Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures
designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules
and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosures.
Our management, with the participation of our
Chief Executive Officer and our Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report,
of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based on this
evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this
report, due to a material weakness in our internal control over financial reporting, our disclosure controls and procedures, as defined
in Rule 13a-15(e), were not effective at the reasonable assurance level.
To address
the material weakness referenced above, the Company performed additional analysis and performed other procedures in order to prepare the
audited consolidated financial statements in accordance with generally accepted accounting principles (GAAP). Accordingly, management
believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects,
our financial condition, results of operations and cash flows for the periods presented.
Management’s Report on Internal Control
Over Financial Reporting.
The Company’s management is responsible
for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Internal
control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United
States of America. The Company’s internal control over financial reporting includes those policies and procedures that:
● pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
● provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
● provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, any system
of internal control over financial reporting, no matter how well defined, may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on this assessment using
those criteria, management identified the following material weaknesses existed as of December 31, 2023: inadequate controls to ensure
that data received from third-party service organizations is complete and accurate. As a result, based on the COSO criteria, the Company’s
management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2023.
33
Plan for Remediation of Material Weakness
Management is actively engaged in the planning
for, and implementation of, remediation efforts to address the material weakness identified above. Management intends to implement the
following remediation steps:
a. The Company will require each third-party service organization to provide a SOC-1, Type 2 report to us.
b. If a SOC-1, Type 2 report is not available, the Company will evaluate each third-party’s relevant
system(s) and reporting directly through inquiry and substantive testing of such third-party’s control environment.
c.
If we are unable to obtain a valid SOC-1 Type 2 report or perform substantive testing of such third-party's control environment, the Company will implement a channel partner qualification and program triaging process, which would include modifying customer contracts, limiting the volume of activity with those third-parties and establishing other controls to ensure the completeness and accuracy of information received from those third-parties, such as performing tagging procedures where possible.
Management believes the measures described above will remediate the material
weakness that we have identified. During the quarter ended December 31, 2023, the Company continued to engage with the third-party service
organizations to discuss the reporting requirements. As management continues to evaluate and improve our disclosure controls and procedures
and internal control over financial reporting, the Company may decide to take additional measures to address control deficiencies or determine
to modify, or in appropriate circumstances not to complete, certain of the remediation measures identified.
Changes in Internal Controls Over Financial
Reporting .
Except as noted above, there was no change in
our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), that occurred during the quarter
ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
Adoption of 10b5-1 Trading Plan
During the year ended December 31, 2023, certain
of our officers and directors adopted Rule 10b5-1 trading arrangements as follows:
On June 15, 2023 , Mr. William J. Febbo , the Chief
Executive Officer of the Company, adopted a written plan for the purchase or sale of our securities that was intended to satisfy the
affirmative defense conditions of Rule 10b5-1(c) (the “Febbo Rule 10b5-1 Trading Plan). The Febbo 10b5-1 Trading Plan, which has
a term of one year , provides for the sale of up to 300,000 shares of common stock pursuant to the terms therein.
On June 15, 2023 , Ms. Marion Odence-Ford , the
General Counsel & Chief Compliance Officer of the Company, adopted a written plan for the purchase or sale of our securities that
is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (the “Odence-Ford Rule 10b5-1 Trading Plan). The Odence-Ford
10b5-1 Trading Plan, which has a term of one year , provides for the sale of up to 7,000 shares of common stock pursuant to the terms therein.
34
William Febbo’s Employment Agreement
On April 12, 2024, the Company entered into
an amended and restated employment letter agreement with William J. Febbo (the “Febbo Employment Agreement”) which
updates and supersedes in its entirety his prior employment agreement, as amended (the “Febbo Prior Employment
Agreement”) to, among other things, eliminate the single trigger cash severance which was payable to Mr. Febbo in connection
with a change in control, remove the Company’s 280G tax gross-up payment obligation afforded to Mr. Febbo under the Febbo
Prior Employment Agreement, and provide for an equity grant to Mr. Febbo of 90,000 restricted stock units which vest over three
years. In connection with the Febbo Employment Agreement, the Compensation Committee amended the OptimizeRx Corporation Executive
Severance Plan to make Mr. Febbo a participant of such plan (as described below). As a result, all of Mr. Febbo’s prior rights
to severance and change in control benefits under the Febbo Prior Employment Agreement were removed from the Febbo Employment
Agreement. Mr. Febbo’s amended severance and/or change in control benefits are now set forth in full in the Amended Severance
Plan (as defined below).
