OptimizeRx Corp - Annual Report: 2008 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
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[X]
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31,
2008
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| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT | |
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For
the transition period from _________ to ________
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Commission
file number: 000-53605
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OptimizeRx Corporation
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(Exact
name of registrant as specified in its charter)
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Nevada
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26-1265381
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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407 Sixth Street, Rochester,
MI
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48307
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number: 248.651.6558
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Securities
registered under Section 12(b) of the Exchange Act:
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Title
of each class
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Name
of each exchange on which registered
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None
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Not Applicable
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Securities
registered under Section 12(g) of the Exchange Act:
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Title
of each class
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Common Stock, par value
$0.001
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Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act. Yes [ ] No
[X]
Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes
[ ] No
[X]
Check whether the
Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No
[ ]
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(§ 229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. 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. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
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 aggregate
market value of the voting and non-voting common equity held by non-affiliates
computed by reference to the price at which the common equity was last sold, or
the average bid and asked price of such common equity, as of the last business
day of the registrant’s most recently completed second fiscal quarter. $32,439,763
Indicate the number
of shares outstanding of each of the registrant’s classes of common stock, as of
the latest practicable date. 12,262,958 as of December 31,
2008.
TABLE OF
CONTENTS
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Page
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PART I
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PART II
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PART III
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PART
IV
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| Item 15. | Exhibits, Financial Statement Schedules | |
PART I
Item 1. Business
Company
Overview
We
conduct all of our operations through our wholly-owned subsidiary, OptimizeRx
Michigan. We are a development-stage company that has developed a website,
www.optimizerx.com (our “Site”), to help medical patients better afford and
manage their rising healthcare costs. In addition, we provide unique
advertising programs to the pharmaceutical and healthcare
industries.
We
recognize that patients have increasing influence in their healthcare decisions,
particularly in their medications: what to buy, where to buy, and how to buy.
However, there is very little information available to consumers regarding how
to access available savings and support programs. We developed our Site to
enable consumers to meet their prescribed pharmacological therapies in the most
cost-effective manner possible. Our Site is a portal that identifies programs
and savings that are available to consumers, based upon their needs. By creating
a portal by which consumers access savings on their pharmaceutical needs, we
have also created a Site where pharmaceutical companies can reach consumers with
their advertising and other programs.
Principal
Products and Applications
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o
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OPTIMIZERx.com
– Our Site is a portal to healthcare savings for patients to centrally
review and participate in prescription and healthcare savings and support
programs. 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.
By
providing information as well as significant savings opportunities to
users of our Site, we hope to become the default medical website for both
patients and the pharmaceutical industry. We feel that the aging of the
baby boom generation, combined with the preponderance of internet usage to
access information and savings in all areas, has created a large potential
market for our Site. The Site is also the launching point for our other
products, OFFERx and ADHERxE.
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o
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OFFERx
– We have entered into an exclusive relationship with Cegedim Dendrite’s
OPUS Health division (“OPUS”). OPUS specializes in developing
pharmaceutical sales and marketing programs, having pioneered the use of
pharmacy loyalty cards. They also have the largest pharmacy network in the
industry, having contracted with over 61,000 pharmacies. Through our
relationship with OPUS, we gain access to and have the opportunity to
offer programs for the pharmacies in OPUS’s network. OPUS, in turn,
manages the loyalty cards generated through the program, building their
patient database as well.
Our
turn-key online platform, OFFERx, allows manufactures to create, promote,
and fulfill new medication offering programs directly in all of the
pharmacies that participate in our system, which now includes the over
61,000 pharmacies in OPUS’s network. Through our simple online interface,
pharmaceutical manufacturers can offer coupons, discounts, and free trials
directly to patients on our Site. This gives a significant level of
control to manufacturers regarding the timing and level of their
discounts. It also allows unprecedented flexibility in responding to
market conditions as manufacturers will no longer need to allow for the
long lead times necessary to prepare, print, and distribute the materials
traditional required for such
programs.
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o
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ADHERxE
– We have entered into an exclusive relationship with S&H Digital
(“S&H”), the Interactive division of Suddler and Hennessey of WPP
healthcare communications agency. S&H has experience in web
development, search engine marketing, database marketing, reporting, and
analytics, specializing in pharmaceutical marketing. Through our
agreement, S&H is responsible for the creating content and managing
ADHERxE.
AHERxE
is our turn-key online platform that allows manufacturers to engage and
monitor patients each month in exchange for activation of their monthly
co-pay coupons. Pharmaceutical companies that wish to monitor the usage
and effectiveness of their products through online surveys are able to
provide incentives for patients to participate in the surveys by providing
discounts through online coupons available on our Site. Patients complete
an initial survey to determine their treatment status. Each month, when
patients respond to reminder emails and complete the manufacturer’s
ongoing survey, they receive a coupon for discounts on their medications
copays. This helps patients afford their medications and provides a way
for pharmaceutical companies to track patient usage and results of
treatment programs.
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Marketing
and Sales
With our
marketing partners, including our New York advertising and PR agencies, we
intend to promote OPTIMIZERx primarily through the following:
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·
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Internet
Marketing
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·
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Public
Relations Campaigns
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·
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Physician
Offices
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·
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Direct
to Consumer Marketing
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Newspaper
and Advertising
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Cable
TV
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Pharmacy
Partners
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·
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Fortune
500 Employers- Benefits Departments
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·
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Unions
and Other Church and Civic
organizations
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For
distribution and sales purposes, we rely on internal and independent sales
representatives. Additionally, the Company has entered into
co-promotional agreements with both OPUS and S&H as detailed
above.
Research
and Development
All of
our officers and directors are part of our continual research development team
and monitor 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 we serve.
We are
currently in launch phase with ADHERxE to allow pharmaceutical and healthcare
manufacturers unique way to engage and monitor patients each month in exchange
for activation of their next savings offer.
We seek
to educate our team 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.
Like any
company, we are seeking new services and solutions to offer. However,
we feel that our three current platforms will provide robust opportunities and
growth during the next five years.
Competition
We will
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 who provide online advertising competition to
OPTIMIZERx.com, including Quality Health, WebMD, McKesson, and
Drugs.com.
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Quality
Health – Quality Health hosts an interactive website that allows users to
research information regarding medical conditions, medications, and
treatments. Visitors to their website can also search for doctors or
health centers in their area, both generally and specific to their
condition.
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·
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WebMD
– WebMD provides in-depth reference material regarding medical conditions
and medicines to users. Individuals can search for a diagnosis via
symptoms or research details regarding their previously diagnosed medical
conditions. Online support forums are also hosted for patients with
particularly challenging
conditions.
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·
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McKesson
– McKesson Corporation has been providing health care services in the
United States for over 175 years. They act as a distributor for
pharmaceutical companies to a network of pharmacies, and have developed
online solutions for customers, third-party payors, and manufacturers.
McKesson has significantly greater financial resources and brand
recognition than we do.
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Drugs.com
– Drugs.com provides free, accurate, and independent advice on more than
24,000 prescription drugs, over-the-counter medicines, and natural
products. Their data sources include Micromedex™, Cerner Multum™, Wolters
Kluwer™, and others. Users can search by condition or
medication.
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Companies
who provide similar offer redemption services through a network of pharmacies,
such as McKesson, could seek to disrupt our exclusive partnership with OPUS.
However, each of our competitors could also be a partner in co-promotion of
exclusive offer and adherence campaigns we create on behalf of the client
through OFFERx and ADHERxE.
Our
competitors who have not done so already may be able to enter into the field by
developing a website to promote health care offers. However, most may be limited
in their ability to create, promote and manage new and exclusive prescription
trials or offers. Additionally, with ADHERxE and the ability to create multiple
offers activated each month for returning patients who sign up, we believe that
we are uniquely positioned with significant barriers to entry for potential
competitors in this area.
Intellectual
Property
All key
aspects of our promotional and offer development platforms are pending patent
review. However, business is not predicated on being awarded patent
exclusiveness. Rather, patent protection represents a huge asset and further
opportunity upon its receipt.
