost of revenues, composed primarily of revenue share expense paid to our network partners, increased in the year ended December

31, 2021 compared to the year ended December 31, 2020 due to the increase in revenues.

Our cost of revenues as a percentage of revenue

decreased from approximately 44% in the year ended December 31, 2020 to approximately 42% in the year ended December 31, 2021.

decrease in our cost of revenues as a percentage of revenue resulted primarily from solution mix, specifically the increase in services

we provide that are not subject to revenue share.

gross margin, which is the difference between our revenues and our cost of revenues, increased from 2020 to 2021 as a result of the increased

In addition, our gross margin percentage increased from 56% in 2020 to 58% in 2021 for the reasons discussed above in the cost

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.

rate per employee declined year over year due to slower revenue growth and a higher average number of FTEs over the last 12 month period.

Twelve Months Ended

Revenue per average full-time employee

Results of Operations for the Years Ended December

31, 2022 and 2021

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:

Years Ended December 31,

(in thousands, except percentage data)

Total Revenue

Cost of Revenues

Operating expenses

Income (loss) from operations

Income (loss) before provision for income taxes

Income tax benefit

Net income (loss)

and percentage of total revenue information may not add due to rounding

Our net revenue increased 2% to $62.5 million

for the year ended December 31, 2022 from $61.3 million for the year ended December 31, 2021.

This increase resulted from increases

in sales of our access solutions.

Cost of Revenues

Our total cost of revenues, composed

primarily of revenue share expense paid to our network partners, decreased in the year ended December 31, 2022 compared to the

year ended December 31, 2021.

Our cost of revenues as a percentage of revenue decreased to approximately 38% in the year ended

December 31, 2022 from approximately 42% in the year ended December 31, 2021.

This decrease in our cost of revenues as a

percentage of revenue resulted primarily due to favorable solution and channel partner mix and increases in the type of services we

provide that are not subject to revenue share.

Our gross margin, which is the difference between

our revenues and our cost of revenues, increased from 2021 to 2022 as a result of solution mix.

In general, during 2022, there was an

increase in the percentage of activity flowing through our lower cost channels compared with 2021.

Additionally, revenue increases in

our access solutions includes a much higher percentage of program design, which carries a higher margin than the delivery of the actual

In addition, our gross margin percentage increased to 62% in 2022 from 58% in 2021 for the reasons discussed above in the cost

of revenues section.

We expect our gross margins to be in the 57% to 60% range in 2022.

expenses increased to $35.3 million for the year ended December 31, 2021, from $26.2 million for the year ended December 31, 2020, an

increase of approximately 34%.

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

Certain 2020 expenses were reclassified

in the table to be comparable to the 2021 presentation.

Ended December 31

Compensation Expense

Operating Expenses

Operating expenses increased to $51.3 million

for the year ended December 31, 2022, from $35.3 million for the year ended December 31, 2021, an increase of approximately

The increase in sales, general and administrative expense was $5.8 million.

The detail by major category is reflected in the table

Years Ended December 31

Stock-based compensation

Contractors and Consultants

Professional Fees

Board Compensation

Investor Relations

Advertising and Promotion

Depreciation and amortization

Technology Infrastructure

Integration Incentives

Office, Facility and Other

Operating Expense

main drivers for the overall increase in operating expenses in 2021 was our focus on staffing and scaling our company to foster and be

able to support our planned growth.

the operating expenses, there were a variety of increases, the largest of which was in compensation expense as a result of additional

staff added in 2020 and 2021, including related benefits.

During 2021, we added to our staff in several key areas, including product

development, sales, and IT, and the addition of our General Counsel and Chief Compliance Officer, and Chief Financial Officer/ Chief

Operating Officer.

Other sales, general, and administrative expense

Total Operating Expense

Within the operating expenses, there were a variety

of increases, the largest of which was in stock-based compensation, a non-cash expense, which increased by $10.3 million from $5.5 million

in 2021 to $15.7 million in 2022.

Stock-based compensation is awarded to all full-time employees upon their start of employment as well

as to directors, officers and certain key employees to provide an equity-based incentive to maintain and enhance the performance and profitability

of the Company.

In the fourth quarter of 2021, we issued a significant market-based grant with a requisite service period of less than

The expense for the market-based award is amortized over the expected service period.

The impact on 2022 expense for such market-based

award in 2022 was $6.1 million.

The increase in other sales, general, and administrative

expense is due to higher salaries, wages, and benefits and other human resources related costs as a result of the expansion of, and investment

in, our team to support additional growth.

During 2022, we hired 12 net additional employees.

We expect our compensation expense to continue to increase in 2022,

as a result of the full year impact of 2021 hires and new hires in 2022.

based compensation increased by $2.3 million from $3.2 million in 2020 to $5.5 million in 2021 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 either the option grant or the

RSU grant and the fair value of the option or RSU, resulting in a higher cost when the stock price is higher.

Our stock price was higher,

on average, in 2021 than 2020.

