UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
| [X] | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended June 30, 2013 | |
| [ ] | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the transition period from __________ to __________ | |
| Commission File Number: 000-53605 |
OptimizeRx Corporation
(Exact name of registrant as specified in its charter)
| Nevada | 26-1265381 |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
407 6th Street Rochester, MI, 48307 | |
| (Address of principal executive offices) | |
| 248-651-6568 |
| (Registrant's telephone number) |
_______________________________________________________________ |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| [ ] Large accelerated filer Accelerated filer | [ ] Non-accelerated filer |
| [X] Smaller reporting company |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 14,252,496 common shares as of June 30, 2013.
| TABLE OF CONTENTS | ||
| Page | ||
PART I – FINANCIAL INFORMATION
| ||
| Item 1: | Financial Statements | 3 |
| Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4 |
| Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 6 |
| Item 4: | Controls and Procedures | 7 |
PART II – OTHER INFORMATION
| ||
| Item 1: | Legal Proceedings | 8 |
| Item 1A: | Risk Factors | 8 |
| Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 8 |
| Item 3: | Defaults Upon Senior Securities | 8 |
| Item 4: | Mine Safety Disclosure | 8 |
| Item 5: | Other Information | 8 |
| Item 6: | Exhibits | 9 |
| 2 |
PART I - FINANCIAL INFORMATION
Our consolidated financial statements included in this Form 10-Q are as follows:
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2013 are not necessarily indicative of the results that can be expected for the full year.
| 3 |
OPTIMIZERx CORPORATION
BALANCE SHEETS (UNAUDITED)
AS OF JUNE 30, 2013 AND DECEMBER 31, 2012
| June 30, | December 31, | |||||||
| 2013 | 2012 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 352,432 | $ | 284,263 | ||||
| Accounts receivable | 939,685 | 616,798 | ||||||
| Prepaid expenses | 55,719 | 68,158 | ||||||
| Total Current Assets | 1,347,836 | 969,219 | ||||||
| Property and equipment, net | 17,871 | 20,685 | ||||||
| Other Assets | ||||||||
| Patent rights, net | 803,136 | 793,236 | ||||||
| Web development costs, net | 322,070 | 387,215 | ||||||
| Security deposit | 5,049 | 5,049 | ||||||
| Total Other Assets | 1,130,255 | 1,185,500 | ||||||
| TOTAL ASSETS | $ | 2,495,962 | $ | 2,175,404 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable - trade | $ | 12,150 | $ | 54,693 | ||||
| Accounts payable - related party | 570,000 | 570,000 | ||||||
| Accrued expenses | 87,500 | 6,000 | ||||||
| Deferred revenue | 42,620 | 49,252 | ||||||
| Total Liabilities | 712,270 | 679,945 | ||||||
| Stockholders' Equity | ||||||||
| Common stock, $.001 par value, 500,000,000 shares authorized, 14,252,496 and 14,232,496 shares issued and outstanding | 14,252 | 14,232 | ||||||
| Preferred stock, $.001 par value, 10,000,000 shares authorized, 65 shares issued and outstanding | -0- | -0- | ||||||
| Stock warrants | 20,058,051 | 20,058,051 | ||||||
| Additional paid-in-capital | 6,203,546 | 6,164,666 | ||||||
| Accumulated deficit | (24,492,157 | ) | (24,741,490 | ) | ||||
| Total Stockholders' Equity | 1,783,692 | 1,495,459 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,495,962 | $ | 2,175,404 | ||||
The accompanying notes are an integral part of these financial statements.
