OptimizeRx(OPRX) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's analysis for OptimizeRx Corporation Item 1. Financial Statements This section presents OptimizeRx Corporation's unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows Condensed Consolidated Balance Sheets Balance sheets show significant increases in total assets and stockholders' equity, driven by a public offering, improving working capital Condensed Consolidated Balance Sheets | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :---------------- | :------------------ | | Cash and cash equivalents | $83,923,455 | $10,516,776 | | Total Current Assets | $104,981,860 | $32,859,092 | | Total Assets | $131,623,380 | $60,327,754 | | Total Current Liabilities | $6,665,304 | $10,028,307 | | Total Liabilities | $6,948,238 | $10,353,840 | | Total Stockholders' Equity | $124,675,142 | $49,973,914 | Condensed Consolidated Statements of Operations The company reported net income for Q2 2021 and a reduced net loss for H1 2021, driven by strong revenue growth Condensed Consolidated Statements of Operations | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Revenue | $13,625,639 | $8,783,230 | $24,854,850 | $16,367,832 | | Gross Margin | $8,044,675 | $5,144,214 | $14,169,283 | $9,487,053 | | Income (Loss) From Operations | $340,139 | $(1,055,813) | $(298,169) | $(3,315,065) | | Net Income (Loss) | $352,100 | $(1,077,468) | $(285,277) | $(3,281,399) | | Basic EPS | $0.02 | $(0.07) | $(0.02) | $(0.22) | | Diluted EPS | $0.02 | $(0.07) | $(0.02) | $(0.22) | Condensed Consolidated Statements of Changes in Stockholders' Equity (2021) Stockholders' equity significantly increased for the three and six months ended June 30, 2021, primarily due to a public offering Condensed Consolidated Statements of Changes in Stockholders' Equity (2021) | Metric | Balance January 1, 2021 | Public Offering (net) | Shares Issued (Board Comp) | Shares Issued (Options) | Stock-based Comp Expense | Net Income (Loss) | Balance June 30, 2021 | | :-------------------------- | :---------------------- | :-------------------- | :------------------------- | :---------------------- | :----------------------- | :---------------- | :-------------------- | | Common Stock Shares | 15,223,340 | 1,523,750 | 4,730 | 743,609 | - | - | 17,495,429 | | Common Stock Amount | $15,223 | $1,524 | $5 | $743 | - | - | $17,495 | | Additional Paid-in Capital | $85,590,428 | $70,670,012 | $250,080 | $2,710,535 | $1,354,106 | - | $160,574,661 | | Accumulated Deficit | $(35,631,737) | - | - | - | - | $(285,277) | $(35,917,014) | | Total Stockholders' Equity | $49,973,914 | $70,671,536 | $250,085 | $2,711,278 | $1,354,106 | $(285,277) | $124,675,142 | Condensed Consolidated Statements of Changes in Stockholders' Equity (2020) Stockholders' equity for H1 2020 increased from compensation and options, but decreased due to net losses Condensed Consolidated Statements of Changes in Stockholders' Equity (2020) | Metric | Balance January 1, 2020 | Shares Issued (Board Comp) | Shares Issued (Options) | Stock-based Comp Expense | Net Loss | Balance June 30, 2020 | | :-------------------------- | :---------------------- | :------------------------- | :---------------------- | :----------------------- | :---------------- | :-------------------- | | Common Stock Shares | 14,600,579 | 18,884 | 90,763 | 42,374 | - | 14,752,600 | | Common Stock Amount | $14,601 | $19 | $91 | $42 | - | $14,753 | | Additional Paid-in Capital | $78,272,268 | $200,008 | $286,892 | $1,435,114 | - | $80,194,282 | | Accumulated Deficit | $(33,424,610) | - | - | - | $(3,281,399) | $(36,706,009) | | Total Stockholders' Equity | $44,862,259 | $200,027 | $286,983 | $1,435,156 | $(3,281,399) | $43,503,026 | Condensed Consolidated Statements of Cash Flows The company generated significant cash from financing and positive operating cash flow for H1 2021, substantially increasing cash Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net Cash Provided By (Used In) Operating Activities | $1,855,654 | $(3,611,183) | | Net Cash Used In Investing Activities | $(220,476) | $(24,998) | | Net Cash Provided By (Used In) Financing Activities | $71,771,501 | $(1,102,205) | | Net Increase In Cash And Cash