OptimizeRx Corp - Quarter Report: 2009 September (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
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[X]
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Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the quarterly period ended September 30,
2009
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[ ]
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Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
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For
the transition period to __________
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Commission
File Number: 000-53605
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OptimizeRx
Cororation
(Exact
name of small business issuer 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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(IRS
Employer Identification No.)
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407
6th
Street
Rochester, MI, 48307
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(Address
of principal executive offices)
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248-651-6568
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(Issuer’s
telephone number)
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_______________________________________________________________
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(Former
name, former address and former fiscal year, if changed since last
report)
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Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days [X]
Yes [ ] No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this
chapter) during the preceeding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ ] No
[X]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
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[ ]
Large accelerated filer Accelerated filer
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[ ]
Non-accelerated filer
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[X]
Smaller reporting company
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No
[X]
State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date: 12,726,117 Common Shares as of September 30,
2009.
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Page
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PART I – FINANCIAL INFORMATION
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3
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4
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PART II – OTHER INFORMATION
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| 8 | ||
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PART
I - FINANCIAL INFORMATION
Item
1. Financial
Statements
Our
consolidated financial statements included in this Form 10-Q are as
follows:
| F-1 |
Consolidated
Balance Sheets as of September 30, 2009 (Unaudited) and
December 31, 2008 (Audited)
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| F-2 |
Consolidated
Statements of Operations for the Three Months Ended
September 30, 2009 and 2008
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| F-3 |
Consolidated
Statements of Operations for the Nine Months Ended
September 30, 2009 and 2008 and for the Period from January
31, 2006 (Inception) to September 30, 2009 (Unaudited)
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| F-4 |
Consolidated
Statement of Stockholders’ Equity as of September
30, 2009 (Unaudited)
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| F-5 |
Consolidated
Statements of Cash Flows for the Nine Months Ended
September 30, 2009 and 2008 and for the Period from January
31, 2006 (Inception) to September 30, 2009 (Unaudited)
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| F-6 |
Notes
to the Consolidated Financial
Statements
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OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheets as of
September 30, 2009(Unaudited)
and December 31, 2008 (Audited)
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9/30/09
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12/31/08
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|||||||
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(unaudited)
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(audited)
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CURRENT
ASSETS
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||||||||
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Cash
and cash equivalents
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$ | 1,006,382 | $ | 2,502,656 | ||||
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Accounts
receivable
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4,892 | -0- | ||||||
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Prepaid
expenses
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10,806 | 3,292 | ||||||
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Loan
receivable - employee
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-0- | 1,346 | ||||||
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TOTAL
CURRENT ASSETS
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1,022,080 | 2,507,294 | ||||||
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PROPERTY
AND EQUIPMENT
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Furniture
and equipment
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16,888 | 16,888 | ||||||
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Less
accumulated depreciation
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(2,884 | ) | (1,618 | ) | ||||
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NET
PROPERTY AND EQUIPMENT
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14,004 | 15,270 | ||||||
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OTHER
ASSETS
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Website
development costs, net
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97,617 | 120,737 | ||||||
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TOTAL
OTHER ASSETS
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97,617 | 120,737 | ||||||
| $ | 1,133,701 | $ | 2,643,301 | |||||
| 1,133,701 | 1,133,701 | |||||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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CURRENT
LIABILITIES
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Accounts
payable - trade
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$ | 11,781 | $ | 171,864 | ||||
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Accrued
expenses
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-0- | 41,933 | ||||||
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Note
payable - related parties
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-0- | 4,000 | ||||||
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TOTAL
CURRENT LIABILITIES
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11,781 | 217,797 | ||||||
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TOTAL
LIABILITIES
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11,781 | 217,797 | ||||||
