UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
[X]
|
Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
|
|
|
|
For the quarterly period ended
June 30, 2011
|
|
|
[ ]
|
Transition Report pursuant to 13 or 15(d) of the Securities Exchange
Act of 1934
|
|
|
|
For the transition period from __________
to __________
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|
|
|
Commission File
Number:
000-53605
|
OptimizeRx
Corporation
(Exact
name of registrant as specified in its charter)
Nevada
|
26-1265381
|
(State or other jurisdiction of incorporation
or organization)
|
(IRS Employer Identification No.)
|
407
6th Street
Rochester,
MI, 48307
|
(Address of principal executive
offices)
|
248-651-6568
|
(Registrant's telephone number)
|
_______________________________________________________________
|
(Former name, former address and former
fiscal year, if changed since last report)
|
Indicate
by check mark 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 [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes [ ] No [X]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
[ ] Large accelerated filer Accelerated filer
|
[ ] Non-accelerated filer
|
[X] Smaller reporting company
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [
] No [X]
State the
number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 13,969,202
shares as of June 30, 2011.
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Our
consolidated
financial statements included in this Form 10-Q are as follows:
These
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management,
all adjustments considered necessary for a fair presentation have been included. Operating results for the interim
period ended June 30, 2011 are not necessarily indicative of the results that can be expected for the full year.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
AS
OF JUNE 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010 (UNAUDITED)
ASSETS
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2011
|
|
2010
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
969,765
|
|
|
$
|
1,278,094
|
|
Accounts
receivable
|
|
|
140,100
|
|
|
|
226,000
|
|
Prepaid
expenses
|
|
|
114,863
|
|
|
|
80,051
|
|
Debt
discount-current portion
|
|
|
500,000
|
|
|
|
500,000
|
|
Total
Current Assets
|
|
|
1,724,728
|
|
|
|
2,084,145
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
12,155
|
|
|
|
13,061
|
|
|
|
|
|
|
|
|
|
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Other
Assets
|
|
|
|
|
|
|
|
|
Patent
rights, net
|
|
|
875,294
|
|
|
|
902,647
|
|
Website
development costs, net
|
|
|
383,116
|
|
|
|
332,107
|
|
Debt
discount-net of current portion
|
|
|
166,667
|
|
|
|
416,667
|
|
Total
Other Assets
|
|
|
1,425,077
|
|
|
|
1,651,421
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
3,161,960
|
|
|
$
|
3,748,627
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable - trade
|
|
$
|
37,460
|
|
|
$
|
38,409
|
|
Accounts
payable - related party
|
|
|
570,000
|
|
|
|
570,000
|
|
Accrued
expenses
|
|
|
57,500
|
|
|
|
5,700
|
|
Accrued
interest
|
|
|
45,000
|
|
|
|
15,000
|
|
Deferred
revenue
|
|
|
152,610
|
|
|
|
225,720
|
|
Total
Current Liabilities
|
|
|
862,570
|
|
|
|
854,829
|
|
|
|
|
|
|
|
|
|
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Long-Term Liabilities
|
|
|
|
|
|
|
|
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Notes
payable - investor
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
Total
Long-Term Liabilities
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
1,862,570
|
|
|
|
1,854,829
|
|
|
|
|
|
|
|
|
|
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Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Common
stock, $.001 par value, 500,000,000 shares authorized, 13,869,202 shares issued and outstanding (13,606,676 - 2010)
|
|
|
13,869
|
|
|
|
13,607
|
|
Preferred
stock, $.001 par value, 10,000,000 shares authorized, 50 shares issued and outstanding
|
|
|
0
|
|
|
|
0
|
|
Stock
warrants
|
|
|
20,281,328
|
|
|
|
20,281,328
|
|
Additional
paid-in-capital
|
|
|
3,658,450
|
|
|
|
3,355,615
|
|
Accumulated
deficit
|
|
|
(22,654,367
|
)
|
|
|
(21,756,752
|
)
|
Total
Stockholders' Equity
|
|
|
1,299,390
|
|
|
|
1,893,798
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
3,161,960
|
|
|
$
|
3,748,627
|
|
The
accompanying notes are an integral part of these financial statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED JUNE 30, 2011 AND 2010
(UNAUDITED)
|
For the
|
|
For the
|
|
three months
|
|
three months
|
|
ended
|
|
ended
|
|
June 30,
|
|
June 30,
|
|
2011
|
|
2010
|
REVENUE
|
|
|
|
Sales
|
$
|
200,174
|
|
|
$
|
16,720
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE
|
|
200,174
|
|
|
|
16,720
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
Operating expenses
|
|
493,154
|
|
|
|
892,083
|
|
|
|
|
|
|
|
|
|
TOTAL EXPENSES
|
|
493,154
|
|
|
|
892,083
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
(292,980
|
)
|
|
|
(875,363
|
)
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
Interest income
|
|
395
|
|
|
|
625
|
|
Interest expense
|
|
(140,098
|
)
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSE)
|
|
(139,703
|
)
|
|
|
460
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
(432,683
|
)
|
|
|
(874,903
|
)
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
$
|
(432,683
|
)
|
|
$
|
(874,903
|
)
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES
|
|
|
|
|
|
|
|
OUTSTANDING: BASIC AND DILUTED
|
|
13,869,202
|
|
|
|
13,378,759