| F-1 |
OPTIMIZERx CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
| For the | For the | For the | For the | |||||||||||||
| three months | three months | six months | six months | |||||||||||||
| ended | ended | ended | ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| REVENUE | ||||||||||||||||
| Sales | $ | 1,104,087 | $ | 515,423 | $ | 1,773,377 | $ | 844,826 | ||||||||
| TOTAL REVENUE | 1,104,087 | 515,423 | 1,773,377 | 844,826 | ||||||||||||
| EXPENSES | ||||||||||||||||
| Operating expenses (See note 17) | 749,966 | 591,628 | 1,524,138 | 1,221,952 | ||||||||||||
| TOTAL EXPENSES | 749,966 | 591,628 | 1,524,138 | 1,221,952 | ||||||||||||
| OPERATING INCOME (LOSS) | 354,121 | (76,205 | ) | 249,239 | (377,126 | ) | ||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest income | 38 | 146 | 94 | 331 | ||||||||||||
| TOTAL OTHER INCOME (EXPENSE) | 38 | 146 | 94 | 331 | ||||||||||||
| INCOME (LOSS) BEFORE PROVISION | ||||||||||||||||
| FOR INCOME TAXES | 354,159 | (76,059 | ) | 249,333 | (376,795 | ) | ||||||||||
| PROVISION FOR INCOME TAXES | -0- | -0- | -0- | -0- | ||||||||||||
| NET INCOME (LOSS) | $ | 354,159 | $ | (76,059 | ) | $ | 249,333 | $ | (376,795 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES | ||||||||||||||||
| OUTSTANDING: BASIC | 14,238,870 | 14,192,496 | 14,235,700 | 14,192,496 | ||||||||||||
| NET INCOME (LOSS) PER SHARE: BASIC | $ | 0.02 | $ | (0.01 | ) | $ | 0.02 | $ | (0.03 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES | ||||||||||||||||
| OUTSTANDING: DILUTED | 33,608,304 | 14,192,496 | 33,608,304 | 14,192,496 | ||||||||||||
| NET INCOME (LOSS) PER SHARE: DILUTED | $ | 0.01 | $ | (0.01 | ) | $ | 0.01 | $ | (0.03 | ) | ||||||
The accompanying notes are an integral part of these financial statements.
| F-2 |
OPTIMIZERx CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
| For the six | For the six | |||||||
| months ended | months ended | |||||||
| June 30, | June 30, | |||||||
| 2013 | 2012 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) for the period | $ | 249,333 | $ | (376,795 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 96,337 | 93,352 | ||||||
| Stock issued for services | 38,900 | -0- | ||||||
| Stock-based compensation | -0- | 178,304 | ||||||
| Changes in: | ||||||||
| Accounts receivable | (322,887 | ) | (54,177 | ) | ||||
| Prepaid expenses | 12,439 | 62,347 | ||||||
| Accounts payable | (42,543 | ) | (158,502 | ) | ||||
| Accrued expenses | 81,500 | (66,700 | ) | |||||
| Deferred revenue | (6,632 | ) | (53,529 | ) | ||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 106,447 | (375,700 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | 0 | (2,230 | ) | |||||
| Patent rights | (38,278 | ) | -0- | |||||
| Website site development costs | -0- | (53,725 | ) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | (38,278 | ) | (55,955 | ) | ||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 68,169 | (431,655 | ) | |||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 284,263 | 959,166 | ||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 352,432 | $ | 527,511 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | -0- | $ | -0- | ||||
| Cash paid for income taxes | $ | -0- | $ | -0- | ||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the year ended December 31, 2012. In the opinion of management, all adjustments necessary for the financial statements to be not misleading for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a December 31 fiscal year end.
Principles of Consolidation
The financial statements reflect the consolidated results of OptimizeRx Corporation (a Nevada corporation) and its wholly owned subsidiary OptimizeRx Corporation (a Michigan corporation). All material inter-company transactions have been eliminated in the consolidation.
| F-4 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents
For purposes of the accompanying financial statements, the Company considers all highly liquid instruments with an initial maturity of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The fair value of cash, accounts receivable, 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.
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 for the six months ended June 30, 2013 and 2012, respectively. The allowance for doubtful accounts was $0 as of June 30, 2013 and December 31, 2012, respectively.
Property and Equipment
The capital assets are being depreciated over their estimated useful lives, three to seven years using the straight-line method of depreciation for book purposes.
Revenue Recognition
All revenue is recognized when it is earned. Revenues are generated either through the Company’s website activities, in which we earn revenue from advertising and lead generation activities, or from our SampleMD activities, which include offering setup within the systems and our offers, coupons, and vouchers that enable our customers to save money on medical products and services. The Company’s processes are monitored by third parties who collect revenues from clients on a per activity basis and report and forward the revenue to the Company’s account.