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STOCKHOLDERS'
EQUITY
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||||||||
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Common
stock, $.001 par value, 500,000,000 shares
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authorized,
12,726,117 shares issued and outstanding
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12,726 | 12,263 | ||||||
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Stock
warrants
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16,199,995 | 16,905,280 | ||||||
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Additional
paid-in-capital
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1,626,313 | -0- | ||||||
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Deficit
accumulated during the development stage
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(16,717,114 | ) | (14,492,039 | ) | ||||
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STOCKHOLDERS'
EQUITY
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1,121,920 | 2,425,504 | ||||||
| $ | 1,133,701 | $ | 2,643,301 | |||||
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Operations for the
Three Months Ended September 30, 2009 and
2008
(Unaudited)
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9/30/09
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9/30/08
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|||||||
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(unaudited)
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(unaudited)
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|||||||
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REVENUE
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Sales
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$ | 6,908 | $ | 1,111 | ||||
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TOTAL
REVENUE
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6,908 | 1,111 | ||||||
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EXPENSES
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||||||||
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Operating
expenses
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534,065 | 162,519 | ||||||
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TOTAL
EXPENSES
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534,065 | 162,519 | ||||||
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OPERATING
LOSS
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(527,157 | ) | (161,408 | ) | ||||
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OTHER
INCOME (EXPENSE)
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||||||||
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Interest
income
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5,647 | -0- | ||||||
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Interest
expense
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(697 | ) | -0- | |||||
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Stock
warrant expense
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-0- | -0- | ||||||
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TOTAL
OTHER INCOME (EXPENSE)
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4,950 | -0- | ||||||
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NET
LOSS
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$ | (522,207 | ) | $ | (161,408 | ) | ||
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WEIGHTED
AVERAGE NUMBER OF
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||||||||
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SHARES
OUTSTANDING
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12,609,094 | 11,662,465 | ||||||
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NET
LOSS PER SHARE
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$ | (0.04 | ) | $ | (0.01 | ) | ||
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Operations for the
Nine Months Ended September 30, 2009 and
2008 and
for the Period from January 31, 2006(Inception)
to September 30, 2009
(Unaudited)
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Inception
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through
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||||||||||||
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9/30/09
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9/30/08
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9/30/09
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(unaudited)
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(unaudited)
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(unaudited)
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REVENUE
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Sales
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$ | 11,628 | $ | 68,317 | $ | 195,632 | ||||||
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TOTAL
REVENUE
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11,628 | 68,317 | 195,632 | |||||||||
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EXPENSES
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Operating
expenses
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2,265,831 | 638,285 | 4,498,139 | |||||||||
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TOTAL
EXPENSES
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2,265,831 | 638,285 | 4,498,139 | |||||||||
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OPERATING
LOSS
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(2,254,203 | ) | (569,968 | ) | (4,302,507 | ) | ||||||
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OTHER
INCOME (EXPENSE)
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Interest
income
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28,311 | 14 | 33,401 | |||||||||
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Other
income
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1,783 | -0- | 1,783 | |||||||||
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Interest
expense
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(966 | ) | -0- | (7,102 | ) | |||||||
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Stock
warrant expense
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-0- | (333,004 | ) | (2,745,280 | ) | |||||||
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TOTAL
OTHER INCOME (EXPENSE)
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29,128 | (332,990 | ) | (2,717,198 | ) | |||||||
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NET
LOSS
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$ | (2,225,075 | ) | $ | (902,958 | ) | $ | (7,019,705 | ) | |||
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WEIGHTED
AVERAGE NUMBER OF
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||||||||||||
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SHARES
OUTSTANDING
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12,503,083 | 13,475,000 | ||||||||||
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NET
LOSS PER SHARE