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE: BASIC AND DILUTED
|
$
|
(0.03
|
)
|
|
$
|
(0.07
|
)
|
The
accompanying notes are an integral part of these financial statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010
(UNAUDITED)
|
For the
|
|
For the
|
|
six months
|
|
six months
|
|
ended
|
|
ended
|
|
June 30,
|
|
June 30,
|
|
2011
|
|
2010
|
REVENUE
|
|
|
|
Sales
|
$
|
594,017
|
|
|
$
|
18,003
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE
|
|
594,017
|
|
|
|
18,003
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
Operating expenses
|
|
962,435
|
|
|
|
1,155,177
|
|
|
|
|
|
|
|
|
|
TOTAL EXPENSES
|
|
962,435
|
|
|
|
1,155,177
|
|
|
|
|
|
|
|
|
|
NET OPERATING LOSS
|
|
(368,418
|
)
|
|
|
(1,137,174
|
)
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
Interest income
|
|
835
|
|
|
|
1,530
|
|
Other income
|
|
66
|
|
|
|
-0-
|
|
Interest expense
|
|
(280,098
|
)
|
|
|
(226
|
)
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSE)
|
|
(279,197
|
)
|
|
|
1,304
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE PROVISION FOR INCOME TAXES
|
|
(647,615
|
)
|
|
|
(1,135,870
|
)
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
$
|
(647,615
|
)
|
|
$
|
(1,135,870
|
)
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES
|
|
|
|
|
|
|
|
OUTSTANDING: BASIC AND DILUTED
|
|
13,749,300
|
|
|
|
13,115,405
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE: BASIC AND DILUTED
|
$
|
(0.05
|
)
|
|
$
|
(0.09
|
)
|
The
accompanying notes are an integral part of these financial statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2011
(UNAUDITED)
|
|
For the
|
|
For the
|
|
|
six months
|
|
six months
|
|
|
ended
|
|
ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2011
|
|
2010
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
Net
loss for the period
|
|
$
|
(647,615
|
)
|
|
$
|
(1,135,870
|
)
|
Adjustments to reconcile net income to
net cash
|
|
|
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
60,100
|
|
|
|
16,258
|
|
Stock issued for services
|
|
|
83,992
|
|
|
|
201,140
|
|
Stock options issued
for compensation
|
|
|
26,715
|
|
|
|
-0-
|
|
Amortization of debt
discount
|
|
|
250,000
|
|
|
|
-0-
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
85,900
|
|
|
|
13,790
|
|
Prepaid expenses
|
|
|
(34,813
|
)
|
|
|
(10,816
|
)
|
Accounts payable
|
|
|
(1,648
|
)
|
|
|
17,442
|
|
Accrued interest
|
|
|
30,000
|
|
|
|
-0-
|
|
Accrued expenses
|
|
|
(5,000
|
)
|
|
|
(4,500
|
)
|
Deferred
revenue
|
|
|
(73,110
|
)
|
|
|
-0-
|
|
NET CASH USED BY
OPERATING ACTIVITIES
|
|
|
(225,479
|
)
|
|
|
(902,556
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
License fees
|
|
|
-0-
|
|
|
|
(40,000
|
)
|
Website
site development costs
|
|
|
(82,850
|
)
|
|
|
(89,660
|
)
|
NET CASH USED BY
INVESTING ACTIVITIES
|
|
|
(82,850
|
)
|
|
|
(129,660
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Issuance of common
stock
|
|
|
-0-
|
|
|
|
8,750
|
|
Issuance
of preferred stock
|
|
|
-0-
|
|
|
|
1,500,000
|
|
NET CASH PROVIDED
BY FINANCING ACTIVITIES
|
|
|
-0-
|
|
|
|
1,508,750
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
|
|
|
(308,329
|
)
|
|
|
476,534
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - BEGINNING
OF PERIOD
|
|
|
1,278,094
|
|
|
|
656,394
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS - END OF PERIOD
|
|
$
|
969,765
|
|
|
$
|
1,132,928
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-0-
|
|
|
$
|
226
|
|
Cash
paid for income taxes
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common
stock issued to satisfy dividends related to preferred stock
|
|
$
|
250,000
|
|
|
$
|
-0-
|
|
Conversion
of warrants to common stock
|
|
$
|
-0-
|
|
|
$
|
153,816
|
|
Common stock issued for settlement of equity issuance costs
|
|
$
|
115,000
|
|
|
|
-
|
|
Payable issued for equity issuance costs
|
|
$
|
57,500
|
|
|
$
|
-
|
|
The accompanying
notes are an integral part of these financial statements.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
1.
NATURE OF BUSINESS
Optimizer
Systems, LLC was formed in the State of Michigan on January 31, 2006. It then became a corporation in the State of Michigan on
October 22, 2007 and changed its name to OptimizeRx Corporation. On April 14, 2008, RFID, Ltd., a Colorado corporation, consummated
a reverse merger by entering into a share exchange agreement with the stockholders of OptimizeRx Corporation, pursuant to which
the stockholders of OptimizeRx Corporation exchanged all of the issued and outstanding capital stock of OptimizeRx Corporation
for 1,256,958 shares of common stock of RFID, Ltd., representing 100% of the outstanding capital stock of RFID, Ltd. As of April 30,
2008, RFID’s officers and directors resigned their positions and RFID changed its business to OptimizeRx’s business.
On April 15, 2008, RFID, Ltd.’s corporate name was changed to OptimizeRx Corporation. On September 4, 2008, a
migratory merger was completed, thereby changing the state of incorporation from Colorado to Nevada, resulting in the current
corporate structure, in which OptimizeRx Corporation, a Nevada corporation, is the parent corporation, and OptimizeRx Corporation,
a Michigan corporation, is a wholly-owned subsidiary (together, "OptimizeRx" and "the Company").
The
wholly-owned subsidiary, OptimizeRx Corporation, is a technology solutions company targeting the health care industry. Their objective
is to bring better access to better care through connecting patients, physicians and pharmaceutical manufacturers through technology.
