10-K
1
f10k2020_optimizerx.htm
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31,
2020
☐ TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________
to ________
Commission file number: 001-38543
OptimizeRx Corporation
(Exact name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number: 248-651-6568
Securities registered under Section 12(b)
of the Exchange Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $0.001 Nasdaq Capital Market
Securities registered under Section 12(g) of the Exchange Act:
Title of each class
Common Stock, par value of $0.001
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by checkmark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions
of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer ☐ Accelerated filer
☒ Non-accelerated filer ☒ Smaller reporting company
☐ Emerging growth company
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last
sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently
completed second fiscal quarter. $185,090,055
Indicate the number of shares
outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 16,806,637 common
shares as of March 3, 2021.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 14
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Mine Safety Disclosures 14
PART II
Item 6. Selected Financial Data 17
Item 8. Financial Statements and Supplementary Data 26
Item 9A. Controls and Procedures 27
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance 28
Item 11. Executive Compensation 36
Item 14. Principal Accountant Fees and Services 40
PART IV
Item 15. Exhibits, Financial Statement Schedules 41
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PART I
Forward-Looking Statements
This Annual Report on Form 10-K contains
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 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,” “will be,” “will continue,” “will likely result,”
and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks
and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict
results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse
effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles.
These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not
be placed on such statements.
Item 1. Business
Overview
OptimizeRx is a digital health company
that provides communications solutions for life science companies, physicians and patients. Connecting over half of healthcare
providers in the U.S. and millions of patients through a proprietary network, the OptimizeRx digital health platform helps patients
afford and stay on medications. The platform unlocks new patient and physician touchpoints for life science companies along the
patient journey, from point-of-care, to retail pharmacy, through mobile patient engagement.
2020 Company Highlights
Sales and Marketing Update
Our sales team continues to expand our
business with existing and new clients communicating the increased value of our enterprise platform approach. We are focused
on increasing the depth and breadth of our business across existing client product portfolios by maximizing the utilization of
our network. We are expanding our business by providing new solutions and obtaining new clients. Our team is also working
on converting current clients from individual solutions to enterprise platform deals with access to our full set of solutions across
our network. These enterprise deals enable us to increase our revenue per customer, and give us a more predictable and consistent
revenue stream.
While our expenditures were down in 2020
due to the global pandemic, we have continued to ramp up our marketing efforts by focusing more heavily on strategic content with
thought leadership in the media and at events, as well as tailoring our solution marketing with an account-based approach. Our
efforts are focused on cementing our image as a strategic partner with our buyers, so we have expanded our panel of thought leadership
voices to include more of our leadership team. They are actively participating as speakers and panelists at industry events, and
we have significantly increased our footprint within earned industry media. Additionally, we hosted a series of webinars featuring
industry leaders in 2020 to foster collaboration, and we introduced the first annual Innovate4Outcomes event, bringing together
thought leaders from across the healthcare industry to collaborate on solutions to some of the toughest challenges facing life
sciences and providers.
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We expanded our attendance and participation
at investor conferences in 2020, most on a virtual basis. We have built marketing strategy momentum in 2020 with increased industry
visibility that we expect to expand in 2021.
Operational Update
In 2020, we continued to expand our existing
network and physician utilization of our partner networks. We continue to work individually with our partners to improve point-of-care
workflow, increase overall revenue derived from each channel and increase coupon utilization by providers who have access. We are
also focused on increasing the number of physicians who have access to our service offerings. In addition to revenue growth provided
by new pharma brands and network partners, we believe there is significant revenue growth potential within existing brands by better
utilizing our existing partner networks and expanding our available solutions.
We also signed agreements with partners
that give us access to provide messages directly to consumers.
Technology Update
To support our growth and to further improve
the efficiency of our systems, we have moved our core platforms to Amazon Web Services. As a result of our acquisitions in 2018
and 2019, we now have tech teams based in both Croatia and Israel, in addition to our core team in the U.S., to help develop further
applications throughout the organization.
