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, 2021
☐ 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 Trading Symbol Name of each exchange on which registered
Common Stock, par value $0.001 OPRX Nasdaq Capital Market
Securities registered under Section 12(g) of the
Exchange Act: None
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 has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
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. $1,030,061,063
Indicate the number of shares outstanding of each
of the registrant’s classes of common stock, as of the latest practicable date. 17,875,435 common shares as of February 24, 2022.
Documents
incorporated by reference
Certain portions of the registrant's definitive proxy statement, in
connection with its 2022 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after
December 31, 2021, are incorporated by reference into PART III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 6
Item 1B. Unresolved Staff Comments 15
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Mine Safety Disclosures 15
Item 4.1 Information about Our Executive Officers 15
PART II
Item 6. Reserved 18
Item 7a. Quantitative and Qualitative Disclosures about Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9A. Controls and Procedures 29
Item 9B. Other Information 29
Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 29
PART III
Item 10. Directors, Executive Officers and Corporate Governance 30
Item 11. Executive Compensation 30
Item 14. Principal Accountant Fees and Services 32
PART IV
Item 15. Exhibits and Financial Statement Schedules 33
i
PART I
Forward-Looking Statements
This Annual Report on Form 10-K contains statements that relate to
future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995. Certain statements, other than purely historical information, including estimates, projections, statements relating
to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating results, and the assumptions
upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified
by the words “believes,” “project,” “expects,” “anticipates,” “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. Forward-looking statements are not guarantees of future performance. Although OptimizeRx believes
that the expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained
and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety
of risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.
For a discussion of some of the specific factors that could cause actual
results to differ materially from the information contained in this report, see the following sections of this report: Part I, Item
1A. "Risk Factors," Part II, Item 7. "Management’s Discussion and Analysis of Financial Condition and Results
of Operations," including the disclosures under "Critical Accounting Policies." Market projections are subject to the risks
discussed in this report and other risks in the market. OptimizeRx disclaims any intention or obligation to update publicly any forward-looking
statements, whether in response to new information, future events or otherwise, except as required by applicable law.
Unless otherwise specified or the context otherwise requires, when
used in this Annual Report on Form 10-K, the terms “we,” “our,” “us,” “OptimizeRx,” or
the “Company” refer to OptimizeRx Corporation and its subsidiaries.
Item 1. Business
Overview
OptimizeRx is a digital health technology company
enabling care-focused engagement between life sciences organizations, healthcare providers, and patients at critical junctures throughout
the patient care journey. Connecting over 60% of U.S. healthcare providers and millions of their patients through an intelligent technology
platform embedded within a proprietary point-of-care network, OptimizeRx helps patients start and stay on their medications.
We are a Nevada corporation organized in September
2008. 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.
1
2021 Company Highlights
12. We were added to the S&P SmallCap 600 Index in October 2021.
Principal Solutions and Applications
Our principal solutions and applications can be
summarized as follows:
2
Sales and Marketing Update
Our sales team continues to expand our business
with existing and new clients, strategically focused on the digital connection of care between the pharmaceutical industry, physicians,
and patients. We continue driving awareness of the increased value of our enterprise platform approach, expanding our share of customer
wallet in reflection of the life sciences budget shift to digital solutions. We have increased 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 making significant
enhancements to our platform and network to digitize pharmaceutical access solutions in support of major industry paradigm shift towards
improving patient care and adherence through technology. In 2021 we announced the launch of our new Therapy Initiation Workflow,
a digital solution focused on accelerating patient access to treatments where time-consuming medical documentation is required of HCPs
prior to pharmacies dispensing prescribed drugs. The new platform enhancement particularly supports the fast-growing area of specialty
medications. Our team continues to work 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.
3
In 2021, we delivered on our marketing strategy
to focus more heavily on strategic content and expansion beyond specific product marketing efforts with a 10x increase in engagement with
our content, resulting in higher brand visibility through organic, non-paid channels. Our efforts remain focused on cementing our image
as a strategic partner with our buyers, and we have completed a positioning expansion effort to better capture the value of our platform
with our buyers in light of the innovations we have deployed over the last two years. Additionally, we hosted a series of webinars featuring
industry leaders in 2021 to foster collaboration, and we hosted our second annual Innovate4Outcomes event, partnering with patient advocacy
groups to brainstorm actionable solutions to address standards of care and equal access to treatment for patients.