The foregoing summary of Mr. Febbo’s Employment
Agreement is not complete and is qualified in its entirety by reference to the complete text of the Febbo Employment Agreement, a copy
of which is filed as Exhibit 10.26 to this Form 10-K and is incorporated herein by reference.
Stephen Silvestro’s Employment Agreement
On April 12, 2024, the Company entered into an
amended and restated employment letter agreement with Stephen Silvestro (the “Silvestro Employment Agreement”) which updates
and supersedes in its entirety his prior employment agreement, as amended (the “Silvestro Prior Employment Agreement”) to,
among other things, remove the Company’s 280G tax gross-up payment obligation afforded to Mr. Silvestro under the Silvestro Prior
Employment Agreement.
The foregoing summary of Mr. Silvestro’s
Employment Agreement is not complete and is qualified in its entirety by reference to the complete text of the Silvestro Employment Agreement,
a copy of which is filed as Exhibit 10.27 to this Form 10-K and is incorporated herein by reference.
Amended Executive Severance Plan
On April 12, 2024, the
Compensation Committee amended the OptimizeRx Corporation Executive Severance Plan (the “Amended Severance Plan”) to include
Mr. Febbo as a participant in the Amended Severance Plan, to remove former and add new executive management team members, and to increase
the Severance Benefits (as defined below) payable to Mr. Silvestro.
The Amended Severance
Plan provides that if Mr. Febbo or Mr. Silvestro is terminated without cause or resigns for Good Reason, he will be paid (i) an amount
equal to 1.5 times his base salary, paid in installments over 18 months, (ii) an amount equal to his target annual bonus in effect
at the time of termination, paid in a lump sum, and (iii) payment by the Company of COBRA premiums for such executive and his
spouse and eligible dependents for up to 12 months following termination (the payments in (i), (ii) and (iii) collectively referred to
as “Severance Benefits”).
The Amended Severance
Plan also provides Change in Control termination and death benefits to executive management team members. Mr. Silvestro’s benefits
under such provisions were not changed in connection with the Amended Severance Plan. The Amended Severance Plan provides that if Mr.
Febbo is terminated without cause or resigns for Good Reason three months prior to or 24 months following a Change in Control, in addition
to the Severance Benefits, Mr. Febbo will be paid a lump sum payment equal to 5.0 times his then current base salary. The Severance Plan
also provides that if Mr. Febbo is terminated due to death or disability, he (or his estate) will be paid an amount equal to his target
annual bonus in effect at the time of termination, paid in a lump sum. Terms not otherwise defined herein have the meanings assigned to
them in the Amended Severance Plan.
The foregoing description
of the Amended Severance Plan is not complete and is qualified in its entirety by reference to the complete text of the Amended Severance
Plan, a copy of which is filed as Exhibit 10.28 to this Form 10-K and is incorporated herein by reference.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections.
None
35
PART III
Item 10. Directors, Executive Officers and
Corporate Governance
Except for the information provided in PART I,
Item 4.1, “Information About Our Executive Officers” and as set forth below, the required information is incorporated by reference
from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections
entitled “Proposal No. 1 Election of Directors, “Committees of the Board of Directors” and “Information Regarding
Security Holders Delinquent Section 16(a) Reports.”
We have a Code of Business Conduct and Ethics
(the “Code”) that applies to our directors, officers, and employees. Only the Board may grant a waiver of any provision for
a director, executive officer, or any other principal financial officer, and any such waiver, or any amendment to the Code, will be promptly
disclosed as required at www.optimizerx.com . The Code can be found on the Company’s website at www.optimizerx.com
under “Investor Relations - Governance.” The information on the website is not and should not be considered part of this Form
10-K and is not incorporated by reference in this Form 10-K.
