FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
OPTIMIZERX CORP.
(Exact name of registrant as specified
in its charter)
Nevada
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7389
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26-1265381
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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400 Water Street, Suite 200
Rochester, MI 48307
(248) 651-6568
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Cane Clark Agency, LLC
3273 E. Warm Springs Rd.
Las Vegas, NV 89120
(702) 312-6255
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(Address,
including zip code, and telephone number, including area code, of principal executive offices)
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(Name, address,
including zip code, and telephone number, including area code, of agent for service)
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Approximate date of commencement of proposed
sale to the public:
From time to time after this
registration statement becomes effective.
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If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. [X]
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. [ ]
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated
filer
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[ ] (Do
not check if a smaller reporting company)
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Smaller reporting company
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[X]
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CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
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Amount to be
Registered(1)
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Proposed
Maximum
Offering Price
per Share(3)
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Proposed
Maximum
Aggregate
Offering Price(3)
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Amount of
Registration Fee
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Common
Stock, par value $0.001 per share
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9,137,472
(2)
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$1.92
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$
17,543,946
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$2,260
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(1)
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Pursuant to Rule
416 under the Securities Act of 1933, as amended (the “Securities Act”), the shares being registered hereunder
include such indeterminate number of shares of our Common Stock as may be issuable with respect to the shares being registered
hereunder to prevent dilution by reason of any stock dividend, stock split, recapitalization or other similar transaction.
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(2)
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All 9,137,472 shares
of Common Stock are to be offered by the Selling Shareholders named herein and were acquired in connection with a private
placement consummated by the Company.
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(3)
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Estimated solely
for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act based upon the closing
price per share of our Common Stock as reported on the OTC Bulletin Board, on April 8, 2014.
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THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
With copies to:
Scott Doney, Esq.
Cane Clark, LLP
3273 E. Warm Springs Rd.
Las Vegas, NV 89120
Telephone: (702) 312-6255
Facsimile: (702) 944-7100
The information in this prospectus
is not complete and may be changed. This prospectus is included in a registration statement that we filed with the Securities
and Exchange Commission. The Selling Shareholders cannot sell these securities under this registration statement until this registration
statement becomes effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated April
9, 2014
PROSPECTUS
OPTIMIZERX CORP.
9,137,472 Shares of Common Stock
This prospectus relates to the resale
by the Selling Shareholders of up to 9,137,472 shares of our Common Stock, par value $0.001 per share (the “Common Stock”).
The Common Stock was acquired by the Selling Shareholders in connection with a private placement offering we completed on March
17, 2014 (the “March 2014 Private Placement”). We are registering the resale of the Common Stock as required by the
Registration Rights Agreement we entered into with the Selling Shareholders in connection with the March 2014 Private Placement
(the “Registration Rights Agreement”).
The Selling Shareholders may offer
and sell or otherwise dispose of the shares described in this prospectus from time to time through public or private transaction
at prevailing market prices, at prices related to such prevailing market prices, at varying prices determined at the time of sale,
at negotiated prices, or at fixed prices. See “Plan of Distribution” beginning on page 14 for more information.
We will not receive any of the proceeds
from the Common Stock sold by the Selling Shareholders.
We have agreed to pay certain expenses
in connection with this registration statement and to indemnify the Selling Shareholders against certain liabilities. The Selling
Shareholders will pay all underwriting discounts and selling commissions, if any, in connection with the sale of the shares of
Common Stock.
Our Common Stock is traded on the OTC
Bulletin Board under the symbol “OPRX.” On April 8, 2014, the last reported sale price of our Common Stock was $1.92
per share.
We are an "emerging growth
company" under the federal securities laws and will be subject to reduced public company reporting requirements. Investing
in our common stock involves risks. See "Risk Factors" beginning on page 7.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus April
9, 2014
Table of Contents
ABOUT THIS PROSPECTUS
This prospectus is part of a registration
statement we filed with the Securities and Exchange Commission, or the SEC. Under this registration process, the selling shareholders
may, from time to time, offer and sell up to 9,137,472 shares of our common stock, as described in this prospectus, in one or
more offerings. This prospectus provides you with a general description of the securities the selling shareholders may offer.
You should read this prospectus carefully before making an investment decision.
You may only rely on the information
contained in this prospectus or that we have referred you to. We have not authorized anyone to provide you with additional or
different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of our common stock offered by this prospectus. This prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any common stock in any circumstances or any jurisdiction in which such offer or solicitation
is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than
the date on the front cover of this prospectus regardless of the time of delivery of this prospectus or any sale of our common
stock. The rules of the SEC may require us to update this prospectus in the future.
As used in this prospectus, unless
the context requires otherwise, the terms “we”, “us”, “our”, or “the Company”
refer to OptimizeRx Corp. and its subsidiaries on a consolidated basis. References to “Selling Shareholders” refer
to those shareholders listed herein under “Selling Shareholders” and their successors, assignees and permitted transferees.
ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), about the Company and
its subsidiaries. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements
provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical
fact, and can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”,
“will”, “could”, “should”, “projects”, “plans”, “goal”,
“targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”,
or “anticipates” or the negative thereof or comparable terminology. Forward-looking statements include discussions
of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans,
objectives, expectations or consequences of various transactions, and statements about the future performance, operations, products
and services of the Company and its subsidiaries. We caution our shareholders and other readers not to place undue reliance on
such statements.
Our businesses and operations are and
will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially
differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual
results and experience to differ from those projected include, but are not limited to, the risk factors set forth in the section
entitled “Risk Factors” beginning on page 7 of this prospectus.
All written or oral forward-looking
statements attributable to us or any person acting on our behalf made after the date of this prospectus are expressly qualified
in their entirety by the risk factors and cautionary statements contained in and incorporated by reference into this prospectus.
Unless legally required, we do not undertake any obligation to release publicly any revisions to such forward-looking statements
to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
SUMMARY
The following summary highlights
selected information contained elsewhere in this prospectus and in the documents incorporated by reference in this prospectus
and does not contain all the information you will need in making your investment decision. You should read carefully this entire
prospectus and the documents incorporated by reference in this prospectus before making an investment decision, especially the
information presented under the heading “Risk Factors.”
Business Summary
We provide unique consumer and physician
platforms and strategies to help patients better afford and comply with their medicines and healthcare products, while offering
pharmaceutical and healthcare companies more effective ways to expand physician and patient awareness, access and adherence to
their medications and available product support.
Our core product offering is our SampleMD™
software application which delivers an automated system that replaces traditional physical drug samples by enabling doctors or
other healthcare providers to automatically print and electronically distribute sample vouchers or co-pay discount coupons within
their ePrescribing/ EHR (electronic health record) system or from their computer desktops. Through SampleMD, pharmaceutical and
biotech manufacturers have a digital paperless platform to directly offer patient's critical cost savings, patient education and
adherence tools-- right at point of prescribing.
Our consumer support website, www.OPTIMIZERx.com
and our subscriber base exceeding 2.5 million patients, continues to grow each month and we believe is quickly becoming the preferred
way to access branded prescription vouchers, co-pay savings and other support programs.
The March 2014 Private Placement
Financing and Exercise of Redemption Option
On March 17, 2014 (the “March
2014 Private Placement”), we entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain
accredited investors (the “Purchasers”) pursuant to which we: (i) sold to the Purchasers an aggregate of 8,333,333
shares of our Common Stock at a price per share of $1.20 (the “Common Shares”) for aggregate gross proceeds of $10
million and (ii) issued warrants to purchase up to 804,139 shares of the our Common Stock to our placement agents (the “Agent
Warrants”). Placement Agents also received commissions equal to approximately 9.7% of the gross proceeds, for an aggregate
commission of approximately $970,000, including reimbursements for their reasonable out of pocket expenses.
We used the net proceeds of the March
2014 Private Placement to exercise the Securities Redemption Option Agreement, as amended, with Vicis Capital Master Fund (“Vicis”)
that provides us with an option to purchase all of the outstanding shares and derivative securities held by Vicis for total payment
of six million dollars ($6,000,000). The shares and derivative securities include 35 shares of Series A Convertible Preferred
Stock, 30 shares of Series B Convertible Preferred Stock, 886,340 shares of common stock, and warrants to purchase 10,000,000
shares of common stock held by Vicis in our company. The balance of the net proceeds will be used for working capital purposes.
In connection with the March 2014 Private
Placement, we entered into a registration rights agreement with the Purchasers (the “Registration Rights Agreement”),
pursuant to which we agreed to register for resale the Common Shares acquired by the Purchasers (the “Registrable Securities”).
Pursuant to the Registration Rights Agreement, we agreed to use our reasonable best efforts to file a registration statement (the
“Registration Statement”) with the Securities and Exchange Commission (the “SEC”) for the resale of the
Registrable Securities within 30 days following the close of the March 2014 Private Placement and to use our reasonable best efforts
to cause the Registration Statement to be declared effective as soon as practicable after the filing thereof, but in any event
no later than 90 days following the close of the March 2014 Private Placement (or 120 days following the close of the March 2014
Private Placement if the SEC determines to review the Registration Statement).
In the event the Registration Statement,
among other things, (i) has not been filed by 30 days following the close of the March 2014 Private Placement, (ii) has not been
declared effective by 90 days following the close of the Offering (or 120 days following the close of the Offering in the event
the SEC determines to review the Registration Statement), or (iii) ceases to remain continuously effective as to all Registrable
Securities for more than 10 consecutive days or 15 days during any 12-month period, then we have agreed to make payments to each
Purchaser as liquidated damages in an amount equal to 1.0% of the aggregate amount invested by each such Purchaser per 30-day
period, up to a maximum aggregate liquidated damages amount equal to 6% of the aggregate amount invested by each such Purchaser.
In addition, we have agreed to keep the Registration Statement continuously effective until the earliest to occur of (i) the date
on which all of the Registrable Securities registered thereunder have been sold and (ii) the date on which all of the Registrable
Securities covered by the Registration Statement may be sold without restriction pursuant to Rule 144 under the Securities Act.
The Offering
Common stock offered by the
Selling Shareholders
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9,137,472 shares of common stock, consisting
of 8,333,333 Common Shares and Agent Warrants to purchase up to 804,139 shares of the our common stock.
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Selling
Shareholders
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See “
Selling Shareholders
”
beginning on page 12
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Common
stock outstanding
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22,809,586 common shares as of March
31, 2014.
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Use
of proceeds
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We will not receive any proceeds from
the sale or other disposition of the shares of common stock covered by this prospectus. However, upon any exercise of the
Agent Warrants for cash, such Selling Shareholders would pay us the exercise price of the warrants. Cash received from exercise
of Agent Warrants will be used for general corporate purposes. Additionally, the Warrants are exercisable on a cashless basis.
If any Agent Warrants are exercised on a cashless basis, we would not receive any cash payment from such Selling Shareholders
upon any exercise of such Agent Warrants. See “
Use of Proceeds
” on page 12 .
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OTC
Bulletin Board Symbol
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Our Common Stock is quoted on the OTC
Bulletin Board under the ticker symbol “OPRX”.
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Risk
Factors
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You should consider
the matters set forth under “
Risk Factors
” beginning on page 7
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as well as other cautionary statements throughout or incorporated by reference in this prospectus, before deciding to invest
in shares of our common stock.
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Summary Financial Information
Balance Sheet Data
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December 31, 2012
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December 31, 2013
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Cash
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$
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1,118,243
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$
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284,263
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Total Assets
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$
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4,008,020
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$
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2,175,404
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Liabilities
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$
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1,968,652
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$
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770,522
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Total Stockholders’ Equity
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$
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2,039,368
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$
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1,404,882
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Statement of Operations
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Year
Ended December 31, 2012
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Year
Ended December 31, 2013
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Revenue
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$
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1,989,086
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4,957,016
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Income (Loss) for the Period
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$
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(454,553
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)
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215,847
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RISK FACTORS
Readers and prospective investors
in our common stock should carefully consider the following risk factors as well as the other information contained or incorporated
by reference in this prospectus.
If any of the following risks actually
occurs, our financial condition, results of operations and liquidity could be materially adversely affected. If this were to happen,
the value of our common stock could decline, and if you invest in our common stock, you could lose all or part of your investment.
The discussion below highlights
some important risks we have identified related to our business and operations and an investment in shares of our common stock,
but these should not be assumed to be the only factors that could affect our future performance and condition, financial and otherwise.
We do not have a policy of updating or revising forward-looking statements except as otherwise required by law, and silence by
management over time should not be construed to mean that actual events are occurring as estimated in such forward-looking statements.
Risks Relating to Business
and Financial Condition
Because we have historically
experienced losses and only recently experienced profits, if we are unable to achieve profitability, our financial condition and
company could suffer.
Since the inception of our business
we have historically incurred losses. We have only recently experienced profits and increased revenues. Our ability to maintain
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, we may not be able to continue our operations.
Because we have
recently learned that our financial statements have errors regarding revenue share expenses, our results of operations may be
different than disclosed in our financial statements.
We recently announced a needed adjustment
to the accounting policy so that revenue share expenses are properly accrued each quarter and at the end of the year, versus when
they are paid. The method of recording revenue share payments previously aligned with our contractual terms with our platform
partners -- which generally required payment 30 days after we received the fees from our sponsored manufacturers in the following
quarter. Therefore, for year-end 2012 and each quarter of 2013, there will be a journal entry needed to record the revenue share
amounts due on an accrual basis rather than recording these as an expense when they are paid. We have disclosed the restated numbers
in our annual report on Form 10-K and will do so for subsequent filings. As such, the financial numbers will be adjusted in our
ongoing SEC filings and the results of operations may differ from what we have disclosed.
Our business and growth may suffer
if we are unable to attract and retain key employees.
Our success depends on the expertise
and continued service of our Chief Executive Officer, David Harrell, our Chief Operating Officer, David Lester, and certain other
key technical personnel. It may be difficult to find a sufficiently qualified individual to replace management or other key technical
personnel in the event of death, disability or resignation, resulting in our being unable to implement our business plan and we
having no operations or revenues.
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. We believe that
it will be able to attract competent employees, but no assurance can be given that we will be successful in this regard. If we
are unable to engage and retain the necessary personnel, its business may be materially and adversely affected.
Our failure to obtain retain
or attract additional customers could prevent us from successfully executing our business plan.
We currently work with many leading
pharmaceutical companies, including Pfizer, Lilly and Novartis. Our failure to retain existing customers or expand with additional
customers could harmfully impact our business.
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 products, services and operations, then the quality of our services, our ability to retain key personnel and
our business could be harmed.
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, including Allscripts and DrFirst. We will need to maintain these relationships as well
as diversify them. The inability to do so could adversely impact our business.
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.
We rely on a combination of internal
development, strategic relationships, licensing and acquisitions to develop our portals and related applications, features and
services. Our development and/or implementation of new technologies, applications, features and services may cost more than expected,
may take longer than originally expected, may require more testing than originally anticipated and may require the acquisition
of additional personnel and other resources. There can be no assurance that the revenue opportunities from any new or updated
technologies, applications, features or services will justify the amounts spent.