We have continued building marketing strategy
momentum in 2021 with increased industry visibility that we expect to expand in 2022.
Operational Update
In 2021, we continued expansion of our network,
driving a broad mix of HCP specialties in alignment with our commercial customer therapeutic portfolios. The introduction of Real-World
Evidence and expansion into omni-channel engagement brought engagement opportunities beyond the point of prescribe, enabling access to
life saving therapies. Leveraging AI, we engage providers and patients with the right insight at precisely the right time, helping
to drive improved outcomes.
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.
All application code, libraires, and 3rd
party services are maintained at high levels, with an ongoing regimen of patches and upgrades and version synchronization to ensure both
forward looking and reverse compatibility.
Systems enhancements in 2021 included upgrades
and full documentation of processes and procedures and security implementation in support of full Enterprise HITRUST Certification in
2022, as well as for ongoing Sarbanes Oxley, HIPAA, customer assessments and other needs.
All systems are fully scalable, automatically
based on various metrics, thresholds, and are live-live in multiple redundant geographically disparate data centers.
Applications introduced are modular and flexible
allowing enhancements and new solutions to flow through the system which results in rapid implementation by our partners that typically
only takes a few weeks to one quarter.
Competition
Our platforms face competition from numerous other
companies, both in attracting users and in generating revenue from advertisers and sponsors. We compete for users with online services
and websites that provide savings on medications and healthcare products, including both commercial sites and not-for-profit sites. We
compete for advertisers and sponsors with health-related web sites, general purpose consumer web sites that offer specialized health sub-channels,
other high-traffic web sites that include both healthcare-related and non-healthcare-related content and services, search engines that
provide specialized health searches, and advertising networks that aggregate traffic from multiple sites.
Our messaging platform competes broadly 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. 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. Our messaging offerings compete for pharmaceutical budgets with a variety of other forms of advertising and promotion.
Our platform is unique in its ability to reach prescribers directly in their workflow through their EHR. The primary direct competitor
in our financial messaging solution is ConnectiveRx. We generally compete on the basis of several factors, including size of our network,
quality of our service, our ability to target specific customer needs, and to a lesser extent, price. We believe we compete favorably
on these metrics. For more information on risks relating to our competition, see Item 1A. Risk Factors.
4
Intellectual Property
We own a number of patents important to our business,
and we expect to continue to file patent applications to protect our research and development investments in new products. As of December 31,
2021 we held 3 patents and several pending patent applications, including foreign counterpart patents and foreign applications. For the
United States, patents may last 20 years from the date of the patent’s filing, depending upon term adjustments made by the patent
office. In addition, we hold numerous trademarks in the United States and other countries. We also have licenses to intellectual property
for the use and sale of certain of our solutions.
OPTIMIZERx, TELAREP, CareSpeak, RMDY Wellness
Layers, Diet Watch, and SampleMD are our licensed trademarks.
We obtain other intellectual property rights and/or
licenses used in connection with our business when practical and appropriate. Historically, we have done so both organically, through
commercial relationships and in connection with acquisitions.
Government Regulation
The healthcare industry and, in particular, our
customers and partners are subject to applicable U.S. federal, state and local laws and regulations, including those governing fraud,
abuse, privacy and security. Many of these laws and regulations are complicated and how they might apply to us, our customers, our partners,
or the specific services and relationships we have with our customers and partners are not always well-defined. Our failure, or perceived
failure, to accurately apply, or comply with, these laws and regulations could subject us to significant fines and liability, result in
reputational harm, and adversely affect our business. See Item 1A. Risk Factors for more information on the impact of Government Regulations
on OptimizeRx.
Employees
As of December 31, 2021, we had 82 full-time employees
in the U.S, as well as 15 full-time international employees, and no part-time employees. None of our employees are represented by a labor
union or collective bargaining agreement with respect to their employment with us. The majority of our employees work remotely and are
geographically distributed across the United States, Israel and Croatia. We supplement our workforce with contractors in the United States
and internationally on an as needed basis. We consider our relationship with our employees to be good and have not experienced any work
stoppages.
We are dedicated
to maintaining an environment where everyone feels valued, and we celebrate both the differences and similarities among our people. We
also believe that diversity in all areas, including cultural background, experience and thought, is essential in making our Company stronger.
In 2021 we introduced a Diversity, Equity & Inclusion Committee, which is actively engaged in improving our culture, hiring
practices and education. In 2021, we committed to the Parity Pledge – pledging to interview and consider at least one qualified
woman and underrepresented minority for every open role, VP or higher.