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.
| F-5 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Concentration of Credit Risks
The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences financial difficulties.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the depreciable lives of such assets and the allowance for doubtful accounts receivable. Actual results could differ from these estimates.
Earnings Per Common and Common Equivalent Share
The computation of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus common stock equivalents which would arise from the exercise of warrants outstanding using the treasury stock method and the average market price per share during the year. Options, warrants and convertible preferred stock which are common stock equivalents are not included in the diluted earnings per share calculation for June 30, 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.
| F-6 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 3 – PREPAID EXPENSES
Prepaid expenses consisted of the following as of June 30, 2013 and December 31, 2012:
| 2013 | 2012 | |||||||
| Insurance | $ | 6,584 | $ | 6,437 | ||||
| Rent | 5,049 | 5,049 | ||||||
| Consulting | 44,086 | 31,672 | ||||||
| Legal | 0 | 25,000 | ||||||
| Total prepaid expenses | $ | 55,719 | $ | 68,158 | ||||
NOTE 4 – PROPERTY AND EQUIPMENT
The Company owned equipment recorded at cost which consisted of the following as of June 30, 2013 and December 31, 2012:
| 2013 | 2012 | |||||||
| Computer equipment | $ | 22,360 | $ | 22,360 | ||||
| Furniture and fixtures | 11,088 | 11,088 | ||||||
| Subtotal | 33,448 | 33,448 | ||||||
| Accumulated depreciation | (15,577 | ) | (12,763 | ) | ||||
| Property and equipment, net | $ | 17,871 | $ | 20,685 | ||||
Depreciation expense was $1,407 and $1,412 for the three months ended June 30, 2013 and 2012, respectively. Depreciation expense was $2,814 and $2,712 for the six months ended June 30, 2013 and 2012, respectively.
NOTE 5 – WEB DEVELOPMENT COSTS
The Company has capitalized costs in developing their website and web-based products, which consisted of the following as of June 30, 2013 and December 31, 2012:
| 2013 | 2012 | |||||||
| OptimizeRx web development | $ | 154,133 | $ | 154,133 | ||||
| SampleMD web development | 602,517 | 602,517 | ||||||
| Subtotal, web development costs | 756,650 | 756,650 | ||||||
| Accumulated amortization | (375,497 | ) | (310,352 | ) | ||||
| Impairment | (59,083 | ) | (59,083 | ) | ||||
| Web development costs, net | $ | 322,070 | $ | 387,215 | ||||
Amortization is recorded using the straight-line method over a period of five years. The Company determined that the original OptimizeRx website was no longer useful so the remaining unamortized balance of $59,083 was impaired as of December 31, 2010. Amortization expense for the web development costs was $32,572 and $32,241 for the three months ended June 30, 2013 and 2012, respectively. Amortization expense for the web development costs was $65,145 and $63,288 for the six months ended June 30, 2013 and 2012, respectively.
| F-7 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 6 – PATENT RIGHTS AND INTANGIBLE ASSETS
On April 26, 2010, the Company acquired from an officer and shareholder the technical contributions and assignment of all exclusive rights to and for the SampleMD patent currently in process in exchange for 300,000 shares of common stock to be granted at the discretion of the seller in addition to 200,000 stock options valued at $360,000. The shares were valued on the grant date at $570,000 and have been recorded as a payable to the related party.
The Company has capitalized costs in purchasing the SampleMD patent, which consisted of the following as of June 30, 2013 and December 31, 2012:
| 2013 | 2012 | |||||||
| Patent rights and intangible assets | $ | 968,278 | $ | 930,000 | ||||
| Accumulated amortization | (165,142 | ) | (136,764 | ) | ||||
| Patent rights and intangible assets, net | $ | 803,136 | $ | 793,236 | ||||
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 $14,246 and $13,676 for the three months ended June 30, 2013 and 2012, respectively. Amortization expense was $28,378 and $27,352 for the six months ended June 30, 2013 and 2012, respectively.