Once defined as a marketing and advertising company through its consumer website, OptimizeRx is maturing as a technology solutions
provider as it launched its direct to physician solution, SampleMD. SampleMD allows physicians to search, print and send available
sample trial vouchers and/or co-pay coupons on behalf of their patients. The SampleMD solution can either sit on the doctor’s
desktop or can be integrated into the ePrescribing or Electronic Medical Records applications. OptimizeRx solutions provide pharmaceutical
manufacturers either a direct to consumer and/or direct to physician channels for communicating and promoting their products.
It provides health care providers a means to provide sampling and coupons without having to physically store samples on site,
and it provides better access and affordability to the patients.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read
in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the
SEC as of and for the period ended December 31, 2010. In the opinion of management, all adjustments necessary for the
financial statements to be not misleading for the interim periods presented have been reflected herein. The results of operations
for interim periods are not necessarily indicative of the results to be expected for the full year.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”
accounting). The Company has adopted a December 31 fiscal year end.
Principles
of Consolidation
The
financial statements reflect the consolidated results of OptimizeRx Corporation (a Nevada corporation) and its wholly owned subsidiary
OptimizeRx Corporation (a Michigan corporation). All material inter-company transactions have been eliminated in the consolidation.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain
accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial
statements.
Cash
and Cash Equivalents
For
purposes of the accompanying financial statements, the Company considers all highly liquid instruments with an initial maturity
of three months or less to be cash equivalents.
Fair
Value of Financial Instruments
The
fair value of cash, accounts receivable and accounts payable approximates the carrying amount of these financial instruments due
to their short-term nature. The fair value of long-term debt, which approximates its carrying value, is based on current rates
at which the Company could borrow funds with similar remaining maturities.
Property
and Equipment
The
capital assets are being depreciated over their estimated useful lives, three to seven years using the straight-line method of
depreciation for book purposes.
Revenue
Recognition
All
revenue is recognized when it is earned. Revenues are generated either through the Company’s website activities, in which
we earn revenue from advertising and lead generation activities, or from our SampleMD activities, which include offering setup
within the systems and our offers, coupons, and vouchers that enable our customers to save money on medical products and services.
The Company’s processes are monitored by third parties who collect revenues from clients on a per activity basis and report
and forward the revenue to the Company’s account.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and
are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax
assets that, based on available evidence, are not expected to be realized.
Concentration
of Credit Risks
The
Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be
at risk if the bank experiences financial difficulties.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the depreciable
lives of such assets and the allowance for doubtful accounts receivable. Actual results could differ from these estimates.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research
and Development
The
Company’s key members are part of a continual research development team and monitor new technologies, trends, services and
partnerships that can provide the Company with additional services, value to healthcare and pharmaceutical industries and to the
patients it serves.
The
Company seeks to educate team members through understanding of all market dynamics that have the potential to affect the business
both short term and longer term. The primary goal is to help patients better afford and access the medicines their doctor prescribes,
as well as other healthcare products and services they need. Based on this, the Company continually seeks better ways to meet
this mission through technology, better user experiences and new ways to engage industries to provide new support for patients
needing their products. The Company is always seeking new services and solutions to offer. At this time, the three current platforms
provide robust opportunities and growth during the next five years.
Earnings
Per Common and Common Equivalent Share
The
computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during
the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during
the year plus common stock equivalents which would arise from the exercise of warrants outstanding using the treasury stock method
and the average market price per share during the year. Options warrants and convertible preferred stock which are common stock
equivalents are not included in the diluted earnings per share calculation for June 30, 2011 and 2010, respectively, since their
effect is anti-dilutive.
Impairment
of Long-Lived Assets
The
Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may
not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived
assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss
based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or the fair value less costs to sell.
Recently
Issued Accounting Guidance
The
Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s
results of operations, financial position or cash flow.
3.
PREPAID EXPENSES
Prepaid
expenses consisted of the following as of June 30, 2011 and December 31, 2010:
|
|
June
30, 2011
|
|
December
31, 2010
|
Insurance
|
|
$
|
7,519
|
|
|
$
|
6,111
|
|
Web development
|
|
|
35,000
|
|
|
|
20,000
|
|
Investor relations
|
|
|
0
|
|
|
|
50,000
|
|
Employee advances
|
|
|
479
|
|
|
|
940
|
|
Consulting
|
|
|
66,275
|
|
|
|
0
|
|
Advertising
|
|
|
3,090
|
|
|
|
3,000
|
|
Rent
|
|
|
2,500
|
|
|
|
0
|
|
Total Prepaid
Expenses
|
|
$
|
114,863
|
|
|
$
|
80,051
|
|
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
4.
PROPERTY AND EQUIPMENT
The
Company owned equipment recorded at cost which consisted of the following as of June 30, 2011 and December 31, 2010:
|
June
30, 2011
|
|
December
31, 2010
|
Computer equipment
|
$
|
13,824
|
|
|
$
|
13,824
|
|
Furniture and
fixtures
|
|
4,293
|
|
|
|
4,293
|
|
Subtotal
|
|
18,117
|
|
|
|
18,117
|
|
Accumulated depreciation
|
|
(5,962
|
)
|
|
|
(5,056
|
)
|
Property
and equipment, net
|
$
|
12,155
|
|
|
$
|
13,061
|
|
Depreciation
expense was $904 and $844 for the six months ended June 30, 2011 and 2010, respectively.
5.