We prioritize recruiting, retaining, and incentivizing
a highly qualified, diverse workforce and we incentivize selected employees through the granting of stock-based awards for compensation
and performance and cash-based bonus awards for performance.
We have increased our focus on training and development
for our current employees. We offer learning and development opportunities and other resources to support our employees in achieving and
enhancing their development objectives. We equip our managers with the skills and tools to provide
ongoing coaching and feedback so employees can maximize their performance and potential, delivering success for the company and the employee.
Available Information
Our Internet address is www.optimizerx.com. 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. The website is, and is only intended to be, for reference purposes only. We make available free of charge on or through our website
our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission
(the “SEC”). In addition, we will provide, at no cost, paper or electronic copies of our reports and other filings made with
the SEC. Requests should be directed to: Attention: Secretary, OptimizeRx Corporation, 400 Water Street, Suite 200, Rochester, MI 48307.
5
Item 1A. Risk Factors
Risks Relating to Our Business
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
2021, since the inception of our business we have historically incurred losses as a result of investing in future growth. We incurred
losses in 2019 and 2020 as a result of our increased spending to build the organization to support expected future growth – both
through additional new hires, as well as through acquisitions. While we have increased revenues significantly, we have not yet consistently
achieved profitability due to these investments 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.
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 had, and continues to have, a severe impact on economies around the world, in particular in the healthcare
industry in which we operate. We have taken steps to modify our business practices and mitigate the impact of the pandemic on us, and
may take further precautions as required by government authorities or to protect the health of our employees, customer, and partners -
but there can be no assurance that such steps will be successful, or that our business operations, or the operations of our customers
or partners 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.
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.
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.
6
Any failure to offer high-quality customer
support for our portals may adversely affect our relationships with our customers and harm our financial results.
Once our solutions are implemented, our customers
use our support organization to resolve technical issues relating to our solutions. In addition, we also believe that our success in selling
our solutions is highly dependent on our business reputation and on favorable recommendations from our existing customers. Any failure
to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could harm our reputation,
adversely affect our ability to maintain existing customers or sell our solutions to existing and prospective customers, and harm our
business, operating results and financial condition.
We may be unable to respond quickly enough to
accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding
revenues, could also increase costs and adversely affect our operating results.
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 2021 and 2020, 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 expect that we will continue to depend upon
a relatively small number of customers for a significant portion of our total revenues for the foreseeable future. The loss of any of
these customers or groups of customers for any reason, or a change of relationship with any of our key customers could cause a material
decrease in our total revenues.
Additionally, mergers or consolidations among
our customers in the healthcare industry could reduce the number of our customers and could adversely affect our revenues and sales. In
particular, if our customers are acquired by entities that are not also our customers, that do not use our solutions or that have more
favorable contract terms with competitors and choose to discontinue, reduce or change the terms of their use of our solutions, our business
and operating results could be materially and adversely affected.
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 53.9% and 52.7% of our revenue through
our largest partner in 2021 and 2020, respectively.
7
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.
Our
future growth depends on our ability to attract, retain customers, and the loss of existing customers, or failure to attract new ones,
could adversely impact our business and future prospects.
We currently work with many leading pharmaceutical
companies, medical device manufacturers, associations, and other companies. While we have experienced
customer growth, this growth may not continue at the same pace in the future or at all. Achieving growth in our customer base may require
us to engage in increasingly sophisticated and costly sales and marketing efforts that may not result in additional customers. We may
also need to modify our pricing model to attract and retain such customers. If we fail to attract new customers or fail to maintain or
expand existing relationships in a cost-effective manner, our business and future prospects may be materially and adversely impacted.
Actual
or perceived failures to comply with applicable laws and regulations that affect the healthcare industry, including data protection, privacy
and security, fraud and abuse laws, regulations, standards and other requirements could adversely affect our business, results of operations,
and financial condition.
The global
data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements
and regulations governing the collection, use, disclosure, retention, and security of personal information, including health-related information.
This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer,
use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose
additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures
or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement
actions, claims by third parties, and damage to our reputation, any of which could have a material adverse effect on our operations, financial
performance and business.