NOTE 7 – ACCRUED EXPENSES
On January 14, 2013, the Company hired a new CEO. The employment agreement requires annual compensation of $175,000 that will be accrued and deferred until at least January 1, 2014. Additionally, the agreement requires the issuance of 2,000,000 options with an exercise price of $1.00 for a term of five years. The options are not exercisable until at least January 1, 2014. The Company has accrued $87,500, or six months compensation, at June 30, 2013.
Accrued expenses consisted of the following as of June 30, 2013 and December 31, 2012:
| 2013 | 2012 | |||||||
| Accrued compensation | $ | 87,500 | $ | 0 | ||||
| Accrued audit fees | 0 | 6,000 | ||||||
| Total accrued expenses | $ | 87,500 | $ | 6,000 | ||||
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 $42,620 and $49,252 as of June 30, 2013 and December 31, 2012, respectively.
| F-8 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
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 June 30, 2013.
There were 14,252,496 and 14,232,496 common shares issued and outstanding at June 30, 2013 and December 31, 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 price as of the date of the contract, which was $1.945/share and has been expensed.
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.
| F-9 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 11 – PREFERRED STOCK (CONTINUED)
Series A Preferred Continued
The holder may cause this conversion at the time the shares are eligible for resale by the holder. The conversion price is subject to adjustment as hereinafter provided, at any time, or from time to time upon the terms and in the manner hereinafter set forth in the shareholder agreement. 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 $175,000 that were due in February 2013 for a total undeclared amount of $525,000 as of June 30, 2013.
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.
| F-10 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 11 – PREFERRED STOCK (CONTINUED)
Series B Preferred Continued
The holder may cause this conversion at the time the shares are eligible for resale by the holder. The conversion price is subject to adjustment as hereinafter provided, at any time, or from time to time upon the terms and in the manner hereinafter set forth in the shareholder agreement. On March 25, 2011, the Company’s Board declared and issued 75,758 common shares for its semi-annual dividend payment. 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 $75,000 that were due in February 2013 for a total undeclared amount of $225,000 as of June 30, 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.
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 during the year ended December 31, 2011 and $9,633 during the six months ended June 30, 2012. The remaining balance was recognized during the remainder of 2012.
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 $8,346 during the year ended December 31, 2011 and $50,078 during the six months ended June 30, 2012. The remaining balance was recognized during the remainder of 2012.
| F-11 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 12 – STOCK OPTIONS AND WARRANTS (CONTINUED)
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 $8,335 during the three months ended December 31, 2012 and $20,004 during the six months ended June 30, 2013. The remaining balance will be recognized over the remainder of 2013.
The Company had the following options outstanding as of June 30, 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 | 0 | 0 |
| Exercised - 2013 | 0 | 0 |
| Expired - 2013 | 0 | 0 |
| Balance, June 30, 2013 | 25,000 | $ 1.58 |
The Company had the following warrants outstanding as of June 30, 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 | 0 | 0 | ||||||
| Balance, June 30, 2013 | 14,344,434 | $ | 2.41 | |||||
| F-12 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
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, 2013 | $ | 60,591 | |||
| 2014 | 55,542 | ||||
| 2015 | 0 | ||||
| Total lease commitment | $ | 116,133 |
NOTE 14 – MAJOR CUSTOMERS
The Company had two major customers that accounted for 63% and two major customers that accounted for 53% of the Company’s revenues for the six months ended June 30, 2013 and 2012, respectively. The Company expects to continue to maintain these relationships with the customers.
NOTE 15 – INCOME TAXES
For the six months ended June 30, 2013, the Company incurred net income of approximately $249,000 but has no tax liability. The Company began operations in 2007 and has previous net operating loss carry-forwards of $13,843,000 through December 31, 2012. The cumulative loss of $13,594,000 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 six months ended June 30, 2013 and 2012:
| 2013 | 2012 | |||||||
| Federal income tax benefit attributable to: | ||||||||
| Current operations | $ | (84,000 | ) | $ | 102,000 | |||
| Valuation allowance | 84,000 | (102,000 | ) | |||||
| Net provision for federal income tax | $ | 0 | $ | 0 | ||||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of June 30, 2013 and December 31, 2012:
| 2013 | 2012 | |||||||
| Deferred tax asset attributable to: | ||||||||
| Net operating loss carryover | $ | 4,622,000 | $ | 4,706,000 | ||||
| Valuation allowance | (4,622,000 | ) | (4,706,000 | ) | ||||
| 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 $13,594,000 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.