OPTIMIZERx
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.
The
following table summarizes the status of our patents and patent applications as
of the date hereof:
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App
Number/ Filing
Date
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Brief
Summary
(Products
Covered)
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Status
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S.N.
11/528,292
September
27, 2006
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System
for providing patient savings and promoting health care product
sales
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Patent
application
pending.
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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.
Corporate
History
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 October 22,
2007. On April 14, 2008, our company, known at the time as RFID Ltd.,
consummated entered 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 10,664,000 shares of common 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. As a result, the historical discussion and financial
statements included in this annual report are those of OptimizeRx
Corporation. On April 15, 2008, RFID Ltd’s corporate name was changed
to OptimizeRx Corporation. On September 4, 2008, we then completed a migratory
merger, thereby changing our state of incorporation from Colorado to Nevada,
resulting in the current corporate structure in which we, OptimizeRx
Corporation, a Nevada corporation is the parent corporation, and OptimizeRx
Corporation, a Michigan Corporation is our wholly-owned subsidiary.
Employees
As of
January 30, 2009, we had two full-time employees and four independent sales and
programming contractors who perform various services for us. We also
engage consultants for investor relations, accounting and legal
services.
Subsidiaries
We
conduct our operations through our wholly-owned subsidiary, OptimizeRx
Michigan.
Item 1A. Risk Factors
A smaller
reporting company is not required to provide the information required by this
Item.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
Currently,
we do not own any real estate. Our principal executive offices are located at
407 Sixth Street, Rochester, Michigan, 48307. We have entered into a
six-month lease for this 2,000 square foot facility, with a cost of
approximately $2,500 per month. We additionally have free offices within both
Cegedim Dendrite’s US Headquarters, as well as Sudler & Hennessey’s New York
City offices. We believe that our properties are adequate for our current and
immediately foreseeable operating needs. We do not have any policies regarding
investments in real estate, securities or other forms of
property.
Item 3. Legal Proceedings
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.
Item 4. Submission of Matters to a Vote of Security
Holders
No
matters were submitted to a vote of our shareholders during the fourth quarter
of our fiscal year ended December 31, 2008.
PART II
Item 5. Market for Registrant’s Common Equity
and Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market
Information
Our
common stock is currently quoted on the Pink Sheets, under the symbol
“OPRX.” We have requested that a market maker apply for quotation on the
OTC Bulletin Board. As of the date of this Annual Report, that
application is still pending.
The
following table sets forth the range of high and low bid quotations for our
common stock for each of the periods indicated as reported by the Pink Sheets.
These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual
transactions.
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Fiscal
Year Ending December 31, 2008
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Quarter
Ended
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High
$
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Low
$
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December
31, 2008
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4.30
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1.56
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September
30, 2008
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4.20
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3.90
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June
30, 2008
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15.00
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3.90
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March
31, 2008
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7.00
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4.00
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Fiscal
Year Ending December 31, 2007
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Quarter
Ended
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High
$
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Low
$
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December
31, 2007
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72.00
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3.00
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September
30, 2007
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490.00
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64.00
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June
30, 2007
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550.00
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360.00
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March
31, 2007
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590.00
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380.00
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On March
13, 2009, the last sales price per share of our common stock was
$4.30.
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
December 31, 2008, we had 12,262,958 shares of our common stock issued and
outstanding, held by 336 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:
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1.
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We
would not be able to pay our debts as they become due in the usual course
of business; or
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|
|
2.
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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 March
5, 2008, our Board of Directors adopted the 2008 Company Stock Option Plan. The
purpose of this plan is to provide incentives to attract, retain and motivate
eligible persons whose present and potential contributions are important to our
success, by offering them an opportunity to participate in the our future
performance through awards of options, the right to purchase common stock and
stock bonuses. We reserved 1,490,000 shares of our Common Stock for awards to be
made under the 2008 Plan. The 2008 Plan is administered by a committee of two or
more members of the Board of Directors or, if no committee is appointed, then by
the Board of Directors. The committee, or the Board of Directors if there is no
committee, determines who is eligible to receive awards under the plan, grant
awards and interpret the 2008 Plan.
We also
have warrants outstanding to purchase 7,059,500 shares of our common stock as of
December 31, 2008.
Equity
Compensation Plans as of December 31, 2008
|
A
|
B
|
C
|
|
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Plan
Category
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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
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-
|
-
|
-
|
|
Equity
compensation plans
not
approved by security
holders
|
7,424,500
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$1.89
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1,125,000
|
|
Total
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7,424,500
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$1.89
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1,125,000
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Recent
Sales of Unregistered Securities
On
October 22, 2007, Optimizer Systems, LLC converted to a C-corporation and was
renamed OptimizeRx Corporation. The total issued and outstanding at
the time of conversion for OptimizeRx Corporation was 10,000,000 shares of
common stock. Following the conversion, in 2007, OptimizeRx
Corporation issued 300,000 shares of its common stock at a price of $1.00 per
share for an aggregate purchase price of $300,000.
During
2008, OptimizeRx Corporation sold an aggregate of 364,000 shares of its common
stock in a private placement to multiple accredited investors at a price of
$1.00 per share for an aggregate purchase price of $364,000.
On April
14, 2008, as RFID, Ltd., we entered into a Share Exchange Agreement with
OptimizeRx Corporation, a Michigan corporation and the shareholders of
OptimizeRx Corporation, pursuant to which we acquired all of the outstanding
stock of OptimizeRx Corporation. As consideration for the acquisition
of OptimizeRx Corporation, we agreed to issue 10,664,000 shares of our common
stock to acquire 100% of issued and outstanding shares of OptimizeRx
Corporation.
Following
the Share Exchange Agreement, we sold an additional 272,000 shares of our common
stock in a private placement to multiple accredited investors at a price of
$1.00 per share for an aggregate purchase price of $272,000
On
September 8, 2008, we sold 35 shares Series A Preferred Stock for $3,500,000 to
an accredited investor in a private placement exempt from registration under
Rule 506 of Regulation D of the Securities Act. The Series A
Preferred Stock is convertible into an aggregate of 3,500,000 shares of our
common stock. Holders of the Series A Preferred Stock are entitled to
receive dividends at the rate per share of 10% per annum of the stated value,
payable semi-annually, either in cash or in shares of registered common stock,
at a ten percent (10%) discount to the market price. Purchasers of
the Series A Preferred Stock were also issued seven-year Series A warrants to
purchase 6,000,000 shares of our common stock at an exercise price of $2.00 per
share. We paid finders’ fees of $350,000 and issued to finders
seven-year warrants to purchase 600,000 shares of our common stock at the
exercise price of $2.00 per share and seven-year warrants to purchase 350,000
shares of our common stock at the exercise price of $1.00 per
share. The offerings and sales were made to a limited number of
persons, of who were accredited investors and transfer was restricted by
OptimizeRx in accordance with the requirement of the Securities Act of
1933.
In 2008,
we issued 70,000 shares of our common stock in exchange for services
rendered.
These
issuances were deemed to be exempt under rule 506 of Regulation D and Section
4(2) of the Securities Act of 1933, as amended, since, among other things, the
transactions did not involve a public offering, the investors were accredited
investors and / or qualified institutional buyers, the investors had access to
information about the Company and their investment, the investors took the
securities for investment and not resale, and the Company took appropriate
measures to restrict the transfer of the securities.
Item 6. Selected Financial Data
A smaller
reporting company is not required to provide the information required by this
Item.
Item 7. 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 are a
development-stage company located in Michigan. Since our formation, we have
concentrated on developing our business strategy and obtaining financing. We
plan to expand awareness, traffic and database to our patient savings portal
OPTIMIZERx.com, as well as the launch of our offer development systems OFFERx™
and ADHERxE. We expect that the primary components of our business
will be:
|
·
|
The
online patient savings portal OPTIMIZERx.com and our network
affiliates
|
|
·
|
OFFERx
to develop, promote and fulfill new offers from pharmaceutical and
healthcare manufactures
|
|
·
|
ADHERxE
to allow manufacturers to re-engage their customers through the activation
of new savings each month
|
As demand
increases for savings and support programs to help the growing number of
patients manage their rising healthcare costs, we plan to extend our reach and
visibility through increased online, print and broadcast marketing to increase
traffic and our database of qualified health care consumers.