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$ | (0.18 | ) | $ | (0.07 | ) | ||||||
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
Consolidated Statement of Stockholders' Equity
as of September 30, 2009
(Unaudited)
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Deficit
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Accumulated
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||||||||||||||||||||||||||||||||
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Additional
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During
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Common
Stock
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Preferred
Stock
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Stock
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Paid-in
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Development
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Stockholders'
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|||||||||||||||||||||||||||
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Shares
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Amount
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Shares
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Amount
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Warrants
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Capital
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Stage
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Equity
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Balance,
January 1, 2007
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-0- | $ | -0- | -0- | $ | -0- | $ | -0- | $ | -0- | $ | 40,289 | $ | 40,289 | ||||||||||||||||||
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Member
contributions
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180,000 | 180,000 | ||||||||||||||||||||||||||||||
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Member
distributions
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(253,750 | ) | (253,750 | ) | ||||||||||||||||||||||||||||
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Issuance
of common stock
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to
former LLC members
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10,000,000 | 10,000 | (10,000 | ) | -0- | |||||||||||||||||||||||||||
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Issuance
of common stock,
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||||||||||||||||||||||||||||||||
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private
offering
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300,000 | 300 | 299,700 | 300,000 | ||||||||||||||||||||||||||||
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Net
loss
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(361,466 | ) | (361,466 | ) | ||||||||||||||||||||||||||||
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Balance,
December 31, 2007
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10,300,000 | 10,300 | -0- | -0- | -0- | 289,700 | (394,927 | ) | (94,927 | ) | ||||||||||||||||||||||
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Issuance
of common stock
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||||||||||||||||||||||||||||||||
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for
cash
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636,000 | 636 | 635,364 | 636,000 | ||||||||||||||||||||||||||||
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Outstanding
common stock
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||||||||||||||||||||||||||||||||
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prior
to reverse merger
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1,256,958 | 1,257 | (1,257 | ) | -0- | |||||||||||||||||||||||||||
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Common
stock issued
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||||||||||||||||||||||||||||||||
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for
services
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70,000 | 70 | 69,930 | 70,000 | ||||||||||||||||||||||||||||
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Issuance
of stock options
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333,004 | 333,004 | ||||||||||||||||||||||||||||||
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Issuance
of preferred stock
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||||||||||||||||||||||||||||||||
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less
issuance costs
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35 | -0- | 2,985,000 | 2,985,000 | ||||||||||||||||||||||||||||
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Stock
warrants issued
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14,160,000 | (4,311,741 | ) | (9,848,259 | ) | -0- | ||||||||||||||||||||||||||
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Stock
warrants issued
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||||||||||||||||||||||||||||||||
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for
services
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2,745,280 | 2,745,280 | ||||||||||||||||||||||||||||||
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Net
loss
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(4,248,853 | ) | (4,248,853 | ) | ||||||||||||||||||||||||||||
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Balance,
December 31, 2008
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12,262,958 | 12,263 | 35 | -0- | 16,905,280 | -0- | (14,492,039 | ) | 2,425,504 | |||||||||||||||||||||||
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Issuance
of common stock
|
||||||||||||||||||||||||||||||||
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for
services
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197,251 | 197 | 921,294 | 921,491 | ||||||||||||||||||||||||||||
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Conversion
of stock warrants
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||||||||||||||||||||||||||||||||
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to
common stock
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265,908 | 266 | (705,285 | ) | 705,019 | -0- | ||||||||||||||||||||||||||
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Net
loss
|
(2,225,075 | ) | (2,225,075 | ) | ||||||||||||||||||||||||||||
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Balance,
September 30, 2009
|
12,726,117 | $ | 12,726 | 35 | $ | -0- | $ | 16,199,995 | $ | 1,626,313 | $ | (16,717,114 | ) | $ | 1,121,920 | |||||||||||||||||
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
Consolidated Statements of Cash Flows for
the
Nine Months Ended September 30, 2009 and
2008 and
for the Period from January 31, 2006(Inception)
to September 30, 2009(Unaudited)
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Period
from
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||||||||||||
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inception