Item 11. Executive Compensation
The required information is incorporated by reference
from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections
entitled “Director Compensation” and “Executive Compensation”.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
Except for the information set forth below, the
required information is incorporated by reference from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including,
but not necessarily limited to, the section entitled “Information Regarding Security Holders.”
36
Equity Compensation Plan Information
The following table details information regarding
our existing equity compensation plans as of December 31, 2023:
Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants
and rights
Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
2013 Equity Compensation Plan – Options
345,435
33.43
0
2013 Equity Compensation Plan – Restricted Stock Units
111,628
N/A
0
2021 Equity Incentive Plan – Options
1,209,626
23.80
276,844
2021 Equity Incentive Plan – Restricted Stock Units
631,581
N/A
0
Equity compensation plans not approved by security holders
0
N/A
0
Total
2,298,270
276,844
Item 13. Certain Relationships and Related
Transactions, and Director Independence
The required information is incorporated by reference
from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections
entitled “Certain Relationships and Related Transactions” and “Corporate Governance - Director Independence.”
Item 14. Principal Accounting Fees and Services
The required information is incorporated by reference
from our definitive proxy statement for our 2024 Annual Meeting of Shareholders, including, but not necessarily limited to, the sections
entitled “Ratification of UHY LLP as Independent Registered Public Accounting Firm – Independent Registered Public Accountant
Fee Information” and “Ratification of UHY LLP as Independent Registered Public Accounting Firm – Pre-Approval Policies
and Procedures.”
37
PART IV
Item 15. Exhibits and Financial Statements
Schedules
(a) The consolidated financial statements and exhibits listed
below are filed as part of this Annual Report on Form 10-K.
(1) The Company’s consolidated financial statements, the
notes thereto and the report of the Independent Registered Public Accounting Firm are included in PART II, Item 8. “Financial Statements
and Supplementary Data.”
(2) Financial statement schedules have been omitted because they
are not applicable, not required, or the required information is included in the Consolidated Financial Statements or Notes thereto.
(3) Exhibits. Reference is made to Item 15(b) below.
(b) Exhibits . The Exhibit Index, which immediately precedes
the signature page, is incorporated by reference into this Annual Report on Form 10-K.
(c) Financial Statement Schedules . Reference is made to
Item 15(a)(2) above.
Item 16. Form 10-K Summary
None
EXHIBIT INDEX
Exhibit
Number
Description
3.1
Articles of Incorporation of OptimizeRx Corporation (the “Company”) Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-155280) filed on November 12, 2008.
3.2
Certificate of Correction, dated April 30, 2018. Incorporated by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
3.3
Third Amended and Restated Bylaws of the Company. Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
4.1
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. Incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
10.1†
Fourth Amended and Restated 2013 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 12, 2020.
10.2†
OptimizeRx 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
10.3†
Form of Stock Option Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
10.4†
Form of Performance Stock Option Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
10.5†
Form of Restricted Stock Unit Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
38
10.6†
Form of Performance Restricted Stock Unit Award for grants under the OptimizeRx Corporation 2021. Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on August 25, 2021
10.7†
Amended Employment Agreement by and between the Company and William J. Febbo. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 26, 2019.
10.8†
Amendment to the Employment Agreement with William Febbo. Incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
10.9†
Addendum to the Employment Agreement with William J. Febbo. Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
10.10*†
Third Addendum to the Employment Agreement with William J. Febbo. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 19, 2021.
10.11†
Employment Agreement by and between the Company and Stephen Silvestro. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 3, 2019.
10.12†
Amendment to the Employment Agreement with Stephen Silvestro. Incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
10.13†
Amendment to Employment Agreement by and between the Company and Stephen Silvestro dated February 28, 2022. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 4, 2022.
10.14†
Employment Agreement with Marion Odence-Ford. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 11, 2021.