Principal Solutions and Applications
Our principal solutions and applications
can be summarized as follows:
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Competition
Our core platform competes in the highly
competitive pharmaceutical and life sciences digital marketing industry that is dominated by large well-known companies with established
names, solid market niches, wide arrays of product offerings and marketing networks. Our messaging offerings compete for pharmaceutical
budgets with a variety of other forms of advertising and promotion.
We have a growing list of potential partners
whom either have content that they want to deliver through our distribution engine and network, or have complementary technology
and want to integrate our solution as a channel partner and thereby increase their reach to clinicians. The primary direct competitor
in our space of the market is ConnectiveRx. However, we believe our breadth of brands offered, extensive list of pharmaceutical
clients, and the vast reach of our network give us a substantial advantage and allow us to achieve a dominant position in the marketplace.
Intellectual Property
In 2012, we were awarded a patent for our
innovative solution (US Patent No. 8,341,015). This award was a result of our extensive research and development efforts. The awarded
claims cover our ability to electronically process, display and distribute eligible prescription savings on the medications and
therapies healthcare providers wish to prescribe for their patients. As part of our acquisition of CareSpeak Communications, we
also acquired (US Patent No. 7,956,727) related to methods and systems for medication management. We also have other patent applications
submitted in various stages of review.
We use a nationally ranked intellectual
property law firm to further expand and protect our intellectual property. We believe our current and expanding IP will allow us
to continue being the leader in this rapidly growing space. We stand ready to prepare additional filings, as necessary, to protect
our intellectual property on any forthcoming solutions that will further assist and support physicians, pharmacists and patients.
OPTIMIZERx, CareSpeak, RMDY Wellness Layers,
Diet Watch, and SampleMD are our licensed trademarks.
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Government Regulation
Fraud and Abuse Laws
Anti-Kickback Statutes
The federal healthcare program Anti-Kickback Statute prohibits
persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange
for or to induce either the referral of an individual for, or the furnishing, arranging for or recommending a good or service for
which payment may be made in whole or part under a federal healthcare program such as Medicare or Medicaid. The definition of remuneration
has been broadly interpreted to include anything of value, including for example gifts, discounts, the furnishing of supplies or
equipment, credit arrangements, payments of cash and waivers of payments. Several courts have interpreted the statute’s intent
requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals or otherwise generate
business involving goods or services reimbursed in whole or in part under federal healthcare programs, the statute has been violated.
The law contains a few statutory exceptions, including payments to bona fide employees, certain discounts and certain payments
to group purchasing organizations. Violations can result in significant penalties, imprisonment and exclusion from Medicare, Medicaid
and other federal healthcare programs. Exclusion of a manufacturer would preclude any federal healthcare program from paying for
its products. In addition, kickback arrangements can provide the basis for an action under the Federal False Claims Act, which
is discussed in more detail below. The Anti-Kickback Statute is broad and potentially prohibits many arrangements and practices
that are lawful in businesses outside of the healthcare industry. Recognizing that the Anti-Kickback Statute is broad and may technically
prohibit many innocuous or beneficial arrangements, the Office of Inspector General of Health and Human Services, or OIG, issued
a series of regulations, known as the safe harbors, beginning in July 1991. These safe harbors set forth provisions that, if all
the applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under
the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not
necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not
fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities such as the OIG.
Arrangements that implicate the Anti-Kickback Law, and that do not fall within a safe harbor, are analyzed by the OIG on a case-by-case
basis. Government officials have focused recent enforcement efforts on, among other things, the sales and marketing activities
of healthcare companies, and recently have brought cases against individuals or entities with personnel who allegedly offered unlawful
inducements to potential or existing customers in an attempt to procure their business. Settlements of these cases by healthcare
companies have involved significant fines and/or penalties and in some instances criminal pleas. In addition to the Federal Anti-Kickback
Statute, many states have their own kickback laws. Often, these laws closely follow the language of the federal law, although they
do not always have the same exceptions or safe harbors. In some states, these anti-kickback laws apply with respect to all payors,
including commercial health insurance companies.