In turn,
we will generate revenues through: (i) advertising sales from our online
OPTIMIZERx.com and affiliate network; (ii) its database; (iii) direct marketing
and sponsorships and (iv) our platforms to create, promote and manage new
savings offers for additional clients.
Subsequent
to the end of the reporting period, on February 9, 2009, we recorded our
300,000th new member since the beginning of 2009. We feel that the rapid growth
of our registered user database will increase our ability to negotiate with
pharmaceutical companies and generate advertising revenue. Also, subsequent to
the end of the reporting period, on February 13, 2009, we began airing
advertisements for OpimizeRx.com on AMC, Travel, MSNBC, Lifetime Movings, and
other channels. We anticipate that this national exposure will further increase
the growth of our database of registered users.
Results
of Operations for the Years Ended December 31, 2008 and 2007
Since
inception, OPTIMIZERx Corp. has generated minimal revenue from advertising and
use of its database. In the same period, OPTIMIZERx Corp has incurred
expenses related to funding the development of the business plan, new products
and platforms and raising capital.
Gross
Revenues
Our total
revenue reported for the year ended December 31, 2008 was
$83,686, a decrease from $100,318 for the year ended
December 31, 2007.
Operating
Expenses
Operating
expenses increased to $1,591,738 for the year ended December 31, 2008 from
$456,259 for the year ended December 31, 2007. Our operating expenses for the
year ended December 31, 2008 consisted mainly of advertising expenses of
$380,497, stock based compensation expenses of $333,004, consulting fees of
$322,625, salaries and wages of $151,593, commission expenses of $87,825,
website maintenance of $76,746, legal and accounting fees of $58,934, and travel
expenses of $54,929.
Other
Expenses
Other
expenses increased to $2,740,801 for the year ended December 31, 2008 from
$5,525 for the year ended December 31, 2007. The increase in other
expenses for the year ended December 31, 2008 from the prior year is primarily
attributable to an increase in warrant based compensation.
Net
Loss
Net loss
for the year ended December 31, 2008 was $4,248,853, compared to net loss of
$361,466 for the year ended December 31, 2007.
Liquidity
and Capital Resources
As of
December 31, 2008, we had total current assets of $2,507,294 and total assets in
the amount of $2,643,301. Our total current liabilities as of December 31, 2008
were $217,797. We had working capital of $2,289,497 as of December
31, 2008.
Operating
activities used $919,402 in cash for the year ended December 31, 2008. Our net
loss of $4,248,853 was the primary component of our negative operating cash
flow, offset mainly by $2,745,280 in stock warrants issued for services,
$333,004 in stock options issued for compensation, a $128,648 increase in
accounts payable, $70,000 in stock issued for services. Cash flows used by
investing activities during the year ended December 31, 2008 was $10,621 for the
acquisition of property and equipment. Cash flows provided by
financing activities during the year ended December 31, 2008 amounted to
$3,297,250 and consisted of $2,985,000 as proceeds from the issuances of
preferred stock, $636,000 as proceeds from the issuances of common stock,
$320,000 as proceeds from notes payable, offset by $643,750 incurred in the
repayment of notes payable to related parties.
In July
7, 2008, we entered into an investment placement agent
agreement with Midtown Partners & Co LLC to raise on a best
efforts basis an amount of up to USD $3 million. Prior to this
relationship our financing activities consisted of private investors and loans
to cover our operating expenses.
On Sept
8, 2008 we received gross proceeds of $3,500,000 (net $2,985,000) from
VICIS Capital for preferred equity share sales which was used towards our
working capital.
Our
monthly use of funds is for general operations, product development, sales and
marketing. Our operational overhead is generally minimized through our small
staff and use of independent contractors.
|
Estimated
Monthly Expenses:
|
Normal
Expected Range
|
|
Staff
salaries
|
$25,000
- 35,000
|
|
Independent
Sales Representatives
|
$10,000
- 15,000
|
|
IT
and Web/Product Development
|
$10,000
- 15,000
|
|
Rent
and other general expenses
|
$5,000
- 10,000
|
|
Travel
and other related expenses
|
$5,000
- 10,000
|
|
Other
expenses
|
$2,000
- 5,000
|
|
Marketing
& Advertising
|
(Variable:
See comments below)
|
Normal
Expected Monthly Cash Burn Rate: Approximately $57,000- 90,000 plus
marketing and advertising
The
biggest anticipated variance in expenses will relate to company’s
marketing/advertising expenses to both the pharmaceutical industry and direct to
consumers. Based on confirmation of successful online and traditional
advertising programs, we will aggressively ramp up these programs to increase
site traffic, membership database and revenue.
We have
invested during the first 4 months of 2009 approximately $250,000 in
online advertising that generated approximately 500,000+ enrollments into our
database which now exceeds 1 million members. Additionally, we have begun
testing a new 30 second national cable commercial to deliver approximately 70
million views/impressions at a cost of approximately $150,000 within the first
quarter of 2009 (for a preview, please go to
www.optimizerx.com/commercial/). Upon attaining specific advertisers,
we may also have additional advertising expenses to generate maximum advertising
revenue to the company. Management feels that our current cash
balance will allow us to meet the expenses required to support our growth plans
over the next twelve months.
Off
Balance Sheet Arrangements
As of
December 31, 2008, there were no off balance sheet arrangements.
Stock
Based Compensation
Effective
January 1, 2006, the Company adopted SFAS No. 123 (revised), "Share-Based
Payment" (SFAS 123(R)) utilizing the modified prospective approach. Prior to the
adoption of SFAS 123(R) we accounted for stock option grant in accordance with
APB Opinion No. 25, “Accounting for Stock Issued to Employees," and accordingly,
recognized compensation expense for stock option grants using the intrinsic
value method.
Under the
modified prospective approach, SFAS 123(R) applies to new awards and to awards
that were outstanding on January 1, 2006 that are subsequently modified,
repurchased or cancelled. Under the modified prospective approach,
compensation cost recognized in the first quarter of fiscal 2006 includes
compensation cost for all share-based payments granted prior to, but not yet
vested as of January 1, 2006, based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123, and compensation
cost for all share-based payments granted subsequent to January 1,
2006 based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123(R). For all quarters after the first quarter
of fiscal 2006, compensation costs recognized will include compensation costs
for all share-based payments granted based on the grant date fair value
estimated in accordance with the provisions of SFAS 123(R).
The fair
value of each option granted in 2008 is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 150%, risk-free
interest rate of 2.59% and expected life of 60 months.
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
A smaller
reporting company is not required to provide the information required by this
Item.
Item 8. Financial Statements and Supplementary
Data
See the
financial statements annexed to this annual report.
Item 9. Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure
No events
occurred requiring disclosure under Item 307 and 308 of Regulation S-K during
the fiscal year ending December 31, 2008.
Item 9A(T). Controls and Procedures
Evaluation
of Controls and Procedures
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This
rule defines internal control over financial reporting as a process designed by,
or under the supervision of, the Company’s Chief Executive Officer and Chief
Financial Officer, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. GAAP. Our internal control over financial
reporting includes those policies and procedures that:
|
§
|
Pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
|
§
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. GAAP, and that
receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company;
and
|
|
§
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. In addition, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
With the
participation of the Chief Executive Officer and the Chief Financial Officer,
our management conducted an evaluation of the effectiveness of our internal
control over financial reporting. Based on this evaluation, our
management has concluded that our internal control over financial reporting was
not effective as of December 31, 2008 as the result of a material
weakness. The material weakness results from significant
deficiencies in internal control that collectively constitute a material
weakness.