Equivalents | $73,406,679 | $(4,738,386) | | Cash And Cash Equivalents - End Of Period | $83,923,455 | $14,114,294 | Notes to Condensed Consolidated Financial Statements These notes provide detailed context for the financial statements, covering business, accounting policies, revenue, leases, equity, and compensation NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION OptimizeRx is a digital health company connecting over half of U.S. healthcare providers; interim results are unaudited - OptimizeRx is a digital health company connecting over half of U.S. healthcare providers and millions of patients to help afford and stay on medications[25] NOTE 2 – NEW ACCOUNTING STANDARDS Adoption of ASU No. 2019-12 (Income Taxes) on January 1, 2021, had no material financial impact - Adoption of ASU No. 2019-12 (Income Taxes) on January 1, 2021, had no material effect on financial statements[29] NOTE 3 – REVENUES Most revenue comes from life science companies, recognized under ASC 606, with unbilled amounts in accounts receivable Revenue by Source | Revenue Source | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Life Science Companies | $13,313,044 | $8,336,298 | $24,256,404 | $15,568,032 | | Other | $312,595 | $446,932 | $598,446 | $799,800 | | Total Revenue | $13,625,639 | $8,783,230 | $24,854,850 | $16,367,832 | - Unbilled amounts included in accounts receivable were $1,215,703 at June 30, 2021, up from $77,516 at December 31, 2020[30] NOTE 4 – LEASES The company holds operating leases for office spaces; lease costs decreased for H1 2021 due to lower short-term leases Lease Costs | Lease Cost Component | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $33,365 | $32,814 | $66,730 | $65,627 | | Short-term lease cost | $16,890 | $36,186 | $32,814 | $80,815 | | Total lease cost | $50,255 | $69,000 | $99,544 | $146,442 | - Weighted average remaining lease term at June 30, 2021, was 3.93 years, with a weighted average discount rate of 4.5%[40] NOTE 5 – STOCKHOLDERS' EQUITY OptimizeRx significantly increased common stock and additional paid-in capital in H1 2021 through a public offering - Issued 1,523,750 shares of common stock in a public offering, generating net proceeds of $70,671,536 in Q1 2021[41] - Issued 743,609 shares from stock option exercises in the first half of 2021, generating $2,710,778 in proceeds[42] - Issued 4,730 shares for board compensation in the first half of 2021, valued at $250,085[44] NOTE 6 – STOCK BASED COMPENSATION The company recognized $1.35 million in stock-based compensation expense for H1 2021, with significant remaining expense Stock-Based Compensation Expense | Compensation Type | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :------------------------ | :--------------------------- | :--------------------------- | | Stock Options Expense | $954,434 | $1,021,787 | | Restricted Stock Awards Expense | $399,672 | $413,369 | | Total Stock-Based Compensation | $1,354,106 | $1,435,156 | - Remaining expense for unvested options is $6,183,249 over approximately 2.5 years[45] - Remaining expense for unvested restricted stock awards is $2,588,851 over 3.4 years[47] NOTE 7 – EARNINGS (LOSS) PER SHARE Basic and diluted EPS for Q2 2021 were $0.02, a positive shift, and H1 2021 showed a reduced loss Earnings (Loss) Per Share | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income (Loss) | $352,100 | $(1,077,468) | $(285,277) | $(3,281,399) | | Basic EPS | $0.02 | $(0.07) | $(0.02) | $(0.22) | | Diluted EPS | $0.02 | $(0.07) | $(0.02) | $(0.22) | - Diluted EPS was not calculated for 2020 periods or the six months ended June 30, 2021, due to anti-dilutive effects[51] NOTE 8 – CONTINGENCIES OptimizeRx Corporation is not currently involved in any material legal proceedings - The Company is not currently involved in any material legal proceedings[54] NOTE 9 – SUBSEQUENT EVENTS In July 2021, the company issued 123,178 shares for $300,548 from stock option exercises - In July 2021, 123,178 shares of common stock were issued from stock option exercises, generating $300,548[55] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results for H1 2021, covering revenue, costs, and liquidity Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties - Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially[57] Overview The company has not seen a noticeable COVID-19 revenue impact but anticipates potential future negative effects - No noticeable impact on revenue from COVID-19 observed in the recently completed fiscal year or quarter[58] - Enacted precautionary measures in March 2020, including remote work and travel elimination; offices reopened voluntarily in June 2021[59] - Digital communication technology is considered more important in the current environment, but advertising/marketing budgets may be cut in a sustained economic downturn[59] Company Highlights through July 2021 OptimizeRx achieved significant revenue growth, positive operating cash flow, launched RWE, and raised capital - Generated sales of $13.6 million for Q2 2021 (+55% YoY) and $24.9 million for H1 2021 (+52% YoY)[65] - Achieved positive cash flow from operations of $1.9 million for H1 2021[65] - Launched new Real World Evidence (RWE) messaging solution, generating Q2 revenue from two leading brands[65] - Raised $70.7 million of capital in a public offering[65] - Enhanced leadership team (General Counsel, Chief Compliance Officer, elevated CTO)[65] - Completed integration work for previous two acquisitions and paid last earnout payment[65] Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020 This section analyzes the company's operational performance for the three and six months ended June 30, 2021 and 2020 Revenues Total revenue increased significantly for both the three and six months ended June 30, 2021, driven by increased sales across all messaging products Net Revenue Performance | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | YoY Change | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | YoY Change | | :---------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Net Revenue | $13,625,639 | $8,783,230 | +55% | $24,854,850 | $16,367,832 | +52% | Cost of Revenues Cost of revenue percentage slightly decreased for Q2 2021 but increased for H1 2021 due to solution mix Cost of Revenues Percentage | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of Revenues % | 41.0% | 41.4% | 43.0% | 42.0% | Gross Margin Gross margin slightly increased in Q2 2021 due to RWE but decreased for H1 2021, with expected improvement Gross Margin Percentage | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :----------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Gross Margin % | 59.0% | 58.6% | 57.0% | 58.0% | - Q2 2021 gross margin improvement was partly due to the launch of the RWE solution, which has a higher margin from program design[66] Operating Expenses Operating expenses increased for H1 2021 due to growth investments, but at a lower rate than revenues Operating Expenses by Category | Operating Expense Category | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Operating Expense | $7,704,536 | $6,200,027 | $14,467,452 | $12,802,118 | | Salaries, Wages, & Benefits | $3,906,796 | $3,176,460 | $7,487,612 | $6,382,597 | | Stock-Based Compensation | $897,038 | $780,670 | $1,604,191 | $1,635,183 | | Professional Fees | $448,598 | $186,834 | $769,818 | $672,304 | | Data Costs | $257,484 | $72,942 | $545,396 | $124,554 | | Travel | $48,925 | $13,111 | $58,755 | $287,622 | - Professional fees increased significantly in Q2 2021 due to a comprehensive governance review ($300,000 expense)[70] - Data costs increased due to purchasing more data for selling efforts and targeted messaging[72] - Travel expense is expected to increase significantly in Q3 due to relaxed restrictions and pent-up demand[69] Net Income (Loss) OptimizeRx reported $0.4 million net income for Q2 2021, a significant improvement, and a reduced net loss for H1 2021 Net Income (Loss) Performance | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income (Loss) | $352,100 | $(1,077,468) | $(285,277) | $(3,281,399) | Liquidity and Capital Resources OptimizeRx demonstrated strong liquidity as of June 30, 2021, with $98.3 million working capital and a 15.7:1 current ratio Liquidity Metrics | Metric | June 30, 2021 | December 31, 2020 | | :------------------ | :---------------- | :------------------ | | Total Current Assets | $105.0 million | $32.9 