False Claims Laws
Federal false claims laws prohibit any
person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly
making, or causing to be made, a false statement to get a false claim paid. Manufacturers can be held liable under false claims
laws, even if they do not submit claims to the government, if they are found to have caused submission of false claims. The Federal
Civil False Claims Act also includes whistle blower provisions that allow private citizens to bring suit against an entity or individual
on behalf of the United States and to recover a portion of any monetary recovery. Many of the recent highly publicized settlements
in the healthcare industry related to sales and marketing practices have been cases brought under the False Claims Act. The majority
of states also have statutes or regulations similar to the federal false claims laws, which apply to items and services reimbursed
under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and
state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government
programs, criminal fines and imprisonment.
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Privacy and Security
The Health Insurance Portability and Accountability
Act of 1996, or HIPAA, and the rules promulgated there under require certain entities, referred to as covered entities, to comply
with established standards, including standards regarding the privacy and security of protected health information, or PHI. HIPAA
further requires that covered entities enter into agreements meeting certain regulatory requirements with their business associates,
as such term is defined by HIPAA, which, among other things, obligate the business associates to safeguard the covered entity’s
PHI against improper use and disclosure. While not directly regulated by HIPAA, our customers or distributors might face significant
contractual liability pursuant to such an agreement if the business associate breaches the agreement or causes the covered entity
to fail to comply with HIPAA. It is possible that HIPPA compliance could become a substantial regulatory burden and
expense to our operations, although we do not believe that this will occur as a general website publisher.
Employees
As of December 31, 2020, we had 57 full-time
employees in the U.S, as well as 14 full-time international employees. None of our employees are represented by a labor union with
respect to their employment with us. We have not experienced any work stoppages, and we consider our relations with our employees
to be good.
Subsidiaries
We conduct our operations through our wholly-owned
subsidiaries, OptimizeRx Corporation, a Michigan corporation, CareSpeak Communications, Inc., a New Jersey corporation, CareSpeak
Communications, D.O.O, a controlled foreign corporation incorporated in Croatia, RMDY Health, Inc. a Delaware corporation, and
Cyberdiet, a controlled foreign corporation incorporated in Israel.
Recent developments
In March 2021, our Board of Directors amended
the 2013 Incentive Plan to increase the number of shares authorized under the Plan to 6,000.000 shares.
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Item 1A. Risk Factors
Risks Relating to Business and Financial
Condition
Because we have historically experienced
losses, if we are unable to achieve profitability, our financial condition and company could suffer.
While we were profitable for the full year
of 2018 and in the fourth quarter of 2020, since the inception of our business we have historically incurred losses as a result
of investing in growth. We incurred losses in 2019 and 2020 as a result of our increased spending to invest in growth – both
through additional new hires, as well as through the acquisition of RMDY. While we have increased revenues significantly, we have
not yet consistently achieved profitability due to significant investments in our growth, and non-cash expenses. Our ability to
achieve consistent profitability depends on our ability to generate sales through our technology platform and advertising model,
while maintaining reasonable expense levels. If we do not achieve sustainable profitability, it may impact our ability to continue
our operations.
Our business and growth may suffer
if we are unable to attract and retain key employees.
Our success depends on the expertise of
our executive officers and certain other key technical personnel. It may be difficult to find sufficiently qualified individuals
to replace management or other key technical personnel in the event of death, disability or resignation, thus frustrating our ability
to implement our business plan, which could negatively affect our operating results.
Furthermore, our ability to expand operations
to accommodate our anticipated growth will also depend on our ability to attract and retain qualified media, management, finance,
marketing, sales and technical personnel. However, competition for these types of employees is intense due to the limited number
of qualified professionals. Our ability to meet our business development objectives will depend in part on our ability to recruit,
train and retain top quality people with advanced skills who understand our technology and business. If we are unable to engage
and retain the necessary personnel, our business may be materially and adversely affected.