In addition, we hired 3 high level executives, which tend to have larger awards, and awarded the CEO a

market-based grant with a requisite service period of less than 3 years.

and consultants decreased from 2020 to 2021 as we added staff to fill roles previously filled by consultants or contractors.

fees increased by 16% in 2021 compared with 2020.

With the assistance of an outside legal firm, we undertook a comprehensive governance

review of our bylaws, board charters, equity compensation plan, and overall corporate policies.

The cost of this review, partially offset

by a reduction in the cost of our audit, accounts for the increase.

compensation increased slightly from 2020 to 2021 due to the full year impact of an increase in the size of our board in 2020.

This represents

only the cash portion of the compensation.

relations increased in 2021as a result of hiring a new investor relations firm, as well as increased activity in the area.

advertising and promotion costs increased from 2020 to 2021 as a result of a resumption in the sponsorship of, and attendance at, conferences.

These activities were drastically reduced in 2020 due to the global pandemic.

These activities were increased in 2021 once a Covid vaccine

was developed.

infrastructure costs increased due to continued investment in our operating systems to facilitate new products as well as the implementation

of additional software products to increase efficiency and information dissemination.

costs increased as we have purchased more data, primarily to aid in our selling effort and allow customers to target their messages more

appropriately based on this data, thereby increasing our ability to charge premium prices for more highly targeted messages.

and exclusivity costs, which represent payments to partners for access and/or exclusivity, increased because of new agreements signed.

These payments are usually made in lump sums and expensed over the term of the contracts.

These expenses are an important part of our

ability to expand our network.

These costs increased in 2021, as we signed more contracts and contracts with larger payments.

and amortization in 2021 remained relatively similar to 2020.

We expect depreciation and amortization expense in 2022 to increase from

2021 levels as we continue to invest in the growth of our business.

facility, and other miscellaneous costs increased from 2020 to 2021.

The main reason for the change related to a higher level of activity

with more employees, as well as hiring expenses, including recruiter fees.

increased slightly from 2020 to 2021 as we reopened travel gradually in the second half of the year.

In 2020, we had three months of

normal travel pre-pandemic followed by very little the remainder of the year, while 2021 had lower levels than normal spread more throughout

Income (Loss)

finished the year ended December 31, 2021 with net income of $0.4 million, as compared to a net loss of $2.2 million during the year

ended December 31, 2020.

The reasons for specific components are discussed above.

Overall, we had an increase in revenue and gross margin

partially offset by increased operating expenses..

Net Income (Loss)

We finished the year ended December 31, 2022

with a net loss of $11.4 million, compared to net income of $0.4 million during the year ended December 31, 2021.

The reasons for

specific components are discussed above.

Overall, we had an increase in revenue and gross margin partially offset by increased operating

In addition, the income or loss in both periods included significant noncash items.

We had $5.2 million in noncash operating expenses in 2020 and $7.6 million in noncash operating expenses in 2021.

Financial Information

is a table of our quarterly operating results for 2021 for information purposes.

Cost of revenues

Income (Loss) from Operations

income (expense)

Income (loss) before Taxes

Income (Loss)

Earnings (loss) per share

of four quarterly per share amounts does not equal annual total due to rounding and the mechanics of the weighted average shares outstanding

is a table of our quarterly operating results for 2020 for information purposes.

Cost of revenues

Income (Loss) from Operations

income (expense)

Income (loss) before Taxes

Income (Loss)

Earnings (loss) per share

of four quarterly per share amounts does not equal annual total due to rounding and the mechanics of the weighted average shares outstanding

and Capital Resources

of December 31, 2021, we had total current assets of $115.1 million, compared with current liabilities of $9.4 million, resulting in

working capital of $105.7 million and a current ratio of 12 to 1.

This compares with the working capital balance of $22.9 million and

the current ratio of 3.3 to 1 at December 31, 2020.

This increase in working capital, as discussed in more detail below, is primarily

the result of a public offering of common stock in 2021.

is a table with summary data from the consolidated statement of cash flows for the years ended December 31, 2021 and 2020, as presented.

Net cash provided

by (used in) operating activities

We had $18.0 million in noncash operating

expenses in 2022 compared to $7.6 million in noncash operating expenses in 2021.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been cash receipts

from customers and proceeds from equity offerings.

As of December 31, 2022, we had total current assets of $98.6 million, compared

with current liabilities of $8.4 million, resulting in working capital of $90.2 million and a current ratio of 12 to 1.

This compares

with a working capital balance of $105.7 million and a current ratio of 12 to 1 at December 31, 2021.

This decrease in working capital,

as discussed in more detail below, is primarily the result of the common stock buyback program.

Following is a table with summary data from the

consolidated statement of cash flows for the years ended December 31, 2022 and 2021, as presented.

Net cash provided by operating activities

Net cash used in investing activities

(58,176,386 )

Net cash used in investing

cash provided by (used in) financing activities

increase in cash and cash equivalents

Net cash (used in) / provided by financing activities

(18,950,777 )

operating activities provided $0.7 million in the year ended December 31, 2021, as compared with approximately $6.3 million used in operating

activities in the year ended December 31, 2020.