WEBSITE DEVELOPMENT COSTS
The
Company has capitalized costs in developing their website and web-based products, which consisted of the following as of June
30, 2011 and December 31, 2010:
|
June
30, 2011
|
|
December
31, 2010
|
OptimizeRx Web development
|
$
|
154,133
|
|
|
$
|
154,133
|
|
SampleMD web development
|
|
414,957
|
|
|
|
332,107
|
|
Subtotal, web development
costs
|
|
569,090
|
|
|
|
486,240
|
|
Accumulated amortization
|
|
(126,891
|
)
|
|
|
(95,050
|
)
|
Impairment
|
|
(59,083
|
)
|
|
|
(59,083
|
)
|
Web
development costs, net
|
$
|
383,116
|
|
|
$
|
332,107
|
|
The
Company began amortizing the OptimizeRx website costs, using the straight-line method over the estimated useful life of 5 years,
once it was put into service in December of 2007. During the year end December 31, 2009, the Company began a new web-based
project and the related programming and development costs have been capitalized for the SampleMD website. The project was completed
in mid-December 2010 and no amortization was recorded in 2010. Amortization began on the straight-line method in January 2011
over the period of five years. Although the Project was completed in mid-December, the Company continues to enhance and upgrade
the website. Monthly payments for these upgrades have been capitalized, but not amortized, as of June 30, 2011. The Company determined
that the original OptimizeRx website was no longer useful so the remaining unamortized balance of $59,083 was impaired as of December 31,
2010. Amortization expense was $31,841 for the six months ended June 30, 2011 and $30,827 for the year ended December 31,
2010, respectively.
6.
PATENT RIGHTS AND INTANGIBLE ASSETS
On
April 26, 2010, the Company acquired from an officer and shareholder the technical contributions and assignment of all exclusive
rights to and for the SampleMD patent currently in process in exchange for 300,000 shares of common stock to be granted at the
discretion of the seller in addition to 200,000 stock options valued at $360,000. The shares were valued on the grant date at
$570,000 and have been recorded as a payable to the related party.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
6.
PATENT RIGHTS AND INTANGIBLE ASSETS (CONTINUED)
The
Company has capitalized costs in purchasing the SampleMD patent, which consisted of the following as of June 30, 2011 and December
31, 2010:
|
June
30, 2011
|
|
December
31, 2010
|
Patent rights and intangible
assets
|
$
|
930,000
|
|
|
$
|
930,000
|
|
Accumulated amortization
|
|
(54,706
|
)
|
|
|
(27,353
|
)
|
Patent
rights and intangible assets, net
|
$
|
875,294
|
|
|
$
|
902,647
|
|
The
Company began amortizing the patent, using the straight-line method over the estimated useful life of 17 years, once it was put
into service in July 2010. Amortization expense was $27,353 for the six months ended June 30, 2011 and $27,353 for the year ended
December 31, 2010, respectively.
7.
ACCRUED EXPENSES
Accrued
expenses consisted of the following as of June 30, 2011 and December 31, 2010:
|
June
30, 2011
|
|
December
31, 2010
|
Accrued payroll taxes
|
$
|
0
|
|
|
$
|
700
|
|
Accrued audit
fees
|
|
0
|
|
|
|
5,000
|
|
Accrued
expenses
|
$
|
0
|
|
|
$
|
5,700
|
|
8.
DEFERRED REVENUE
The
Company has signed several contracts with customers for coupon redemptions on their website. The payments are not taken into revenue
until the end user redeems the coupon. The redemptions are tracked via their website and revenues are recorded as the coupons
are redeemed. Deferred revenue was $152,610 and $225,720 as of June 30, 2011 and December 31, 2010, respectively.
9.
NOTE PAYABLE
On
October 5, 2010, the Company issued a secured promissory note of $1,000,000 to an investor. The note accrues interest at
6% per annum, compounded on April and October each year and will be paid at the earliest of September 12, 2012 or earlier
at the Company’s option. No principal or interest payments are required until the maturity date. Accrued interest was $15,000
as of December 31, 2010. The terms of the note also granted 1,000,000 stock warrants and 1,000,000 contingent stock warrants
in connection with the financing. The non-contingent warrants were valued at $1,007,992 with $1,000,000 recorded as debt discount
and $7,992 recorded as interest expense in the December 31, 2010 year. The Company analyzed the assumptions associated with
the contingent warrants and determined that the performance objectives were not likely to occur in 2011. Therefore, no value was
recorded for the contingent warrants. The debt discount derived from the warrant valuation of $1,000,000 will be amortized over
the life of the loan using the straight-line method and charged to interest expense. As of June 30, 2011 and December 31,
2010, $333,333 and $83,333, respectively, had been amortized with the remaining balance of $666,667 at June 30, 2011 to be amortized
through October 5, 2012.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
10.
COMMON STOCK
OptimizeRx
Corporation has 500,000,000 shares of $.001 par value common stock authorized as of December 31, 2010. There were 13,869,202
and 13,606,676 common shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively.
On
March 11, 2010, the Company issued 12,000 shares of common stock for services valued at $27,960.
On
April 20, 2010, the Company issued 66,000 shares to board members for services valued at $130,680.
Additionally
on May 27, 2010, the Company issued 25,000 for services valued at $42,500.
On
September 27, 2010, the Company issued 100,000 shares of common stock for services valued at $100,000.
On
October 14, 2010, the Company issued 24,000 shares to a board member or advisory services valued at $30,000.
During
the year ended December 31, 2010, the Company issued 410,520 shares of common stock to satisfy $700,000 of preferred dividends.
On
February 19, 2010, 75,400 stock warrants were exercised for 43,039 shares of common stock in a cashless exchange.
On
May 19, 2010, 25,000 stock warrants were exercised for 25,000 shares of common stock for total proceeds of $8,750.
On
April 26, 2010, the Company acquired from an officer and shareholder the technical contributions and assignment of all exclusive
rights to and for the SampleMD patent currently in process in exchange for 300,000 shares of common stock to be granted at the
discretion of the seller in addition to 200,000 stock options valued at $360,000. The shares were valued on the grant date at
$570,000 and have been recorded as a payable to the related party.
