What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-12 compared with 2022-11-08 · 206 added, 254 removed, 98 unchanged (82% of the section changed)

3 unchanged sentences

This Quarterly Report on Form 10-Q contains statements

that relate to future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private

Securities Litigation Reform Act of 1995.

Certain statements, other than purely historical information, including estimates, projections,

statements relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating

results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking

statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,”

that relate to future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private Securities

Litigation Reform Act of 1995.

Certain statements, other than purely historical information, including estimates, projections, statements

relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating results, and

the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements

generally are identified by the words “believes,” “project,” “expects,” “anticipates,”

“estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,”

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Although OptimizeRx believes that the

expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained

and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety

of risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.

Forward-looking statements are subject to

risks and uncertainties.

Actual results could differ materially from those expressed in or implied by such forward-looking

statements due to a variety of factors, including:

disruptions to our business or the business of our customers due to the global

the inability to support our technology and scale our operations successfully, developing and implementing new and updated

applications, features and services for our portals may be more difficult and expensive and take longer than expected;

dependence on

a concentrated group of customers;

expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained and

it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of

risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.

Forward-looking statements are subject to risks

and uncertainties.

Actual results could differ materially from those expressed in or implied by such forward-looking statements due to

a variety of factors, including:

seasonal trends in the pharmaceutical brand marketing industry;

the inability to support our technology

and scale our operations successfully, developing and implementing new and updated applications, features and services for our portals

may be more difficult and expensive and take longer than expected;

the inability to offer high-quality customer support for our portals;

dependence on a concentrated group of customers;

inability to maintain contracts with electronic prescription platforms, agreements with

electronic prescription platforms and electronic health record systems being subject to audit;

inability to attract and retain

inability to attract and retain customers;

inability to comply with laws and regulations that affect the healthcare industry;

developments in the

healthcare industry;

developments in the healthcare industry;

inability to manage growth;

inability to identify suitable acquisition candidates, complete acquisitions or

integrate acquisitions successfully;

inability to attract and retain key employees;

economic, political, regulatory and other risks

arising from our international operations;

inability to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully;

inability to attract and retain senior management and other key employees;

economic, political, regulatory and other risks arising from

our international operations;

inability to protect our intellectual property;

cybersecurity incidents;

reduction in the

performance, reliability and availability of our network infrastructure;

lack of a consistent active trading market for our common

reduction in the performance, reliability

and availability of our network infrastructure;

increases in costs due to inflation and other adverse economic conditions;

decreases in customer demand due to macroeconomic

and volatility in the market price of our common stock.

customer demand due to macroeconomic factors;

lack of a consistent active trading market for our common stock;

and volatility in the market

price of our common stock.

The risks and uncertainties included here are

not exhaustive.

Further information concerning our business, including additional factors that could materially affect our financial

results, is included herein and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended December

Further information concerning our business, including additional factors that could materially affect our financial results,

is included herein and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31,

Moreover, we operate in a rapidly changing and competitive environment.

New risk factors emerge from time to time, and it is

not possible for management to predict all such risk factors.

New risk factors emerge from time to time, and it is not

possible for management to predict all such risk factors.

Further, it is not possible to assess the effect

5 unchanged sentences

statements to reflect events or circumstances that occur after the date of this report.

OptimizeRx Corporation is a digital health technology

company incorporated in the State of Nevada.

We enable care-focused engagement between life sciences organizations, healthcare providers,

and patients at critical junctures throughout the patient care journey.

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 COVID-19 pandemic did not have a material

net impact on our financial statements during the nine months ended September 30, 2022.

However, there still remains uncertainty around

the COVID-19 pandemic.

The Company cannot reasonably predict the ultimate impact of the COVID-19 pandemic, including the extent of any

impact on our business, results of operations and financial condition, which will depend on, among other things, the duration and spread

of the pandemic (including the emergence and spread of new COVID-19 variants and resurgences), actions taken by governmental authorities

and others in response to the pandemic, the acceptance, safety and efficacy of vaccines, and global economic conditions.