If we are unable to adhere to
the regulatory and competitive climate in which we operate, we could be materially and negatively impacted.
Do to the labyrinth of regulations
in healthcare space, state and federal, as well as political sensitivity of healthcare delivery the proposed 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.
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Our
portals 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 Web sites 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 search;
and advertising networks that aggregate traffic from multiple sites.
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Our healthcare provider
portals compete with: providers of healthcare decision-support tools and online health management applications; wellness and
disease management vendors; and health information services and health management offerings of healthcare benefits companies
and their affiliates.
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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:
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government
regulation or private initiatives that affect the manner in which healthcare providers interact with patients, payers or other
healthcare industry participants, including changes in pricing or means of delivery of healthcare products and services;
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consolidation of
healthcare industry participants;
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reductions in governmental
funding for healthcare; and
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•
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adverse changes
in business or economic conditions affecting healthcare payers or providers, pharmaceutical, biotechnology or medical device
companies or other healthcare industry participants.
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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 products and services could be
affected by:
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changes
in the design of health insurance plans;
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a decrease in the
number of new drugs or medical devices coming to market; and
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decreases in marketing
expenditures by pharmaceutical or medical device companies, including as a result of governmental regulation or private initiatives
that discourage or prohibit advertising or sponsorship activities by pharmaceutical or medical device companies.
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In addition, our customers’ expectations
regarding pending or potential industry developments may also affect their budgeting processes and spending plans with respect
to products 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 products 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.
Because we are embroiled in various
lawsuits with uncertain consequences, the outcome of potential judgments may negatively affect our financial condition and results
of operations
We are involved in the following lawsuits.
On February 6, 2013, we filed a Complaint
for Patent Infringement against Physicians Interactive Inc., Physicians Interactive Holdings,Inc. and Skyscape.com, in which we
allege that one or more of those entities has infringed on United States Patent No. 8,341,015. As of September 30, 2013, the defendants
responded denying the assertions made in our Complaint, and the matter is currently being litigated in federal court in Detroit,
Michigan.
We recently learned of an action in
New Jersey brought by Milton J. Wilpon and the Milton Wilpon 2000 Trust. Last November 2013, we were served notice that we would
be added as an additional party to the case titled Mitlon Wilson et al. v. Continental Capital Corporation, C-289-06, in the Superior
Court of New Jersey. There is an existing default judgment of roughly $700,000 plus fees and costs. On March 10, 2014, we were
added as a defendant. The complaint adding us alleges that the judgment relates to a settlement agreement dating to 2001. We do
not know the subject matter of the dispute that resulted in the settlement agreement. We must file an answer to the complaint
on or before April 14, 2014. We plan to vigorously oppose plaintiffs’ attempt to hold us liable for the judgment. We may
also seek third party claims against those that are involved in our being named in the lawsuit. We do not know the outcome of
this litigation.
These lawsuits are ongoing, uncertain
and involve a substantial degree of risk. If we are unable to successfully defend these actions, our financial condition and results
of operations will suffer.
Our success is dependent in part
on obtaining, maintaining and enforcing our proprietary rights and our ability to avoid infringing on the proprietary rights of
others.
We seek patent protection for those
inventions and technologies for which we believe such protection is suitable and is likely to provide a competitive advantage
to us. Because patent applications in the United States are maintained in secrecy until either the patent application is published
or a patent is issued, we may not be aware of third-party patents, patent applications and other intellectual property relevant
to our products that may block our use of our intellectual property or may be used in third-party products that compete with our
products and processes. In the event a competitor or other party successfully challenges our products, processes, patents or licenses
or claims that we have infringed upon their intellectual property, we could incur substantial litigation costs defending against
such claims, be required to pay royalties, license fees or other damages or be barred from using the intellectual property at
issue, any of which could have a material adverse effect on our business, operating results and financial condition.
We also rely substantially on trade
secrets, proprietary technology, nondisclosure and other contractual agreements, and technical measures to protect our technology,
application, design, and manufacturing know-how, and work actively to foster continuing technological innovation to maintain and
protect our competitive position. We cannot assure you that steps taken by us to protect our intellectual property and other contractual
agreements for our business will be adequate, that our competitors will not independently develop or patent substantially equivalent
or superior technologies or be able to design around patents that we may receive, or that our intellectual property will not be
misappropriated.
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 products 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 product 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 products and services could be less attractive to our users and our
business would be materially harmed.
If we are unable to manage growth,
our operations could be adversely affected.
Our progress is expected to require
the full utilization of our management, financial and other resources. Our ability to manage growth effectively will depend on
our ability to improve and expand operations, including our financial and management information systems, and to recruit, train
and manage personnel. There can be no absolute assurance that management will be able to manage growth effectively.
If we do not properly manage the growth
of our business, we may experience significant strains on our management and operations and disruptions in our business. Various
risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer
demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased
demand for our products. 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.
Risks Relating to Our Securities
If a market for our common stock
does not develop, shareholders may be unable to sell their shares.
Our common stock is quoted under the
symbol “OPRX” on the OTCQB operated by OTC Markets Group, Inc, an electronic inter-dealer quotation medium for equity
securities. We do not currently have an active trading market. There can be no assurance that an active and liquid trading market
will develop or, if developed, that it will be sustained.
Our securities are very 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.
Because we will be subject to
the “Penny Stock” rules once our shares are quoted on the over-the-counter bulletin board, the level of trading activity
in our stock may be reduced.
The Securities and Exchange Commission
has adopted regulations which generally define "penny stock" to be any listed, trading equity security that has a market
price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer
must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the
customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the
broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive
the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the
level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase
the difficulty Purchasers may experience in attempting to liquidate such securities.
We do not expect to pay dividends in the foreseeable
future. Any return on investment may be limited to the value of our common stock.
We do not anticipate paying cash dividends on our common
stock in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and
other business and economic factors affecting it at such time as the board of directors may consider relevant. If we do not pay
dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
Provisions in the Nevada Revised Statutes and our
Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations
of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
Members of our board of directors and our officers will
have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances, pursuant
to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. Specifically, Section
78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders
or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it
is proven that (1) the director’s or officer’s act or failure to act constituted a breach of his or her fiduciary
duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing
violation of law. This provision is intended to afford directors and officers protection against and to limit their potential
liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly,
you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty
of care. In addition, our Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges
and expenses resulting from their acting in such capacities with us. This means that if you were able to enforce an action against
our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit
and any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert
needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and
adversely affect prevailing market prices for our common stock.
USE OF PROCEEDS
All
of the shares of common stock covered by this prospectus are being sold by the Selling Shareholders. See “Selling Shareholders”
below. We will not receive any proceeds from these sales of shares of our common stock. A portion of the shares covered by this
prospectus are issuable upon exercise of the Agent Warrants to purchase our common stock. Upon any exercise of the Agent Warrants
for cash, such Selling Shareholders would pay us the exercise price of the warrants. Cash received from exercise of Agent Warrants
will be used for general corporate purposes. Additionally, the Warrants are exercisable on a cashless basis. If any Agent Warrants
are exercised on a cashless basis, we would not receive any cash payment from such Selling Shareholders upon any exercise of such
Agent Warrants.
The Selling Shareholders will pay any
underwriting discounts and commissions and expenses incurred by the Selling Shareholders for brokerage, accounting, tax, or legal
services or any other expenses incurred by the Selling Shareholders in disposing of the shares. We will bear all other costs,
fees, and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation,
all registration and filing fees, and fees and expenses of our counsel and our accountants.
DETERMINATION OF OFFERING PRICE
The Selling Shareholders will determine
at what price they may sell the offered shares, and such sales may be made at prevailing market prices, or at privately negotiated
prices.
SELLING SHAREHOLDERS
We have prepared this prospectus to
allow the Selling Shareholders or their successors, assignees or other permitted transferees to sell or otherwise dispose of,
from time to time, up to 9,137,472 shares of our Common Stock. Of the shares of common stock being offered under this prospectus
8,333,333 were acquired by the purchasers in our March 2014 Private Placement and 804,139 shares are able to be acquired pursuant
to the Agent Warrants we issued in connection with our March 2014 Private Placement, which Agent Warrants are currently exercisable.
The shares of common stock sold to
the Selling Shareholders in the March 2014 Private Placement were sold pursuant to an exemption from registration provided by
Rule 506 of Regulation D under the Securities Act. In connection therewith, the investors made to us certain representations,
warranties, covenants, and conditions customary for private placement investments.
The table below presents information
regarding the Selling Shareholders and the shares of our Common Stock that they may sell or otherwise dispose of from time to
time under this prospectus. Percentages of beneficial ownership are based upon 22,809,586 shares of Common Stock issued and outstanding
as of March 31, 2014. Beneficial ownership is determined under Section 13(d) of the Exchange Act and generally includes voting
or investment power with respect to securities and including any securities that grant the Selling Shareholders the right to acquire
Common Stock within 60 days of March 31, 2014. Unless otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares, subject to community property laws where applicable.
We do not know when or in what amounts
the Selling Shareholders may sell or otherwise dispose of the shares covered hereby. We currently have no agreements, arrangements
or understandings with the Selling Shareholders regarding the sale of any of the shares by them other than the registration rights
agreement described below. The Selling Shareholders might not sell any or all of the shares covered by this prospectus or may
sell or dispose of some or all of the shares other than pursuant to this prospectus. Because the Selling Shareholders may not
sell or otherwise dispose of some or all of the shares covered by this prospectus and because there are currently no agreements,
arrangements or understandings with respect to the sale or other disposition of any of the shares, we cannot estimate the number
of the shares that will be held by the Selling Shareholders after completion of the offering.
Each Selling Shareholder has indicated
to us that neither it nor any of its affiliates has held any position or office or had any other material relationship with us
in the past three years except as described in the footnotes to the table.
The shares of common stock being offered
under this prospectus may be offered for sale from time to time during the period the registration statement of which this prospectus
is a part remains effective, by or for the accounts of the Selling Shareholders named below.
|
|
Shares
of Common Stock
|
|
Name of Selling
Shareholder
|
|
Beneficially
Owned Prior to
the Sale of all
Shares covered by
this Prospectus
|
|
|
Covered by
this Prospectus
|
|
|
Beneficially
Owned After
the Sale of all
Shares covered by
this Prospectus
|
|
|
As a Percent of
Total Outstanding
After the Sale of
Shares covered by
this Prospectus
|
|
Goldman Partners L.P.(1)
|
|
833,333
|
|
|
833,333
|
|
|
0
|
|
|
0
|
|
Capital Ventures International(2)
|
|
600,000
|
|
|
600,000
|
|
|
0
|
|
|
0
|
|
Michael Patrick Torok & Sara
Coleen Torok JT TEN
|
|
420,000
|
|
|
420,000
|
|
|
0
|
|
|
0
|
|
Michael W. Taglich
|
|
208,333
|
|
|
208,333
|
|
|
0
|
|
|
0
|
|
Harvey L. Poppel IRA
|
|
521,500
|
|
|
521,500
|
|
|
0
|
|
|
0
|
|
Bradley Louis Radoff
|
|
3,250,000
|
|
|
3,250,000
|
|
|
0
|
|
|
0
|
|
Richard Smithline
|
|
208,333
|
|
|
208,333
|
|
|
0
|
|
|
0
|
|
Wolverine Flagship Fund Trading
Limited(3)
|
|
2,083,500
|
|
|
2,083,500
|
|
|
0
|
|
|
0
|
|
Robert F. Taglich
|
|
208,333
|
|
|
208,333
|
|
|
0
|
|
|
0
|
|
Merriman Capital, Inc.(4)
|
|
591,613
|
|
|
591,613
|
|
|
0
|
|
|
0
|
|
Taglich Brothers, Inc.(5)
|
|
212,526
|
|
|
212,526
|
|
|
0
|
|
|
0
|
|
|
(1)
|
Goldman
Partners L.P. is the record and direct beneficial owner of the shares of common stock.
Neal Goldman, as General Partner of Goldman Partners, L.P., has voting and disposition
power of the shares owned by Goldman Partners, L.P.
|
|
(2)
|
Heights
Capital Management, Inc., the authorized agent of Capital Ventures International, has
discretionary authority to vote and dispose of the shares held by Capital Ventures International.
Martin Kobinger, in his capacity as Investment Manager of Heights Capital Management,
Inc., also has investment discretion and voting power over the shares held by Capital
Ventures International. As a result, each of Heights Capital Management, Inc. and Mr.
Kobinger may be deemed to have beneficial ownership of the securities held by Capital
Ventures International that are covered hereunder. Mr. Kobinger disclaims any such beneficial
ownership of such securities.
|
|
(3)
|
Wolverine
Asset Management, LLC (“WAM”) is the investment manager of Wolverine Flagship
Fund Trading Limited (the “Fund”) and consequently has voting and investment
power over these securities. The sole member and manager of WAM is Wolverine Holdings,
L.P. (“Wolverine Holdings”). Robert R. Bellick and Christopher L. Gust are
deemed to control Wolverine Trading Partners, Inc. (“WTP”), the general partner
of Wolverine Holdings, and therefore may be deemed to share voting and dispositive power
over these securities. Each of Mr. Bellick, Mr. Gust, WTP, Wolverine Holdings, and WAM
disclaims beneficial ownership of the shares held by the Fund.
|
|
(4)
|
Consists
of warrants received as our placement agent in our March 2014 Private Placement. Merriman
Capital, Inc. is a registered broker-dealer that served as the placement agent in connection
with our March 2014 Private Placement. Jon Merriman is the CEO of Merriman Capital, Inc.
and an affiliate of a registered-broker-dealer. Mr. Merriman has voting and dispositive
power with respect to the warrants.
|
|
(5)
|
Consists
of warrants received as our placement agent in our March 2014 Private Placement. Taglich
Brothers, Inc. is a registered broker-dealer that served as the placement agent in connection
with our March 2014 Private Placement. Michael N. Taglich is a stockholder and executive
officer of Taglich Brothers, Inc. and an affiliate of a registered-broker-dealer. Mr.
Taglich has voting and dispositive power with respect to the warrants.
|
The Selling Shareholders, or their
partners, pledgees, donees, transferees or other successors that receive the shares and their corresponding registration in accordance
with the registration rights agreement to which the Selling Shareholder is party (each also a selling shareholder for purposes
of this prospectus), may sell up to all of the shares of our common stock shown in the table above pursuant to this Prospectus
in one or more transactions from time to time as described below under “Plan of Distribution.” However, the Selling
Shareholders are not obligated to sell any of the shares of our common stock offered by this prospectus.
Information about the Selling Shareholders
may change from time to time. Any changed information with respect to which we are given notice will be included in prospectus
supplements.
PLAN OF DISTRIBUTION
We are registering the shares of Common
Stock to permit the resale of these shares of Common Stock by the Selling Shareholders and any of their transferees, pledgees,
assignees, donees, and successors-in-interest from time to time after the date of this prospectus. We will not receive any of
the proceeds from the sale by the Selling Shareholders of the shares of Common Stock. Upon any exercise of the Agent Warrants
by payment of cash, however, we will receive the exercise price of the Agent Warrants. We will bear all fees and expenses incident
to our obligation to register the shares of Common Stock.