| F-13 |
OPTIMIZERx CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2013
NOTE 16 – CONTINGENT LIABILITY
On January 14, 2013, the Company hired a new CEO. The employment agreement requires annual compensation of $175,000 that will be accrued and deferred until at least January 1, 2014. Additionally, the agreement requires the issuance of 2,000,000 options with an exercise price of $1.00 for a term of five years. The options are not exercisable until at least January 1, 2014, and are only exercisable after reaching certain financial terms and conditions. Due to these restrictions, no accrual has been made for the issuance of these options.
NOTE 17 – OPERATING EXPENSES
Operating expenses consisted of the following for the three months and six months ended June 30, 2013 and 2012, respectively:
| Three months ended June 30 |
Six months ended June 30 | |||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||
| Advertising | $ | 3,825 | $ | 32,651 | $ | 7,165 | $ | 43,921 | ||||
| Professional fees | 79,190 | 34,632 | 132,288 | 72,635 | ||||||||
| Consulting | 19,722 | 1,220 | 40,129 | 7,835 | ||||||||
| Salaries, wages and benefits | 320,188 | 294,570 | 695,259 | 601,465 | ||||||||
| Rent | 15,148 | 15,148 | 30,296 | 32,066 | ||||||||
| Depreciation and amortization | 48,226 | 47,329 | 96,337 | 93,352 | ||||||||
| Stock-based compensation | 10,002 | 100,835 | 20,004 | 228,383 | ||||||||
| Revenue share expense | 197,200 | 8,135 | 237,403 | 8,135 | ||||||||
| General and administrative | 56,465 | 57,110 | 265,257 | 134,160 | ||||||||
| Total Operating Expenses | $ | 749,966 | $ | 591,630 | $ | 1,524,138 | $ | 1,221,952 | ||||
NOTE 18 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to June 30, 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.
| F-14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
We finished the second quarter of 2013 with revenue of $1,104,087, bringing revenue for the first six months of 2013 to $1,773,377. We achieved net income during the second quarter of $354,159. During the same period in 2012, revenue was $591,628 while the company had an operating loss of $76,059.
The record revenues were driven primarily by our SampleMD solution, which generated approximately 265,628 new ePrescriptions with co-pay coupons or free sample vouchers during the second quarter of 2013, helping patients more affordably start and stay on their prescribed medications. That is a substantial increase from the 177,000 distributions in the first quarter of 2013 and even more substantial from the 49,400 distributions in the second quarter of 2012.
We continue to drive our two primary messages to the pharmaceutical industry:
1) 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
2) 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.
On the distribution front, during the second quarter of 2013, we completed the integration of our SampleMD platform into HealthTronics, the largest Urology EMR in the country, which serves over 2,200 doctors. This specialty network is very significant to some of our current brand coupons and is a very attractive distribution network for other new brands and manufacturers of urology-specific drugs.
| 4 |
Also during the second quarter of 2013, we continued to implement our partnership with PDR, also known as Physicians Desk Reference. This allows both companies to leverage synergistic strengths to offer more solutions and reach to the pharmaceutical industry, as well as more value to the electronic health records (EMR/EHR) platforms. SampleMD will be PDR’s eCoupon and Rep invite platform, and PDR will enable expansion of SampleMD’s reach to additional EMRs and directly to physicians' offices via a PDR-branded downloadable desktop application of the SampleMD solution. We are currently in the process of finalizing several integrations through and with PDR, which we anticipate concluding by year-end.
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.
Results of Operations for the Three and Six Months Ended June 30, 2013 and 2012
Revenues
Our total revenue reported for the three months ended June 30, 2013 was $1,104,087, an increase of $515,423 from the three months ended June 30, 2012. Our total revenue reported for the six months ended June 30, 2013 was $1,773,377, an increase of $844,826 from the six months ended June 30, 2012.