Our failure to obtain, retain or
attract additional customers could prevent us from successfully executing our business plan.
We currently work with many leading pharmaceutical
companies, medical device manufacturers, medtech, associations, and other companies. Our failure to retain existing customers or
expand with new customers could negatively impact our business.
We are dependent on a concentrated
group of customers.
Our revenues are concentrated in less than
50 customers, primarily large pharmaceutical manufacturers. Loss of one or more of our larger customers could have a negative impact
on our operating results. In both 2020 and 2019, we had three customers that each represented slightly over 10% of our revenues;
however only one customer represented over 10% of our revenues in both years.
We may be unable to support our technology
to further scale our operations successfully.
Our plan is to grow rapidly through further
integration of our technology in electronic platforms. Our growth will place significant demands on our management and technology
development, as well as our financial, administrative and other resources. We cannot guarantee that any of the systems, procedures
and controls we put in place will be adequate to support the commercialization of our operations. Our operating results will depend
substantially on the ability of our officers and key employees to manage changing business conditions and to implement and improve
our financial, administrative and other resources. If we are unable to respond to and manage changing business conditions, or the
scale of our solutions, services and operations, then the quality of our services, our ability to retain key personnel and our
business could be harmed.
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If we are unable to maintain our contracts with
electronic prescription platforms, our business will suffer.
We are reliant upon our contracts with
leading electronic prescribing platforms and electronic health record systems to generate our revenues received from customers
Such arrangements subject us to a number of risks, including the following:
We will need to maintain these relationships
as well as diversify them. The inability to do so could adversely impact our business. We generated 52.7% and 37.4% of our revenue
through our largest partner in 2020 and 2019, respectively.
Our agreements with electronic prescription
platforms and electronic health record systems are subject to audit.
Our agreements with our partners provide
for revenue sharing payments to the platform partners based on the revenue we generate through the platform. These payments are
subject to audit by our partners, at their cost, and if there is a dispute as to the calculation, we may be liable for additional
payments. If an underpayment is determined to be in excess of a certain amount, for example 10%, some agreements would require
us to pay for the cost of the audit, as well.
Developing and implementing new and
updated applications, features and services for our portals may be more difficult than expected, may take longer and cost more
than expected and may not result in sufficient increases in revenue to justify the costs.
Attracting and retaining users of our portals
requires us to continue to improve the technology underlying those portals and to continue to develop new and updated applications,
features and services for those portals. If we are unable to do so on a timely basis or if we are unable to implement new applications,
features and services without disruption to our existing ones, we may lose potential users and clients. The costs of development
of these enhancements may negatively impact our ability to achieve profitability.
We rely on a combination of internal development,
strategic relationships, licensing and acquisitions to develop our portals and related applications, features and services. Our
development and/or implementation of new technologies, applications, features and services may cost more than expected, may take
longer than originally expected, may require more testing than originally anticipated and may require the acquisition of additional
personnel and other resources. There can be no assurance that the revenue opportunities from any new or updated technologies, applications,
features or services will justify the amounts spent.
If we are unable to adhere to the
regulatory and competitive climate in which we operate, we could be materially and negatively impacted.
Due to the labyrinth of regulations in
healthcare space, state and federal, as well as political sensitivity of healthcare delivery, our business model could be negatively
impacted or fail.
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The markets in which we operate are
competitive, continually evolving and, in some cases, subject to rapid change.
Many of our competitors have greater financial,
technical, product development, marketing and other resources than we do. These organizations may be better known than we are and
have more customers or users than we do. We cannot provide assurance that we will be able to compete successfully against these
organizations or any alliances they have formed or may form. Since there are no substantial barriers to entry into the markets
in which our public portals participate, we expect that competitors will continue to enter these markets.
Developments in the healthcare industry
could adversely affect our business.
Most of our revenue is derived from the
healthcare industry and could be affected by changes affecting healthcare spending. We are particularly dependent on pharmaceutical,
biotechnology and medical device companies for our advertising and sponsorship revenue.