Each Selling Shareholder (the “Selling
Shareholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their securities covered hereby on the OTC Bulletin Board, OTCQB or any other stock exchange, market or trading
facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling
Shareholder may use any one or more of the following methods when selling securities:
|
§
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
§
|
block
trades in which the broker-dealer will attempt to sell the securities as agent but may
position and resell a portion of the block as principal to facilitate the transaction;
|
|
§
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
§
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
|
§
|
privately
negotiated transactions;
|
|
§
|
settlement
of short sales entered into after the effective date of the registration statement of
which this prospectus is a part;
|
|
§
|
in
transactions through broker-dealers that agree with the Selling Shareholders to sell
a specified number of such securities at a stipulated price per security;
|
|
§
|
through
the writing or settlement of options or other hedging transactions, whether through an
options exchange or otherwise;
|
|
§
|
a
combination of any such methods of sale; or
|
|
§
|
any
other method permitted pursuant to applicable law.
|
The Selling Shareholders may also sell
securities under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling
Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts
from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in
amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not
in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the
securities or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The
Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or
pledge the securities to broker-dealers that in turn may sell these securities. The Selling Shareholders may also enter into option
or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such
broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The Selling Shareholders and any broker-dealers
or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities
Act. Each Selling Shareholder has informed the Company that it does not have any written or oral agreement or understanding, directly
or indirectly, with any person to distribute the securities. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).
The Company is required to pay certain
fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify
the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
Because Selling Shareholders may be
deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The
Selling Shareholders have advised us that there is no underwriter or coordinating broker acting in connection with the proposed
sale of the resale securities by the Selling Shareholders.
We agreed to keep this prospectus effective
until the earlier of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without
regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance
with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of
the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect.
The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities
laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and
is complied with.
Under applicable rules and regulations
under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to
the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities
of the common stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling
Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time
of the sale (including by compliance with Rule 172 under the Securities Act).
LEGAL PROCEEDINGS
Aside from the following, we are not a party
to any pending legal proceeding. 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 6, 2013, we filed a Complaint
for Patent Infringement against Physicians Interactive Inc., Physicians Interactive Holdings, Inc. and Skyscape.com, in which
we allege that one or more of those entities has infringed on United States Patent No. 8,341,015. As of September 30, 2013, the
defendants responded denying the assertions made in our Complaint, but no further action has occurred in the case.
We recently learned of an action in New Jersey brought by
Milton J. Wilpon and the Milton Wilpon 2000 Trust. Last November 2013, we were served notice that we would be added as an additional
party to the case titled Mitlon Wilson et al. v. Continental Capital Corporation, C-289-06, in the Superior Court of New Jersey.
There is an existing default judgment of roughly $700,000 plus fees and costs. On March 10, 2014, we were added as a defendant.
The complaint adding us alleges that the judgment relates to a settlement agreement dating to 2001. We do not know the subject
matter of the dispute that resulted in the settlement agreement. We must file an answer to the complaint on or before April 14,
2014. We plan to vigorously oppose plaintiffs’ attempt to hold us liable for the judgment. We may also seek third party
claims against those that are involved in our being named in the lawsuit. We do not know the outcome of this litigation.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
The following information sets forth the names,
ages, and positions of our current directors and executive officers as of December 31, 2013.
Name
|
|
Age
|
|
Position(s)
and Office(s) Held
|
David Lester
|
|
56
|
|
Chief Operating
Officer, Secretary, Treasurer and Director
|
David A. Harrell
|
|
48
|
|
Chairman, Chief
Executive Officer, Chief Strategic Officer and Director
|
Terence J. Hamilton
|
|
48
|
|
Director and VP
of Sales
|
Set forth below is a brief description of
the background and business experience of each of our current executive officers and directors.
David Lester
Mr. Lester is a business veteran whom has
accumulated over thirty years of executive experience in the areas of business, marketing, sales, operations, technology, and
leadership. Prior to accepting his new role with us, Mr. Lester held the title of Director, Consumer & Industrial Products
Marketing for Deloitte LLP. During his tenure at Deloitte, he established Deloitte as a leader through innovative programs and
strategic partnerships. Prior to Deloitte, he worked with Sun Microsystems as Director, Industry Strategy & Marketing, and
Manufacturing Industries.
David Lester has worked with Governor Tommy
Thompson, former Secretary of Health & Human Services, on health care reform and cost control; partnered with Governor Tom
Ridge, former head of Homeland Security on defending cyber security initiatives; and as a active participant within the National
Association of Manufacturers and the Manufacturing Institute worked with former Michigan Governor John Engler, now President of
the National Association of Manufacturers, on challenges inhibiting the competitiveness of manufacturers like health care reform,
trade policy, renewable energy, business tax reform, and sustainability.
David A. Harrell
Mr. Harrell founded the Company in January
of 2006 and has served as our President and Chief Executive Officer. He became a director when the Company changed
from a limited liability to a corporation in 2007. Mr. Harrell was the Vice President of Development for Meridian Incorporated
from 2003-2005 and, prior to that, had been Vice President of Sales and Marketing since 1999 at Advance Graphic Systems. Mr.
Harrell has spent two decades leading sales, marketing and business development units within the pharmaceutical and national retail
industries. Prior to his work at Advance Graphic Systems, Mr. Harrell served for ten years at SmithKline Beecham, specializing
in the managed markets healthcare segment. As part of the Integrated Health Division, Mr. Harrell was responsible for contracting
and achieving regional revenue growth for SmithKline Beecham's four business units: Pharmaceuticals, Consumer Health, Clinical
Labs and Diversified Pharmaceutical Services (PBM). During his tenure with SmithKline Beecham, he was a recipient of numerous
national awards and served as a member of the Division's Strategic Planning Committee. Mr. Harrell graduated from Oakland University
with a Bachelor of Science in Business Administration.
Terence J. Hamilton
Mr. Hamilton joined the Company as a Director
and VP of Sales in February 2008. Prior to that, Mr. Hamilton was Manager at MedImmune since 2005 and was Senior National Account
Manager for Glaxo SmithKline pharmaceuticals for 13 years prior to that. Mr. Hamilton has spent the last 19 years working in the
pharmaceutical and biotech arenas within various sales, marketing and managed markets management positions. He also has held many
positions within the pharmaceutical and biotech industries, including District Manager, Brand Manager, Managed Market Specialist,
Contract Manager, Government Account Manager.
Directors
Our bylaws authorize two (2) directors unless
changed by the Board of Directors. The board has since changed the number of directors authorized, and we currently have three
(3) Directors.
Term of Office
Our Directors are appointed for a one-year
term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with
our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Significant Employees
We have no significant employees other than
our officers and directors.
Family Relationships
There are no family relationships between
or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during
the past ten years, none of the following occurred with respect to our present or former director, executive officer, or employee:
(1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject
to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities;
and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2014, the
beneficial ownership of our common and preferred stock by each executive officer and director, by each person known by us to beneficially
own more than 5% of the our common stock and by the executive officers and directors as a group. Unless otherwise noted, the address
of each beneficial owner is located at 400 Water Street, Ste. 200, Rochester, MI 48307.
Title
of class
|
|
Name
and address of beneficial owner
(1)
|
|
|
Amount
of beneficial ownership
|
|
|
Percent
of class
(2)
|
|
Common
|
|
David Lester
(3)
|
|
|
483,348
|
|
|
2.1
|
%
|
Common
|
|
David Harrell
(4)
|
|
|
3,599,687
|
|
|
15.5
|
%
|
Common
|
|
Terence J. Hamilton
(5)
|
|
|
754,812
|
|
|
3.2
|
%
|
Total of All Directors and Executive
Officers:
|
|
|
|
|
4,837,847
|
|
|
20.5
|
%
|
More Than 5% Beneficial Owners:
|
|
|
|
|
|
|
|
|
|
Common
|
|
Bradley Louis Radoff
117 W Loop S, Ste 1625 Houston, TX 77027
|
|
|
3,250,000
|
|
|
14.2
|
%
|
Common
|
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Wolverine Flagship Fund
Trading Limited
175 W Jackson Blvd, 3rd Flr
Chicago, IL 60604
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2,083,500
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9.1
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%
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(1)
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As used
in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security,
or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition
of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership"
of any security that such person has the right to acquire within 60 days after such date.
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(2)
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The percent of class
is based on 22,809,586 voting shares as of March 31, 2014.
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(3)
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Includes 428,348
shares held in his name and options to purchase 55,000 shares of common stock at $1.00 per share.
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(4)
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Includes 3,197,187
shares held in his name, options to purchase 402,500 shares of common stock at prices ranging from of $1.00 to $1.81 per share.
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(5)
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Includes 527,312
shares held in his name and options to purchase 227,500 shares of common stock at a price of $1.00 per share.
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DESCRIPTION OF SECURITIES
The following descriptions are summaries
of the material terms that are included in our amended and restated articles of incorporation (as amended) and our bylaws (as
amended) as well as the specific agreements such descriptions relate to. This summary is qualified in its entirety by the specific
terms and provisions contained in our restated articles of incorporation, bylaws and the specific agreements described herein,
copies of which we have filed as exhibits to the registration statement of which this prospectus is a part, and by the provisions
of applicable law.
Overview
Authorized Capital Stock
Our authorized capital stock consists
of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $0.001 per share. As of March 31, 2014
there were 22,809,586 shares of our common stock issued and outstanding and 0 shares of our preferred stock issued and outstanding.
Common Stock
Our common stock is entitled to one vote per
share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required
by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders
of our common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common
stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock.
Holders of our common stock representing fifty percent (50%) of our capital stock issued, outstanding and entitled to vote, represented
in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority
of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment
to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any
outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our common
stock will be entitled to such cash dividends as may be declared from time to time by our board of directors from funds available
therefore.
Subject to any preferential rights of any
outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or winding
up, the holders of shares of our common stock will be entitled to receive pro rata all assets available for distribution to such
holders.
In the event of any merger or consolidation
with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares
of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same
kind and amount of shares of stock and other securities and property (including cash). Holders of our common stock have no pre-emptive
rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Preferred Stock
Our board of directors may become authorized
to authorize preferred shares of stock and to divide the authorized shares of our preferred stock into one or more series, each
of which must be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series
and classes. Our board of directors is authorized, within any limitations prescribed by law and our articles of incorporation,
to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series
of preferred stock including, but not limited to, the following:
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(1)
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The number of shares
constituting that series and the distinctive designation of that series, which may be by distinguishing number, letter or
title;
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(2)
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The dividend rate
on the shares of that series, whether dividends will be cumulative, and if so, from which date(s), and the relative rights
of priority, if any, of payment of dividends on shares of that series;
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(3)
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Whether that series
will have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;
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(4)
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Whether that series
will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors determines;
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(5)
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Whether or not the
shares of that series will be redeemable, and, if so, the terms and conditions of such redemption, including the date or date
upon or after which they are redeemable, and the amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
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(6)
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Whether that series
will have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
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(7)
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The rights of the
shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation,
and the relative rights of priority, if any, of payment of shares of that series; and
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(8)
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Any other relative
rights, preferences and limitations of that series.
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Registration Rights
In connection with the March 2014 Private
Placement, we entered into a registration rights agreement with each of the Selling Shareholders (the “Registration Rights
Agreement”). The Registration Rights Agreement requires us to file a registration statement (the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) within forty-five (45) days of the closing date of the
March 2014 Private Placement (the “Filing Date”) for the resale by the Selling Shareholders of all of the Common Shares
acquired in the March 2014 Private Placement and all shares of Common Stock issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect thereto (the “Registrable Securities”). We agreed to use our commercially
reasonable efforts to cause the Registration Statement to be declared effective by the SEC no later than ninety (90) days
after the closing date of the March 2014 Private Placement (the “Effectiveness Date”) subject to certain adjustments.
Upon the occurrence of certain events (each an “Event”), including, but not limited to, that the Registration Statement
is not filed prior to the Filing Date, we will be required to pay liquidated damages to each of the Selling Shareholders equal
to 1.5% of the aggregate purchase price paid by such Selling Shareholders for the Registrable Securities upon the date of the
Event and then monthly thereafter until the earlier of: (i) the Event is cured, or (ii) the registrable shares are eligible
for resale under Rule 144 without manner of sale or volume limitations. In no event shall the aggregate amount of liquidated damages
payable to each of the Selling Shareholders exceed in the aggregate 10% of the aggregate purchase price paid by such Selling Shareholders
for the Registrable Securities.
We also agreed to use our commercially
reasonable efforts to keep the Registration Statement effective for resales until the earlier of (1) one year from the closing
date (2) the date that all of the shares of our common stock included in the Registration Statement have been resold thereunder
or under Rule 144 promulgated under the Securities Act, or (3) the date that all of the shares of our common stock covered
by such registration statement may be sold without volume or manner of sale restrictions under Rule 144. The registration rights
agreement contains cross-indemnification provisions between us and the Selling Shareholders.
Provisions in Our Articles of Incorporation
and By-Laws That Would Delay, Defer or Prevent a Change in Control
Our articles of incorporation authorize
our board of directors to issue a class of preferred stock commonly known as a "blank check" preferred stock. Specifically,
the preferred stock may be issued from time to time by the board of directors as shares of one (1) or more classes or series.
Our board of directors, subject to the provisions of our Articles of Incorporation and limitations imposed by law, is authorized
to adopt resolutions; to issue the shares; to fix the number of shares; to change the number of shares constituting any series;
and to provide for or change the following: the voting powers; designations; preferences; and relative, participating, optional
or other special rights, qualifications, limitations or restrictions, including the following: dividend rights, including whether
dividends are cumulative; dividend rates; terms of redemption, including sinking fund provisions; redemption prices; conversion
rights and liquidation preferences of the shares constituting any class or series of the preferred stock.
In each such case, we will not need
any further action or vote by our shareholders. One of the effects of undesignated preferred stock may be to enable the board
of directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest,
merger or otherwise, and thereby to protect the continuity of our management. The issuance of shares of preferred stock pursuant
to the board of director's authority described above may adversely affect the rights of holders of common stock. For example,
preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred
stock may discourage bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock.
Dividend Policy
We have never declared or paid any
cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion
of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Share Purchase Warrants
We had warrants outstanding to purchase
13,658,334shares of our common stock at a weighted average exercise price of $2.44 as of December 31, 2013.
Options
We had options outstanding to purchase
125,000 shares of our common stock at a weighted average exercise price of $1.00 as of December 31, 2013.
Convertible Securities
We have not issued and do not have
outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of
our common stock.
Certain Anti-Takeover Provisions
Nevada Anti-Takeover Laws
Nevada Revised Statutes sections 78.378 to
78.379 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles
of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation
and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person
or entity to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition
attempt, among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200
or more stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business
in the State of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does
not apply to our company.
