OptimizeRx Corp 10-Q

Item 1. Financial Statements Our condensed consolidated financial statements included in this Form 10-Q are as follows: 2 Condensed Consolidated Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023 (unaudited); 3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited); 4 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months June 30, 2024 and 2023 (unaudited); 6 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited); 7 Notes to Condensed Consolidated Financial Statements (unaudited). 1 OPTIMIZERX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data, unaudited) June 30, 2024 December 31, 2023 ASSETS Current assets Cash and cash equivalents $ 14,959 $ 13,852 Accounts receivable, net of allowance for credit losses of $ 371 and $ 480 at June 30, 2024 and December 31, 2023, respectively 24,521 36,253 Taxes receivable 1,842 1,036 Prepaid expenses and other 4,647 3,190 Total current assets 45,969 54,331 Property and equipment, net 171 149 Other assets Goodwill 78,357 78,357 Other intangibles, net 14,470 15,198 Tradename and customer relationships, net 33,003 34,198 Operating lease right of use assets, net 472 573 Security deposits and other assets 434 568 Total other assets 126,736 128,894 TOTAL ASSETS $ 172,876 $ 183,374 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current portion of long-term debt $ 3,300 $ 2,000 Accounts payable – trade 2,980 2,227 Accrued expenses 5,310 7,706 Revenue share payable 2,094 5,506 Taxes payable — 49 Current portion of lease liabilities 219 222 Deferred revenue 1,053 172 Total current liabilities 14,956 17,882 Non-current liabilities Long-term debt, net 32,296 34,231 Lease liabilities, net of current portion 271 371 Deferred tax liabilities, net 4,337 4,337 Total liabilities 51,860 56,821 Commitments and contingencies (See note 11) Stockholders’ equity Preferred stock, $ 0.001 par value, 10,000,000 shares authorized, none issued and outstanding at June 30, 2024 or December 31, 2023 — — Common stock, $ 0.001 par value, 166,666,667 shares authorized, 20,061,907 and 19,899,679 shares issued at June 30, 2024 and December 31, 2023, respectively 20 20 Treasury stock, $ 0.001 par value, 1,741,397 shares held at June 30, 2024 and December 31, 2023 ( 2 ) ( 2 ) Additional paid-in-capital 196,164 190,793 Accumulated deficit ( 75,166 ) ( 64,258 ) Total stockholders’ equity 121,016 126,553 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 172,876 $ 183,374 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 OPTIMIZERX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data, unaudited) For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Net revenue $ 18,812 $ 13,818 $ 38,502 $ 26,821 Cost of revenues, exclusive of depreciation and amortization presented separately below 7,108 5,993 14,595 11,563 Gross profit 11,704 7,825 23,907 15,258 Operating expenses General and administrative expenses 14,380 12,209 30,545 26,208 Depreciation and amortization 1,073 465 2,140 929 Total operating expenses 15,453 12,674 32,685 27,137 Loss from operations ( 3,749 ) ( 4,849 ) ( 8,778 ) ( 11,879 ) Other income (expense) Interest expense ( 1,528 ) — ( 3,074 ) — Other income 75 — 75 — Interest income 106 721 125 1,386 Total other income (expense), net ( 1,347 ) 721 ( 2,874 ) 1,386 Loss before provision for income taxes ( 5,096 ) ( 4,128 ) ( 11,652 ) ( 10,493 ) Benefit (expense) from income taxes 1,088 ( 33 ) 744 ( 66 ) Net loss $ ( 4,008 ) $ ( 4,161 ) $ ( 10,908 ) $ ( 10,559 ) Weighted average number of shares outstanding – basic 18,257,879 16,992,100 18,213,992 17,043,493 Weighted average number of shares outstanding – diluted 18,257,879 16,992,100 18,213,992 17,043,493 Loss per share – basic $ ( 0.22 ) $ ( 0.24 ) $ ( 0.60 ) $ ( 0.62 ) Loss per share – diluted $ ( 0.22 ) $ ( 0.24 ) $ ( 0.60 ) $ ( 0.62 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 OPTIMIZERX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 (in thousands, except share data, unaudited) Common Stock Treasury Stock Additional Paid in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance January 1, 2024 19,899,679 $ 20 ( 1,741,397 ) $ ( 2 ) $ 190,793 $ ( 64,258 ) $ 126,553 Stock based compensation expense Options — — — — 1,353 — 1,353 Restricted stock — — — — 1,671 — 1,671 Issuance of common stock For options exercised — — — — — — — For restricted stock units vested 22,200 — — — ( 140 ) — ( 140 ) Net loss — — — — — ( 6,900 ) ( 6,900 ) Balance March 31, 2024 19,921,879 $ 20 ( 1,741,397 ) $ ( 2 ) $ 193,677 $ ( 71,158 ) $ 122,537 Stock based compensation expense Options — — — — 1,149 — 1,149 Restricted stock — — — — 1,753 — 1,753 Issuance of common stock For