Net (decrease) / increase in cash and cash equivalents

$ (66,473,085 )

Our operating activities provided $10.7 million

in the year ended December 31, 2022, as compared with approximately $0.7 million provided by operating activities in the year ended

December 31, 2021.

We had a net loss of $11.4 million for 2022, but non-cash expenses of $18.1 million and working capital generated

by the collection of receivables offset the loss.

The cash provided in 2021 was the result of our net income and non-cash expenses, which

2 unchanged sentences

higher revenues.

The cash used in 2020 was primarily the result of the increased working capital required to support higher revenues,

totaling $9.7 million.

In addition, we had a net loss of $2.2 million, but non-cash expenses included in that loss of $5.6 million, resulting

in net cash generated of $3.4 million between the two, which offset the investment in working capital.

used $0.5 million in investing activities in 2021, compared with $0.1 million in 2020, primarily as the result of purchase of both tangible

and intangible assets.

The 2021 amount included $0.4 million of capitalized software development costs related to our proprietary systems

and $0.1 million of tangible property, primarily personal computers.

The majority of the 2020 investments were in computers, with small

additional amounts of capitalized software.

activities provided $73.9 million in the year ended December 31, 2021.

The cash provided in 2021 was the result of our underwritten offering

in 2021, which generated $70.7 million, as well as from the proceeds of option exercises, which generated $4.9 million.

This was partially

offset by the payment of contingent consideration related to previous acquisitions of $1.6 million.

We used cash of $1.9 million in 2020

as the result of the payment of contingent consideration related to previous acquisitions of $4.4 million, partially offset by the proceeds

from option exercises of $2.5 million.

believe that funds generated from operations, together with existing cash, will be sufficient to finance our current operations and planned

growth for the next twelve months.

We used $58.2 million in investing activities

in 2022, compared with $0.5 million in 2021.

In addition to the $2.0 million investment in EvinceMed technology, we purchased $55.9 million

in Treasury bills in 2022 with maturity dates in 2023.

The 2021 amount included $0.4 million of capitalized software development costs

related to our proprietary systems and $0.1 million of tangible property, primarily personal computers.

We used $19.0 million in financing activities

in the year ended December 31, 2022.

We repurchased 1,214,398 shares of common stock for $20.0 million.

This was partially offset

by the collection of $1.1 million related to the exercise of stock options during the period.

The cash provided in 2021 was the result

of our underwritten offering in 2021, which generated $70.7 million, as well as from the proceeds of option exercises, which generated

$4.9 million.

This was partially offset by the payment of contingent consideration related to previous acquisitions of $1.6 million.

We believe that funds generated from operations,

together with existing cash and short term investments, 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.

we believe we can generate the cash needed to operate beyond the next 12 months from operations.

Balance Sheet Arrangements

of December 31, 2021, there were no off-balance sheet arrangements.

Accounting Policies

“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.

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, 2021;

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

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

assets and impairment of assets.

Following is a summary of those policies.

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.

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.

Off Balance Sheet Arrangements

As of December 31, 2022, 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.

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 Note 2 to the Consolidated

Financial Statements 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:

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

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.

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.

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.

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.

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

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.

some instances, we license certain of our software applications in arrangements that do not include other performance obligations.

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.

some instances, we also resell messaging solutions that are available through channel partners that are complementary to the core business

and client base.

These partner specific solutions are frequently similar to our own solutions and revenue recognition for these programs

is the same as described above.

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

revenue split that we receive.

There were no 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.

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.

assets are stated at cost.

Finite-lived assets are being amortized over their estimated useful lives of fifteen to seventeen years for

patents, eight years for customer relationships, fifteen years for tradenames, four years for covenants not to compete, and three to

four years for software and websites, all using the straight-line method.

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

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

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.

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.

were no 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 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.

Intangible Assets

Intangible assets are stated at cost.

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.

There was no impairment of our intangible assets in either year presented.

evaluate goodwill for impairment during our fiscal fourth quarter, or more frequently if an event occurs or circumstances change.

determined there was no impairment as goodwill had a fair value comfortably in excess of its carrying value.

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.

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.

There was no impairment of our intangible assets

in either year presented.

We evaluate goodwill for impairment during our

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

We determined there was no impairment as goodwill

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

Stock-based Compensation

We use the fair value method to account for stock-based

compensation.

The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital over

the period during which services are rendered.

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

For 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

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.

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.

restricted stock units, the fair value is based on the market value of the Company’s common stock on the date of grant.

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.

Issued Accounting Pronouncements

December 2019, the FASB issued ASU No.

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 December 2019, the FASB issued ASU No.

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 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 was effective for us as of January 1, 2021.

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

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.

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.

Quantitative and Qualitative Disclosures About Market Risk

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 adoption of this standard is not expected to have a material effect

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

Quantitative and Qualitative Disclosures

About Market Risk

Not applicable.

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 7. Management’s Discussion and Analysis