A
significant deficiency is a deficiency, or combination of deficiencies, in
internal control over financial reporting that is less severe than a material
weakness, yet important enough to merit attention by those responsible for
oversight of the registrant’s financial reporting. The Company
had the following significant deficiencies at December 31, 2008:
|
§
|
The
company currently only has one employee to oversee bank reconciliations,
posting payables, and so forth, so there are no checks and balances on
internal controls. Mr. David Lester recently assumed responsibilities for
the company as the sole officer. Prior officers of the company
have not implemented checks and balances on internal
controls.
|
Remediation of Material
Weakness
In the
first quarter 2009, the company engaged the accounting firm of Tama Budaj
& Raab P.C. to assist on the preparation of quarterly and annual
financials. The firm also plans to assist the company with quickbooks
assistance. The company plans to remedy internal control weaknesses during
2009.
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. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. 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 our 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.
Management’s
Annual Report on Internal Control over Financing Reporting
This
annual report does not include a report of management's assessment regarding
internal control over financial reporting or an attestation report of the
company's registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
Changes
in Internal Control over Financial Reporting
During
the most recently completed fiscal quarter, there has been no change in our
internal control over financial reporting that has materially affected or is
reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate
Governance
The
following information sets forth the names, ages, and positions of our current
directors and executive officers as of December 31, 2008.
|
Name
|
Age
|
Position(s)
and Office(s) Held
|
|
David
A. Harrell
|
42
|
Chief
Executive Officer, President and Director
|
|
Thomas
E. Majerowicz
|
57
|
Secretary
and Director
|
|
Terence
J. Hamilton
|
43
|
Director
|
Set forth
below is a brief description of the background and business experience of each
of our current executive officers and directors.
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.
Thomas
E. Majerowicz
Mr.
Majerowicz joined the Company as our Director in 2007. Mr. Majerowicz
has been a partner at the law firm of Puzzuoli, Hribar, Iafrate, Majerowicz
& Kohler since 1979.
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 five years, none of the
following occurred with respect to a
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.
Audit
Committee
We do not
have a separately-designated standing audit committee. The entire
board of directors performs the functions of an audit committee, but no written
charter governs the actions of the board of directors when performing the
functions of that would generally be performed by an audit committee. The board
of directors approves the selection of our independent accountants and meets and
interacts with the independent accountants to discuss issues related to
financial reporting. In addition, the board of directors reviews the scope and
results of the audit with the independent accountants, reviews with management
and the independent accountants our annual operating results, considers the
adequacy of our internal accounting procedures and considers other auditing and
accounting matters including fees to be paid to the independent auditor and the
performance of the independent auditor.
We do not
have an audit committee financial expert because of the size of our company and
our board of directors at this time. We believe that we do not
require an audit committee financial expert at this time because we retain
outside consultants who possess these attributes as
needed.
For the
fiscal year ending December 31, 2008, the board of directors:
|
1.
|
Reviewed
and discussed the audited financial statements with management,
and
|
|
2.
|
Reviewed
and discussed the written disclosures and the letter from our independent
auditors on the matters relating to the auditor's
independence.
|
Based
upon the board of directors’ review and discussion of the matters above, the
board of directors authorized inclusion of the audited financial statements for
the year ended December 31, 2008 to be included in this Annual Report on Form
10-KSB and filed with the Securities and Exchange Commission.
Section
16(a) Beneficial Ownership Reporting Compliance
We were
not a reporting company under Section 12 of the Securities and Exchange Act of
1934 at the end of fiscal year December 31, 2008, and therefore do not have
Section 16 reporting compliance information to report during that period of
time.
Code
of Ethics
As of
December 31, 2008, we had not adopted a Code of Ethics for Financial Executives,
which would include our principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions.
Item 11. Executive Compensation
Summary
Compensation Table
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, 2008, 2007
and 2006.
|
SUMMARY
COMPENSATION TABLE
|
|||||||||
|
Name
and
principal
position
|
Year
|
Salary ($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
David
Harrell, Former President and CEO
|
2008
2007
2006
|
144,000
144,000
111,000
|
-
-
-
|
-
-
-
|
91,000(1)
-
-
|
-
-
-
|
-
-
-
|
-
-
-
|
235,000
144,000
111,000
|
|
James
Vandeberg, Former CEO of RFID
|
2008
2007
2006
|
-
-
-
|
-
-
-
|
-
-
-
|
-
-
-
|
-
-
-
|
-
-
-
|
-
-
-
|
-
-
-
|
|
(1)
|
Options
to purchase 100,000 shares of Common Stock valued at $0.91 per share with
an exercise price of $1.00 per share. Please see our
Management’s Discussion and Analysis for a discussion on the valuation of
our options .
|
Narrative
Disclosure to the Summary Compensation Table
On April
6, 2009, we entered into an employment agreement with Mr. Lester to serve as our
Chief Executive Officer. Under the agreement, we agreed to compensate
Mr. Lester $150,000 annually and we granted him options to purchase 500,000
shares of our common stock, with 25% vesting immediately and 25% vesting after
the completion of each quarter of hire. Mr. Lester is also eligible
for additional quarterly and annual bonus compensation, stock options, and stock
grants based on performance metrics outlined by our board of
directors. He is entitled to vacation and sick days, and other
benefits included in the agreement.
Outstanding
Equity Awards at Fiscal Year-End
The table
below summarizes all unexercised options, stock that has not vested, and equity
incentive plan awards for each named executive officer and directors as of
December 31, 2008.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|||||||||
|
OPTION
AWARDS
|
STOCK
AWARDS
|
||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
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
Harrell
|
100,000
(1)
|
0
|
0
|
$1.00
|
March
5, 2013
|
0
|
0
|
0
|
0
|
|
Terry
Hamilton
|
150,000
(1)
|
0
|
0
|
$1.00
|
March
5, 2013
|
0
|
0
|
0
|
0
|
|
Vernon
Hartman
|
50,000
(1)
|
0
|
0
|
$1.00
|
March
5, 2013
|
0
|
0
|
0
|
0
|
|
Andrew
Dahl
|
20,000
(1)
|
0
|
0
|
$1.00
|
March
5, 2013
|
0
|
0
|
0
|
0
|
|
Jay
Pinney, MD
|
25,000
(1)
|
0
|
0
|
$1.00
|
March
5, 2013
|
0
|
0
|
0
|
0
|
|
Thomas
Majerowicz
|
20,000
(1)
|
0
|
0
|
$1.00
|
March
5, 2013
|
0
|
0
|
0
|
0
|
|
(1)
|
These
options fully vested on the date of
grant.
|
On March
5, 2008, the Board of Directors of the Company approved the issuance of stock
options to the above individuals.
Director
Compensation
The table
below summarizes all compensation of our directors as of December 31,
2008.
|
DIRECTOR
COMPENSATION
|
|||||||
|
Name
|
Fees
Earned or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Thomas
E. Majerowicz
|
-
|
-
|
18,200(1)
|
-
|
-
|
-
|
18,200
|
|
Terence
J. Hamilton
|
-
|
-
|
136,500(2)
|
-
|
-
|
-
|
?136,500
|
|
(1)
|
Represents
20,000 options to purchase common stock valued at $0.91 per share with an
exercise price of $1.00 per share. 20,000 options were outstanding at the
end of our fiscal 2008 year. Please see our Management’s Discussion
and Analysis for a discussion on the valuation of our common
stock.
|
|
(2)
|
Represents
150,000 options to purchase common stock valued at $0.91 per share with an
exercise price of $1.00 per share. 150,000 options were outstanding
at the end of our fiscal 2008 year. Please see our Management’s
Discussion and Analysis for a discussion on the valuation of our common
stock.
|
Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder
Matters
The
following table sets forth certain information known to us with respect to the
beneficial ownership of our Common Stock as of January 30, 2009, by (1) all
persons who are beneficial owners of 5% or more of our voting securities, (2)
each director, (3) each executive officer, and (4) all directors and executive
officers as a group. The information regarding beneficial ownership of our
common stock has been presented in accordance with the rules of the Securities
and Exchange Commission. Under these rules, a person may be deemed to
beneficially own any shares of capital stock as to which such person, directly
or indirectly, has or shares voting power or investment power, and to
beneficially own any shares of our capital stock as to which such person has the
right to acquire voting or investment power within 60 days through the exercise
of any stock option or other right. The percentage of beneficial ownership as to
any person as of a particular date is calculated by dividing (a) (i) the number
of shares beneficially owned by such person plus (ii) the number of shares as to
which such person has the right to acquire voting or investment power within 60
days by (b) the total number of shares outstanding as of such date, plus any
shares that such person has the right to acquire from us within 60 days.