Listing of Common Stock
Our common stock is currently traded on the OTC Bulletin
Board under the trading symbol “OPRX.”
Transfer Agent and Registrar
The transfer agent and registrar of our common stock is
Empire Stock Transfer, 1859 Whitney Mesa Dr, Henderson, NV 89014, telephone: (702) 974-1444.
INTERESTS OF NAMED EXPERTS
No expert or counsel named in this prospectus
as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being
registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant
or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries
as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
Cane Clark LLP, our independent legal counsel,
has provided an opinion on the validity of our common stock.
Silberstein Ungar, PLLC, Certified Public
Accountants and Advisors have audited our financial statements included in this prospectus and registration statement to the extent
and for the periods set forth in their audit report. Silberstein Ungar, PLLC has presented their report with respect to our audited
financial statements. The report of Silberstein Ungar, PLLC is included in reliance upon their authority as experts in accounting
and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the following
provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person
in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the shares being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
DESCRIPTION OF BUSINESS
Company Overview
We finished
the fourth quarter with revenues of $1,810,610
bringing
revenue for fiscal 2013 to a total of $4,957,016, an increase of 149% over 2012. We achieved net income of $215,847 for the year.
Our year end also recognizes a onetime adjustment relative to our cost of goods sold and reflects a change in accounting procedures
for these expenses. Prior reporting was based upon how the revenue share expenses were paid per the agreements held with OPTIMIZERx’s
channel partners. The change in accounting process will now accrue the expense as it is incurred.
Our continued
growth in revenues is again primarily driven by our SampleMD content delivery solution. During the 2013 fiscal year, OPTIMIZERx
delivered some 1,122,589
new ePrescriptions with
co-pay coupons or free sample vouchers
helping patients more affordably start and stay on
their prescribed medications.
We continue to be very enthusiastic about
our growth and the state of our core business. We continue to be resilient in growing our business throughout the year and it
is a testament to the core employee base and the dedication of our management and employees alike to move the organization forward.
We have gained the confidence of pharmaceutical manufacturers and partners, and continue to add new clients and partners that
increases our offering portfolio and expands our network reach.
During the second half of the year we have
initiated a major technology undertaking to develop SampleMD 2.0. This effort is focused on moving our technology from flash to
HTML 5 based that will improve our response times and user interfaces and offer infinite scalability to support our expected growth.
Additionally, this work focuses on building modularity for ease of adding new features and functions to the core solution while
simplifying the integration process with future partners and other solution providers. On top of building out our updated software
solution, we are also updating our infrastructure by replacing and updating our computers in a high availability environment,
taking greater precautions for security and building out the architecture to facilitate disaster recovery with a secondary facilitated
computer environment. This investment will increase performance, simplify integrations, insure availability and protect the investments
of our shareholders. It is anticipated that the release of SampleMD 2.0 be fully implemented by April 2014.
Initial market reaction to the OPTIMIZERx
announcement of its emerging OPTIMIZEHR consulting practice has been very positive as we have engaged in our first two (2) major
pharmaceutical manufacture EHR strategy initiatives (pilot projects). Coordinating efforts with our strategic partners, we have
collaborated to deliver sound strategy for each of these manufacturers. These efforts have resulted in ongoing and growing commitments
by these clients with new and expanded contracts. OPTIMIZERx will continue to work with its partners in building out this practice
as more clients are interested in Drug File Integration, Sales Force Training and Strategy.
Additionally, we are expanding our partnership
with WPP and have completed account sales training of Grey Health account personnel to resell our services. We are also working
with their other agencies, including Sudler, who have expressed a strong interest in additionally collaborating to sell and develop
new services. The partnership has also been highly received by the pharmaceutical and EHR industries.
The results of our efforts are reflected in
the growth and record revenues experienced during 2013 despite overcoming growth challenges presented in the year. The company
remained very resilient and with the dedication of the employees and management, these challenges were overcome and the company
remained profitable for the year and continued to generate cash from operations.
Going forward into the New Year, we continue
to drive our three primary messages to the pharmaceutical industry:
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1)
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SampleMD has the
largest capacity to deliver targeted promotional and incentive messaging to physicians at point of prescription through interoperability
with multiple disparate electronic health platforms; and
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Electronic health
platforms (EMRs, eRx, Patient Portals) are the most cost-effective way to reach physicians and patients, as opposed to external
web sites that have been traditionally the focus of their non-rep marketing, and should therefore be an increasing focus for
all pharmaceutical marketing dollars.
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3)
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Pharmaceutical brands
must move their Financial and Educational Support programs into the physicians ePrescribe workflow to increase prescriptions
and fill rates. Samples are continuing to be restricted, as are pharmaceutical reps regular access and this is the most effective
alternative channel with demonstrated strong ROI.
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In summary, we remain committed to working
with top organizations to provided better affordability and access to healthcare for the patients we serve. To achieve this, we
will continue to work with leading providers in partnering to provide simple to use solutions. As compliance and regulatory requirements
(i.e. meaningful use) continue to surround healthcare providers, OptimizeRx continues through its partnerships and internal R&D
to become the “HUB” for providing access to these ease-of-use solutions.
With these continued efforts, we believe that
SampleMD continues to be regarded as the innovative industry leader, setting the standards within this new frontier of digital
EMR solution marketing for patient care.
Principal Products and Applications
Our principal products and applications can
be summarized as follows:
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SampleMD - Today,
almost 60% of doctors’ offices ban or limit drug representatives and the samples they offer. Although samples are still
valuable, many healthcare systems and doctors are looking for an easier, more effective way to increase affordable access
and adherence to their prescribed branded medications which led us during the past year to develop our direct to physician
solution called SampleMD.
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SampleMD is a revolutionary
virtual "Patient Support Center" that allows doctors and staff to access a universe of sample vouchers, co-pay coupons
and other patient support through their EMR and/or e-Prescribe systems to search, print or electronically dispense directly
to patients and a national network of pharmacies. SampleMD eliminates the need for physicians to manage and store physical
drug samples by offering a more convenient and efficient way to allocate, administer and track samples and co-pay savings
provided to their patients.
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OPTIMIZEHR –
Our consulting practice focused at educating and working with pharmaceutical manufacturers on identifying, formulating, and
implementing new eRx media strategies for promoting their product. Our consulting services include 1) Drug File Integration
- a service to insure that the manufacturers drug is present in every ePrescribing platform available, 2) Sales Force Training
– a service to educate the extended field sales force on this new integrated solution and what to look for within their
client base to insure maximum exposure of their bands and 3) Strategy Development – a service that assists manufactures
in identifying and building a competitive strategy to take advantage of this new digital frontier.
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OPTIMIZERx.com –
Our Direct to Consumer WebSite is a portal to healthcare savings for patients to centrally review and participate in prescription
and healthcare savings and support programs. To date, we have over 2.4 million members who have registered. We strive to provide
all the information and guidance that patients undergoing long-term pharmaceutical treatments may require. Patients can search
by their medication or their condition in order to access educational information regarding their condition, information regarding
their medication, coupons for instant savings when they purchase their medications, information on free drug trials, and guidance
to any other savings programs available to them.
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Marketing and Sales
We continue to extend our marketing efforts
to build both brand and capabilities awareness to the market. As mentioned above, we continue to actively participate in industry
and partner events such as exlPharma and the ACE – Allscripts Users Conference as well as taking a lead sponsor position
in the inaugural CBInet eRx and EHR conference in March of 2014. During the course of the year, we also initiated and delivered
successful email marketing campaigns, webinar with CMI Compass on What Physicians want within their HER’s, as well as successful
public relations and press release communications initiatives. We ran advertising campaigns through Pharma Exec magazine that
netted several responses and qualified leads.
In 2013, we also announced our strategic partnership
with WPP/Grey Health Group, a leading agency within the healthcare marketplace. We plan to continue to increase our marketing
efforts with all of our strategic partners, as we intend to continue to promote OPTIMIZERx and SampleMD primarily through the
following:
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Industry and Partner
Events;
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Public Relations
Campaigns;
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Direct to Consumer
Marketing;
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Trade Media
Advertising;
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Physician Organizations
and Associations; and
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Strategic Relationships
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Additionally, we have attracted and hired
a highly seasoned Sales and Marketing Executive who has decades of global pharmaceutical marketing and sales experience at AstraZeneca
and others as our Eastern Vice President of Sales.
Research and Development
We continue to invest in our technology and
plan to release SampleMD 2.0 in 2014. This new and improved release will enhance the performance of our first version through
quicker response times, easier integration to platform partners, modularity for the addition of new features and functions and
an entirely updated user interface to speed and enhance the setup of new programs and campaigns. We will continue to offer reporting
portal access to our clients with a new and improved user interface and updated reporting capabilities for monitoring program
and campaign performance.
The SampleMD 2.0 release
will also be supported by a new and updated infrastructure that is a high availability clustered environment with remote disaster
recovery enabling us to be back up and running from the worst facility catastrophe in very short order.
We continue our commitment
to educate both our direct and our extended teams through an understanding of all market dynamics that have the potential to affect
our business in both the short and long term. Our primary goal is to help patients better afford and access the medicines their
doctors prescribe, as well as other healthcare products and services they need. Based on this goal, we continually seek better
ways to meet this mission through the use of improved technology, user feedback, and working closely with the pharmaceutical industry.
We are continually seeking new ways we can engage the pharmaceutical industry to provide new support programs to patients in need
of their products.
At OPTIMIZERx, we are still keen on the opinions
and input that we gain from all stakeholders by which our products and solutions cross. From the prescribing clinicians that utilize
our solutions to add value to the patients they serve, to the partners we use to leverage their channels for distribution and
promotion of the services, we are able to greatly assist the pharmaceutical manufacturing clients that depend on our solutions
to increase their brand awareness and assist patients in need of their offerings. This “Voice of the Stakeholder”
is a mantra that we leverage in analyzing industry trends and market shifts and identifying enhancements and new offerings through
our SampleMD™ solution. This effort involves all of our officers and directors as part of our continual research development
team while monitoring new technologies, trends, services, and partnerships that can help us provide additional services and increased
value to the healthcare and pharmaceutical industries and to the patients they serve.
Our technology roadmap for potential new solutions
continues to grow as we continued to finalize the two development programs initiated this year featuring a live chat or conversation
between the health provider and product manufacturer or service, as well as a one click way to request a representative visit.
These solutions address major access barriers that limit doctors’ interaction with the manufacturer and allow the health
system or provider to access needed information when they want it. As we are in collaboration with our partners, further content
and information delivery solutions are being flushed out as we continue to integrate with new channels and partners
Under the leadership of the Director of Technology
and Director of Software Development, whom were added late in 2011 to strengthen our core technical team, we have added an additional
developer and a technical intern while leveraging a new development partner in Simple eSolutions, whom provided valuable architecture,
system design and database management support on the SampleMD 2.0 effort. We also continued to work with the Engineering and Information
Technology department of Oakland University in Rochester Michigan. As the University has opened the doors of its new medical school,
it also brings highly skilled technology and application developers whom possess a solid knowledge of medical industry IT requirements.
Competition
SampleMD has faced some competition based
on the growth in the space primarily by Physicians Interactive. As noted, we have filed a patent infringement suit against the
company.
The OptimizeRx.com website continues to compete
in the highly competitive pharmaceutical and healthcare advertising industry that is dominated by large well-known companies with
established names, solid market niches, wide arrays of product offerings and marketing networks. Our largest competitors
include a variety of healthcare website publishers and networks that provide online advertising competition to OPTIMIZERx.com,
including Quality Health, WebMD, McKesson, and Drugs.com.
Despite these competitors, we do not have
major competition in our space of the market. We have been experiencing a growing list of potential partners whom either have
content that want to deliver through the SampleMD engine and network, or whom have complementary technology and want to integrate
our solution as a channel partner, expanding the reach to clinicians for OPTIMIZERx.
Intellectual Property
In the fourth quarter of 2012, we were awarded
a patent for our innovative SampleMD solution (US Patent No. 8,341,015). This award highlighted our continued research and development
efforts. The awarded claims cover our ability to electronically process, display and distribute eligible prescription savings
on the medications and therapies healthcare providers wish to prescribe for their patients. We have also recently submitted and
will be preparing additional filings to protect our intellectual property on forthcoming solutions that will further assist and
support physicians, pharmacists and patients.
In addition, we have hired Harness, Dickey
& Pierce, a nationally ranked IP firm, to further expand and protect our intellectual property. Through them, we have filed
two additional patents on our technology. We also used the firm to file a patent infringement lawsuit against Physicians Interactive.
Management believes the current and expanding IP will allow us to continue being the leader in this rapidly growing space.
OPTIMIZERx is a licensed trademark. SampleMD
is a licensed trademark.
Our intellectual property is developed significantly
each month. Since inception, we have developed and launched OFFERx and ADHERxE, and we are further integrating these
platforms to provide more robust offerings. OPTIMIZERx.com and OFFERx are patent pending.
Government Regulation
Fraud and Abuse Laws
Anti-Kickback Statutes
The federal healthcare program Anti-Kickback
Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or
indirectly, in exchange for or to induce either the referral of an individual for, or the furnishing, arranging for or recommending
a good or service for which payment may be made in whole or part under a federal healthcare program such as Medicare or Medicaid.
The definition of remuneration has been broadly interpreted to include anything of value, including for example gifts, discounts,
the furnishing of supplies or equipment, credit arrangements, payments of cash and waivers of payments. Several courts have interpreted
the statute's intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals
or otherwise generate business involving goods or services reimbursed in whole or in part under federal healthcare programs, the
statute has been violated. The law contains a few statutory exceptions, including payments to bona fide employees, certain discounts
and certain payments to group purchasing organizations. Violations can result in significant penalties, imprisonment and exclusion
from Medicare, Medicaid and other federal healthcare programs. Exclusion of a manufacturer would preclude any federal healthcare
program from paying for its products. In addition, kickback arrangements can provide the basis for an action under the Federal
False Claims Act, which is discussed in more detail below. The Anti-Kickback Statute is broad and potentially prohibits many arrangements
and practices that are lawful in businesses outside of the healthcare industry. Recognizing that the Anti-Kickback Statute is
broad and may technically prohibit many innocuous or beneficial arrangements, the Office of Inspector General of Health and Human
Services, or OIG, issued a series of regulations, known as the safe harbors, beginning in July 1991. These safe harbors set forth
provisions that, if all the applicable requirements are met, will assure healthcare providers and other parties that they will
not be prosecuted under the Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or
more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business
arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement
authorities such as the OIG. Arrangements that implicate the Anti-Kickback Law, and that do not fall within a safe harbor, are
analyzed by the OIG on a case-by-case basis. Government officials have focused recent enforcement efforts on, among other things,
the sales and marketing activities of healthcare companies, and recently have brought cases against individuals or entities with
personnel who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business.