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 artificial intelligence-powered real-world data 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.

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.

In general, the pharmaceutical brand marketing

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

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

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

We generally expect these seasonality trends to continue and our ability to effectively manage our resources in anticipation of these

trends may affect our operating results.

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 a fewer number of U.S.

drug approvals could create additional uncertainty within our target

customer markets.

Historically, during periods of economic uncertainty and downturns, businesses may slow spending, which may impact our

business and our customers’ businesses.

Adverse changes in demand could impact our business, collection of accounts receivable and

our expected cash flow generation, which may adversely impact our financial condition and results of operations.

Key Performance Indicators

We developed a number of key performance indicators

in the first quarter of the year and intend to monitor these going forward, to 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.

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.

During the first nine months of 2022, numerous macroeconomic factors converged that resulted in our

customers slowing their rate of spend, particularly for large and/or new implementations, which we believe temporarily elongated sales

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

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.

updated the definition of “top 20 pharmaceutical manufacturers” in our key performance indicators to be based upon Fierce Pharma’s

most updated list of “The top 20 pharma companies by 2022 revenue”.

We previously used “The top 20 pharma companies by

2020 revenue”.

As a result of this change, prior periods have been restated for comparative purposes.

Average revenue per top 20 pharmaceutical manufacturer.

Average revenue per top 20 pharmaceutical manufacturer is calculated by taking the total revenue the company recognized through pharmaceutical

manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2022 revenue” over the last twelve months, divided

by the total number of the aforementioned pharmaceutical manufacturers that our solutions helped support over that time period.

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.

decrease in the average in twelve months ended March 31, 2023 as compared to the twelve months ended March 31, 2022 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

Rolling Twelve Months

September 30,

Ended March 31

Average revenue per top 20 pharmaceutical manufacturer

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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

The increase from twelve months ended September 30, 2021 to the twelve months ended September 30, 2022 reflects continued

penetration into this core customer base and reflects one new top 20 pharma customers in the twelve months ended September 30, 2022.

vertical and believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment.

Our penetration within this core customer group stayed consistent from the twelve months ended March 31, 2022 to the twelve months

ended March 31, 2023.

Rolling Twelve Months

September 30,

Ended March 31

Percent of top 20 pharmaceutical manufacturers that are customers

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believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment.

the first nine months of 2022, numerous macroeconomic factors converged that resulted in our customers slowing their rate of spend, particularly

for large and/or new implementations, which we believe temporarily elongated sales cycles with the top 20 pharmaceutical manufacturers

that were existing customers.

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.

Rolling Twelve Months

September 30,

Ended March 31

Percent of total revenue attributable to top 20 pharmaceutical manufacturers

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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).

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 the twelve months ended September 30, 2021 was higher 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 the initial quarters

of the pandemic.

By the middle of 2021, while the pandemic continued, there was less disruption and customers shift towards digital solutions

became more normalized.

During the first nine months of 2022, however, numerous macroeconomic factors converged that resulted in

our customers slowing their rate of spend, particularly for large and/or new implementations, which we believe temporarily elongated

sales cycles.

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 the

twelve months ended March 31, 2023 was lower 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.

Rolling Twelve Months

September 30,

Ended March 31

Net revenue retention

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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 higher average number of FTEs over last 12 mos period.

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.

Rolling Twelve Months

September 30,

Ended March 31

Revenue per average full-time employee

Results of Operations for the Three and Nine Months Ended September 30,

Results of Operations for the Three Months Ended March 31,

2023 and 2022

Our total revenue for the three months ended

September 30, 2022 was approximately $15.1 million, a decrease of 6.45% over the approximately $16.1 million from the same period in

The decreased revenue during the three months ended September 30, 2022 primarily resulted from the non-renewal of solutions from

one customer brand.