Including those shares in the tables does not, however, constitute an admission
that the named stockholder is a direct or indirect beneficial owner of those
shares. Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares that power with that person’s
spouse) with respect to all shares of capital stock listed as owned by that
person or entity.
Except as
otherwise indicated, all shares are owned directly and the percentage shown is
based on 12,262,958 shares of common stock issued and outstanding on December
31, 2008. Except as otherwise indicated, the address of each person named in
this table is c/o OptimizeRx Corporation, 407 Sixth Street, Rochester,
MI 48307.
|
Title
of class
|
Name
and address of
beneficial owner (1)
|
Amount
of beneficial
ownership
|
Percent
of
class(2)
|
|
Executive
Officers & Directors:
|
|||
|
Common
|
David
A. Harrell(3)
|
3,612,250
shares
|
29.21%
|
|
Common
|
Thomas
E. Majerowicz(4)
|
242,750
shares
|
2.00%
|
|
Common
|
Terence
J. Hamilton(5)
|
595,500
shares
|
4.80%
|
|
Total
of All Directors and Executive Officers:
|
4,450,500
shares
|
35.51%
|
|
|
More
Than 5% Beneficial Owners:
|
|||
|
Common
|
Richard
J. Kraniak Roth IRA(6)
|
1,250,000
shares
|
10.19%
|
|
Common
|
Cypress
Trust(7)
|
1,150,000
shares
|
9.38%
|
|
Common
|
Vicis
Capital Master Fund(8)
|
9,500,000
shares
|
77.47%
(9)
|
|
Common
|
Cypress
Trust i/t/f Jillene Pinella
|
1,150,000
shares
|
9.38%
|
|
Total
of All 5% Beneficial Owners:
|
13,050,000
shares
|
60.34%
|
|
|
(1)
|
Includes
stock option grants made to officers, directors, employees and/or
consultants under the 2008 Company Stock Option Plan. All
options listed in this table were granted under the 2008 Stock Option
Plan.
|
|
(2)
|
Applicable
percentage ownership is based on 12,262,958 shares of common stock
outstanding as of December 31, 2008, together with securities exercisable
or convertible into shares of common stock within 60 days of December 31,
2008 for each stockholder. Shares of common stock that are currently
exercisable or exercisable within 60 days of January 30, 2009 are deemed
to be beneficially owned by the person holding such securities for the
purpose of computing the percentage of ownership of such person, but are
not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
|
|
(3)
|
Includes
options to purchase 100,000 shares of common stock at a price of $1.00 per
share.
|
|
(4)
|
Includes
options to purchase 20,000 shares of common stock at a price of $1.00 per
share.
|
|
(5)
|
Includes
options to purchase 150,000 shares of common stock at a price of $1.00 per
share.
|
|
(6)
|
Richard
J. Kraniak has voting and dispositive control over the shares held by
Richard J. Kraniak Roth IRA, which is located at 101 West Long Lake,
Bloomfield Hills, Michigan 48304.
|
|
(7)
|
Linwood
C. Meehan III has voting and dispositive control over the shares held by
Cypress Trust, which is located at 13750 W. Colonial Dr., Ste. 250-317,
Winter Garden, Florida 34787.
|
|
(8)
|
Chris
Phillips holds investment and dispositive power of the shares held by
Vicis Capital Master Fund. Shares beneficially
owned represent an aggregate of 9,500,000 shares of Common Stock,
consisting of (i) 3,500,000 shares issuable upon the conversion of the
Series A Preferred Stock; and (ii) 6,000,000 shares issuable upon the
exercise of the Series A Warrants. The selling stockholder has
informed us that it is not a broker-dealer or affiliate of a
broker-dealer.
|
|
(9)
|
Percentage
of outstanding shares assumes full conversion and/or exercise of the
Series A Preferred Stock and Series A Warrants,
respectively. The selling stockholders purchased the securities
which are convertible into common shares. The selling
stockholders have contractually agreed to restrict their ability to
convert their shares of Series A Preferred Stock into shares of common
stock and to exercise their warrants to purchase shares of common stock
such that the number of shares of common stock held by them in the
aggregate and their affiliates after such conversion or exercise does not
exceed 4.99% of the then issued and outstanding shares of common stock as
determined in accordance with Section 13(d) of the Exchange Act.
Accordingly, the number of shares of common stock set forth in the table
for the selling stockholders exceeds the number of shares of common stock
that the selling stockholders could own beneficially at any given time
through their ownership of the Series A Preferred Stock and the warrants.
In that regard, the beneficial ownership of the common stock by the
selling stockholder set forth in the table is not determined in accordance
with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
|
Item 13. Certain Relationships and Related
Transactions, and Director Independence
Except as
follows, none of our directors or executive officers, nor any proposed nominee
for election as a director, nor any person who beneficially owns, directly or
indirectly, shares carrying more than 5% of the voting rights attached to all of
our outstanding shares, nor any members of the immediate family (including
spouse, parents, children, siblings, and in-laws) of any of the foregoing
persons has any material interest, direct or indirect, in any transaction since
the beginning of our last fiscal year on January 1, 2008 or in any presently
proposed transaction which, in either case, has or will materially affect
us.
|
§
|
We
had personal loans from private investors to Richard Krankiak and Jillene
Pinella, each consisting of $160,000. Both Mr. Krankiak and Ms. Pinella
are shareholders each holding in excess of 5% of the issued and
outstanding common stock of our company. No interest accrued on
either loan. We paid each loan in full with proceeds from the
September 8, 2008 private placement we conducted with Vicis Capital Master
Fund.
|
|
§
|
We
engaged David
Harrell for management services under a contract that paid him
$48,000 for the period ended April 30, 2008 and $114,500 for the year
ended December 31, 2008. Mr. Harrell
became an employee of our company beginning on June 1,
2008.
|
|
§
|
Upon
the transfer of the assets and liabilities from the Optimizer Systems, LLC
to OptimizeRx Corporation, the LLC members were issued promissory notes
totaling $253,750 under a dilution agreement for a portion of their
interests in Optimizer Systems, LLC, except for David Harrell, our
director. Under the exchange agreement, dated April 8, 2008,
Mr. Harrell is entitled to the same benefits other LLC members received,
only against our company in exchange for waiving his anti-dilution
rights.
|
|
§
|
There
was a note to David Harrell for $4,000 and $24,000 at December 31, 2008
and 2007, respectively.
|
Item 14. Principal Accounting Fees and
Services
Below is
the table of Audit Fees (amounts in US$) billed by our auditor in connection
with the audit of the Company’s annual financial statements for the years
ended:
|
Financial
Statements for the Year Ended December 31
|
Audit
Services
|
Audit
Related Fees
|
Tax
Fees
|
Other
Fees
|
|
2008
|
$16,475
|
$0
|
$0
|
$0
|
|
2007
|
$11,927
|
$0
|
$0
|
$0
|
PART IV
Item 15. Exhibits, Financial Statements
Schedules
Index to
Financial Statements Required by Article 8 of Regulation S-X:
|
Audited
Financial Statements:
|
|
|
Exhibit Number
|
Description
|
|
3.1
|
Articles
of Incorporation of OptimizeRx Corporation (the “Company”)1.
|
|
3.2
|
Amended
and Restated Bylaws of the Company1.
|
|
3.3
|
Certificate
of Designation, filed on September 5, 2008, with the Secretary of State of
the State of Nevada by the Company1.
|
|
10.1
|
Agreement
Concerning the Exchange of Securities, dated on April 14, 2008 by and
among RFID, Ltd., OptimizeRx Corporation and the Security Holders of
OptimizeRx Corporation1.