General reductions in expenditures by healthcare
industry participants could result from, among other things:
● Consolidation of healthcare industry participants;
● Reductions or changes in governmental funding for healthcare;
● A move to a single-payer healthcare system in the U.S.
Even if general expenditures by industry
participants remain the same or increase, developments in the healthcare industry may result in reduced spending in some or all
of the specific market segments that we serve or are planning to serve. For example, use of our solutions and services could be
affected by:
● Changes in the design of health insurance plans;
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● A decrease in the number of new drugs or medical devices coming to market;
● Payor pressure to move to generic brands.
In addition, our customers’ expectations
regarding pending or potential industry developments may also affect their budgeting processes and spending plans with respect
to solutions and services of the types we provide.
The healthcare industry has changed significantly
in recent years and we expect that significant changes will continue to occur. However, the timing and impact of developments in
the healthcare industry are difficult to predict. We cannot assure you that the markets for our solutions and services will continue
to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those
markets.
Future acquisitions
may adversely affect our financial condition.
While we currently do not have any immediate
arrangements, commitments or understandings regarding any future acquisitions, as part of our strategy for growth, we may continue
to explore acquisitions or strategic alliances, which may not be completed or may not be ultimately beneficial to us. Acquisitions
may pose risks to our operations, including:
● unanticipated costs;
● failure to achieve anticipated increases in revenues and profitability;
● diversion of management’s attention from our core business;
● volatility associated with accounting for earn-outs in a given transaction;
● entering markets in which we have no, or limited, prior experience; and
In addition, in connection with any acquisitions
or investments we could:
● incur debt and assume liabilities;
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The failure to successfully integrate any
acquisitions in an efficient or timely manner may negatively impact our financial condition and operating results, or we may not
be able to fully realize anticipated savings. In addition, our competitors could try to emulate our acquisition strategy, leading
to greater competition for scarce acquisition targets and could lead to larger competitors if they succeed in emulating our strategy.
The global pandemic may disrupt our
business or the business of our customers.
In December 2019, a novel strain of corona
virus, which causes the infectious disease known as COVID-19 was reported. The World Health Organization declared COVID-19 a Public
Health Emergency and Global Pandemic. COVID-19 has severely impacted economies around the world. We have taken steps to mitigate
the impact on us, but there can be no assurance that such steps will be successful, or that our business operations, or the operations
of our customers will not be materially and adversely affected by the consequences of the pandemic. This could materially impact
our results of operations, cash flows, and financial condition.
A material weakness in our internal
control over financial reporting, if not remediated, could result in material misstatements in our financial statements.
Management is responsible for establishing
and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange
Act of 1934, as amended. A material weakness (as defined in Rule 12b-2) is a deficiency, or combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim
financial statements will not be prevented or detected on a timely basis. We have had material weaknesses in the past that have
been remediated as of December 31, 2020. There is no guarantee that material weakness could not arise in the future. If additional
material weaknesses were to be identified, it could result in our consolidated financial statements containing material misstatements
in the future.
Our success is dependent in part
on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary rights of
others.
We seek patent protection for those inventions
and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage to us. Because
patent applications in the United States are maintained in secrecy until either the patent application is published, or a patent
is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant to our solutions
that may block our use of our intellectual property or may be used in third-party products that compete with our solutions and
processes. In the event a competitor or other party successfully challenges our solutions, processes, patents or licenses or claims
that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against such claims,
be required to pay royalties, license fees or other damages or be barred from using the intellectual property at issue, any of
which could have a material adverse effect on our business, operating results and financial condition.
We also rely substantially on trade secrets,
proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect our technology, application,
design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and protect our
competitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual agreements
for our business will be adequate, that our competitors will not independently develop or patent substantially equivalent or superior
technologies or be able to design around patents that we may receive, or that our intellectual property will not be misappropriated.
We could be subject to economic,
political, regulatory and other risks arising from our international operations.