During
the quarter ended June 30, 2011, the Company issued 252,526 shares of common stock to satisfy $250,000 of preferred dividends.
On June 30, 2011, the Company entered into a settlement agreement with Midtown Partners. Under the settlement
agreement, the Company will pay Midtown Partners $57,500 and grant 100,000 shares of its common stock. The cost of the settlement
has been recorded as equity issuance costs. As a result of the settlement, the litigation in the Eastern District of Michigan will
be dismissed.
11.
PREFERRED STOCK
Series
A Preferred
During
the year ended December 31, 2008, 35 preferred shares were issued for $3,500,000. Issuance costs totaled $515,000 resulting
in net proceeds of $2,985,000. The 35 shares are convertible to 3,500,000 shares of common stock and bear a 10% cumulative dividend.
In addition, there was a warrant issued to purchase 6,000,000 shares of common stock at an exercise price of $2 for a period of
seven years.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
11.
PREFERRED STOCK (CONTINUED)
The
holders of the preferred stock are entitled to semi-annual dividends payable on the stated value of the Series A preferred stock
at a rate of 10% per annum, which shall be cumulative, and accrue daily from the issuance date. The dividends may be paid in cash
or shares of the Company's common stock at management’s discretion. If after the conversion eligibility date, the market
price for the common stock for any ten consecutive trading days in which the stock trades for over $2 per share and trading exceeds
100,000 shares per day, the preferred shareholders can be required to convert their shares to common stock. Each share of Series
A preferred stock shall also be convertible at the option of the holder into that number of shares of common stock of the Company
at the stated value of such share at a $1 conversion price.
The
holder may cause this conversion at the time the shares are eligible for resale by the holder. The conversion price is subject
to adjustment as hereinafter provided, at any time, or from time to time upon the terms and in the manner hereinafter set forth
in the shareholder agreement. There is no conversion expiration date, however, the holder must provide 30 days notice for the
registration of the conversion.
On
May 12, 2010, the Company’s Board declared and issued 236,598 common shares as payment for all cumulative and current
semi-annual dividends. On November 16, 2010, the Company’s Board declared and issued 173,922 common shares for its
semi-annual dividend payment. On March 25, 2011, the Company’s Board declared and issued 176,768 common shares for
its semi-annual dividend payment.
Series
B Preferred
During
the year ended December 31, 2010, 15 preferred shares were issued for $1,500,000. The 15 shares are convertible to 1,500,000
shares of common stock and bear a 10% cumulative dividend. In addition, there was a warrant issued to purchase 2,000,000 shares
of common stock at an exercise price of $3 for a period of seven years.
The
preferred stock was issued for $1,500,000 less associated issuance costs of $350,000 for net proceeds of $1,150,000. Additionally,
3,000,000 common stock warrants were issued with the preferred stock. Based on the fair values of the preferred stock and common
stock warrants on the issue date, $341,100 was allocated to preferred stock and $1,158,900 was allocated to the common stock warrants.
Equity issuance costs of $350,000 were allocated to the preferred stock.
Series
B Preferred
The
holders of the preferred stock are entitled to semi-annual dividends payable on the stated value of the Series B preferred stock
at a rate of 10% per annum, which shall be cumulative, and accrue daily from the issuance date. The dividends may be paid in cash
or shares of the Company's common stock at management’s discretion. If after the conversion eligibility date, the market
price for the common stock for any ten consecutive trading days in which the stock trades for over $2 per share and trading exceeds
100,000 shares per day, the preferred shareholders can be required to convert their shares to common stock. Each share of Series
B preferred stock shall also be convertible at the option of the holder into that number of shares of common stock of the Company
at the stated value of such share at a $1.50 conversion price.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
11.
PREFERRED STOCK (CONTINUED)
The
holder may cause this conversion at the time the shares are eligible for resale by the holder. The conversion price is subject
to adjustment as hereinafter provided, at any time, or from time to time upon the terms and in the manner hereinafter set forth
in the shareholder agreement. On March 25, 2011, the Company’s Board declared and issued 75,758 common shares for its
semi-annual dividend payment.
In
the event the Company has added at least 1,750 active physicians to the system, and added 35 brands, the Company may issue and
sell at its option, and the Purchaser agrees to purchase, up to 15 shares of the Company’s Series B Preferred Stock at a
subsequent date, provided that the date cannot occur earlier than November 1, 2010. If the conditions have not been fulfilled
prior to June 30, 2011, the Purchaser shall have no obligation to purchase any securities from the Company.
12.
STOCK OPTIONS AND WARRANTS
The
Company accounts for employee stock-based compensation in accordance with the guidance of ASC Topic 718: Compensation - Stock
Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values.
The
Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants
and other non-employees. In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services
provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value
of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly
to compensation expense and additional paid-in capital over the period during which services are rendered.
On
January 6, 2010, the Company issued 25,000 stock warrants for services to a consultant with an exercise price of $0.35. The
warrants were valued on the grant date using the Black-Scholes option-pricing model with the following assumptions: dividend yield
of 0%, expected volatility of 259%, risk-free interest rate of 2.6% and expected life of 60 months. The Company recognized consulting
expense of $57,425.
On
June 4, 2010, the Company issued 3,000,000 stock warrants in connection with the preferred stock issuance with an exercise
price of $3.00. The warrants were valued on the grant date using the Black-Scholes option-pricing model with the following assumptions:
dividend yield of 0%, expected volatility of 260%, risk-free interest rate of 2.65% and expected life of 84 months. The Company
recorded the stock warrants valued at $5,096,472 in an equity transaction.