|
|
10.2
|
Securities
Purchase Agreement, dated September 8, 2008, by and between the Company
and Vicis Capital Master Fund (“Vicis”)1.
|
|
10.3
|
Form
of Series A Warrant1.
|
|
10.4
|
Registration
Rights Agreement, dated September 8, 2008, by and between the Company and
Vicis1.
|
|
10.5
|
Security
Agreement, dated September 8, 2008, by and between the Company and
Vicis1.
|
|
10.6
|
Guaranty
Agreement, dated September 8, 2008, by and between the Company and
Vicis1.
|
|
10.7
|
Guarantor
Security Agreement, dated September 8, 2008, by and between the Company
and Vicis1.
|
|
10.8
|
Form
of Partnership Agreement between the Company and Dendrite International,
Inc. d/b/a/ Cegedim Dendrite, as entered into on June 24, 20081.
|
|
10.9
|
Letter
of Intent between the Company and Sudler & Hennessy, dated September
30, 20081.
|
|
21.1
|
List
of Subsidiaries1
|
| 23.1 | Consent of Maddox Ungar Silberstein, PLLC CPAs and Business Advisors |
1Incorporated
by reference to the Form S-1, filed by the Company with the Securities and
Exchange Commission on November 12, 2008.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
OptimizeRx
Corporation
|
By:
|
/s/
David Lester
|
|
David
Lester
Chief
Executive Officer, Principal Executive Officer,
Chief
Financial Officer, Principal Financial Officer, Principal Accounting
Officer and Director
|
|
|
April
15, 2009
|
In accordance with Section 13 or 15(d)
of the Exchange Act, 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
|
By: | /s/ Terence J. Hamilton |
|
David
Harrell
Director
|
Terence
J. Hamilton
Director
|
||
|
April
15, 2009
|
April 15, 2009 | ||
| By: | /s/ Thomas E. Majerowicz | ||
|
Thomas
E. Majerowicz
Director
|
|||
| April 15, 2009 |
Maddox
Ungar
Silberstein, PLLC CPAs and Business
Advisors
Phone
(248) 203-0080
Fax (248)
281-0940
30600
Telegraph Road, Suite 2175
Bingham
Farms, MI 48025-4586
www.maddoxungar.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, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity (deficit), and cash flows for the years then
ended and the period from January 31, 2006 (inception) to December 31,
2008. These financial statements are the responsibility of the
Companies 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, 2008 and 2007 and the results of their operations and cash flows
for the years then ended and for the period from January 31, 2006 (inception) to
December 31, 2008, in conformity with accounting principles generally accepted
in the United States.
/s/ Maddox Ungar
Silberstein, PLLC
Maddox
Ungar Silberstein, PLLC
Bingham
Farms, Michigan
April 10,
2009
OPTIMIZERx CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
AS
OF DECEMBER 31, 2008 AND 2007
|
ASSETS
|
2008
|
2007
|
|||
|
Current
Assets
|
|||||
|
Cash
and cash equivalents
|
$ | 2,502,656 | $ | 135,429 | |
|
Account
receivable – employee
|
1,346 | 0 | |||
|
Prepaid
expenses
|
3,292 | 2,000 | |||
|
Total
Current Assets
|
2,507,294 | 137,429 | |||
|
Property
and Equipment, net
|
15,270 | 5,972 | |||
|
Website
Development Costs, net
|
120,737 | 151,564 | |||
|
TOTAL
ASSETS
|
$ | 2,643,301 | $ | 294,965 | |
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|||||
|
Current
Liabilities
|
|||||
|
Accounts
payable
|
$ | 171,864 | $ | 43,216 | |
|
Accrued
expenses
|
41,933 | 18,926 | |||
|
Notes
payable – related parties
|
4,000 | 277,750 | |||
|
Total
Current Liabilities
|
217,797 | 339,892 | |||
|
Long
- term Debt
|
|||||
|
Notes
payable – related party
|
0 | 50,000 | |||
|
TOTAL
LIABILITIES
|
217,797 | 389,892 | |||
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
|||||
|
Common
stock, par $.001, 450,000,000 shares authorized, 12,222,958 shares issued
and outstanding (10,300,000 – 2007)
|
12,263 | 10,300 | |||
|
Preferred
stock, par $.001, 10,000,000 shares authorized, 35 shares issued and
outstanding
|
0 | 0 | |||
|
Stock
warrants
|
16,905,280 | 0 | |||
|
Paid
in capital
|
0 | 289,700 | |||
|
Deficit
accumulated during the development stage
|
(14,492,039) | (394,927) | |||
|
Total
Stockholders’ Equity (Deficit)
|
2,425,504 | (94,927) | |||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
$ | 2,643,301 | $ | 294,965 | |
The
accompanying notes are an integral part of the financial
statements.
OPTIMIZERx CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
FOR
THE PERIOD FROM JANUARY 31, 2006 (INCEPTION) TO DECEMBER 31, 2008
|
2008
|
2007
|
Inception
through December 31, 2008
|
||||||
|
GROSS
REVENUES
|
$ | 83,686 | $ | 100,318 | $ | 184,004 | ||
|
OPERATING
EXPENSES
|
1,591,738 | 456,259 | 2,232,308 | |||||
|
NET
OPERATING LOSS
|
(1,508,052) | (355,941) | (2,048,304) | |||||
|
OTHER
INCOME (EXPENSES)
|
(2,740,801) | (5,525) | (2,746,326) | |||||
|
NET
LOSS BEFORE INCOME TAXES
|
(4,248,853) | (361,466) | (4,794,630) | |||||
|
PROVISION
FOR INCOME TAXES
|
0 | 0 | 0 | |||||
|
NET
LOSS
|
$ | (4,248,853) | $ | (361,466) | $ | (4,794,630) | ||
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
12,014,772 | 2,071,233 | - | |||||
|
NET
LOSS PER SHARE
|
$ | (0.35) | $ | (0.17) | - | |||
The
accompanying notes are an integral part of the financial
statements.
OPTIMIZERx CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
AS
OF DECEMBER 31, 2008
|
Common
Stock
|
Preferred
Stock
|
Stock
|
Additional
Paid
in
|
Deficit
Accumulated
During the
Development |
|||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Warrants
|
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Balance,
January 1, 2007
|
0 | $ | 0 | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 40,289 | $ | 40,289 | |||||||||
|
Member
contributions
|
- | - | - | - | - | - | 180,000 | 180,000 | |||||||||||||||
|
Member
distributions
|
- | - | - | - | - | - | (253,750) | (253,750) | |||||||||||||||
|
Common
stock issued to LLC members
|
10,000,000 | 10,000 | - | - | - | (10,000) | - | - | |||||||||||||||
|
Common
stock issued for cash
|
300,000 | 300 | - | - | - | 299,700 | - | 300,000 | |||||||||||||||
|
Net
loss for the year ended December 31, 2007
|
- | - | - | - | - | - | (361,466) | (361,466) | |||||||||||||||
|
Balance,
December 31, 2007
|
10,300,000 | $ | 10,300 | 0 | $ | 0 | $ | 0 | $ | 289,700 | $ | (394,927) | $ | (94,927) | |||||||||
The
accompanying notes are an integral part of the financial
statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
AS
OF DECEMBER 31, 2008 (CONTINUED)
|
Common
Stock
|
Preferred
Stock
|
Stock
|
Additional
Paid
in
|
Deficit
Accumulated
During the
Development
|
|||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Warrants
|
Capital
|
Stage
|
Total
|
||||||||||||||||
|
Balance,
December 31, 2007
|
10,300,000 | $ | 10,300 | 0 | $ | 0 | $ | 0 | $ | 289,700 | $ | (394,927) | $ | (94,927) | |||||||||
|
Issuance
of common stock for cash
|
636,000 | 636 | - | - | - | 635,364 | - | 636,000 | |||||||||||||||
|
Outstanding
common stock prior to reverse merger
|
1,256,958 | 1,257 | - | - | - | (1,257) | - | - | |||||||||||||||
|
Common
stock issued for services
|
70,000 | 70 | - | - | - | 69,930 | - | 70,000 | |||||||||||||||
|
Issuance
of stock options
|
- | - | - | - | - | 333,004 | - | 333,004 | |||||||||||||||
|
Preferred
stock issued for cash
|
- | - | 35 | - | - | 3,500,000 | - | 3,500,000 | |||||||||||||||
|
Preferred
stock issuance costs
|
- | - | - | - | - | (515,000) | - | (515,000) | |||||||||||||||
|
Stock
warrants issued
|
14,160,000 | (4,311,741) | (9,848,259) | 0 | |||||||||||||||||||
|
Stock
warrants issued for services
|
2,745,280 | 2,745,280 | |||||||||||||||||||||
|
Net
loss for the year ended December 31, 2008
|
- | - | - | - | - | - | (4,248,853) | (4,248,853) | |||||||||||||||
|
Balance,
December 31, 2008
|
12,262,958 | $ | 12,263 | 35 | $ | 0 | $ | 16,905,280 | $ | 0 | $ | (14,492,039) | $ | 2,425,504 | |||||||||
The
accompanying notes are an integral part of the financial
statements.