Settlements of these cases by healthcare companies have involved significant fines and/or penalties and in some instances criminal
pleas. In addition to the Federal Anti-Kickback Statute, many states have their own kickback laws. Often, these laws closely follow
the language of the federal law, although they do not always have the same exceptions or safe harbors. In some states, these anti-kickback
laws apply with respect to all payors, including commercial health insurance companies.
False Claims Laws
Federal false claims laws prohibit any person
from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making,
or causing to be made, a false statement to get a false claim paid. Manufacturers can be held liable under false claims laws,
even if they do not submit claims to the government, if they are found to have caused submission of false claims. The Federal
Civil False Claims Act also includes whistle blower provisions that allow private citizens to bring suit against an entity or
individual on behalf of the United States and to recover a portion of any monetary recovery. Many of the recent highly publicized
settlements in the healthcare industry related to sales and marketing practices have been cases brought under the False Claims
Act. The majority of states also have statutes or regulations similar to the federal false claims laws, which apply to items and
services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under
these federal and state laws may include civil monetary penalties, exclusion of a manufacturer's products from reimbursement under
government programs, criminal fines and imprisonment.
Privacy and Security
The Health Insurance Portability and Accountability
Act of 1996, or HIPAA, and the rules promulgated there under require certain entities, referred to as covered entities, to comply
with established standards, including standards regarding the privacy and security of protected health information, or PHI. HIPAA
further requires that covered entities enter into agreements meeting certain regulatory requirements with their business associates,
as such term is defined by HIPAA, which, among other things, obligate the business associates to safeguard the covered entity's
PHI against improper use and disclosure. While not directly regulated by HIPAA, our customers or distributors might face significant
contractual liability pursuant to such an agreement if the business associate breaches the agreement or causes the covered entity
to fail to comply with HIPAA. It is possible that HIPPA compliance could become a substantial regulatory burden and
expense to our operations, although we do not believe that this will occur as a general website publisher.
Employees
As of March 31, 2014, we had 13 employees
in addition to 4 contracted programmers through our established relationship with Simple eSolutions a technical and programming
resources partner. Additionally we have one contracted business development individual targeting new EMR channel and pharma client.
Subsidiaries
We conduct our operations through our wholly-owned
subsidiary, OptimizeRx Michigan.
Description of Property
Currently, we do not own any real estate.
Our principal executive offices are located at 400 Water Street, Suite 200, Rochester, Michigan, 48307. We have entered
into a 3 year lease for this 2,886 square foot facility, with a cost of approximately$5,049.25 per month. We believe that our
properties are adequate for our current needs, but growth potential may require larger facilities due to anticipated addition
of personnel. We do not have any policies regarding investments in real estate, securities or other forms of property.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations for the Years Ended
December 31, 2013 and 2012
Revenues
Our total revenue reported for year ended
December 31, 2013 was $4,957,016, an increase from $1,989,086 from the prior year.
Our increased
revenue for the year ended December 31, 2013 as compared with the prior year is a result of the continued viability of our SampleMD
solution and the setup and integration fees for pharmaceutical manufacturers whom are participating within this offering.
The bulk of our revenue for the year ended December 31, 2013 came mainly from our core SampleMD
solutions as opposed to our new consulting business. We expect revenues to increase on our consulting business for 2014.
Operating Expenses
Operating expenses increased to $2,973,990
for the year ended December 31, 2013 from $2,328,648 for the year ended December 31, 2012. Our major expenses for the year ended
December 31, 2013 were salaries, wages and benefits of $1,319,712, professional fees of $552,824, stock-based compensation of
$411,412, general and administrative expenses of $288,297, depreciation and amortization of $193,971, and consulting fees of $100,077.
Our expenses increased in 2013 as compared with 2012 largely as a result of salaries, wages and benefits, professional fees and
stock-based compensation.
We expect operating
expenses to
increase slightly, with the most increase
coming as we will continue to add personnel to strengthen our operations, sales and marketing efforts going forward.
Net Loss
Net income for the year ended December 31,
2013 was $215,847, compared to net loss of $ $454,553 for the year ended December 31, 2012.
We believe that
our company is starting to show real signs of improvement with positive income this year. With increased sales forecasted for
next year, we believe that we will achieve a small improvement to net income in 2014.
Liquidity and Capital Resources
As of December 31, 2013, we had total current
assets of $2,696,978 and total assets in the amount of $4,008,020. Our total current liabilities as of December 31, 2013 were
$1,968,652. We had working capital of $728,326 as of December 31, 2013.
Operating activities provided $1,132,628 in
cash for the year ended December 31, 2013. Our revenue share payable of $1,103,084, stock-based compensation of $399,092, net
income of $215,847 and depreciation and amortization of $193,791 were the primary components of our positive operating cash flow,
offset mainly by accounts receivable of $950,166.
Investing activities used $298,648 during
the year ended December 31, 2013 largely as a result of patent rights and website development costs.
On March 17, 2014, we entered into a securities purchase agreement
with accredited investors pursuant to which we sold an aggregate of 8,333,333 shares of our common stock, par value $0.001 per
share, for $1.20 per share, or gross proceeds of $10,000,000. We used $6,000,000 of the proceeds to exercise our option to redeem
Vicis Capital Master Fund’s holdings in our company. The balance of the proceeds will be used for working capital. With
the financing and cash on hand, we have sufficient cash to operate our business for the next twelve months.
Off Balance Sheet Arrangements
As of December 31, 2013, there were no off
balance sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that all
registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated
that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial
condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain.
Our critical accounting policies are set forth
in Note 2 to the financial statements.
Recently Issued Accounting Pronouncements
The Company does not expect the adoption of
recently issued accounting pronouncements to have a significant impact on the Company’s results of operation, financial
position or cash flow.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the transactions described below
and under the heading “Executive Compensation” (or with respect to which such information is omitted in accordance
with SEC regulations), since January 1, 2013 there have not been, and there is not currently proposed, any transaction or series
of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed the lesser
of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and in which
any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family
of any of the foregoing persons had or will have a direct or indirect material interest.
On March 17, 2014, we raised gross proceeds
of $10,000,000 in the March 2014 Private Placement with certain accredited investors. We used a portion of the net proceeds to
exercise the Securities Redemption Option Agreement, as amended, with Vicis Capital Master Fund (“Vicis”) that provides
us with an option to purchase all of the outstanding shares and derivative securities held by Vicis for total payment of six million
dollars ($6,000,000). The shares and derivative securities include 35 shares of Series A Convertible Preferred Stock, 30 shares
of Series B Convertible Preferred Stock, 886,340 shares of common stock, and warrants to purchase 10,000,000 shares of common
stock held by Vicis in our company.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
Our common stock is quoted under the symbol
“OPRX” on the OTCQB operated by OTC Markets Group, Inc. Only a limited market exists for our securities. There
is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder
may be unable to resell his securities in our company.
The following tables set forth the range of
high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Fiscal
Year Ending December 31, 2012
|
Quarter
Ended
|
|
High
$
|
|
Low
$
|
|
December
31, 2012
|
|
|
|
1.61
|
|
|
|
0.85
|
|
|
September 30, 2012
|
|
|
|
1.85
|
|
|
|
0.43
|
|
|
June 30, 2012
|
|
|
|
1.35
|
|
|
|
0.75
|
|
|
March 31, 2012
|
|
|
|
1.23
|
|
|
|
0.53
|
|
Fiscal Year Ending December
31, 2013
|
|
Quarter
Ended
|
|
|
|
High
$
|
|
|
|
Low
$
|
|
|
December 31, 2013
|
|
|
|
1.65
|
|
|
|
0.91
|
|
|
September 30, 2013
|
|
|
|
1.80
|
|
|
|
0.88
|
|
|
June 30, 2013
|
|
|
|
1.91
|
|
|
|
1.12
|
|
|
March 31, 2013
|
|
|
|
1.42
|
|
|
|
0.96
|
|
On April 8, 2014, the last sales price per
share of our common stock was $1.92.
Penny Stock
The SEC has adopted rules that regulate broker-dealer
practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of
less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such securities is provided by the exchange or system.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure
document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks
in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer
and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the
securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny
stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries
on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks;
and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require
by rule or regulation.
The broker-dealer also must provide, prior
to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation
of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply,
or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement
showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment
of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and
dated copy of a written suitability statement.
These disclosure requirements may have the
effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of March 31, 2014, we had 22,809,586 shares
of our common stock issued and outstanding, held by 316 shareholders of record.
Dividends
We currently intend to retain future
earnings for the operation of our business. We have never declared or paid cash dividends on our common stock, and we do not anticipate
paying any cash dividends in the foreseeable future.
In the event that a dividend is
declared, common stockholders on the record date are entitled to share ratably in any dividends that may be declared from time
to time on the common stock by our board of directors from funds legally available.
There are no restrictions in our articles
of incorporation or bylaws that restrict us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from
declaring dividends where, after giving effect to the distribution of the dividend:
|
1.
|
We would not be
able to pay our debts as they become due in the usual course of business; or
|
|
2.
|
Our total assets would be less than
the sum of our total liabilities, plus the amount that would be needed to satisfy the rights of shareholders who have preferential
rights superior to those receiving the distribution.
|
Securities Authorized for Issuance under Equity Compensation
Plans
On June 13, 2013, our Board of Directors adopted
the 2013 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the best available personnel
for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants,
and to promote our success. Under the Plan, we may issue up to an aggregate total of 1,500,000 incentive or non-qualified options
to purchase our common stock or stock awards.
Equity Compensation Plans as of December 31, 2013
|
|
A
|
|
B
|
|
C
|
Plan Category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
Weighted-average
exercise price of outstanding options, warrants and right
|
|
Number
of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column
(A))
|
Equity compensation plans approved by
security holders
|
|
-
|
|
-
|
|
-
|
Equity
compensation plans not approved by security holders
|
|
|
13,783,334
|
|
|
$
|
2.42
|
|
|
|
—
|
|
Total
|
|
|
13,783,334
|
|
|
$
|
2.42
|
|
|
|
—
|
|
Recent Sales of Unregistered Securities
On August 14, 2013,
we granted restricted stock awards under our 2013 Incentive Plan. Mr. David Harrell was awarded 121,875 shares of our common stock
and Mr. Terry Hamilton was awarded 215,625 shares of our common stock. The restricted stock awards will vest 50% on the date six
months and one day after the date of grant, and the remaining 50% one year after the first vesting date.
On September 20, 2013,
we entered into a Separation Agreement with Mr. Shad Stastney regarding the terms and conditions of his departure from our company
(the “Agreement”). Under the Agreement, among other things, we agreed to issue to Mr. Stastney 500,000 shares of our
common stock, half now and the rest by January 1, 2014.
On March 17, 2014, we entered into a securities
purchase agreement with accredited investors, pursuant to which we sold an aggregate of 8,333,333 shares of the Company’s
common stock, par value $0.001 per share, for $1.20 per Share, or gross proceeds of $10,000,000. We issued warrants to purchase
804,139 shares of our common stock with an exercise price of $1.20 per share and a term of 5 years to placement agents in the
raise.
These securities were issued pursuant to Section
4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities
for investment only and not with a view towards distribution. The investors were given adequate information about us to make an
informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to
issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
EXECUTIVE COMPENSATION
The table below summarizes all compensation awarded to, earned
by, or paid to our former or current executive officers for the fiscal years ended December 31, 2013 and 2012.
SUMMARY
COMPENSATION TABLE
|
Name
and
principal position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
(2)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Shad
Stastney
Former Chairman, President, CEO and Director
|
|
2012
2013
|
|
0
126,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
126,762
|
David
Lester
COO, Secretary, Treasurer and Director
|
|
2012
2013
|
|
157,500
157,500
|
|
10,000
15,000
|
|
|
|
|
|
|
|
|
|
|
|
167,500
172,500
|
David
A. Harrell
Chairman, Chief Executive Officer, Chief Strategic Officer and Director
|
|
2012
2013
|
|
166,698
180,104
|
|
50,000
19,151
|
|
|
|
|
|
|
|
|
|
|
|
216,698
199,255
|
Terence
J. Hamilton
VP of Sales and Director
|
|
2012
2013
|
|
157,500
157,500
|
|
7,000
11,000
|
|
|
|
|
|
|
|
|
|
|
|
164,500
168,500
|
Narrative Disclosure to the Summary Compensation
Table
On January 14, 2013, we entered into a written
Employment Agreement with Shad Stastney. Pursuant to the terms and conditions of the Employment Agreement:
|
§
|
Mr. Stastney will
serve as Chairman and Chief Executive Officer of our company for a period of twelve (12) months;
|
|
§
|
Mr. Stastney will
earn a base salary of $175,000;
|
|
§
|
We will issue to
Mr. Stastney an option to acquire two million (2,000,000) shares of our common stock at an exercise price per share of $1.00
with a term of 5 years; and
|
|
§
|
Mr. Stastney will
be entitled to participate in any employee benefit plans, as established by our board of directors.
|
Mr. Stastney also agreed to keep certain information
confidential and not compete with or solicit from our company for a period of time.
On August 14, 2013, we amended the employment
agreement with Mr. Stastney. Pursuant to the terms and conditions of the Amendment to Employment Agreement with Shad Stastney:
|
§
|
Mr. Stastney agreed
to non-competition and non-solicitation restrictions with our company during the term of his employment and two years thereafter;
|
|
§
|
The term of Mr.
Stastney’s employment shall be for one year, and shall automatically renew for each year thereafter unless terminated
on thirty day’s notice before the end of the term; and
|
|
§
|
Mr. Stastney shall
be entitled to two years of severance pay if he is terminated with or without cause.
|
On September 20, 2013, we entered into a Separation
Agreement with Mr. Stastney regarding the terms and conditions of his departure from the Company (the “Agreement”).
Pursuant to the provisions of the Agreement, we agreed with Mr. Stastney as follows:
|
§
|
As of the date of
the Agreement, Mr. Stastney is no longer an officer or director of our company and all prior agreements with Mr. Stastney
are terminated in their entirety;
|
|
§
|
Mr. Stastney shall
receive 500,000 shares of our common stock, half now and the rest by January 1, 2014;
|
|
§
|
We agreed to use
our best efforts to register Mr. Stastney’s shares on Form S-8 by March 1, 2014;
|
|
§
|
We agreed to pay
Mr. Stastney $126,762 and his reasonable out of pocket expenses incurred on our behalf;
|
|
§
|
The parties agreed
to a mutual release of all claims and Mr. Stastney further agreed to certain covenants as provided for in the Agreement; and
|
|
§
|
Mr. Stastney will
be involved with our company in a limited role as a consultant for one year to assist us on financing, strategic and legal
initiatives and to help the transition with several ongoing projects.
|
On April 6, 2009, we entered into an employment
agreement with Mr. Lester to serve as our Chief Executive Officer. The agreement was amended on January 14, 2013 to account for
his new positions as COO, Secretary and Treasurer. Under the agreement, we agreed to compensate Mr. Lester $150,000 annually and
we granted him options to purchase 500,000 shares of our common stock, with 25% vesting immediately and 25% vesting after the
completion of each quarter of hire. Mr. Lester is also eligible for additional quarterly and annual bonus compensation, stock
options, and stock grants based on performance metrics outlined by our board of directors. He is entitled to vacation and sick
days, and other benefits included in the agreement.