On
July 1, 2010, the Company issued 100,000 stock warrants for services to a consultant with an exercise price of $2.50. The
warrants were valued on the grant date using the Black-Scholes option-pricing model with the following assumptions: dividend yield
of 0%, expected volatility of 241%, risk-free interest rate of 1.26% and expected life of 60 months. The Company recognized consulting
expense of $129,000.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
12.
STOCK OPTIONS AND WARRANTS (CONTINUED)
On
October 5, 2010, the Company issued 1,000,000 stock warrants and 1,000,000 contingent stock warrants in connection with the
Company’s debt financing with an exercise price of $2.25. The warrants were valued on the grant date using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of 241%, risk-free interest rate
of 1.83% and expected life of 84 months. The non-contingent warrants were valued at $1,007,992 with $1,000,000 recorded as debt
discount and $7,992 recorded as interest expense in the current period. The company analyzed the assumptions associated with the
contingent warrants and determined that the performance objectives were not likely to occur in 2011. Therefore, no value was recorded
for the contingent warrants. The Company recorded $250,000 and $83,333 of the debt discount as interest expense in the six months
ended June 30, 2011 and the year ended December 31, 2010 with the remaining balance of $666,667 to be amortized over the
remaining term of the loan. See Note 9.
On
April 26, 2010, the Company issued 200,000 stock options to acquire from an officer and shareholder the technical contributions
and assignment of all exclusive rights to and for the SampleMD patent currently in process in exchange for 300,000 shares of common
stock to be granted at the discretion of the seller in addition to 200,000 stock options with an exercise price of $1.81. The
options were valued on the grant date using the Black-Scholes option-pricing model with the following assumptions: dividend yield
of 0%, expected volatility of 262%, risk-free interest rate of 2.54% and expected life of 60 months. The Company capitalized $360,000
as patent rights for these options.
On
October 1, 2010, the Company issued 25,000 stock options to an employee with a vesting period of one year and an exercise
price of $1.21. The options were valued on the grant date using the Black-Scholes option-pricing model with the following assumptions:
dividend yield of 0%, expected volatility of 241%, risk-free interest rate of 1.26% and expected life of 60 months. The Company
recognized share-based compensation expense of $6,203 during the year ended December 31, 2010 with the remaining balance
of $18,610 to be recognized in 2011. $6,203 has been recognized in the six months ended June 30, 2011.
On
April 27, 2011, the Company issued 100,000 stock options to an individual at an exercise price of $0.73. The options were
valued on the grant date using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected
volatility of 221%, risk-free interest rate of 2.06% and expected life of 60 months. The agreement is for a period of six months.
The Company recognized expenses of $27,717 during the six months ended June 30, 2011 with the remaining balance of $66,275
recorded as prepaid consulting to be expensed over the next four months.
On
May 31, 2011, the Company issued 285,000 stock options to 3 employees at an exercise price of $1.00. The options were valued
on the grant date using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected
volatility of 218%, risk-free interest rate of 1.68% and expected life of 60 months. The total value of the options was $320,585.
The options vest over one year. The Company recognized share-based compensation expense of $26,715 during the six months ended
June 30, 2011. The remaining balance will be recognized over the following eleven months.
13.
COMMITMENTS AND CONTINGENCIES
The
Company leases their offices for $2,500 a month on a month-to-month rental.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
14.
RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2010, the Company acquired from an officer and shareholder the technical contributions and assignment
of all exclusive rights to and for the SampleMD patent currently in process in exchange for 300,000 shares of common stock to
be granted at the discretion of the seller in addition to 200,000 stock options valued at $360,000. The shares were valued on
the grant date at $570,000 and have been recorded as a payable to the related party. See Notes 6, 10 and 12.
15.
MAJOR CUSTOMERS
The
Company has one major customer that accounted for 50% of the Company’s revenues and has two major customers that accounted
for approximately 55% of revenues for the six months ended June 30, 2011 and for the year ended December 31, 2010, respectively.
The Company expects to continue to maintain these relationships with the customers.
16.
INCOME TAXES
For
the six months ended June 30, 2011, the Company incurred a net loss of approximately $648,000 and therefore has no tax liability.
The Company began operations in 2007 and has previous net operating loss carry-forwards of $11,359,000 through December 31,
2010. The cumulative loss of $12,007,000 will be carried forward and can be used through the year 2031 to offset future taxable
income. In the future, the cumulative net operating loss carry-forward for income tax purposes may differ from the cumulative
financial statement loss due to timing differences between book and tax reporting.
The
provision for Federal income tax consists of the following for the six months ended June 30, 2011 and 2010:
|
June
30, 2011
|
|
June
30, 2010
|
Federal income tax benefit attributable
to:
|
|
|
|
|
|
|
|
Current operations
|
$
|
220,000
|
|
|
$
|
386,000
|
|
Valuation allowance
|
|
(220,000
|
)
|
|
|
(386,000
|
)
|
Net
provision for federal income tax
|
$
|
0
|
|
|
$
|
0
|
|
The
cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as
of June 30, 2011 and December 31, 2010:
|
|
June
30, 2011
|
|
December
31, 2010
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
4,082,000
|
|
|
$
|
3,862,000
|
|
Valuation allowance
|
|
|
(4,082,000
|
)
|
|
|
(3,862,000
|
)
|
Net
deferred tax asset
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $12,007,000
for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating
loss carry forwards may be limited as to use in future years.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2011
17.