options exercised — — — — — — — For restricted stock units vested 140,028 — — — ( 415 ) — ( 415 ) Net loss — — — — — ( 4,008 ) ( 4,008 ) Balance June 30, 2024 20,061,907 $ 20 ( 1,741,397 ) $ ( 2 ) $ 196,164 $ ( 75,166 ) $ 121,016 4 OPTIMIZERX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE SIX MONTHS ENDED JUNE 30, 2023 (in thousands, except share data, unaudited) Common Stock Treasury Stock Additional Paid in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance January 1, 2023 18,288,571 $ 18 ( 1,214,398 ) $ ( 1 ) $ 172,786 $ ( 46,692 ) $ 126,111 Stock based compensation expense Options — — — — 1,467 — 1,467 Restricted stock — — — — 2,914 — 2,914 Issuance of common stock For options exercised 9,668 — — — 40 — 40 For restricted stock units vested 33,272 — — — ( 171 ) — ( 171 ) Net loss — — — — — ( 6,398 ) ( 6,398 ) Balance March 31, 2023 18,331,511 $ 18 ( 1,214,398 ) $ ( 1 ) $ 177,036 $ ( 53,090 ) $ 123,963 Stock based compensation expense Options — — — — 1,655 — 1,655 Restricted stock — — — — 1,848 — 1,848 Issuance of common stock For options exercised 10,000 — — — 105 — 105 For restricted stock units vested 35,260 — — — ( 73 ) — ( 73 ) Repurchase of common stock ( 526,999 ) ( 1 ) ( 7,522 ) ( 7,522 ) Net loss — — — — — ( 4,161 ) ( 4,161 ) Balance June 30, 2023 18,376,771 $ 18 ( 1,741,397 ) $ ( 2 ) $ 173,049 $ ( 57,251 ) $ 115,815 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 OPTIMIZERX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) For the Six Months Ended June 30, 2024 2023 OPERATING ACTIVITIES: Net loss $ ( 10,908 ) $ ( 10,559 ) Adjustments to reconcile net loss to net cash provided by (used in) provided by operating activities: Depreciation and amortization 2,140 929 Stock-based compensation 5,926 7,884 Bad debt expense 132 239 Amortization of debt issuance costs 365 — Changes in: Accounts receivable 11,600 3,635 Prepaid expenses and other assets ( 1,457 ) ( 1,772 ) Accounts payable 752 ( 732 ) Revenue share payable ( 3,412 ) ( 1,269 ) Accrued expenses and other liabilities ( 2,264 ) ( 1,097 ) Taxes payable ( 855 ) — Deferred revenue 881 287 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,900 ( 2,455 ) INVESTING ACTIVITIES: Purchase of property and equipment ( 77 ) ( 49 ) Purchases of held-to-maturity investments — ( 109,501 ) Redemptions of held-to-maturity investments — 112,501 Acquisition of intangible assets, including intellectual property rights — ( 3 ) Capitalized software development costs ( 161 ) ( 1,274 ) NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ( 238 ) 1,674 FINANCING ACTIVITIES: Cash paid for employee withholding taxes related to the vesting of restricted stock units ( 555 ) ( 244 ) Proceeds from exercise of stock options — 145 Repurchase of common stock — ( 7,522 ) Repayment of long-term debt ( 1,000 ) — NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ( 1,555 ) ( 7,621 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,107 ( 8,402 ) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 13,852 18,210 CASH AND CASH EQUIVALENTS - END OF PERIOD $ 14,959 $ 9,808 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 2,710 $ — Cash paid for income taxes $ 110 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 6 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION The accompanying condensed consolidated financial statements include OptimizeRx Corporation and its wholly owned subsidiaries (collectively, the “Company”, “we”, “our”, or “us”). We are a digital health technology company enabling care-focused engagement between life sciences organizations, healthcare providers, and patients at critical junctures throughout the patient care journey. Connecting over two million U.S. healthcare providers and millions of their patients through an intelligent technology platform embedded within a proprietary point-of-care network, as well as mass digital communications channels, OptimizeRx helps life sciences organizations engage and support their customers. We operate a single reporting segment and, accordingly, the consolidated statements of profit or loss provide this information and it is not presented separately here. The condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 have been prepared by us without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments necessary to present fairly our financial position at June 30, 2024, and our results of operations, changes in stockholders’ equity, and cash flows for the six months ended June 30, 2024 and 2023, have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated balance sheet as of December 31, 2023, has been derived from the audited consolidated condensed