On August 14, 2013, we amended the employment
agreement with Mr. Lester. Pursuant to the terms and conditions of the Amendment to Employment Agreement with David Lester:
|
§
|
Mr. Lester will
serve as Chief Operating Officer of our company; and
|
|
§
|
Mr. Lester will
earn a base salary of $157,500 per year.
|
On August 1, 2008, we entered into an employment
agreement with Mr. Hamilton to serve as our VP of Sales. Under the agreement, we agreed to compensate Mr. Hamilton $120,000 annually
and we granted him options to purchase 150,000 shares of our common stock in 2009. Mr. Hamilton is also eligible for additional
quarterly and annual bonus compensation, stock options, and stock grants based on performance metrics outlined by our board of
directors. He is entitled to vacation and sick days, and other benefits included in the agreement. On March 18, 2010, we entered
into an addendum to the employment agreement to increase his compensation to $150,000 annually.
On August 14, 2013, we amended the employment
agreement with Mr. Hamilton. Pursuant to the terms and conditions of the Amendment to Employment Agreement with Terry Hamilton:
|
§
|
Mr. Hamilton will
earn a base salary of $157,500 per year.
|
On August 14, 2013 we granted restricted stock
awards under our 2013 Incentive Plan. Mr. Hamilton was awarded 215,625 shares of our common stock. The restricted stock awards
will vest 50% on the date six months and one day after the date of grant, and the remaining 50% one year after the first vesting
date.
On June 1, 2008, we entered into an employment
agreement with Mr. Harrell to serve as our CEO. The agreement was amended on January 14, 2013 to account for his new positions
as CSO and Vice Chairman. The terms of his compensation, which is still in effect, are an annual salary of $144,000 with a 5%
cost of living increase on each 12 month anniversary. Mr. Harrell is also eligible for additional quarterly and annual bonus compensation,
stock options, and stock grants based on performance metrics outlined by our board of directors. He is entitled to vacation and
sick days, and other benefits included in the agreement. On March 18, 2010, we entered into an addendum to the employment agreement
to increase his compensation to $152,004 annually.
On August 14, 2013, we amended the employment
agreement with Mr. Harrell Pursuant to the terms and conditions of the Amendment to Employment Agreement with David Harrell:
|
§
|
Mr. Harrell will
serve as Vice Chairman of the Board and Chief Strategy Officer of our company;
|
|
§
|
The term of Mr.
Harrell’s employment shall be for one year, and shall automatically renew for each year thereafter unless terminated
on thirty day’s notice before the end of the term; and
|
|
§
|
Mr. Harrell will
earn a base salary of $183,750 per year;
|
On August 14, 2013 we granted restricted stock
awards under our 2013 Incentive Plan. Mr. David Harrell was awarded 121,875 shares of our common stock. The restricted stock awards
will vest 50% on the date six months and one day after the date of grant, and the remaining 50% one year after the first vesting
date.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that
has not vested, and equity incentive plan awards for each named executive officers as of December 31, 2013.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
OPTION
AWARDS
|
|
STOCK
AWARDS
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
Number
of
Shares
or Units
of
Stock That
Have
Not
Vested
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
|
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
|
|
David Lester
|
|
375,000
125,000
55,000
|
|
|
|
|
|
|
$0.35
(1)
$0.35
(1)
$1.00
|
|
|
10/1/14
12/22/14
5/31/16
|
|
|
|
|
|
|
|
|
|
|
|
|
David Harrell
|
|
100,000
200,000
102,500
|
|
|
|
|
|
|
$1.00
$1.81
$1.00
|
|
|
3/5/14
4/26/15
5/31/16
|
|
121,875
|
|
225,468
|
|
|
|
|
|
|
|
|
Terence J. Hamilton
|
|
150,000
127,500
|
|
|
|
|
|
|
$1.00
$1.00
|
|
|
3/5/14
5/31/16
|
|
215,625
|
|
398,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
These are warrants that
were revalued on October 1, 2009 to $0.35 per share.
FINANCIAL
STATEMENTS
Index to Financial Statements Required by
Article 8 of Regulation S-X:
Silberstein Ungar, PLLC CPAs and
Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors
OptimizeRx Corporation
Rochester, Michigan
We have audited the
accompanying consolidated balance sheets of OptimizeRx Corporation as of December 31, 2013 and 2012, and the related consolidated
statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of OptimizeRx Corporation, as of
December 31, 2013 and 2012 and the results of their operations and cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC
Bingham Farms, Michigan
March 20, 2014
OPTIMIZERx
CORPORATION
Consolidated Balance
Sheet as of
December 31, 2013
and 2012
|
December 31,
2013
|
|
December 31,
2012
|
ASSETS
|
|
|
(restated)
|
Current Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,118,243
|
|
|
$
|
284,263
|
|
Accounts receivable
|
|
1,566,964
|
|
|
|
616,798
|
|
Prepaid expenses
|
|
11,771
|
|
|
|
68,158
|
|
Total Current Assets
|
|
2,696,978
|
|
|
|
969,219
|
|
Property and equipment, net
|
|
15,057
|
|
|
|
20,685
|
|
Other Assets
|
|
|
|
|
|
|
|
Patent rights, net
|
|
885,950
|
|
|
|
793,236
|
|
Web development costs, net
|
|
404,986
|
|
|
|
387,215
|
|
Security deposit
|
|
5,049
|
|
|
|
5,049
|
|
Total Other Assets
|
|
1,295,985
|
|
|
|
1,185,500
|
|
TOTAL ASSETS
|
$
|
4,008,020
|
|
|
$
|
2,175,404
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
Accounts payable - trade
|
$
|
188,739
|
|
|
$
|
54,693
|
|
Accounts payable - related party
|
|
570,000
|
|
|
|
570,000
|
|
Accrued expenses
|
|
12,000
|
|
|
|
6,000
|
|
Revenue share payable
|
|
1,193,661
|
|
|
|
90,577
|
|
Deferred revenue
|
|
4,252
|
|
|
|
49,252
|
|
Total Liabilities
|
|
1,968,652
|
|
|
|
770,522
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value, 10,000,000 shares authorized, 65 shares
issued and outstanding
|
|
-0-
|
|
|
|
-0-
|
|
Common stock, $.001 par value, 500,000,000 shares authorized, 14,773,496
and 14,232,496 shares issued and outstanding
|
|
14,773
|
|
|
|
14,232
|
|
Stock warrants
|
|
18,148,049
|
|
|
|
20,058,051
|
|
Additional paid-in-capital
|
|
8,726,708
|
|
|
|
6,164,666
|
|
Deferred stock compensation
|
|
(233,942
|
)
|
|
|
-0-
|
|
Accumulated deficit
|
|
(24,616,220
|
)
|
|
|
(24,832,067
|
)
|
Total Stockholders' Equity
|
|
2,039,368
|
|
|
|
1,404,882
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
4,008,020
|
|
|
$
|
2,175,404
|
|
The accompanying notes are an integral part
of these financial statements.
OPTIMIZERx
CORPORATION
Consolidated
Statements of Operations for the Years
Ended
December 31, 2013 and 2012
|
For the year ended
December 31, 2013
|
|
For the year ended
December 31, 2012
|
|
|
|
(restated)
|
NET REVENUE
|
$
|
4,957,016
|
|
|
$
|
1,989,086
|
|
REVENUE SHARE EXPENSE
|
|
1,767,425
|
|
|
|
115,360
|
|
GROSS MARGIN
|
|
3,189,591
|
|
|
|
1,873,726
|
|
EXPENSES
|
|
|
|
|
|
|
|
Operating expenses (See Note 17)
|
|
2,973,990
|
|
|
|
2,328,648
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
215,601
|
|
|
|
(454,922
|
)
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
Interest income
|
|
246
|
|
|
|
469
|
|
Interest expense
|
|
-0-
|
|
|
|
(100
|
)
|
TOTAL OTHER INCOME (EXPENSE)
|
|
246
|
|
|
|
369
|
|
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
|
|
215,847
|
|
|
|
(454,553
|
)
|
PROVISION FOR INCOME TAXES
|
|
-0-
|
|
|
|
-0-
|
|
NET INCOME (LOSS)
|
$
|
215,847
|
|
|
$
|
(454,553
|
)
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC
|
|
14,388,017
|
|
|
|
14,211,455
|
|
NET INCOME (LOSS) PER SHARE: BASIC
|
$
|
0.02
|
|
|
$
|
(0.03
|
)
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: DILUTED
|
|
14,713,017
|
|
|
|
14,211,455
|
|
NET INCOME (LOSS) PER SHARE: DILUTED
|
$
|
0.01
|
|
|
$
|
(0.03
|
)
|
The accompanying notes are an integral part
of these financial statements.
OPTIMIZERx
CORPORATION
Consolidated
Statement of Stockholders’ Equity as of
December 31, 2013
|
Preferred Stock
|
|
|
Common
Stock
|
|
|
Stock
|
|
|
Additional
Paid-in
|
|
|
Deferred
Stock
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Warrants
|
|
|
Capital
|
|
|
Compensation
|
|
|
Deficit
|
|
|
Equity
|
Balance, January 1, 2012
|
65
|
|
$
|
-0-
|
|
|
14,192,496
|
|
$
|
14,192
|
|
$
|
20,826,934
|
|
$
|
5,125,558
|
|
$
|
-0-
|
|
$
|
(24,377,514
|
)
|
$
|
1,589,170
|
Issuance of stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to employees
|
150,367
|
|
|
150,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for consulting
|
75,098
|
|
|
75,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for services
|
40,000
|
|
|
40
|
|
|
44,760
|
|
|
44,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification for options previously recorded as warrants
|
(768,883
|
)
|
|
768,883
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year (restated)
|
(454,553
|
)
|
|
(454,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012 (restated)
|
65
|
|
$
|
-0-
|
|
|
14,232,496
|
|
$
|
14,232
|
|
|
20,058,051
|
|
$
|
6,164,666
|
|
$
|
-0-
|
|
$
|
(24,832,067
|
)
|
$
|
1,404,882
|
Issuance of stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to employees
|
7,720
|
|
|
7,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for consulting
|
70,961
|
|
|
(59,134
|
)
|
|
11,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for services
|
40,000
|
|
|
40
|
|
|
68,860
|
|
|
68,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for employment severance
|
500,000
|
|
|
500
|
|
|
504,500
|
|
|
(505,000
|
)
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
for correction of prior issue
|
1,000
|
|
|
1
|
|
|
(1
|
)
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassify expired warrants
|
(1,910,002
|
)
|
|
1,910,002
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense consulting services
|
330,192
|
|
|
330,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
215,847
|
|
|
215,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
65
|
|
$
|
-0-
|
|
|
14,773,496
|
|
$
|
14,773
|
|
$
|
18,148,049
|
|
$
|
8,726,708
|
|
$
|
(233,942
|
)
|
$
|
(24,616,220
|
)
|
$
|
2,039,368
|
The accompanying notes are an integral
part of these financial statements.
OPTIMIZERx
CORPORATION
Consolidated
Statements of Cash Flows for the Years
Ended
December 31, 2013 and 2012
|
|
For
the year ended
December
31, 2013
|
|
For the year ended
December 31, 2012
|
|
|
|
|
(restated)
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income (loss) for the period
|
|
$
|
215,847
|
|
|
$
|
(454,553
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
193,791
|
|
|
|
187,104
|
|
Stock issued for services
|
|
|
-0-
|
|
|
|
49,618
|
|
Stock options issued for services
|
|
|
19,547
|
|
|
|
40,007
|
|
Stock-based compensation
|
|
|
399,092
|
|
|
|
180,640
|
|
Bad debt expense
|
|
|
-0-
|
|
|
|
6,923
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(950,166
|
)
|
|
|
(151,851
|
)
|
Prepaid expenses
|
|
|
56,387
|
|
|
|
50,874
|
|
Accounts payable
|
|
|
134,046
|
|
|
|
(282,019
|
)
|
Revenue share payable
|
|
|
1,103,084
|
|
|
|
90,577
|
|
Accrued expenses
|
|
|
6,000
|
|
|
|
(60,000
|
)
|
Deferred revenue
|
|
|
(45,000
|
)
|
|
|
(281,353
|
)
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
1,132,628
|
|
|
|
(624,033
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
-0-
|
|
|
|
(2,230
|
)
|
Patent rights
|
|
|
(150,588
|
)
|
|
|
-0-
|
|
Web development costs
|
|
|
(148,060
|
)
|
|
|
(48,640
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(298,648
|
)
|
|
|
(50,870
|
)
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
833,980
|
|
|
|
(674,903
|
)
|
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
|
284,263
|
|
|
|
959,166
|
|
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
|
$
|
1,118,243
|
|
|
$
|
284,263
|
|
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
Cash paid for income taxes
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common stock issued for future services
|
|
$
|
233,942
|
|
|
$
|
-0-
|
|
The accompanying notes are an integral
part of these financial statements.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
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.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United
States of America and are presented in US dollars.
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.
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.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair
Value of Financial Instruments
The
fair value of cash, accounts receivable, prepaid expenses, patent rights, web development costs, accounts payable, accounts payable
– related party, accrued expenses and deferred revenue 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.
Fair
value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly
transaction between market participants at the measurement date and in the principal or most advantageous market for that asset
or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset
or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration
of non-performance risk including our own credit risk.
In
addition to defining fair value, the disclosure requirements around fair value establish a fair value hierarchy for valuation
inputs which is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring
fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined
by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level
1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level
2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices
for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level
3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include
option pricing models, discounted cash flow models, and similar techniques. The Company’s stock options and warrants are
valued using level 3 inputs.
The
carrying value of the Company’s financial assets and liabilities which consist of cash, accounts receivable, prepaid expenses,
patent rights, web development costs, accounts payable, accounts payable – related party, accrued expenses and deferred
revenue are valued using level 1 inputs. The Company believes that the recorded values approximate their fair value due to the
short maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to
significant interest, exchange or credit risks arising from these financial instruments.
Accounts
Receivable and Allowance for Doubtful Accounts
Accounts
receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period
the related revenue is recorded. The Company has a standardized approach to estimate and review the collectability of its receivables
based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience
is an integral part of the estimation process related to allowances for doubtful accounts. In addition, the Company regularly
assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables
or reserve estimates. Bad debt expense was $0 and $6,923 for the years ended December 31, 2013 and 2012, respectively. The
allowance for doubtful accounts was $0 as of December 31, 2013 and 2012.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 and Revenue Share Expense
All
revenue is recognized when it is earned. Revenues are generated either through the Company’s web-based activities, in which
we earn revenue from advertising and lead generation activities, from our SampleMD activities by which we deliver eCoupons and
eVouchers through a distribution network of ePrescribers and Electronic Health Record technology providers (channel partners),
or from reselling services for other of our partners products that complement our business.