Operating in international markets requires
significant resources and management attention and will subject us to regulatory, economic and political risks that may be different
from and incremental to those in the United States. In addition to the risks that we face in the United States, our international
operations, as a result of our acquisitions in 2018 and 2019 wherein we now operate in Israel and Croatia, may involve risks that
could adversely affect our business, including:
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● management distraction;
● unexpected changes in regulatory requirements;
● less favorable foreign intellectual property laws;
● profit repatriation and other restrictions on the transfer of funds;
● new and different sources of competition;
Our failure to manage any of these risks
successfully could harm our international operations and our overall business, as well as results of our operations.
Our business will suffer if our network
systems fail or become unavailable.
A reduction in the performance, reliability
and availability of our network infrastructure would harm our ability to distribute our solutions to our users, as well as our
reputation and ability to attract and retain customers. Our systems and operations could be damaged or interrupted by fire, flood,
power loss, telecommunications failure, Internet breakdown, earthquake and similar events. Our systems could also be subject to
viruses, break-ins, sabotage, acts of terrorism, acts of vandalism, hacking, cyber-terrorism and similar misconduct. We might not
carry adequate business interruption insurance to compensate us for losses that may occur from a system outage. Any system error
or failure that causes interruption in availability of our solutions or an increase in response time could result in a loss of
potential customers, which could have a material adverse effect on our business, financial condition and results of operations.
If we suffer sustained or repeated interruptions, then our solutions and services could be less attractive to our users and our
business would be materially harmed.
If we are unable to manage growth,
our operations could be adversely affected.
Our progress is expected to require the
full utilization of our management, financial and other resources. Our ability to manage growth effectively will depend on our
ability to improve and expand operations, including our financial and management information systems, and to recruit, train and
manage personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth
of our business, we may experience significant strains on our management and operations and disruptions in our business. Various
risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer
demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased
demand for our solutions. Our failure to properly manage the growth that we or our industry might experience could negatively impact
our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and
results of operations, and our reputation with our current or potential customers.
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Our business is subject to changing
regulation of corporate governance and public disclosure.
Because our common stock is publicly traded,
we are subject to certain rules and regulations of federal and state entities charged with the protection of investors and the
oversight of companies whose securities are publicly traded. These entities have continued to develop additional regulations and
requirements in response to laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Complying with these new regulations
has resulted in, and is likely to continue to result in, increased general and administrative costs and a diversion of management
time and attention from revenue generating and other business activities to compliance activities.
Risks Relating to Our Securities
If a market for our common stock
is not maintained, shareholders may be unable to sell their shares.
Our common stock is traded under the symbol
“OPRX” on the Nasdaq Capital Market. We do not currently have a consistent active trading market. There can be no assurance
that a consistent active and liquid trading market will develop or, if developed, that it will be sustained.
Historically, our securities have been
thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of
the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to
result in major fluctuations in the price of the stock.
The market price of our common stock
is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our
control.
Our stock price is subject to a number
of factors, including:
● Government regulation of our solutions and services;
● The establishment of partnerships with other healthcare companies;
● Intellectual property disputes;
● Additions or departures of key personnel;
● Sales of our common stock;
● Our ability to integrate operations, technology, solutions, and services;
● Our ability to execute our business plan;
● Operating results below or exceeding expectations;
● Whether we achieve profits or not;
● Loss or addition of any strategic relationship;
● Industry developments;
● Economic and other external factors; and
● Period-to-period fluctuations in our financial results.
Our stock price may fluctuate widely as
a result of any of the above. In addition, the securities markets have from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially
and adversely affect the market price of our common stock.
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We do not expect to pay dividends
in the foreseeable future and any return on investment may be limited to the value of our common stock.
We do not anticipate paying cash dividends
on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial
condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. If
we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock
price appreciates.
Provisions in the Nevada Revised
Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers
for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such
actions.