OPTIMIZERx CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
FOR
THE PERIOD FROM JANUARY 31, 2006 (INCEPTION) TO DECEMBER 31, 2008
|
2008
|
2007
|
Inception
through December 31, 2008
|
||||||
|
Cash
Flows from Operating Activities:
|
||||||||
|
Net
Loss
|
$ | (4,248,853) | $ | (361,466) | $ | (4,794,630) | ||
|
Adjustments
to Reconcile Net Loss to Net Cash Used in Operating
Activities:
|
||||||||
|
Depreciation
and amortization expense
|
32,150 | 2,824 | 35,013 | |||||
|
Stock
issued for services
|
70,000 | 0 | 70,000 | |||||
|
Stock
options issued for compensation
|
333,004 | 0 | 333,004 | |||||
|
Stock
warrants issued for services
|
2,745,280 | 0 | 2,745,280 | |||||
|
Changes
in Assets and Liabilities
|
||||||||
|
(Increase)
in prepaid expenses and other current assets
|
(2,638) | (2,000) | (4,638) | |||||
|
Increase
in accounts payable
|
128,648 | 43,216 | 171,864 | |||||
|
Increase
in accrued expenses
|
23,007 | 13,793 | 41,933 | |||||
|
Net
Cash Used in Operating Activities
|
(919,402) | (303,633) | (1,402,174) | |||||
|
Cash
Flows from Investing Activities:
|
||||||||
|
Acquisitions
of property and equipment
|
(10,621) | (5,493) | (16,887) | |||||
|
Website
development costs
|
0 | (120,088) | (154,133) | |||||
|
Net
Cash Used in Investing Activities
|
(10,621) | (125,581) | (171,020) | |||||
|
Cash
Flows from Financing Activities:
|
||||||||
|
Proceeds
from issuance of notes payable
|
320,000 | 70,000 | 394,000 | |||||
|
Repayments
of notes payable – related parties
|
(643,750) | 0 | (643,750) | |||||
|
Member
contributions
|
0 | 180,000 | 404,600 | |||||
|
Net
proceeds from common stock
|
636,000 | 300,000 | 936,000 | |||||
|
Net
proceeds from preferred stock
|
2,985,000 | 0 | 2,985,000 | |||||
|
Net
Cash Provided by Financing Activities
|
3,297,250 | 550,000 | 4,075,850 | |||||
|
Net
Increase in Cash and Cash Equivalents
|
2,367,227 | 120,786 | 2,502,656 | |||||
|
Cash
and Cash Equivalents – Beginning
|
135,429 | 14,643 | 0 | |||||
|
Cash
and Cash Equivalents – Ending
|
$ | 2,502,656 | $ | 135,429 | $ | 2,502,656 | ||
|
Supplemental
Cash Flow Information:
|
||||||||
|
Cash
paid for interest
|
$ | 0 | $ | 4,453 | $ | 4,453 | ||
|
Cash
paid for income taxes
|
$ | 0 | $ | 0 | $ | 0 | ||
|
Supplemental
Disclosure of Noncash Investing and Financing Activities:
|
||||||||
|
Distributions
paid through issuance of notes payable-related party
|
$ | 0 | $ | 253,750 | $ | 253,750 | ||
The
accompanying notes are an integral part of the financial
statements.
OPTIMIZERx CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
1: Nature
of Operations
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 October 22,
2007. 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 development-stage website
publisher and marketing company that creates, promotes and fulfills custom
marketing and advertising programs. The Company help patients better
afford and manage their rising healthcare costs. In addition, the
Company also provides unique advertising programs to the pharmaceutical and
healthcare industries. The Company’s websites provide the following
services: (i) OptimizeRx provides patients an opportunity to
centrally review and participate in prescription and healthcare savings/support
programs; (ii) OFFERx provides a platform to allow manufacturers to create,
promote and fulfill new patient offer programs in over 64,000 pharmacies; and
(iii) ADHERxE provides a platform that allows manufacturers to engage and
monitor patients each month in exchange for activation of their monthly co-pay
coupons.
Note
2: Significant Accounting
Policies
This
summary of significant accounting policies of the Company is presented to assist
in understanding the company’s financial statements. The financial
statements and notes are representations of the company’s management, who is
responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have been
consistently applied to the preparation of the financial
statements.
Basis of
Accounting
The
accompanying financial statements have been prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America. The Company is currently a development
stage enterprise. All losses accumulated since the inception of
business have been considered as part of its development stage
activities.
Principles
of Consolidation
The
financial statements reflect the consolidated results of OptimizeRx Corporation
(a Nevada corporation) and its wholly owned subsidiary OptyimizeRx 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
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
2: Significant Accounting Policies (continued)
Fair Value of Financial
Instruments
The fair
value of cash, accounts receivable and accounts payable approximates the
carrying amount of these financial instruments due to their short-term nature.
The fair value of long-term debt, which approximates its carrying value, is
based on current rates at which the Company could borrow funds with similar
remaining maturities.
Property and
Equipment
The
capital assets are being depreciated over their estimated useful lives using the
straight line method of depreciation for book purposes. As of October 18, 2007,
the Company acquired the majority of its capital assets at the lower market cost
from Optimizer Systems, LLC.
Research and
Development
The
Company’s key members are part of a continual research and 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 we serve.
The
Company is currently in a launch phase with ADHERxE to allow pharmaceutical and
healthcare manufacturers unique ways to engage and monitor patients each month
in exchange for activation of their next savings offer.
The
Company seeks to educate team members through understanding of all market
dynamics that have the potential to affect business both short term and long
term. The primary goal is to help patients better afford and access
the medications their doctors prescribe, 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 program 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.
Revenue
Recognition
Substantially
all revenue is recognized when it is earned. All revenues are generated through
the Company’s website activities. 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.
Management
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 those
estimates.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
2: Significant Accounting
Policies (continued)
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
operation, financial position or cash flow.
Concentration of Credit
Risks
The
Company maintains its cash 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.
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 2008 and 2007, respectively,
since their effect is anti-dilutive.
Note
3: Property
and Equipment
Property
and equipment is recorded at cost and consisted of the following at December
31:
|
2008
|
2007
|
||||
|
Computer
equipment
|
$ | 12,594 | $ | 1,974 | |
|
Furniture
and fixtures
|
4,293 | 4,293 | |||
|
Subtotal
|
16,887 | 6,267 | |||
|
Accumulated
depreciation
|
(1,617) | (295) | |||
|
Property
and equipment, net
|
$ | 15,270 | $ | 5,972 | |
Depreciation
expense was $1,322 and $256 for the years ended December 31, 2008 and 2007,
respectively.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
4: Website
Development Costs
The
Company has capitalized costs in developing their website which consisted of the
following at December 31:
|
2008
|
2007
|
||||
|
Website
costs
|
$ | 154,133 | $ | 154,133 | |
|
Accumulated
amortization
|
(33,396) | (2,569) | |||
|
Website
development costs, net
|
$ | 120,737 | $ | 151,564 | |
The
Company began amortizing the website costs, using the straight-line method over
the estimated useful life of 5 years, once it was put into service in December
of 2007.