OPERATING EXPENSES
Operating
expenses consisted of the following for the three and six months ended June 30, 2011 and 2010:
|
|
Three
months ended June 30, 2011
|
|
Three
months ended June 30, 2010
|
|
Six
months ended June 30, 2011
|
|
Six
months ended June 30, 2010
|
Advertising
|
|
$
|
6,030
|
|
|
$
|
57,160
|
|
|
$
|
43,295
|
|
|
$
|
91,265
|
|
Professional fees
|
|
|
106,675
|
|
|
|
53,751
|
|
|
|
212,889
|
|
|
|
71,105
|
|
Consulting
|
|
|
35,326
|
|
|
|
369,828
|
|
|
|
82,101
|
|
|
|
401,472
|
|
Salaries, wages and benefits
|
|
|
206,627
|
|
|
|
180,961
|
|
|
|
380,341
|
|
|
|
318,185
|
|
Rent
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
15,000
|
|
|
|
15,000
|
|
General and administrative
|
|
|
130,996
|
|
|
|
222,883
|
|
|
|
228,809
|
|
|
|
258,150
|
|
Total
Operating Expenses
|
|
$
|
493,154
|
|
|
$
|
892,083
|
|
|
$
|
962,435
|
|
|
$
|
1,155,177
|
|
18.
GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has
sustained substantial losses from operations.
In
view of this matter, the ability of the Company to continue as a going concern is dependent upon growth of revenues and the ability
of the Company to raise additional capital. Management believes that its successful ability to raise capital and their plans for
increases in revenues will provide the opportunity for the Company to continue as a going concern.
19.
SUBSEQUENT EVENTS
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 2011 through August 10, 2011 and
has determined that it does not have any material subsequent events to disclose in these financial statements.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
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” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. We intend
such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. 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 affect 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. We
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including additional factors that could materially
affect our financial results, is included herein and in our other filings with the SEC.
Overview
We
have worked diligently to build our SampleMD™ solution which provides the ability to search and select free sample vouchers
and co-pay assistance by prescribing clinicians on behalf of their patents. We installed the SampleMD™ solution within our
first health system in November of 2010. In parallel to our efforts of providing the doctors desktop version of the SampleMD™
solution to health systems that have eliminated access to pharmaceutical representatives, we have also worked with Allscripts
to integrate its solution right within their electronic prescribing application. The Allscripts ePrescribe solution was launched
in mid December of 2010. These launches where inclusive of those handful of early adopting pharmaceutical manufacturers which
saw the benefits and potentials of this new channel in reaching prescribing clinicians that prior where inaccessible.
With
the completed launch of SampleMD™ to various health systems and within the Allscripts solutions, we began 2011 with two
major focuses. First, we set out to improve the field functionality and adoption by prescribing clinicians of our SampleMD™
solution. Early feedback from prescribing clinicians was positive. Overall, for both installed environments, desk top and eRx,
clinicians were satisfied with the ease and availability of our SampleMD
TM
solution. With the feedback we received,
we continued to enhance and update product ease, usability and speed. We project that our SampleMD™ 3.0 will feature components
with easier access to formulary information, broader search capabilities and a scheduler for pharmaceutical representatives. Additionally,
SampleMD™ will be integrated not only within ePrescribing environments, but also within Electronic Medical (EMR) and Electronic
Health Record (EHR) environments – right within the clinicians work stream.
Our
second focus was to evaluate market trends and consumer demands to adjust our market message and product performance and pricing.
With increasing demand for our product, we have adjusted our pricing and have been aggressively selling and positioning within
the market. At the end of the first six months of 2011, our portfolio consists of nine (9) major pharmaceutical manufacturers,
forty (40) brands and over fifty-three (53) offerings, with commitments from other major manufacturers to integrate their brand
within the SampleMD™ solution. All of this has been reflective in seeing revenues generated from setups, redemptions and
print activity. We have, and intend to continue to, acquire additional resources to assist in positioning and securing new sales
and recruiting new channel partners for integration of our solution.
Results
of Operations for the Three and Six Months Ended June 30, 2011 and 2010
Revenues
Our
total revenue reported for three months ended June 30, 2011 was $200,174, an increase from $16,720 for the three months ended
June 30, 2010. Our total revenue reported for six months ended June 30, 2011 was $594,017, an increase from $18,003 for the six
months ended June 30, 2010.
Our
increased revenue for the three and six months ended June 30, 2011 as compared with the prior year periods is a result of our
SampleMD solution and the setup and integration fees for pharmaceutical manufacturers which are participating within this offering.
We are in the process of extending and renewing existing contracts, solidifying new contracts, and broadening our distribution
channel with leading e-prescribers and electronic medical record providers. We expect that these efforts will result in larger
revenues for our third quarter.
Operating
Expenses
Operating
expenses decreased to $493,154 for the three months ended June 30, 2011 from $892,083 for the same period ended 2010. Operating
expenses decreased to $962,435 for the six months ended June 30, 2011 from $1,155,177 for the same period ended 2010. A detail
of the significant expenses for the three and six months ended June 30, 2011 as compared to the prior year period is set forth
below:
|
|
Three
months ended June 30, 2011
|
|
Three
months ended June 30, 2010
|
|
Six
months ended June 30, 2011
|
|
Six
months ended June 30, 2010
|
Advertising
|
|
$
|
6,030
|
|
|
$
|
57,160
|
|
|
$
|
43,295
|
|
|
$
|
91,265
|
|
Professional fees
|
|
|
106,675
|
|
|
|
53,751
|
|
|
|
212,889
|
|
|
|
71,105
|
|
Consulting
|
|
|
35,326
|
|
|
|
369,828
|
|
|
|
82,101
|
|
|
|
401,472
|
|
Salaries, wages and benefits
|
|
|
206,627
|
|
|
|
180,961
|
|
|
|
380,341
|
|
|
|
318,185
|
|
Rent
|
|
|
7,500
|
|
|
|
7,500
|
|
|
|
15,000
|
|
|
|
15,000
|
|
General and administrative
|
|
|
130,996
|
|
|
|
222,883
|
|
|
|
228,809
|
|
|
|
258,150
|
|
Total
Operating Expenses
|
|
$
|
493,154
|
|
|
$
|
892,083
|
|
|
$
|
962,435
|
|
|
$
|
1,155,177
|
|
Our
operating expenses have decreased in the three and six months ended June 30, 2011 as compared with the prior year periods largely
as a result of a decrease in stock-based compensation, which is included in the category for “consulting” expenses.