to
|
||||||||||||
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9/30/2009
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9/30/2008
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9/30/2009
|
||||||||||
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(unaudited)
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(unaudited)
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(unaudited)
|
||||||||||
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CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
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Net
loss
|
$ | (2,225,075 | ) | $ | (902,958 | ) | $ | (7,019,705 | ) | |||
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Adjustments
to reconcile net income to net cash
|
||||||||||||
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provided
by operating activities:
|
||||||||||||
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Depreciation
and amortization
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24,386 | 27,799 | 59,400 | |||||||||
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Stock
issued for services
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921,491 | -0- | 991,491 | |||||||||
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Compensation
expense for stock options
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-0- | 333,004 | 333,004 | |||||||||
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Stock
warrants issued for services
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-0- | -0- | 2,745,280 | |||||||||
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Changes
in:
|
||||||||||||
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Accounts
receivable
|
(4,892 | ) | -0- | (4,892 | ) | |||||||
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Prepaid
expenses
|
(7,514 | ) | 2,000 | (10,806 | ) | |||||||
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Loan
receivable
|
1,346 | -0- | -0- | |||||||||
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Accounts
payable
|
(160,083 | ) | (55,908 | ) | 11,781 | |||||||
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Accrued
expenses
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(41,933 | ) | 1,419 | -0- | ||||||||
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TOTAL
ADJUSTMENTS
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732,801 | 308,314 | 4,125,258 | |||||||||
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NET
CASH (USED BY)
|
||||||||||||
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OPERATING
ACTIVITIES
|
(1,492,274 | ) | (594,644 | ) | (2,894,447 | ) | ||||||
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CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
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Purchases
of property and equipment
|
-0- | (2,293 | ) | (16,888 | ) | |||||||
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Website
site development costs
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-0- | (26,875 | ) | (154,133 | ) | |||||||
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NET
CASH (USED BY)
|
||||||||||||
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INVESTING
ACTIVITIES
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-0- | (29,168 | ) | (171,021 | ) | |||||||
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CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
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Members
capital contributions
|
-0- | -0- | 404,600 | |||||||||
|
Issuance
of common stock
|
-0- | 635,000 | 936,000 | |||||||||
|
Issuance
of preferred stock
|
-0- | 2,985,000 | 2,985,000 | |||||||||
|
Payments
on loan payable
|
(4,000 | ) | (324,094 | ) | (647,750 | ) | ||||||
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Proceeds
from issuance of notes payable
|
-0- | -0- | 394,000 | |||||||||
|
NET
CASH PROVIDED BY (USED BY)
|
||||||||||||
|
FINANCING
ACTIVITIES
|
(4,000 | ) | 3,295,906 | 4,071,850 | ||||||||
|
NET
INCREASE (DECREASE) IN CASH
|
||||||||||||
|
AND
CASH EQUIVALENTS
|
(1,496,274 | ) | 2,672,094 | 1,006,382 | ||||||||
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CASH
AND CASH EQUIVALENTS - BEGIN OF PERIOD
|
2,502,656 | 135,429 | -0- | |||||||||
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
$ | 1,006,382 | $ | 2,807,523 | $ | 1,006,382 | ||||||
|
SUPPLEMENTAL CASH FLOW
INFORMATION:
|
||||||||||||
|
Cash
paid for interest
|
$ | 1,793 | $ | -0- | $ | 6,246 | ||||||
|
SUPPLEMENTAL DISCLOSURE OF
NONCASH
|
||||||||||||
|
INVESTING AND FINANCING
ACTIVITIES:
|
||||||||||||
|
Distributions
paid through issuance of notes
|
||||||||||||
|
payable-related
party
|
$ | -0- | $ | -0- | $ | 253,750 | ||||||
|
Conversion
of warrants to common stock
|
$ | 705,285 | $ | -0- | $ | 705,285 | ||||||
The accompanying notes are an integral part of these financial
statements.
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2009
|
1.
|
NATURE
OF BUSINESS
|
Optimizer
Systems, LLC was formed in the State of Michigan on January 31,
2006. It then became a corporation in the State of Michigan on
October 22, 2007 and changed its name to OptimizeRx Corporation. On
April 14, 2008, RFID, Ltd., a Colorado corporation, consummated a reverse merger
by entering into a share exchange agreement with the stockholders of OptimizeRx
Corporation, pursuant to which the stockholders of OptimizeRx Corporation
exchanged all of the issued and outstanding capital stock of OptimizeRx
Corporation for 1,256,958 shares of common stock of RFID, Ltd., representing
100% of the outstanding capital stock of RFID, Ltd. As of
April 30, 2008, RFID’s officers and directors resigned their positions and
RFID changed its business to OptimizeRx’s business. On April 15,
2008, RFID, Ltd.’s corporate name was changed to OptimizeRx Corporation. On
September 4, 2008, a migratory merger was completed, thereby changing the
state of incorporation from Colorado to Nevada, resulting in the current
corporate structure, in which OptimizeRx Corporation, a Nevada corporation, is
the parent corporation, and OptimizeRx Corporation, a Michigan corporation, is a
wholly-owned subsidiary (together, "OptimizeRx" and "the Company").
The
wholly-owned subsidiary, OptimizeRx Corporation, is a development stage website
publisher and marketing company that creates, promotes and fulfills custom
marketing and advertising programs. The Company helps 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.
|
2.
|
SUMMARY
OF 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 the
business have been considered as part of its development stage
activities. Revenues are recognized as income when earned and
expenses are recognized when they are incurred.
Continued...
F-6
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
Principles of
Consolidation
The
financial statements reflect the consolidated results of OptimizeRx Corporation
(a Nevada corporation) and its wholly owned subsidiary OptimizeRx Corporation (a
Michigan corporation). All material inter-company transactions have
been eliminated in the consolidation.