We also
may be bound by contractual obligations and other obligations relating to privacy, data protection, and information security that are
more stringent than applicable laws and regulations. The costs of compliance with, and other burdens imposed by, laws, regulations, standards,
and other obligations relating to privacy, data protection, and information security are significant. Although we work to comply with
applicable laws, regulations, and standards, our contractual obligations and other legal obligations, these requirements are evolving
and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with another
or other legal obligations with which we must comply. Accordingly, our failure, or perceived inability, to comply with these laws, regulations,
standards, and other obligations may limit the use and adoption of our solution, reduce overall demand for our solution, lead to regulatory
investigations, breach of contract claims, litigation, and significant fines, penalties, or liabilities for actual or alleged noncompliance
or slow the pace at which we close sales transactions, any of which could harm our business.
The Health Insurance Portability and Accountability
Act of 1996, or HIPAA, and the rules promulgated thereunder 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 we are not a Covered Entity and 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 HIPAA compliance could become a substantial regulatory burden and expense to our
operations as we expand our point of care technology solutions to help patients start and stay on therapies.
8
Certain other laws and regulations such as federal
and state anti-kickback and false claims laws may apply to us indirectly through our relationships with our customers and partners. Violations
can result in considerable penalties and sanctions. If we are found to have violated, or to have facilitated the violation of such laws,
we could be subject to significant penalties.
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.
The markets in which we operate are competitive,
continually evolving and, in some cases, subject to rapid change.
Our platforms face competition from numerous other
companies, both in attracting users and in generating revenue from advertisers and sponsors. We compete for users with online services
and websites that provide savings on medications and healthcare products, including both commercial sites and not-for-profit sites. We
compete for advertisers and sponsors with health-related web sites, general purpose consumer web sites that offer specialized health sub-channels,
other high-traffic web sites that include both healthcare-related and non-healthcare-related content and services, search engines that
provide specialized health searches, and advertising networks that aggregate traffic from multiple sites.
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; and
9
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;
● 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.
If we are unable to manage growth, our operations
could be adversely affected.
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. To manage growth effectively,
we will be required to continue to implement and improve our operating and financial systems and controls to expand, train and manage
our employee base. Our ability to manage our operations and growth effectively will require us to continue to expend funds to enhance
our operational, financial and management controls, reporting systems and procedures, and to attract and retain sufficient talented personnel.
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 grow too quickly. If our business 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.
Our growth may be impacted by acquisitions.
We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.
Our future growth is likely to depend to some
degree on our ability to acquire and successfully integrate new businesses. We may not be able to identify suitable acquisition candidates,
complete acquisitions, or integrate acquisitions successfully. We may seek additional acquisition opportunities, both to further diversify
our business and to penetrate or expand important product offerings or markets. There are no assurances, however, that we will be able
to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions,
successfully integrate acquired businesses, or expand into new markets. Once acquired, operations may not achieve anticipated levels of
revenues or profitability. Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services
and products of the acquired companies and the diversion of management's attention from other business concerns. Although our management
will endeavor to evaluate the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all
such risks. Difficulties encountered with acquisitions could have a material adverse impact on our business.
10
Our business and growth may suffer if we are unable to attract
and retain key employees.
Our success has been largely dependent on the
skills, experience and efforts of our key employees and the loss of the services of any of our executive officers or other key employees,
without a properly executed transition plan, could have an adverse effect on us. The loss of any member of our senior management
team or any of our other key employees could damage critical customer relationships, result in the loss of vital knowledge, experience
and expertise, could lead to an increase in recruitment and training costs and make it more difficult to successfully operate our business
and execute our business strategy. We may not be able to find qualified potential replacements for these individuals and the integration
of potential replacements may be disruptive to our business.
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.
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 in Israel and
Croatia, may involve risks that could adversely affect our business, including:
● 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.
11
Risks Related to Our Intellectual Property
and Technology
We are dependent, in part, on our intellectual
property. If we are not able to protect our proprietary rights or if those rights are invalidated or circumvented, our business may be
adversely affected.
Our business is dependent, in part, on our ability
to innovate, and, as a result, we are reliant on our intellectual property. We generally protect our intellectual property through patents,
trademarks, trade secrets, confidentiality and nondisclosure agreements and other measures to the extent our budget permits. There can
be no assurance that patents will be issued from pending applications that we have filed or that our patents will be sufficient to protect
our key technology from misappropriation or falling into the public domain, nor can assurances be made that any of our patents, patent
applications, trademarks or our other intellectual property or proprietary rights will not be challenged, invalidated or circumvented.
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 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.