balance sheet as of that date. Certain information and note disclosures, including a detailed discussion about the Company’s significant accounting policies, normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with a reading of the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on April 15, 2024 (“Form 10-K”). The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the full year. On October 24, 2023, the Company acquired 100 % of the issued and outstanding preferred and common stock of Healthy Offers, Inc., a Nevada corporation d/b/a Medicx Health (“Medicx Health”) - See Part II, Item 8. Financials Statements and Supplementary Data; Note 3 - Acquisitions in our Form 10-K for additional information regarding this transaction. The following presents the pro forma consolidated statement of operations as if Medicx Health had been included in the consolidated results of the Company for the three and six months ended June 30, 2023: Three Months Ended Six Months Ended Pro-forma consolidated statement of operations June 30, Revenue $ 22,408 $ 43,439 Net loss ( 6,076 ) ( 14,708 ) These amounts have been calculated after applying the Company’s accounting policies, adjusting Medicx Health results to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2023, interest expense associated with the term loan and elimination of interest income on short-term investments that were used to fund the acquisition, During the year ended December 31, 2023, the Company disposed of its non-core Access business - See Part II, Item 8. Financials Statements and Supplementary Data; Note 7 - Goodwill and Intangible Assets in our Form 10-K for additional information regarding this transaction. A pro forma statement of operations for the three and six months ended June 30, 2024, is not presented for this transaction as the pro forma impacts were not material to the Company’s consolidated results. 7 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) Revenue presented in the pro forma financial consolidated statement of operations data above includes $ 1,213 and $ 3,080 , respectively related to the Access and other non-core solutions for which no revenue was recorded in the three and six months ended June 30, 2024, (see also the discussion under Net Revenues in Results of Operations for the three and six months ended June 30, 2024 in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations). Change in Accounting Estimate In accordance with its policy, the Company periodically reviews the stand-alone selling prices of its performance obligations under ASC 606 for use in allocating the contract prices. As a result, effective April 1, 2024, the Company updated the methodology for determining the value of program design and consulting services from the residual method to using an adjusted market assessment approach. The effect of this change in estimate was immaterial to the results for the three and six months ended June 30, 2024, but may become material in future periods. Fair Value of Financial Instruments Fair value is defined as the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk. In addition to defining fair value, the disclosure requirements around fair value establish a fair value hierarchy for valuation inputs, which is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: Level 1 – Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. Level 2 – Inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. The Company’s stock options and warrants are valued using Level 3 inputs. The Company’s carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and other current liabilities, approximate their fair values due to their short maturities. NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS In November 2023, the FASB issued ASU No. 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07. In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09. 8 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) NOTE 3 – CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents include items almost as liquid as cash comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily include domestic commercial paper and securities issued or guaranteed by the U.S. government or its agencies. We account for marketable equity securities in accordance with ASC 321-10, “Investments - Equity Securities”, as the shares have a readily determinable fair value quoted on the national stock exchange and are classified within Level 1 of the fair value hierarchy. At June 30, 2024 and December 31, 2023, we have recorded $ 8.1 million and none , respectively, of money market funds at cost. NOTE 4 – CAPITALIZED SOFTWARE COSTS The Company capitalizes certain development costs incurred in connection with software development for internal-use software platforms used in operations and for providing services to our customers. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized internal use software development costs are included in intangible assets and are amortized on a straight-line basis over the estimated useful life of the software platforms and are included in depreciation and amortization within operating expenses in the consolidated statements of operations. Amortization of capitalized internal use software expense for the three and six months ended June 30, 2024 and 2023 was $ 71 and $ 141 and $ 48 and $ 95 , respectively. The Company accumulates capitalizable costs related to current projects in a construction in process (“CIP”) software account, the balance of which was $ 393 and $ 696 at June 30, 2024 and December 31, 2023, respectively. NOTE 5 – REVENUES Under ASC 606, Revenue from Contracts with Customers (“ASC Topic 606”), we record revenue when earned, rather than when billed. From time to time, we may record revenue based on our revenue recognition policies in advance of being able to invoice the customer, or we may invoice the customer prior to being able to recognize the revenue. Included in accounts receivable are unbilled amounts of $ 4,134 and $ 3,288 at June 30, 2024, and December 31, 2023, respectively. Amounts billed in advance of revenue recognition are presented as deferred revenue on the condensed consolidated balance sheets. Revenues are primarily generated from content delivery activities in which the Company delivers 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.The Company’s contracts are generally less than one year and the primary performance obligation is delivery of messages, or 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 program design and related consulting services to be performance obligations separate from the delivery of messages. Revenue is recognized at the point in time when the work product is delivered to the customer. The net contract balance for contracts in progress at June 30, 2024 and December 31, 2023, was $ 26,766 and $ 2,021 , respectively. The outstanding performance obligations are expected to be satisfied during the year ended December 31, 2024. In certain circumstances, the Company will offer sales rebates to customers based on spend volume. Rebates are typically contracted based on a quarterly or annual spend amount based on a volume threshold or tiered model. At the beginning of the year, the rebate percentage is estimated based on input from the sales team and analysis of prior year sales. Thereafter, the open contract balance for the customer is assessed quarterly to ensure the estimated rebate percentage being used for the rebate accrual remains reasonable. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For the year ended 2023 and during the first half of 2024, there were two contracts with customers that included a rebate clause. 9 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) As the content is distributed through the platform and network of channel partners (a transaction), these transactions are recorded, and revenue is recognized over time as the distributions occur. Revenue for transactions can be realized based on a price per message, a price per redemption, as a flat fee occurring over a period of time, or upon completion of the program, depending on the client contract. The Company recognizes 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, the Company also recognizes revenue for providing program performance reporting and maintenance. 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 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. 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. The Company has several signed contracts with customers for the distribution of messaging, or other services, which include payment in advance. The payments are not recorded as revenue until the revenue is earned under its revenue recognition policy. Deferred revenue was $ 1,053 and $ 172 as of June 30, 2024 and December 31, 2023, respectively. The contracts are all short term in nature and all revenue is expected to be recognized within 12 months, or less. The following is a summary of activity for the deferred revenue account for the six months ended June 30: 2024 2023 Balance January 1 $ 172 $ 164 Revenue recognized ( 3,228 ) ( 2,444 ) Amount collected 3,961 3,015 Balance March 31 $ 905 $ 735 Revenue recognized ( 1,853 ) ( 3,171 ) Amount collected 2,002 2,887 Balance June 30 $ 1,054 $ 451 10 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) Disaggregation of Revenue Consistent with ASC Topic 606, we have disaggregated our revenue by timing of revenue recognition. The majority of our revenue is recognized over time as solutions are provided. A small portion of our revenue related to program development, solution architect design, and other solutions is recognized at a point in time upon delivery to customers. A break down is set forth in the table below. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue recognized over time $ 17,769 $ 13,034 $ 34,694 $ 25,606 Revenue recognized at a point in time 1,043 784 3,809 1,215 Total Revenue $ 18,812 $ 13,818 $ 38,502 $ 26,821 Accounts receivable are reported at realizable value, net of allowances for credit losses, which is estimated and recorded in the period the related revenue is recorded. The Company does not seek collateral to secure its accounts receivable and amounts billed are generally due within a short period of time based on terms and conditions normal for our industry. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. If current or expected future economic trends, events, or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due receivable balances are written off when the Company’s collection efforts have been exhausted. The following is a summary of changes in the allowance for credit losses for the six months ended June 30,: 2024 2023 Balance at January 1, $ 239 $ 352 Bad debt expense 132 128 Write-offs — — Balance at March 31, $ 371 $ 480 Bad debt expense — 111 Write-offs — — Balance at June 30, $ 371 $ 591 11 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) NOTE 6 – LONG-TERM DEBT Long-term debt, net comprised the following at June 30, 2024 and December 31, 2023: June 30, 2024 December 31, 2023 Term loan, due in 2027 $ 37,290 $ 38,290 Less: current portion ( 3,300 ) ( 2,000 ) Less: unamortized issuance costs ( 1,694 ) ( 2,059 ) Long-term debt, net $ 32,296 $ 34,231 As of June 30, 2024, the Term loan bears interest at 14.1 %, with an effective rate of 16.2 %, including the impact of the amortization of debt issuance costs of $ 182 and $ 365 for the three and six months ended June 30, 2024, respectively. The Company was in full compliance with the financial covenants associated with the Term loan. The Term Loan is repayable in quarterly installments, beginning December 31, 2023, equivalent to 1.25 % or $ 500,000 , of the original principal amount, with the outstanding unpaid principal and all accrued but unpaid interest due and payable on the earlier of (i) the fourth anniversary of the closing date of the Term Loan or (ii) the date on which the Term Loan is declared due and payable pursuant to the terms of the Financing. In addition, the Company is required to make a mandatory prepayment on March 31, of each year, commencing with 2025, equivalent to Excess Cash Flow multiplied by a percentage factor of 25%, if the leverage ratio is 3.60 to 1.00 or less, 50% if the leverage ratio is greater than 3.60 to 1 or less than or equal; to 4.10 to 1.00 and 75%, if the leverage ratio is greater than 4.10 to 1.00. Excess Cash Flow is defined in the Financing as Consolidated EBITDA for the previous fiscal year less scheduled principal and interest payments, capital expenditure, cash taxes and any cash expenses/gains added back to net income in the calculation of Consolidated EBITDA, adjusted for any increase/decrease in working capital during the fiscal year. Repayments due under the terms of the Term loan, including an estimate of the amount associated with the Excess Cash Flow calculation discussed above, for the remainder of the current and in each of the next three fiscal years are as follows: As of June 30, 2024 2024 (remainder) $ 1,000 2025 3,300 2026 2,000 2027 30,990 $ 37,290 12 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) NOTE 7 – LEASES We had operating leases with terms greater than 12 months for office space in four multi-tenant facilities, which are recorded as Operating lease right-of-use assets and Operating lease liabilities. For the three and six months ended June 30, 2024 and 2023, the Company’s lease cost consists of the following components, each of which is included in operating expenses within the Company’s condensed consolidated statements of operations: Three months ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Operating lease cost $ 62 $ 25 $ 124 $ 49 Short-term lease cost — — 1 8 Total lease cost $ 62 $ 25 $ 125 $ 57 The table below presents the future minimum lease payments to be made under operating leases in each of the remainder of the current and next four fiscal years and thereafter: As of June 30, 2024 2024 (remainder) $ 132 2025 186 2026 113 2027 65 2028 45 Thereafter — Total 541 Less: discount 52 Total lease liabilities $ 489 The weighted average remaining lease term at June 30, 2024 for the operating lease is 2.8 years, and the weighted average discount rate used in calculating the operating lease asset and liability is 6.85 %. Cash paid for amounts included in the measurement of lease liabilities was $ 109 and $ 45 for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and 2023, payments on lease obligations were $ 127 and $ 49 , respectively, and amortization on the right of use assets was $ 113 and $ 49 , respectively. 