Cash and Cash
Equivalents
For
purposes of the accompanying financial statements, the Company considers all
highly liquid instruments with an initial maturity of three months or less to be
cash equivalents.
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 the Optimizer Systems, LLC.
Research and
Development
The
Company’s key members are part of a continual research development team and
monitor new technologies, trends, services and partnerships that can provide the
Company with additional services, value to healthcare and pharmaceutical
industries and to the patients it serves.
The
Company is currently in launch phase with ADHERxE to allow pharmaceutical and
healthcare manufacturers a unique way to engage and monitor patients each month
in exchange for activation of their next savings offer.
Continued…
F-7
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
Research and Development
(Continued)
The
Company seeks to educate team members through understanding of all market
dynamics that have the potential to affect the business both short term and
longer term. The primary goal is to help patients better afford and
access the medicines their doctor prescribes, as well as other healthcare
products and services they need. Based on this, the Company
continually seeks better ways to meet this mission through technology, better
user experiences and new ways to engage industries to provide new support for
patients needing their products. The Company is always seeking new
services and solutions to offer. At this time, the three current
platforms provide robust opportunities and growth during the next five
years.
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 these
estimates.
Recently Issued Accounting
Guidance
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company’s results of
operations, financial position or cash flow.
Concentration of Credit
Risks
The
Company maintains its cash and cash equivalents in bank deposit accounts, which,
at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts; however, amounts in excess of the
federally insured limit may be at risk if the bank experiences financial
difficulties.
Continued…
F-8
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
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 September 30,
2009 and September 30, 2008, respectively, since their effect is
anti-dilutive.
Basis of
Presentation
The
accompanying unaudited interim financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission (“SEC”), and
should be read in conjunction with the audited financial statements and notes
thereto contained in the Company’s Form 10-K filed with the SEC as of and for
the period ended December 31, 2008. In the opinion of management, all
adjustments necessary for the financial statements to be not misleading for the
interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the full year.
|
3.
|
PROPERTY
AND EQUIPMENT
|
The
Company and the LLC owned equipment recorded at cost which consisted of the
following:
|
9/30/09
|
12/31/08
|
|||||||
|
Computer
equipment
|
$ | 12,594 | $ | 12,594 | ||||
|
Furniture
and fixtures
|
4,294 | 4,294 | ||||||
|
Subtotal
|
16,888 | 16,888 | ||||||
|
Accumulated
depreciation
|
(2,884 | ) | (1,618 | ) | ||||
|
Property
and equipment, net
|
$ | 14,004 | $ | 15,270 | ||||
Depreciation
expense was $1,266 and $1,323 for the nine months ended September 30, 2009 and
the year ended December 31, 2008, respectively.
F-9
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
4.
|
WEBSITE
DEVELOPMENT COSTS
|
The
Company has capitalized costs in developing their website, which consisted of
the following:
|
9/30/09
|
12/31/08
|
|||||||
|
Website
costs
|
$ | 154,133 | $ | 154,133 | ||||
|
Accumulated
amortization
|
(56,516 | ) | (33,396 | ) | ||||
|
Website
development costs, net
|
$ | 97,617 | $ | 120,737 | ||||
The
Company began amortizing the website costs, using the straight-line method over
the estimated useful life of five years, once it was put into service in
December 2007.
Amortization
expense was $23,120 and $30,827 for the nine months ended September 30,
2009 and the year ended December 31, 2008, respectively.
|
5.
|
ACCRUED
EXPENSES
|
Accrued
expenses consisted of the following:
|
9/30/09
|
12/31/08
|
|||||||
|
Accrued
interest
|
$ | -0- | $ | 1,683 | ||||
|
Accrued
expenses
|
-0- | 6,159 | ||||||
|
Accrued
payroll taxes
|
-0- | 24,091 | ||||||
|
Accrued
audit fees
|
-0- | 10,000 | ||||||
|
Accrued
expenses
|
$ | -0- | $ | 41,933 | ||||
|
6.
|
NOTES
PAYABLE - RELATED PARTY
|
Notes
payable - related party consisted of the following:
|
9/30/09
|
12/31/08
|
|||||||
|
Note
payable - David Harrell
|
$ | -0- | $ | 4,000 | ||||
|
Less:
current portion
|
-0- | (4,000 | ) | |||||
|
Long-term
debt
|
$ | -0- | $ | -0- | ||||
The note
payable to David Harrell is due on demand, bears 9% interest and was paid off in
April 2009.