Professional fees and salaries wages and benefits, however, are all higher in the three and six months ended June 30, 2011 as
compared to the prior year periods as a result of ramping up operations, as we have transformed from a development stage company
to an operating company. For the third quarter, we expect to have higher operating expenses as we bring on account manager and
sales positions.
Other
Income/Expenses
Other
expenses were $139,703 for the three months ended June 30, 2011 as compared with other income of $460 for same period ended 2010. Other
expenses were $279,197 for the six months ended June 30, 2011 as compared with other income of $1,304 for same period ended 2010. Interest
expenses were the major factor for other expenses for the periods ended June 30, 2011.
Net Loss
Net
loss for the three months ended June 30, 2011 was $432,683, compared to net loss of $874,903 for the same period 2010. Net loss
for the six months ended June 30, 2011 was $647,615, compared to net loss of $1,135,870 for the same period 2010.
Liquidity
and Capital Resources
As
of June 30, 2011, we had total current assets of $1,724,728 and total assets in the amount of $3,161,960. Our total current liabilities
as of June 30, 2011 were $862,570. We had working capital of $862,158 as of June 30, 2011.
Operating
activities used $225,479 in cash for the six months ended June 30, 2011. Our net loss of $647,615, deferred revenue of $73,110
and prepaid expenses of $34,813 were the primary components of our negative operating cash flow, offset mainly by $250,000 in
amortization of debt discount, $85,900 in accounts receivable, $83,992 in stock issued for services, and $60,100 in depreciation
and amortization. Investing activities used $82,850 during the six months ended June 30, 2011 as a result of website development
costs. Financing activities provided $0 for the six months ended June 30, 2011.
As
of June 30, 2011, with the current level of financing and cash on hand, we have sufficient cash to operate our business at the
current level for the next twelve months but insufficient cash to achieve our business goals unless we: a) realize cash revenues
on sales generated; b) meet the milestones as defined in the second round of financing with Vicis Capital Master Fund, a sub-trust
of Vicis Capital Series Master Trust, a unit trust organized and existing under the laws of the Cayman Islands (“Vicis”)
and satisfy the conditions to secure the second tranche of funding; and/or c) obtain additional financing through debt and/or
equity based financing arrangements which may be insufficient to fund our capital expenditures, working capital, or other cash
requirements. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
Off Balance
Sheet Arrangements
As of June
30, 2011, there were no off balance sheet arrangements.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
A
smaller reporting company is not required to provide the information required by this Item.
Item
4T. Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2011. This evaluation was carried out under the supervision
and with the participation of our Chief Executive Officer and Chief Financial Officer, Mr. David Lester. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2011, our disclosure controls
and procedures are effective. There have been no significant changes in our internal controls over financial reporting
during the quarter ended June 30, 2011 that have materially affected or are reasonably likely to materially affect such controls.
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure.
Limitations
on the Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily
prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override
of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
Aside
from the following, we are not a party to any pending legal proceeding, and we are not aware of any pending legal proceeding to
which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have
a material interest adverse to us.
On
February 10, 2011, we commenced an action against Beringea, LLC (“Beringea”) in the Circuit Court for the County of
Oakland in the State of Michigan. The action is based on a dispute between our company and Beringea surrounding a capital raising
agreement that was entered into on October 15, 2009. We have alleged that Beringea has failed to perform under the agreement,
misinformed us about “tail” liability, and is wrongfully withholding funds due to us. We are seeking $400,000 in damages.
On
August 18, 2010, we commenced an action against Midtown Partners & Co., LLC (“Midtwon Partners”) in the Circuit
Court for the County of Oakland in the State of Michigan. The action is based on a dispute between our company and Midtown Partners
surrounding a placement agent agreement that was entered into on June 27, 2008. We filed the action seeking declaratory relief
that no compensation is due and owing to Midtown Partners in connection with an investment made by on June 4, 2010.
Midtown
Partners removed the action to the United States District Court for the Eastern District of Michigan. On June 30, 2011
,
we entered into a settlement agreement with Midtown Partners. Under the settlement agreement, we paid Midtown Partners $57,500
and issued the company 100,000 shares of our common stock. As a result of the settlement, the litigation in the Eastern District
of Michigan will be dismissed.
Item
1A: Risk Factors
A
smaller reporting company is not required to provide the information required by this Item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
During
the current reporting period, we issued the following securities:
During
the quarter ended June 30, 2011, we issued 252,526 shares of common stock to satisfy $250,000 of preferred dividends to Vicis.
During
the quarter ended June 30, 2011, we issued options to purchase 285,000 shares of our common stock to our directors at an exercise
price of $1.00.
On June 30, 2011, we issued 100,000 shares of our common stock in connection with a settlement of our dispute
with Midtown Partners.
These
issuances were deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended,
since, among other things, the transactions did not involve a public offering, the investors were accredited investors and / or
qualified institutional buyers, the investors had access to information about the Company and their investment, the investors
took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.
Item
3. Defaults upon Senior Securities
None
Item
4. Removed and Reserved
Item
5. Other Information
None
Item
6. Exhibits
SIGNATURES
In
accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
OptimizeRx Corporation
|
|
|
Date:
|
August 17, 2011
|
|
|
|
By:
/s/
David Lester
David
Lester
Title:
Chief
Executive Officer, Chief Financial Officer, and Director
|
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