13 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) NOTE 8 – STOCKHOLDERS’ EQUITY Preferred Stock The Company had 10,000,000 shares of preferred stock, $ 0.001 par value per share, authorized as of June 30, 2024. No shares were issued or outstanding in either 2024 or 2023. Common Stock The Company had 166,666,667 shares of common stock, $ 0.001 par value per share, authorized as of June 30, 2024. There were 18,320,510 and 18,158,282 shares of common stock outstanding, net of shares held in treasury of 1,741,397 and 1,741,397 at June 30, 2024 and December 31, 2023, respectively. During each of the quarters ended March 31, 2024 and June 30, 2024, no shares of our common stock were issued, and no proceeds were received in connection with the exercise of options under our 2013 Incentive Plan and our 2021 Equity Incentive Plan. During the quarters ended March 31, 2024 and June 30, 2024, 22,200 and 140,028 shares of common stock, respectively, were issued in connection with the vesting of restricted stock units under our 2013 Incentive Plan and our 2021 Equity Incentive Plan. Some of the participants utilized a net withhold settlement method, in which shares were surrendered to cover payroll withholding taxes. Of the shares issued to participants during the six months ended June 30, 2024, a total of 48,281 shares, valued at $ 555,007 , were surrendered and subsequently cancelled. During the quarters ended March 31, 2023 and June 30, 2023, the Company issued 9,668 and 10,000 shares of our common stock and received proceeds of $ 40 and $ 105 , respectively, in connection with the exercise of options under our 2013 Incentive Plan. During the quarters ended March 31, 2023 and June 30, 2023, the Company issued 33,272 and 35,260 shares of common stock in connection with the vesting of restricted stock units under our 2013 Incentive Plan and our 2021 Equity Incentive Plan. 23,217 shares valued at $ 244 were surrendered in connection with the net withhold settlement method, and were subsequently cancelled. Treasury Stock During the quarter ended March 31, 2023, the Board authorized a share repurchase program, under which the Company could repurchase up to $ 15.0 million of its outstanding common stock. This stock repurchase authorization expired on March 12, 2024. During the quarter and six months ended June 30, 2024 the Company did not repurchase any of its outstanding shares of common stock. During the quarter and six months ended June 30, 2023 the Company repurchased 526,999 shares of common stock under this program for a total of $ 7,522 , including commissions paid on repurchases. These shares were recorded as treasury shares using the par value method. NOTE 9 – STOCK BASED COMPENSATION On June 5, 2024, at the 2024 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the 2021 Equity Incentive Plan to increase the number of shares of common stock available for awards under the 2021 Equity Incentive Plan by 1,950,000 shares for a total of 4,450,000 shares. 14 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) Stock Options The compensation expense related to options for the six months ended June 30, 2024 and 2023 was $ 2,502 and $ 3,122 , respectively. The fair value of these instruments was calculated using the Black-Scholes option pricing model. There is $ 5,031 of remaining expense related to unvested options to be recognized in the future over a weighted average period of 1.57 years. The total intrinsic value of outstanding options at June 30, 2024 was $ 214 . During 2022, the Company granted certain performance based stock options, the expense for which will be recorded over time once the achievement of the performance is deemed probable. There was $ 8 in expense related to these options recorded during the three and six months ended June 30, 2024. Restricted Stock Units The Company recorded $ 3,424 and $ 4,762 in compensation expense related to restricted stock units for the six months ended June 30, 2024 