If we are unable to protect our proprietary rights,
we may be at a disadvantage to others who do not incur the substantial time and expense we incur. Preventing unauthorized use or infringement
of our intellectual property rights is inherently difficult. Moreover, it may be difficult or practically impossible to detect theft or
unauthorized use of our intellectual property. Any of the foregoing could have a material adverse effect upon our business, financial
condition and results of operations.
Cybersecurity incidents could disrupt business
operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.
Global cybersecurity threats can range from uncoordinated
individual attempts to gain unauthorized access to our information technology (IT) systems to sophisticated and targeted measures known
as advanced persistent threats. While we employ comprehensive measures to prevent, detect, address and mitigate these threats (including
access controls, insurance, vulnerability assessments, continuous monitoring of our IT networks and systems, maintenance of backup and
protective systems and user training and education), cybersecurity incidents, depending on their nature and scope, could potentially result
in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own
or that of third parties) and the disruption of business operations. The potential consequences of a material cybersecurity incident include
reputational damage, loss of customers, litigation with customers and other parties, loss of trade secrets and other proprietary business
data and increased cybersecurity protection and remediation costs, which in turn could adversely affect our competitiveness and results
of 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.
12
Risks Relating to Our Common Stock
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 execute our business plan;
● Operating results below or exceeding expectations;
● Our operating and financial performance and prospects;
● Loss or addition of any strategic relationship;
● 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.
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 have never declared or paid any cash dividends
on our common stock. We currently intend to retain all available funds and future earnings, if any, to fund our future growth and do not
expect to declare or pay any dividend on shares of our common stock in the foreseeable future. As a result, the success of an investment
in our common stock may depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate
in value or even maintain the price at which it was purchased.
13
“Anti-takeover”
provisions may make it more difficult for a third party to acquire control of us, even if the change in control would be beneficial to
shareholders.
The
Company is a Nevada corporation. Anti-takeover provisions in Nevada law and our charter and bylaws could make it more difficult for a
third party to acquire control of us. These provisions could adversely affect the market price of the common stock and could reduce the
amount that shareholders might receive if the Company is sold. For example, our charter provides that the board of directors may issue
preferred stock without shareholder approval. In addition, our bylaws provide that shareholders cannot act by written consent and that
directors may be removed by shareholders only with the approval of the holders of not less than two-thirds
of the voting power of the issued and outstanding stock entitled to vote at an annual or special meeting of the shareholders.
Risks Related to Being a
Public Company
A material weakness in our internal control
over financial reporting, if not remediated, could result in material misstatements in our financial statements. As
a result, current and potential shareholders and customers could lose confidence in our financial reporting, which could harm our business,
the trading price of our stock and our ability to retain our current customers or obtain new customers.
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 were remediated as of December 31, 2020.
We cannot provide assurance that we will not in the future have additional material weaknesses in our internal control over financial
reporting. As a result, we may be required to implement further remedial measures and to design enhanced processes and controls to address
deficiencies, which could result in significant costs to us and require us to divert substantial resources, including management time,
from other activities. If we identify material weaknesses or fail to maintain adequate internal controls over financial reporting in the
future, we may not be able to prepare reliable financial reports and comply with our reporting obligations under the Exchange Act on a
timely basis. Any such delays in the preparation of financial reports and the filing of our periodic reports may result in a loss of public
confidence in the reliability of our financial statements, the commencement of litigation, or the commencement of regulatory action against
us, which may include court actions or administrative proceedings, any of which could materially adversely affect our business, the market
value of our securities and our access to the capital markets.
14
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.
As of December 31, 2021, we had operating leases
with initial lease terms greater than 12 months for office space in three multitenant facilities. The lease on our headquarters space
in Rochester, Michigan expires November 30, 2023, with a two-year renewal option through 2025, with monthly rent payable at rates ranging
from $6,384 to $6,688. We have assumed renewal of this lease for financial statement purposes. We also had a lease on office space in
Cranbury, New Jersey, which expired in January 2022, with a monthly payment of $3,158, as well as a lease of approximately $1,883 per
month in Zagreb, Croatia expiring in 2024. We did not renew the New Jersey lease. We also lease minor amounts of space in shared space
facilities on a month to month basis as necessary.
Item 3. Legal Proceedings
We have no current legal proceedings.
Item 4. Mine Safety Disclosures
Not applicable.
Item 4.1 Information About Our Executive Officers
The following information sets forth the names,
ages, and positions of our executive officers as of February 24, 2022.