Members of our board of directors and our
officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances,
pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. Specifically,
Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or
its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or
officer unless it is proven that (1) the director’s or officer’s act or failure to act constituted a breach of his
or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud
or a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their
potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly,
you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty
of care. In addition, our Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and
expenses resulting from their acting in such capacities with us. This means that if you were able to enforce an action against
our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and
any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed
financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely
affect prevailing market prices for our common stock.
13
Item 1B. Unresolved Staff comments
None
Item 2. Properties
Currently, we do not own any real estate.
Our principal executive offices are located at 400 Water Street, Suite 200, Rochester, Michigan 48307.
We have operating leases with terms greater
than 12 months for office space in three multitenant facilities. The lease on our headquarters space in Rochester, Michigan expires
November 30, 2022, with a three-year renewal option through 2025, with monthly rent payable at rates ranging from $6,384 to $6,688.
We have assumed renewal of the lease. We also have a lease on office space in Cranbury, New Jersey, expiring in 2022 with monthly
payments ranging from $3,008 to $3,158, as well as a lease of approximately $1,883 per month in Zagreb, Croatia expiring in 2022.
We also lease minor amounts of space in shared space facilities on a month to month basis as necessary.
We believe that our properties are adequate
for our current needs, but growth potential may require larger facilities due to anticipated addition of personnel. We do not have
any policies regarding investments in real estate, securities or other forms of property.
Item 3. Legal Proceedings
We have no current legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
14
PART II
Item 5. Market for Registrant’s
Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded under the symbol
“OPRX” on the Nasdaq Capital Market.
Holders of Our Common Stock
As of March 3, 2021, we had
16,806,637 shares of our common stock issued and outstanding, held by approximately 400 shareholders of record at our
transfer agent, with approximately 7,000 additional shareholders holding our shares in street name.
Dividends
We currently intend to retain future earnings
for the operation of our business. We have never declared or paid cash dividends on our common stock, and we do not anticipate
paying any cash dividends in the foreseeable future.
In the event that a dividend is declared,
common stockholders on the record date are entitled to share ratably in any dividends that may be declared from time to time on
the common stock by our board of directors from funds legally available.
There are no restrictions in our
articles of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, do prohibit
us from declaring dividends where, after giving effect to the distribution of the dividend:
Securities Authorized for Issuance under Equity Compensation
Plans
On June 13, 2013, our Board of Directors adopted
the 2013 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the best available personnel
for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and
to promote our success. As of December 31, 2020, under the Plan, as amended, we are currently able to issue up to an aggregate
total of 3,000,000 incentive or non-qualified options to purchase our common stock, stock awards and other offerings. In March
2021, our Board of Directors amended the Plan to increase the number of shares authorized under the plan to 6,000,000 shares.
15
Equity Compensation Plans as of December 31, 2020
2013 Equity Compensation Plan – Restricted Stock Awards 100,000 N/A N/A
Recent Sales of Unregistered Securities
The information set forth below relates
to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not
previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
In December 2020, we issued 4,010 shares
of restricted common stock to our outside Directors as part of our director compensation package for services rendered in Q4 2020.
From October through December 2020, we
issued 125,918 shares of common stock and received proceeds of $1,156,314 in connection with the exercise of options.
These securities were issued pursuant to
Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the
securities for investment only and not with a view towards distribution. The investors were given adequate information about us
to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer
agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
16
Item 6. Selected Financial Data
Not required under Regulation S-K for “smaller
reporting companies.”
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Overview
We are a pioneering digital health company that provides healthcare
communications solutions for life science companies to connect and deliver relevant information to healthcare providers and patients.
As the largest digital health network of its kind, the OptimizeRx platform bridges the communication gap that exists between key
stakeholders in healthcare, including pharmaceutical companies, payers, hospitals, physicians, and patients, providing patient
affordability, access, and adherence directly at the point of care through EHRs and e-prescribing systems.
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 continues to rise, our platform has expanded
over the years 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.
Our strategic focus remains on growing our existing client base
and generating greater and more consistent revenues in part through our continued shift in our business model toward enterprise