million | | Total Current Liabilities | $6.7 million | $10.0 million | | Working Capital | $98.3 million | $22.9 million | | Current Ratio | 15.7:1 | 3:1 | - Operating activities provided $1.9 million in cash flow for the six months ended June 30, 2021, compared to $3.6 million cash used in the prior year[79] - Financing activities provided $71.8 million in cash for the six months ended June 30, 2021, primarily from a $70.7 million public offering and $2.7 million from stock option exercises[81] - No remaining earnout payments are due from previous acquisitions[81] - The company does not anticipate needing to raise additional capital for operating or growth purposes but may do so for strategic opportunities like acquisitions[82] Critical Accounting Policies Critical accounting policies involve significant management judgment and estimates, including revenue recognition and stock-based compensation - Critical accounting policies include revenue recognition, revenue share expense, stock-based compensation, intangible asset capitalization and amortization, asset impairment, and fair value of liabilities[83] Recently Issued Accounting Pronouncements The company adopted ASU No. 2019-12 (Income Taxes) on January 1, 2021, with no material impact - Adoption of ASU No. 2019-12 (Income Taxes) on January 1, 2021, had no material effect on financial position, results of operations, or cash flows[84] Off Balance Sheet Arrangements As of June 30, 2021, OptimizeRx Corporation had no off-balance sheet arrangements - No off-balance sheet arrangements as of June 30, 2021[85] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide disclosures about market risk for this reporting period - The company is not required to provide market risk disclosures[86] Item 4. Controls and Procedures Management concluded that disclosure controls were effective as of June 30, 2021, with routine improvements Disclosure Controls and Procedures The CEO and CFO concluded that disclosure controls were effective as of June 30, 2021 - Disclosure controls and procedures were effective as of June 30, 2021[88] Changes in Internal Control over Financial Reporting Routine improvements were made to internal controls and a finance team member hired in Q2 2021 - Routine improvements made to internal controls and an additional finance team member hired in Q2 2021; no material changes[89] Limitations on the Effectiveness of Controls Control systems provide only reasonable assurance against error and fraud - Control systems provide only reasonable assurance and cannot prevent all error and fraud due to inherent limitations and resource constraints[90] PART II – OTHER INFORMATION This section covers other required disclosures, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings The company is not a party to any material pending legal proceedings - The company is not a party to any material pending legal proceedings[92] Item 1A: Risk Factors For a discussion of risk factors, the company refers to its Annual Report on Form 10-K for 2020 - Refer to the Annual Report on Form 10-K for 2020 for risk factors[93] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2021, the company issued restricted common stock to directors and shares from stock option exercises - Issued 2,035 shares of restricted common stock to independent directors in Q2 2021[94] - Issued 232,806 shares from stock option exercises in Q2 2021[95] - Issued 123,178 shares from stock option exercises in July 2021[96] - Securities issued under Section 4(2) of the Securities Act and/or Rule 506[96] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities[98] Item 4. Mine Safety Disclosure This item is not applicable to the company - Not applicable[98] Item 5. Other Information The company reported no other information for this item - No other information to report[98] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications and XBRL documents - Includes certifications from CEO and CFO (31.1, 31.2, 32.1) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[98] SIGNATURES The report is signed by William J. Febbo (CEO) and Douglas P. Baker (CFO) on August 4, 2021 - Report signed by William J. Febbo (CEO) and Douglas P. Baker (CFO) on August 4, 2021[101]