Our increased revenue for the three and six months ended June 30, 2013 as compared with the same periods ended 2012 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.
Operating Expenses
Operating expenses increased to $749,966 for the three months ended June 30, 2013 from $591,628 for the three months ended June 30, 2012. Our major expenses for the three months ended June 20, 2013 were salaries, wages and benefits of $320,188, revenue share expenses of $197,200, professional fees of $79,190, depreciation and amortization of $48,226 and general and administrative expenses of $56,465. In comparison, our major expenses for the three months ended June 30, 2012 were sales, wages and benefits of $294,570, stock-based compensation of $100,835, depreciation and amortization of $47,329, professional fees of $34,632 and general and administrative expenses of $57,110.
Operating expenses increased to $1,524,138 for the six months ended June 30, 2013 from $1,221,952 for the six months ended June 30, 2012. Our major expenses for the six months ended June 20, 2013 were salaries, wages and benefits of $695,259, revenue share expenses of $237,403, professional fees of $132,288, depreciation and amortization of $96,337 and general and administrative expenses of $265,257. In comparison, our major expenses for the six months ended June 30, 2012 were sales, wages and benefits of $601,465, stock-based non cash compensation of $228,383, depreciation and amortization of $93,352, professional fees of $72,635 and general and administrative expenses of $134,160.
We expect our operating expenses to continue to increase as we further implement our business plan and expand our operations.
| 5 |
Net Income
Net income for the three months ended June 30, 2013 was $354,159, compared to a net loss of $76,059 for the three months ended June 30, 2012. Net income for the six months ended June 30, 2013 was $249,333, compared to net loss of $376,795 for the six months ended June 30, 2012.
Liquidity and Capital Resources
As of June 30, 2013, we had total current assets of $1,347,836 and total assets in the amount of $2,495,962. Our total current liabilities as of June 30, 2013 were $712,270. We had working capital of $635,566 as of June 30, 2013.
Operating activities provided $106,447 in cash for the six months ended June 30, 2013. Our positive operating cash flow was largely a result of our net income of $249,333, $96,337 in depreciation and amortization, $87,500 in stock based compensation and $38,900 in stock issued for services, offset by accounts receivable of $322,887 and accounts payable of $42,543.
Investing activities used $38,278 during the six months ended June 30, 2013 entirely as a result of patent rights.
We had no financing activities during the six months ended June 30, 2013.
As of June 30, 2013, with the current level of financing and cash on hand, we have sufficient cash to operate our business at the current level for the next twelve months but insufficient cash to achieve our business goals unless we: a) realize cash revenues on sales generated; and/or b) receive financing. We are uncertain what type of financing, if any, we will need as we continue to ramp up our revenue stream.
Off Balance Sheet Arrangements
As of June 30, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
| 6 |
Item 4. Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2013. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Shad Stastney,and our Chief Financial Officer, Mr. David Lester. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2013, our disclosure controls and procedures are effective. There have been no significant changes in our internal controls over financial reporting during the quarter ended June 30, 2013 that have materially affected or are reasonably likely to materially affect such controls.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Limitations on the Effectiveness of Internal Controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
| 7 |
PART II – OTHER INFORMATION
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 November 5, 2012, LDM Group, LLC commenced an action against us in the United States District Court for the Eastern District of Missouri, Eastern Division. The complaint alleges that we infringed on a patent issued on February 21, 2012 in favor of LDM. LDM alleges 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, our 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 we breached the Settlement and Patent License Agreement. We intend to vigorously enforce the Settlement and Patent License Agreement and defend the action brought by LDM.
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 June 30, 2013, no further action has occurred in that case.
A smaller reporting company is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On June 1, 2013, we issued 20,000 shares pursuant to the terms of a consulting agreement with North Coast Advisors, Inc.
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.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosure
N/A
None
| 8 |
| Exhibit Number | Description of Exhibit |
| 31.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 formatted in Extensible Business Reporting Language (XBRL). |
**Provided herewith
| 9 |
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| OptimizeRx Corporation | |
| Date: | August 12, 2013 |
By: /s/ Shad Stastney Shad Stastney Title: Chief Executive Officer, Principal Executive Officer, and Director |
| 10 |