Our total revenue for the nine months ended September 30, 2022 was approximately $42.8 million, an increase of 4.43%

over the approximately $41.0 million from the same period in 2021.

The increased revenue during the nine months ended September 30, 2022

resulted from increases in sales of our access solutions.

We expect that our revenues in the fourth quarter

will exceed the revenues in the third quarter as a result of the new contracts we secured in the first nine months of the year as well

as those we expect to engage in the remainder of the year.

In addition, we generally benefit from increased marketing spend by pharmaceutical

companies in the fourth quarter.

The following table sets forth, for the periods

indicated, the dollar value and percentage of net revenue represented by certain items in our consolidated statements of operations:

Three months ended March 31,

(in thousands, except percentage data)

Cost of revenues

The cost of revenue decreased from $7.0 million

to $5.7 million primarily as a result of the solution and channel mix, in the quarter ended September 30, 2022, as compared to the

same period in 2021.

The cost of revenue for the nine month period ended September 30, 2022 decreased from $17.7 million to $16.3

million, as compared to the same period in 2021.

This improvement was a result of solution mix, both as it relates to solutions and the

partners through which the messages are delivered and increases in the type of services we provide that are not subject to revenue share.

Additional discussion is included in the gross margin section below.

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses

Loss from operations

Loss before provision for income taxes

Income tax benefit

$ (6,397,714 )

$ (3,761,098 )

* Balances and percentage of net revenue information may not

add due to rounding

Our net revenue reported for the three months

ended March 31, 2023 was approximately $13.0 million, a decrease of 5% over the approximately $13.7 million from the same period

The decrease in revenue was primarily driven by the macroeconomic pressures affecting our customers.

Cost of Revenues

Gross Margin %

As reflected in the table above, our gross margin,

which is the difference between our revenues and our cost of revenues, increased for the quarter ended September 30, 2022, compared

with the prior year, as a result of solution mix.

In general, there has been an increase in the percentage of activity flowing through

our lower cost channels compared with a year ago.

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 messages.

We expect our gross margin to remain relatively

constant for the balance of the year.

Our cost of revenues, composed primarily of revenue

share expense paid to our network partners, remained relatively consistent at $5.6 million for the three months ended March 31, 2023

compared to the same period of 2022.

Our cost of revenues as a percentage of revenue increased to approximately 42.8% for the quarter

ended March 31, 2023 from approximately 41.0% for the quarter ended March 31, 2022.

This increase in cost of revenue as a percentage

of revenue was a result of solution and channel mix.

Additional discussion is included in the gross margin section below.

Our gross margin, which is the difference between

our revenues and our cost of revenues, decreased for the three months ended March 31, 2023, as a result of solution and channel mix.

During the three months ended March 31, 2023, there was a decrease in the percentage of activity flowing through our lower cost channels

compared with a year ago.

Operating Expenses

Operating expenses increased from approximately

$9.0 million for the three months ended September 30, 2021 to approximately $13.2 million for the same period in 2022, an increase

of approximately 46%.

Operating expenses increased from approximately $23.5 million for the nine months ended September 30, 2021 to approximately

$37.9 million for the same period in 2022, an increase of approximately 61%.

This increase in expense is due to investment in, and expansion

of, our workforce to enable future growth.

Stock based compensation, a noncash expense, had the greatest increase over prior year and

is discussed in greater detail below.

The detail of expenditures by major category is reflected in the table

Operating expenses increased to approximately

$14.5 million for the three months ended March 31, 2023 from approximately $11.9 million for the same period in 2022, an increase of approximately

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Salaries, Wages, & Benefits

Stock-based compensation

Contractors and Consultants

Board Compensation

Professional Fees

Investor Relations

Advertising and Promotion

Technology Infrastructure Costs

Integration Incentives

Office, Facility, and Other

Depreciation and Amortization

Depreciation, amortization and noncash lease expense

Other general and administrative expenses

Total operating expense

The increase in operating expense related to

salaries, wages, and benefits and other human resource related costs is due to the expansion of our team to support additional growth.