and 2023, respectively. A total of $ 8,337 remains to be recognized at June 30, 2024 over a weighted average period of 1.52 years. During 2022, the Company granted certain performance based restricted stock units, the expense for which will be recorded over time once the achievement of the performance is deemed probable. There was $ 8 in expense related to these restricted stock units recorded during the three and six months ended June 30, 2024. The director’s compensation program calls for the grant of restricted stock units with a one year vesting period. There was $ 402 and $ 352 included in the compensation expense discussed above related to director’s compensation for the periods ended June 30, 2024 and 2023, respectively. NOTE 10 – LOSS PER SHARE Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. The number of shares related to options and restricted stock units included in diluted EPS is based on the “Treasury Stock Method” prescribed in ASC 260-10, Earnings per Share . This method assumes the theoretical repurchase of shares using proceeds of the respective stock options exercised, and for restricted stock units, the amount of compensation cost attributed to future services which have not yet been recognized, and the amount of current and deferred tax benefit, if any, that would be credited to additional paid in capital upon the vesting of the restricted stock units, at a price equal to the issuer’s average stock price during the related earnings period. Accordingly, the number of shares that could be included in the calculation of EPS in respect of the stock options and restricted stock units is dependent on this average stock price and will increase as the average stock price increases. The following table sets forth the computation of basic and diluted net loss per share. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Numerator Net loss $ ( 4,008 ) $ ( 4,161 ) $ ( 10,908 ) $ ( 10,559 ) Denominator Weighted average shares outstanding used in computing net loss per share Basic 18,257,879 16,992,100 18,213,992 17,043,493 Effect of dilutive stock options, warrants, and stock grants — — — — Diluted 18,257,879 16,992,100 18,213,992 17,043,493 Net loss per share Basic $ ( 0.22 ) $ ( 0.24 ) $ ( 0.60 ) $ ( 0.62 ) Diluted $ ( 0.22 ) $ ( 0.24 ) $ ( 0.60 ) $ ( 0.62 ) 15 OPTIMIZERX CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, excepts share and per share data, unaudited) The number of common shares potentially issuable upon the exercise of certain options and the vesting of certain restricted stock units that were excluded from the diluted loss per common share calculation are reflected in the table below. Three Months Ended June 30, Six Months Ended June 30, Weighted average number of shares for the periods ended 2024 2023 2024 2023 Options 7,233 19,824 6,618 24,923 Unvested restricted stock unit awards 93,431 24,922 81,514 24,922 Total 100,664 44,746 88,132 49,845 NOTE 11 – COMMITMENTS AND CONTINGENT LIABILITIES Litigation From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently not a party to any material legal or administrative proceedings, and we are not aware of any pending or threatened material legal or administrative proceedings against us. Commitments From time to time, the Company enters into arrangements with partners to acquire minimum amounts of media, data or messaging capabilities. As of June 30, 2024, the Company had commitments for future minimum payments of $ 18.5 million that will be reflected in cost of revenues during the years from 2024 through 2028. Minimum payments are due in the remainder of 2024 and fiscal 2025, 2026, 2027 and 2028 in the amounts of $ 3.9 million, $ 8.5 million, $ 3.6 million, $ 2.4 million and $ 0.1 million, respectively. NOTE 12 – INCOME TAXES The Company reported a benefit from income taxes of $ 1,088 and $ 744 for the three and six months ended June 30, 2024, representing an effective tax rate of 21.4 % and 6.4 %. The effective tax rate for the three and six months ended June 30, 2024 reflects the impact of certain permanent items, projected increases in our valuation allowance during the year and discrete items for the quarter related to stock based compensation. There was no provision for or benefit from taxes in the three and six months ended June 30, 2023, as we carried a full valuation allowance against our net deferred tax assets due to our history of losses. As discussed in our annual report on Form 10-K for the year ended December 31, 2023, we had net operating loss carry-forwards for federal income tax purposes of approximately $ 16.7 million as of December 31, 2023. NOTE 13 – SUBSEQUENT EVENTS NONE 16