For
our SampleMD business the company recognizes setup fees that are required for integrating client offerings and campaigns into
the SampleMD content delivery system and network. Setup fees are recognized upon completion of the setup and launch of the client’s
campaign within the SampleMD system. As the eCoupons and or eVouchers are distributed through the SampleMD platform and network
of channel partners (a transaction), these transactions are recorded and revenue is recognized. Revenue for transactions can be
realized as cost per distribution or cost per redemption depending on the client contract. Additionally, the company also recognizes
revenue for providing program performance reporting and maintenance, either by the company directly delivering reports or by providing
access to its online reporting portal that the client can utilize. These fees are administered monthly and recognized as recurring
monthly revenue.
The
company on occasion has also resold products and or services that are available through our channel partners, and that is complementary
to our core businesses and client base. In these events net revenue is recognized as this is a commission based revenue split
that the company recognizes.
Based
on the volume of transactions that are delivered through our channel partner network, we provide a revenue share to compensate
the partner for their promotion of the campaign. Revenue shares are a negotiated percentage of the transaction fee depending upon
if the revenue is generated through distributions and or redemptions and can also be specific to special considerations and campaigns.
Traditionally, revenue share has been recognized between 25% and 50% of the transaction value. See Note 18.
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.
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.
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.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
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 included in the diluted earnings per share calculation for the year ended December 31, 2013. They have not
been included in the diluted earnings per share calculation for the year ended December 31, 2012 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.
NOTE
3 – PREPAID EXPENSES
Prepaid
expenses consisted of the following as of December 31, 2013 and 2012:
|
|
2013
|
|
2012
|
Insurance
|
|
$
|
6,722
|
|
|
$
|
6,437
|
|
Rent
|
|
|
5,049
|
|
|
|
5,049
|
|
Consulting
|
|
|
0
|
|
|
|
31,672
|
|
Legal
|
|
|
0
|
|
|
|
25,000
|
|
Total prepaid expenses
|
|
$
|
11,771
|
|
|
$
|
68,158
|
|
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
4 – PROPERTY AND EQUIPMENT
The
Company owned equipment recorded at cost which consisted of the following as of December 31, 2013 and 2012:
|
|
2013
|
|
2012
|
Computer equipment
|
|
$
|
22,360
|
|
|
$
|
22,360
|
|
Furniture and fixtures
|
|
|
11,088
|
|
|
|
11,088
|
|
Subtotal
|
|
|
33,448
|
|
|
|
33,448
|
|
Accumulated depreciation
|
|
|
(18,391
|
)
|
|
|
(12,763
|
)
|
Property and equipment, net
|
|
$
|
15,057
|
|
|
$
|
20,685
|
|
Depreciation
expense was $5,628 and $5,476 for the years ended December 31, 2013 and 2012, respectively.
NOTE
5 – WEB-BASED TECHNOLOGY
The
Company has capitalized costs in developing their web-based technology, which consisted of the following as of December 31,
2013 and 2012:
|
|
2013
|
|
2012
|
OptimizeRx web-based technology
|
|
$
|
154,133
|
|
|
$
|
154,133
|
|
SampleMD web-based technology
|
|
|
602,517
|
|
|
|
602,517
|
|
SampleMD 2.0 web-based technology
|
|
|
148,060
|
|
|
|
0
|
|
Subtotal, web-based technology
|
|
|
904,710
|
|
|
|
756,650
|
|
Accumulated amortization
|
|
|
(440,641
|
)
|
|
|
(310,352
|
)
|
Impairment
|
|
|
(59,083
|
)
|
|
|
(59,083
|
)
|
Web-based technology, net
|
|
$
|
404,986
|
|
|
$
|
387,215
|
|
Amortization
is recorded using the straight-line method over a period of five years. The Company is currently developing enhanced SampleMD
web-based technology and has capitalized $148,060. The development is currently in process. It was not completed at December 31,
2013. Accordingly, no amortization has been recorded. The development is expected to be completed in 2014. Amortization expense
for the web-based technology costs was $130,289 and $126,923 for the years ended December 31, 2013 and 2012, respectively.
NOTE
6 – PATENT AND TRADEMARKS
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 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.
The
Company has capitalized costs in purchasing and defending the SampleMD patent, which consisted of the following as of December 31,
2013 and 2012:
|
|
2013
|
|
2012
|
Patent rights and intangible assets
|
|
$
|
930,000
|
|
|
$
|
930,000
|
|
Patent defense costs
|
|
|
87,993
|
|
|
|
0
|
|
New patents and trademarks
|
|
|
62,595
|
|
|
|
0
|
|
Accumulated amortization
|
|
|
(194,638
|
)
|
|
|
(136,764
|
)
|
Patent rights and intangible
assets, net
|
|
$
|
885,950
|
|
|
$
|
793,236
|
|
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
6 – PATENT AND TRADEMARKS (CONTINUED)
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. In 2013, the Company began incurring costs related to defense of the patent. These costs have been
capitalized and will be amortized using the straight-line method over the remaining useful life of the original patent. Amortization
expense was $57,874 and $54,705 for the years ended December 31, 2013 and 2012, respectively.
NOTE
7 – ACCRUED EXPENSES
Accrued
expenses at December 31, 2013 and 2012 consisted of amounts owed to the Company’s outside independent auditors for services
rendered for periods reported on in these financial statements.
NOTE
8 – DEFERRED REVENUE
The
Company has signed several contracts with customers for either the distribution or redemption of coupons. The payments are not
taken into revenue until either the coupon is distributed to a patient or the coupon has been redeemed depending on the specific
contract. The distributions and redemptions are tracked by the Company’s administrative tool. Additionally, customer setup
contracts that have been paid in full are deferred until the Company has completed the obligations of the contacts. Deferred revenue
was $4,252 and $49,252 as of December 31, 2013 and 2012, respectively.
NOTE
9 – 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.
NOTE
10 – COMMON STOCK
OptimizeRx
Corporation has 500,000,000 shares of $.001 par value common stock authorized as of December 31, 2013. There were 14,773,496 and
14,232,496 common shares issued and outstanding at December 31, 2013 and 2012, respectively.
On
June 1, 2012, the Company entered into a consulting agreement with North Coast Advisors, Inc. for various services. The Company
agreed to issue 40,000 shares of common stock as of the date of the contract. However, these shares were not issued until July 12,
2012. The Company also agreed to issue an additional 40,000 shares every six months in alignment with the agreement renewal up
to the two years of the agreement. The first 40,000 shares were valued at the Company’s common stock price as of the date
of the contract, which was $1.12/share and has been expensed. No additional shares were issued and the agreement was voided and
replaced by a new agreement as noted below.
On
June 1, 2013, the Company entered into a consulting agreement with North Coast Advisors, Inc. for various services. The Company
agreed to issue 20,000 shares of common stock as of the date of the contract. The Company also agreed to issue an additional 20,000
shares every six months in alignment with the agreement renewal up to the two years of the agreement. The first 20,000 shares
were valued at the Company’s common stock closing price as of the date of the contract, which was $1.945/share; and the
second 20,000 shares were valued at the Company’s common stock closing price of $1.50/share on the date of issuance, and
have been expensed.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
10 – COMMON STOCK (CONTINUED)
On
September 20, 2013, the Company entered into a separation agreement that includes post-employment consulting services with
a former officer. The Company agreed to issue 500,000 shares of common stock, 250,000 shares immediately and 250,000 by January 1,
2014. The first 250,000 shares have been issued and the Company has recognized the entire issuance in the December 31, 2013 shares
outstanding. The shares were valued at $505,000 and $174,808 of that amount remains as deferred stock compensation as of December 31,
2013.
NOTE
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.
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. On September 21, 2011, the Company's Board declared and issued 156,306 common shares for
its semi-annual dividend payment. The Company has undeclared dividends that were due in February and September 2012 totaling $350,000
and undeclared dividends of $350,000 that were due in February and September 2013 for a total undeclared amount of $700,000 as
of December 31, 2013.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
11 – PREFERRED STOCK (CONTINUED)
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 1,000,000
shares of common stock and bear a 10% cumulative dividend. In addition, there was a warrant issued to purchase 3,000,000 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.
During
the quarter ended September 30, 2011, 15 preferred shares were issued to an investor for $1,500,000. The 15 shares are convertible
to 1,000,000 shares of common stock and bear a 10% cumulative dividend. In addition, there was a warrant issued to purchase 1,000,000
shares of common stock at an exercise price of $3 for a period of seven years. Based on the fair values of the preferred stock
and common stock warrants on the issue date, $855,460 was allocated to preferred stock and $644,540 was allocated to the common
stock warrants. See Note 12.
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.
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.
On September 21, 2011, the Company's Board declared and issued 66,988 common shares for its semi-annual dividend payment.
The Company has undeclared dividends that were due in February and September 2012 totaling $150,000 and undeclared dividends of
$150,000 that were due in February and September 2013 for a total undeclared amount of $300,000 as of December 31, 2013.
NOTE
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.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
12 – STOCK OPTIONS AND WARRANTS (CONTINUED)
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
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 $187,005 during the year ended December
31, 2011. The remaining balance of $133,580 was recognized over the first five months of 2012.
During
the quarter ended December 31, 2011, the Company issued 20,000 stock options to 2 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 204-205%, risk-free interest rate of 0.88-0.93% and expected life of 60 months. The total
value of the options was $19,270. The options vest over one year.
The Company recognized
share-based compensation expense of $2,480 and $16,790 during the years ended December 31, 2012 and 2011
, respectively.
On
November 21, 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 205%, risk-free interest rate of 0.92% and expected life of 60 months.
The
Company recognized expenses of $91,811 and $8,346 during the years ended December 31, 2012 and 2011
, respectively.
During
the quarter ended March 31, 2012, the Company issued 50,000 stock options to 4 non-employees at an exercise price of $0.89.
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 198%, risk-free interest rate of 0.65% and expected life of 48 months. The total value of
the options was $35,091. The options vest over 4 months. The Company recognized share-based compensation expense of $35,091 during
the six months ended June 30, 2012.
During
the quarter ended December 31, 2012, the Company issued 25,000 stock options to a non-employee at an exercise price of $1.58.
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 200%, risk-free interest rate of 0.67% and expected life of 60 months. The total value of
the options was $40,007. The options vest over 1 year. The Company recognized share-based compensation expense of $31,672 and
$8,335 during the years ended December 31, 2013 and 2012, respectively.
On
October 30, 2013, the Company issued 50,000 stock options to 6 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 171%, risk-free interest rate of 1.30% and expected life of 60 months. The total value of the options was $46,322.
The options vest over one year.
The Company recognized share-based compensation
expense of $7,720 during the year ended December 31, 201
3
. The remaining
balance will be recognized during 2014.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
12 – STOCK OPTIONS AND WARRANTS (CONTINUED)
On
November 8, 2013, the Company issued 75,000 stock options to 2 non-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 171%, risk-free interest rate of 1.42% and expected life of 60 months. The total value of the options was $70,961.
The options vest over 1 year. The Company recognized share-based compensation expense of $11,827 during the three months ended
December 31, 2013. The remaining balance of $59,134 has been recorded as deferred stock compensation and will be recognized
during 2014.
The
Company had the following options outstanding as of December 31, 2013:
|
|
Number of Options
|
|
Weighted average exercise price
|
|
Outstanding,
January 1, 2012
|
|
|
|
405,000
|
|
|
$
|
1.01
|
|
|
Granted
- 2012
|
|
|
|
75,000
|
|
|
|
1.17
|
|
|
Exercised
- 2012
|
|
|
|
0
|
|
|
|
0
|
|
|
Expired
– 2012
|
|
|
|
(455,000
|
)
|
|
|
(.98
|
)
|
|
Balance,
December 31, 2012
|
|
|
|
25,000
|
|
|
|
1.58
|
|
|
Granted
– 2013
|
|
|
|
125,000
|
|
|
|
1.00
|
|
|
Exercised
– 2013
|
|
|
|
0
|
|
|
|
0
|
|
|
Expired
– 2013
|
|
|
|
(25,000
|
)
|
|
|
(1.58
|
)
|
|
Balance,
December 31, 2013
|
|
|
|
125,000
|
|
|
$
|
1.00
|
|
The
Company had the following warrants outstanding as of December 31, 2013:
|
|
Number of Warrants
|
|
Weighted average exercise price
|
|
Outstanding,
January 1, 2012
|
|
|
|
14,344,434
|
|
|
$
|
2.41
|
|
|
Granted
- 2012
|
|
|
|
0
|
|
|
|
0
|
|
|
Exercised
- 2012
|
|
|
|
0
|
|
|
|
0
|
|
|
Expired
- 2012
|
|
|
|
0
|
|
|
|
0
|
|
|
Balance,
December 31, 2012
|
|
|
|
14,344,434
|
|
|
|
2.41
|
|
|
Granted
- 2013
|
|
|
|
0
|
|
|
|
0
|
|
|
Exercised
- 2013
|
|
|
|
0
|
|
|
|
0
|
|
|
Expired
- 2013
|
|
|
|
(686,100
|
)
|
|
|
(2.71
|
)
|
|
Balance,
December 31, 2013
|
|
|
|
13,658,334
|
|
|
$
|
2.44
|
|
NOTE
13 – OPERATING LEASES
The
Company signed a lease for new office space on December 1, 2011 at an approximate rent of $5,000 per month. The new offices are
in Rochester, Michigan. The lease is for three years with an option to renew for an additional two years at approximately $5,200
per month with six months advance notice to exercise the option. Minimum annual rent is as follows for the initial term of the
lease:
Year ended December 31, 2014
|
|
$
|
55,542
|
|
Total lease commitment
|
|
$
|
55,542
|
|
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
14 – MAJOR CUSTOMERS
The
Company had two major customers that accounted for 58% and two major customers that accounted for 52% of the Company’s revenues
for the years ended December 31, 2013 and 2012, respectively. The Company expects to continue to maintain these relationships
with the customers.
NOTE
15 – INCOME TAXES
For
the year ended December 31, 2013, the Company incurred net income of approximately $216,000 but has no tax liability. The
Company began operations in 2007 and has previous net operating loss carry-forwards of approximately $13,934,000 through December 31,
2012. The cumulative loss of approximately $13,718,000 will be carried forward and can be used through the year 2033 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 years ended December 31, 2013 and 2012:
|
|
2013
|
|
2012
|
Federal income tax (expense) benefit attributable to:
|
|
|
|
|
|
|
|
|
Current operations
|
|
$
|
(73,000
|
)
|
|
$
|
155,000
|
|
Valuation allowance
|
|
|
73,000
|
|
|
|
(155,000
|
)
|
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 December 31, 2013 and 2012:
|
|
2013
|
|
2012
|
Deferred tax asset attributable to:
|
|
|
|
|
|
|
|
|
Net operating loss carryover
|
|
$
|
4,665,000
|
|
|
$
|
4,738,000
|
|
Valuation allowance
|
|
|
(4,665,000
|
)
|
|
|
(4,738,000
|
)
|
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 $13,718,000
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.