Amortization
expense was $30,827 and $2,569 for the years ended December 31, 2008 and 2007,
respectively.
Note
5: Accrued
Expenses
Accrued
expenses consisted of the following at December 31:
|
2008
|
2007
|
||||
|
Accrued
interest
|
$ | 1,683 | $ | 1,072 | |
|
Accrued
payroll taxes
|
24,091 | 0 | |||
|
Accrued
expenses
|
6,159 | 10,354 | |||
|
Accrued
audit fees
|
10,000 | 7,500 | |||
|
Total
accrued expenses
|
$ | 41,933 | $ | 18,926 | |
Note
6: Notes
Payable – Related Party
Notes payable – related party consisted
of the following at December 31:
|
2008
|
2007
|
||||
|
Note
payable – Dante Panetta
|
$ | 0 | $ | 50,000 | |
|
Note
payable – David Harrell
|
4,000 | 24,000 | |||
|
Notes
payable – LLC members
|
0 | 253,750 | |||
|
Less:
current portion
|
(4,000) | (277,750) | |||
|
Long
–Term Debt
|
$ | 0 | $ | 50,000 | |
The note
payable to David Harrell is due on demand and bears 9% interest.
The note
payable to Dante Panetta is non-interest bearing and was due within five days of
the Company raising $1,000,000 of additional capital. The note was
paid off during 2008.
The notes
payable to the LLC members were created with a dilution agreement on October 18,
2007 and were non-interest bearing. The notes were paid off in the
first quarter of 2008.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
7: Commitments and
Contingencies
The
company leases its offices for $2,500 a month and has signed a lease through May
31, 2009 with an option for a six month renewal.
The
following is a schedule of future minimum rents:
|
December
31, 2009
|
$ | 30,000 |
|
December
31, 2010
|
27,500 | |
|
Total
Lease Obligation
|
$ | 57,500 |
Note
8: Dividend
Distribution
The
Company recorded a one-time, non-cash deemed dividend on October 18, 2007 of
$33,461. This dividend resulted from the continuous efforts of acquiring assets
from Optimizer Systems, LLC. Through this dividend, the Company
acquired all assets and liabilities of the LLC.
Note
9: Common
Stock
OptimizeRx
Corporation has 450,000,000 shares of $.001 par value common stock
authorized as of December 31, 2008. There were 12,262,958 and 10,300,000 common
shares issued and outstanding at December 31, 2008 and 2007,
respectively.
During
2008, 636,000 shares of common stock were sold for
cash. Additionally, 70,000 shares were issued as compensation for
services during the year ended December 31, 2008. Pursuant to the
share exchange agreement with RFID Ltd., 100% of OptimizeRx’s stock was
exchanged for 10,664,000 shares of RFID’s common stock. At the time of the
share exchange, RFID had an additional 1,256,958 shares of common stock issued
and outstanding.
Note
10: Preferred
Stock
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 ten percent cumulative dividend. In addition, there was a
warrant issued to purchase 6,000,000 shares of common stock at an exercise price
of $2.00 for a period of 7 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 ten percent per
annum, which shall be cumulative, and accrue daily from the issuance date. The
dividends may be paid in cash or shares of the corporation’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 two dollars per share and trading exceeds
100,000 shares per day, the 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 corporation at the stated value of such
share at a one dollar conversion price.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
10: Preferred Stock
(continued)
The
holder may cause this conversion at the time the shares are eligible for resale
by the holder. The conversion price is subject to adjustment as
hereinafter provided, at any time, or from time to time upon the terms and in
the manner hereinafter set forth in the shareholder agreement. The shares are
required to be redeemed on September 5, 2010. As of December 31,
2008, the cumulative dividend was $110,274, however, it has not yet been
declared.
Note 11: Stock-Based
Compensation
Effective
January 1, 2006, the Company adopted SFAS No. 123 (revised), "Share-Based
Payment: (SFAS 123(R)) utilizing the modified prospective approach. Prior to the
adoption of SFAS 123(R) we accounted for stock option grant in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and accordingly, recognized compensation expense for stock
option grants using the intrinsic value method.
Under the
modified prospective approach, SFAS 123(R) applies to new awards and to awards
that were outstanding on January 1, 2006 that are subsequently modified,
repurchased or cancelled. Under the modified prospective approach, compensation
cost recognized in the first quarter of fiscal 2006 includes compensation cost
for all share-based payments granted prior to, but not yet vested as of January
1, 2006 based on the grant-date fair value estimated in accordance with the
original provisions of SFAS 123, and compensation cost for all share-based
payments granted subsequent to January 1, 2006 based on the grant-date fair
value estimated in accordance with the provisions of SFAS 123(R). For all
quarters after the first quarter of fiscal 2006, compensation costs recognized
will include the compensation costs for all share-based payments granted based
on the grant date fair value estimated in accordance with the provisions of SFAS
123(R).
The fair
value of each option granted in 2008 is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 150%, risk-free
interest rate of 2.59% and expected life of 60 months. The Company recognized
expense of $333,004 on the 365,000 options issued on March 5, 2008.
Note
12: Stock
Warrants
During
the year ended December 31, 2008, OptimizeRx Corporation issued
6,000,000 common stock warrants with an exercise price of $2.00 and a term of
seven years in connection with the preferred stock issuance. These
warrants were valued using the Black-Scholes pricing model at
$14,160,000. The warrants are treated as a re-distribution of equity
and are shown as a component of equity.
During
the year ended December 31, 2008, OptimizeRx Corporation issued 1,059,500
common stock warrants were issued in exchange for services. These
warrants were issued with exercise prices of either $1.00 or $2.00 and a term of
five years. The Black-Scholes method was used to value these warrants
at $2,745,280 and the warrants are being expensed during 2008.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
12: Stock Warrants
(continued)
The fair
value of each warrant issued in 2008 was calculated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 6%, risk-free interest
rate of 1.85% and expected life of 60 - 84 months.
Note
13: Related
Party Transactions
The
Company had engaged an officer of the company for management services under a
contract that paid him $48,000 for the period ended April 30, 2008 and $114,500
for the year ended December 31, 2008. The officer became an employee
of the Company beginning on May 1, 2008.
Upon the
transfer of the assets and liabilities from the LLC to the corporation, the LLC
members were issued promissory notes totaling $253,750 under a dilution
agreement for a portion of their interests in Optimizer Systems,
LLC.
The
company had a $50,000 note payable to a shareholder (see note 6) that was repaid
during the year ended December 31, 2008. In addition there was a note
to an officer of the company (see note 6) for $4,000 and $24,000 at December 31,
2008 and 2007, respectively.
Note
14: Other Income
(Expenses)
Other
income (expenses) consisted of the following at December 31:
|
2008
|
2007
|
||||
|
Interest
income
|
$ | 5,090 | $ | 0 | |
|
Interest
expense
|
(611) | (5,525) | |||
|
Stock
warrant expense
|
(2,745,280) | 0 | |||
|
Total
other income (expenses)
|
$ | (2,740,801) | $ | (5,525) | |
Note
15: Income
Taxes
For the
period ended December 31, 2008, the Company incurred a net loss of approximately
$4,250,000 and therefore has no tax liability. The company began operations in
2007 and has previous net operating loss carry-forwards of
$200,000. The cumulative loss will be carried forward and can be used
through the year 2028 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.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008
Note
15: Income Taxes
(continued)
The
cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
|
2008
|
2007
|
||||
|
Deferred
tax asset attributable to:
|
|||||
|
Net
operating loss carryover
|
$ | 1,513,000 | $ | 68,000 | |
|
Valuation
allowance
|
(1,513,000) | (68,000) | |||
|
Net
deferred tax asset
|
$ | - | $ | - | |
F-14