We expect our compensation expense for the remaining quarter of 2022 to only be marginally higher to the expenses recognized for the

quarter ended September 30, 2022.

Since September 30, 2021, we have added to our staff in several key areas, including product

development, sales, and technology, and the addition of our Chief Financial Officer/Chief Operations Officer.

During the past 12 months

we hired 37 net additional employees.

Stock-based compensation increased by $3.3 million

from $1.0 million for the three months ended September 30, 2021 to $4.3 million for the same period in 2022 and by $8.9 million from

$2.6 million for the nine months ended September 30, 2021 to $11.5 million for the same period in 2022.

Stock based compensation is awarded

to all full-time employees upon their start of employment as well as to certain key directors, officers, and 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 3 years.

The expense for the market-based award is amortized

over the expected service period.

The impact on year to date expense is $4.6 million.

Contractors and consultants increased compared

to the same period in prior year as we have incurred consulting costs associated with building a scalable infrastructure and increased

development work for customers and channels.

Our advertising and promotion remained relatively

consistent with prior year, though the timing of the expenses throughout the year has fluctuated.

The most current three month period

reflects a decrease in advertising and promotion.

This spend fluctuates throughout the year based on event sponsorships and campaigns

related to product releases.

Technology 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.

Integration incentives, which represent payments

to partners for access and/or exclusivity, increased because of new agreements signed in the second half of 2021.

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

Data costs decreased from the same period in

the prior year as we have continued to evaluate our data vendors and partner with the most effective and relevant providers.

All other variances in the table above are the

result of normal fluctuations in activity.

Net Income (Loss)

The greatest increase was in stock-based compensation,

a non-cash expense.

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

Other general and administrative expenses increased by $1.4 million over the same period prior year, mostly as a result of an

increase in headcount as well as other investments to support our growth initiatives and operations.

We had a net loss of approximately $6.4 million

for the three months ended September 30, 2022, as compared to net income of approximately $0.04 million during the same period in

We had a net loss of approximately $11.1 million for the nine months ended September 30, 2022, as compared to a net loss of

approximately $0.2 million during the same period in 2021.

The reasons and specific components associated with the change are discussed

Overall, the net loss resulted from significant investments made in our people and technology infrastructure.

The net loss reflected

in the 2022 periods were effected by significant noncash expenses of $4.8 million and $13.2 million for the three and nine month periods,

respectively.

for the three months ended March 31, 2023, as compared to a net loss of approximately $3.8 million during the same period in 2022.

The reasons and specific components associated with the change are discussed above.

Liquidity and Capital Resources

As of September 30, 2022, we had total current

assets of approximately $99.3 million, compared with current liabilities of approximately $6.1 million, resulting in working capital

of approximately $93.2 million and a current ratio of approximately 16.2 to 1.

This represents a decrease from our working capital of

approximately $105.7 million and an increase from our current ratio of 12.3 to 1 at December 31, 2021.

Our operating activities provided $7.9 million

during the nine months ended September 30, 2022, compared with $2.1 million in the same period in 2021.

We had a net loss of $11.1

million for the nine month period ended September 30, 2022, but non-cash expenses of $13.2 million and working capital generated

by the collection of receivables offset the loss.

The cash provided in the 2021 period was the result of our net loss increased by non-cash

expenses, partially offset by working capital used in the reduction of liabilities.

Cash used in investing activities was $39.7 million

for the nine months ended September 30, 2022.

In addition to the $2.0 million investment in EvinceMed technology, we purchased $37.5 million

in Treasury bills with a maturity date in January 2023.

This allowed the Company to earn a higher rate of interest on excess cash for

Historically, our primary sources of liquidity

have been cash receipts from customers and proceeds from equity offerings.