NOTE
16 – CONTINGENT LIABILITY
On
January 14, 2013, the Company hired a new CEO. The employment agreement required annual compensation of $175,000 that was to be
accrued and deferred until at least January 1, 2014. Additionally, the agreement required the issuance of 2,000,000 options with
an exercise price of $1.00 for a term of five years. The options were not exercisable until at least January 1, 2014, and were
only exercisable after reaching certain financial terms and conditions. Due to these restrictions, no accrual was made for the
issuance of these options.
On
September 20, 2013, the Company entered into a separation agreement with the CEO. As part of the terms of the separation
agreement, the accrued compensation up to the date of separation was paid and the options were terminated.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
17 – OPERATING EXPENSES
Operating
expenses consisted of the following for the years ended December 31, 2013 and 2012, respectively:
|
|
Years ended December 31,
|
|
Years ended December 31,
|
|
|
2013
|
|
2012
|
Advertising
|
|
$
|
47,105
|
|
|
$
|
57,218
|
|
Professional fees
|
|
|
552,824
|
|
|
|
263,396
|
|
Consulting
|
|
|
100,077
|
|
|
|
19,148
|
|
Salaries, wages and benefits
|
|
|
1,319,712
|
|
|
|
1,184,367
|
|
Rent
|
|
|
60,592
|
|
|
|
62,362
|
|
Depreciation and amortization
|
|
|
193,971
|
|
|
|
187,104
|
|
Stock-based compensation
|
|
|
411,412
|
|
|
|
285,605
|
|
General and administrative
|
|
|
288,297
|
|
|
|
269,448
|
|
Total Operating Expenses
|
|
$
|
2,973,990
|
|
|
$
|
2,328,648
|
|
NOTE
18 – RESTATEMENT
During
the quarter ended December 31, 2013, the Company corrected an accounting error related to revenue share expenses. The Company
will accrue the expense for amounts due, versus when they are paid, for proper matching. The revenue share expense was not properly
accrued at the end of 2012 or at the end of each 2013 quarter
The
restated Consolidated Balance Sheet, Consolidated Statement of Operations and Consolidated Statement of Cash Flows for the year
ended December 31, 2012 is as follows:
Year ended December 31, 2012
|
|
|
|
|
Financial Statement
|
|
Line Item
|
|
|
Corrected
|
|
|
|
Previously
Stated
|
|
Balance sheet
|
|
Revenue share payable
|
|
$
|
90,577
|
|
|
$
|
0
|
|
Income statement
|
|
Revenue share expense
|
|
$
|
115,360
|
|
|
$
|
24,783
|
|
Income statement
|
|
Loss from operations
|
|
$
|
(454,922
|
)
|
|
$
|
(364,345
|
)
|
Income statement
|
|
Loss before provision for income taxes
|
|
$
|
(454,553
|
)
|
|
$
|
(363,976
|
)
|
Income statement
|
|
Net loss
|
|
$
|
(454,553
|
)
|
|
$
|
(363,976
|
)
|
Statement of cash flows
|
|
Net loss
|
|
$
|
(454,553
|
)
|
|
$
|
(363,976
|
)
|
Statement of cash flows
|
|
Increase in revenue share payable
|
|
$
|
90,577
|
|
|
$
|
0
|
|
NOTE
19 – SUBSEQUENT EVENTS
On
January 2, 2014 the Company executed an amendment to their securities redemption option agreement with Vicis Capital Master
Fund that provides an option to purchase all of the outstanding shares and derivative securities held by Vicis for a total of
$6,000,000. The term of the option is through March 31, 2014. The original agreement payment was for $9,000,000 and term
was through December 30, 2013.
On March
17, 2014, the Company entered into a securities purchase agreement, pursuant to which the Company sold an
aggregate of 8,333,333 shares of the Company’s common stock for $1.20 per share, or gross proceeds of $10,000,000.
OPTIMIZERx
CORPORATION
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2013
NOTE
19 – SUBSEQUENT EVENTS (CONTINUED)
Placement
agents in the offering received commissions equal to approximately 9.7% of gross proceeds, for an aggregate commission of approximately
$970,000, including reimbursements for their reasonable out of pocket expenses. Placement agents also received warrants to purchase
up to 804,139 shares of the Company's common stock with an exercise price of $1.20 per share and a term of 5 years. The agent
warrants also provide for piggy-back registration rights.
The
Company used a portion of the net proceeds of the offering to exercise the securities redemption option agreement, as amended,
with Vicis Capital Master Fund that provides the Company with an option to purchase all of the outstanding shares and
derivative securities held by Vicis for total payment of $6,000,000. The shares and derivative securities include the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Common Stock, and warrants to purchase shares of common stock
held by Vicis in the Company. The balance of the net proceeds will be used for working capital purposes.
On
November 5, 2012, LDM Group, LLC (“LDM”) commenced an action against the Company in the United States District Court
for the Eastern District of Missouri, Eastern Division. The complaint alleged that OptimizeRx infringed on a patent issued on
February 21, 2012 in favor of LDM. LDM alleged that its patent is an invention of a method for making available targeted content
to a prescription medication patient while the patient is still in the physician’s office. According to LDM, the Company’s
Integrated SampleMD uses systems and methods that perform the elements of the LDM patent and, therefore, infringes on its patent.
On February 25, 2013, a Settlement and Patent License Agreement was reached with LDM, and LDM subsequently dismissed the lawsuit
with prejudice. On April 23, 2013, however, LDM reinstituted the patent infringement action in the United States District
Court for the Eastern District of Missouri, Eastern Division claiming that OptimizeRx breached the Settlement and Patent License
Agreement. The Company continued to vigorously defend the OptimizeRx technology, preparing for litigation, depositions and patent
protection while also positioning for legal actions against LDM. On February 28, 2014, a Settlement Agreement was reached with
LDM, and the judge dismissed the case with prejudice on March 18, 2014. Per the terms of the settlement agreement, the Company
paid a one-time fee of $400,000 and will pay LDM the greater of $0.37 per patient discount distributed by OptimizeRx or 10% of
the total revenue earned by OptimizeRx for distribution and redemption of all patent discounts.
In
accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2013 through the date these
financial statements were issued and has determined that it does not have any material subsequent events to disclose in these
financial statements other than the events described above.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
No events occurred requiring disclosure under
Item 304 of Regulation S-K during the fiscal year ending December 31, 2013.
AVAILABLE INFORMATION
We file annual, quarterly and current
reports, proxy statements and other documents with the SEC. These filings contain important information which does not appear
in this prospectus. You may read and copy, at prescribed rates, any documents we have filed with the SEC at its Public Reference
Room located at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. We also file these documents with the SEC electronically. You can access the electronic
versions of these filings on the SEC’s website found at http://www.sec.gov.
We have filed with the Securities and
Exchange Commission (“SEC”) a registration statement for the securities on Form S-1 under the Securities Act. This
prospectus, which forms part of the registration statement, does not contain all the information contained in the registration
statement. Whenever a reference is made in this prospectus to any of our contracts or other documents, the reference may not be
complete and, for a copy of the contract or document, you should refer to the exhibits that are part of the registration statement.
You may inspect and copy the registration
statement at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549 upon payment
of certain prescribed fees. You may obtain information on the operation of the SEC’s public reference facilities by calling
the SEC at 1-800-SEC-0330. You may also access the registration statement electronically through the SEC’s Electronic Data
Gathering, Analysis and Retrieval, or EDGAR, system at the SEC’s website located at http://www.sec.gov.
Until _______________, all dealers
that effect transactions in these securities whether or not participating in this offering may be required to deliver a prospectus.
This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART
II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
|
Other
Expenses of Issuance and Distribution
|
SEC
Registration Fees
|
$
|
2,260
|
|
Accounting
Fees and Expenses
*
|
|
15,000
|
|
Legal
Fees and Expenses
*
|
|
20,000
|
|
Miscellaneous
*
|
|
15,000
|
|
Total
|
$
|
52,260
|
|
* Estimates
We will bear our fees and expenses
incurred in connection with the registration of shares of common stock in connection with this offering. The Selling Shareholders
will bear all selling and other expenses that they incur in connection with their sale of shares of common stock pursuant to the
prospectus which is part of this registration statement.
Item 14.
|
Indemnification
of Directors and Officers.
|
Our officers and directors are indemnified as provided
by the Nevada Revised Statutes and our bylaws.
Under the governing Nevada statutes, director immunity
from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited
by a company's articles of incorporation. Our articles of incorporation do not contain any limiting language regarding director
immunity from liability. Excepted from this immunity are:
|
1.
|
a willful failure
to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict
of interest;
|
|
2.
|
a violation of criminal
law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe
that his or her conduct was unlawful);
|
|
3.
|
a transaction from
which the director derived an improper personal profit; and
|
Our bylaws provide that we will indemnify our directors
and officers to the fullest extent not prohibited by Nevada law; provided, however, that we may modify the extent of such indemnification
by individual contracts with our directors and officers; and, provided, further, that we shall not be required to indemnify any
director or officer in connection with any proceeding (or part thereof) initiated by such person unless:
|
1.
|
such indemnification
is expressly required to be made by law;
|
|
2.
|
the proceeding was
authorized by our Board of Directors;
|
|
3.
|
such indemnification
is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or;
|
|
4.
|
such indemnification
is required to be made pursuant to the bylaws.
|
Our bylaws provide that we will advance to any person
who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the
company, or is or was serving at the request of the company as a director or executive officer of another company, partnership,
joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore,
all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified
under our bylaws or otherwise.
Our bylaws provide that no advance shall be made
by us to an officer of the company, except by reason of the fact that such officer is or was a director of the company in which
event this paragraph shall not apply, in any action, suit or proceeding, whether civil, criminal, administrative or investigative,
if a determination is reasonably and promptly made: (a) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (b) if such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making
party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a
manner that such person did not believe to be in or not opposed to the best interests of the company.
Item 15.
|
Recent Sales of Unregistered Securities.
|
On August 14, 2013, we granted restricted stock awards under our 2013 Incentive Plan. Mr. David Harrell was awarded 121,875 shares
of our common stock and Mr. Terry Hamilton was awarded 215,625 shares of our common stock. The restricted stock awards will vest
50% on the date six months and one day after the date of grant, and the remaining 50% one year after the first vesting date.
On September 20, 2013,
we entered into a Separation Agreement with Mr. Shad Stastney regarding the terms and conditions of his departure from our company
(the “Agreement”). Under the Agreement, among other things, we agreed to issue to Mr. Stastney 500,000 shares of our
common stock, half now and the rest by January 1, 2014.
On March 17, 2014, we entered into a securities
purchase agreement with accredited investors, pursuant to which we sold an aggregate of 8,333,333 shares of the Company’s
common stock, par value $0.001 per share, for $1.20 per Share, or gross proceeds of $10,000,000. We issued warrants to purchase
804,139 shares of our common stock with an exercise price of $1.20 per share and a term of 5 years to placement agents in the
raise.
These securities were issued pursuant to Section
4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities
for investment only and not with a view towards distribution. The investors were given adequate information about us to make an
informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to
issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Exhibit
Number
|
Description
|
3.1
|
Articles
of Incorporation of OptimizeRx Corporation (the “Company”)
1
|
3.2
|
Amended
and Restated Bylaws of the Company
1
|
3.3
|
Certificate
of Designation, filed on September 5, 2008, with the Secretary of State of the State of Nevada by the Company
1
|
5.1
|
Opinion
of Cane Clark, LLP, with consent to use
|
10.1
|
Employment
Agreement, dated March 20, 2009
2
|
10.2
|
Employment
Agreement, dated August 1, 2008
2
|
10.3
|
Employment
Agreement, dated June 1, 2008
2
|
10.4
|
Employment
Agreement Addendum, dated March 18, 2010
2
|
10.5
|
Employment
Agreement Addendum, dated March 18, 2010
2
|
10.6
|
Addendum
to Employment Agreement, dated July 28, 20103
3
|
10.7
|
Amendment
to Employment Agreement, dated July 28, 2010
3
|
10.8
|
Amendment
to Employment Agreement, dated July 28, 2010
3
|
10.9
|
Employment
Agreement, dated January 14, 2013
4
|
10.10
|
Securities
Redemption Option Agreement, dated January 10, 2013
5
|
10.11
|
Amendment
to Employment Agreement, dated August 14, 2013
6
|
10.12
|
Amendment
to Employment Agreement, dated August 14, 2013
6
|
10.13
|
Amendment
to Employment Agreement, dated August 14, 2013
6
|
10.14
|
Amendment
to Employment Agreement, dated August 14, 2013
6
|
10.15
|
Separation
Agreement, dated September 20, 2013
7
|
10.16
|
Amendment
No. 1 to Securities Redemption Option Agreement
8
|
10.17
|
Securities
Purchase Agreement
9
|
10.18
|
Registration
Rights Agreement
9
|
23.1
|
Consent of Independent Registered Public Accounting Firm
|
101**
|
The following materials from the Company’s Annual Report on Form 10-K for the year ended December
31, 2013 formatted in Extensible Business Reporting Language (XBRL).
|
1
Incorporated by reference
to the Form S-1, filed by the Company with the Securities and Exchange Commission on November 12, 2008.
2
Incorporated by reference
to the Form 10-K, filed by the Company with the Securities and Exchange Commission on March 31, 2010.
3
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on July 30, 2010.
4
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on January 18, 2013.
5
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on January 11, 2013.
6
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on August 15, 2013.
7
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on September 20, 2013.
8
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on January 2, 2014.
9
Incorporated by reference
to the Form 8-K, filed by the Company with the Securities and Exchange Commission on March 18, 2014.
The registrant hereby undertakes:
|
(a)
|
To
file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
|
|
(i)
|
to
include any prospectus required by Section 10(a)(3) of the Securities Act;
|
(ii) to
reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(b) That, for
the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) To remove
from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination
of the offering.
(d) That,
for the purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part
of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is
first used after effectiveness. Provided, however , that no statement made in a registration statement or prospectus that is part
of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such date of first use.
(e) Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other that the
payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit of proceeding) is asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Rochester, State of Michigan on April 11, 2014.
|
OptimizeRx
Corporation
|
|
|
By:
|
/s/
David Harrell
|
|
Shad Stastney
Chief Executive Officer, Principal Executive Officer
and Director
|
|
April
11, 2014
|
|
OptimizeRx
Corporation
|
|
|
By:
|
/s/
H. David Lester
|
|
H. David Lester
Chief Operating Officer, Chief Financial Officer,
Principal Financial Officer and Director
|
|
April
11, 2014
|
POWER OF ATTORNEY
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By:
|
/s/ David Harrell
|
|
David Harrell
|
Title:
|
Director
|
Date:
|
April 11, 2014
|
By:
|
/s/ David Lester
|
|
David Lester
|
Title:
|
Director
|
Date:
|
April 11, 2014
|
By:
|
/s/ Terence J. Hamilton
|
|
Terence J. Hamilton
|
Title:
|
Director
|
Date:
|
April 11, 2014
|
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