10.15†
Amendment to Employment Agreement by and between the Company and Marion Odence-Ford dated February 28, 2022. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on March 4, 2022.
10.16*†
Offer Letter by and between the Company and Edward Stelmakh. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 30, 2021.
10.17†
OptimizeRx Corporation 2022 Cash Bonus Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 4, 2022.
10.18†
OptimizeRx Corporation Executive Severance Plan. Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on March 10, 2023.
10.19†
Fourth Addendum to the Employment Agreement with William J. Febbo. Incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on March 10, 2023.
10.20
Agreement and Plan of Merger dated as of October 11, 2023 by and among OptimizeRx Corporation, Healthy Offers, Inc., the securityholders of Healthy Offers, Inc. who are party to the Agreement, and Michael Weintraub, not in his individual capacity, but solely in his capacity as the representative, agent and attorney-in-fact of the Securityholders. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 16, 2023.
10.21
Support Agreement, dated as of October 11, 2023 by and among the stockholders party thereto, OptimizeRx Corporation and Healthy Offers, Inc. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 16, 2023.
10.22
Financing Agreement, dated as of October 11, 2023, by and among OptimizeRx Corporation, the lenders from time to time party thereto, and Blue Torch Finance, LLC, as collateral agent and administrative agent. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 16, 2023.
10.23
Letter Agreement, dated as of October 11, 2023, OptimizeRx Corporation and Blue Torch Finance, LLC. Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on October 16, 2023.
10.24
Common Stock Purchase Agreement dated October 24, 2023 by and among the Company and the Management Investors. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 25, 2023.
10.25
Amendment No. 1 to Financing Agreement, dated March 29, 2024. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 2, 2024.
10.26*†**
Amended and Restated Employment Agreement by and between the Company and William J. Febbo dated April 12, 2024.
39
10.27*†**
Amended and Restated Employment Agreement by and between the Company and Stephen Silvestro dated April 12, 2024.
10.28†**
Amended OptimizeRx Corporation Executive Severance Plan dated April
12, 2024.
14.1
Code of Business Conduct and Ethics Incorporated by reference to Exhibit 14.1 to the Company’s Current Report on Form 8-K filed on June 25, 2021.
19.1**
OptimizeRx Corporation Insider Trading Policy
21.1**
List of Subsidiaries
23.1**
Consent of UHY LLP
31.1**
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97.1**
OptimizeRx Corporation Clawback Policy
101.INS**
Inline XBRL Instance Document
101.SCH**
Inline XBRL Schema Document
101.CAL**
Inline XBRL Calculation Linkbase Document
101.DEF**
Inline XBRL Definition Linkbase Document
101.LAB**
Inline XBRL Label Linkbase Document
101.PRE**
Inline Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
† Management Contracts and Compensatory Plans, Contracts or
Arrangements.
* Exhibits have been omitted pursuant to Item 601(a)(5) of
Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted exhibit to the SEC upon request.
** Provided herewith.
40
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
OptimizeRx Corporation
By:
/s/ William J. Febbo
William Febbo
Title:
Chief Executive Officer
Date:
April 15, 2024
By:
/s/ Edward Stelmakh
Edward Stelmakh
Title:
Chief Financial Officer
Chief Operations Officer
Date:
April 15, 2024
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature
Title
Date
/s/ William J. Febbo
Chief Executive Officer and Director
April 15, 2024
William J. Febbo
(principal executive officer)
/s/ Edward Stelmakh
Chief Financial Officer and Chief Operations Officer
April 15, 2024
Edward Stelmakh
(principal financial and accounting officer)
/s/ Lynn O’Connor Vos
Chairperson
April 15, 2024
Lynn O’Connor Vos
/s/ Gus D. Halas
Director
April 15, 2024
Gus D. Halas
/s/ Patrick Spangler
Director
April 15, 2024
Patrick Spangler
/s/ James Lang
Director
April 15, 2024
James Lang
/s/ Greg Wasson
Director
April 15, 2024
Greg Wasson
/s/ Catherine Klema
Director
April 15, 2024
Catherine Klema
41