As of March 31, 2023, we had total current assets of

approximately $95.9 million, compared with current liabilities of approximately $7.6 million, resulting in working capital of approximately

$88.3 million and a current ratio of approximately 13 to 1 at March 31, 2023.

This decrease in our working capital, as discussed in more

detail below, is primarily the result of the timing of prepaid services and investment in our reporting infrastructure.

Following is a table with summary data from the

consolidated statements of cash flows for the three months ended March 31, 2023 and 2022, as presented.

Three Months Ended

Net cash (used in) / provided by operating activities

Net cash used in investing activities

Net cash (used in) / provided by financing activities

Net (decrease) / increase in cash and cash equivalents

We used approximately $0.1 million for operating

activities during the three months ended March 31, 2023, compared with $4.1 million provided by operating activities in the same

period in 2022.

We had a net loss of $6.4 million for the first quarter of 2023, but noncash expenses of $5.0 million and working capital

generated by the collection of receivables offset the loss.

Additionally, there were differences in the timing of prepaid services that

affected the first quarter change in working capital year over year.

Cash used in investing activities was approximately

$1.5 million for the three months ended March 31, 2023.

We purchased $56.9 million in treasury bills with maturity dates in 2023.

This allowed the Company to earn a higher rate of interest on excess cash for the period.

These purchases were partially offset by the

redemption of $55.6 million in treasury bills.

Cash used for financing activities was approximately

$11.5 million during the nine months ended September 30, 2022.

We repurchased 706,114 shares of common stock for $12.6 million.

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

For the same period

in 2021, we raised $70.7 million in a public offering of our common stock as well as generated $3.8 million from the issuance of shares

related to the exercise of stock options.

These proceeds in 2021 were partially offset by the payment of $1.6 million in earnout payments

from a previous acquisition.

$0.1 million related to the payment of withholding taxes on behalf of the employees for the vesting of restricted stock units during the

three months ended March 31, 2023.

This value represents the stock units surrendered and cancelled.

This cost was partially offset

by proceeds received as a result of option exercises during the period.

We had proceeds from financing activities of approximately $0.3

million related to the exercise of stock options during the three months ended March 31, 2022.

We 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 (12) months.

In addition, we believe we can generate the cash needed to operate beyond the next twelve (12) months from operations.

However, we may

seek additional debt or equity financing to supplement cash from operations to fund acquisitions or strategic partner relationships,

make capital expenditures, and satisfy working capital needs.

We currently have an effective shelf registration statement, which allows

us to issue, in unlimited amounts, securities, including common stock, preferred stock, debt securities, warrants, and units.

Critical Accounting Policies

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

However, we may seek additional

debt or equity financing to supplement cash from operations to fund acquisitions or strategic partner relationships, make capital expenditures,

and satisfy working capital needs.

Critical Accounting Estimates

We prepare our consolidated financial statements

5 unchanged sentences

and assumptions.

Our significant accounting policies are described in Note 2 to our Consolidated Financial Statements in the Annual Report

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements in the Annual Report

on Form 10-K for the year ended December 31, 2022 (2022 Annual Report on Form 10-K).

2 unchanged sentences

Our critical accounting

policies are described in Management’s Discussion and Analysis included in the 2021 Annual Report on Form 10-K.

estimates are described in Management’s Discussion and Analysis included in the 2022 Annual Report on Form 10-K.

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 was effective for annual and interim reporting periods beginning after December 15, 2020, with

early adoption permitted.

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

805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , 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.

The standard was effective for the Company’s

fiscal year beginning January 1, 2023.

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

of operations, or cash flows.

Off Balance Sheet Arrangements

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From time to time the Company enters into arrangements with a partner to acquire minimum amounts of messaging capabilities.

As of September 30,

31, 2023, the Company had commitments for future minimum payments of $14.9 million that will be reflected in cost of revenues during the

years 2023 through 2025.

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-Q

Item 2. Management’s Discussion and Analysis