F-10
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
7.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company leases their offices for $2,500 a month and has signed a lease through
November 7, 2009 with an option for a six month renewal. The
option has not been exercised and the company will be on a month-to-month
rental.
|
September
30, 2010
|
$ | 5,000 | ||
|
Total
lease obligation
|
$ | 5,000 |
|
8.
|
DIVIDEND
DISTRIBUTION
|
The
Company recorded a one-time, non-cash deemed dividend on October 18, 2007 of
$33,461. This dividend resulted due to the continuous efforts of
acquiring all the assets from Optimizer Systems, LLC. Through this
dividend, the Company acquired all assets and liabilities of the
LLC.
|
9.
|
COMMON
STOCK
|
OptimizeRx
Corporation has 500,000,000 shares of $.001 par value common stock authorized as
of September 30, 2009. There were 12,726,117 and 12,262,958 common shares issued
and outstanding at September 30, 2009 and December 31, 2008,
respectively.
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.
During
2008, 636,000 shares of common stock were sold for
cash. Additionally, 197,251 and 70,000 shares were issued as
compensation for services during the nine months ended September 30, 2009 and
the year ended December 31, 2008, respectively. Included in operating
expenses at September 30, 2009 is $921,491 for the issuance of these 197,251
shares. There were 265,908 shares issued as a cashless exchange of
common stock warrants during the nine months ended September 30,
2009.
|
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 10% cumulative dividend. In addition, there was a warrant
issued to purchase 6,000,000 shares of common stock at an exercise price of $2
for a period of seven years.
Continued…
F-11
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
10.
|
PREFERRED
STOCK (CONTINUED)
|
The
holders of the preferred stock are entitled to semi-annual dividends payable on
the stated value of the Series A preferred stock at a rate of 10% per annum,
which shall be cumulative, and accrue daily from the issuance date. The
dividends may be paid in cash or shares of the Company's common stock at
management’s discretion. If after the conversion eligibility date,
the market price for the common stock for any ten consecutive trading days in
which the stock trades for over $2 per share and trading exceeds 100,000 shares
per day, the preferred shareholders can be required to convert their shares to
common stock. Each share of Series A preferred stock shall also be
convertible at the option of the holder into that number of shares of common
stock of the Company at the stated value of such share at a $1 conversion
price.
The
holder may cause this conversion at the time the shares are eligible for resale
by the holder. The conversion price is subject to adjustment as
hereinafter provided, at any time, or from time to time upon the terms and in
the manner hereinafter set forth in the shareholder agreement. The shares are
required to be redeemed on September 5, 2010. As of September 30,
2009, the cumulative dividend was $197,774; however, it has not yet been
declared.
|
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.
F-12
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
12.
|
STOCK
WARRANTS
|
During
the year ended December 31, 2008, OptimizeRx issued 6,000,000 common stock
warrants with an exercise price of $2 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 issued 1,059,500 common stock
warrants were issued in exchange for services. These warrants were
issued with exercise prices of either $1 or $2 and a term of five
years. The Black-Scholes method was used to value these warrants at
$2,745,280 and the warrants were expensed during 2008.
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.
During
the nine months ended September 30, 2009, the Company exchanged 173,000 common
stock warrants with an exercise price of $1 and 108,908 common stock warrants
with an exercise price of $2, for 265,908 shares of common stock in a cashless
exchange. This exchange has been reflected in the Stockholders'
equity for 2009.
|
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 Company paid $36,000
through September 30, 2008 and the expense is included in operating
expenses. 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 Company, 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 at December 31, 2008 that
was repaid during the nine months ended September 30, 2009.
F-13
OPTIMIZERx
CORPORATION
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER
30, 2009
|
14.
|
INCOME
TAXES
|
For the
nine months ended September 30, 2009, the Company incurred a net loss of
approximately $2,225,000 and therefore has no tax liability. The Company began
operations in 2007 and has previous net operating loss carry-forwards of
$1,513,000 through December 31, 2008. 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.
The
cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
|
9/30/09
|
12/31/08
|
|||||||
|
Deferred
tax asset attributable to:
|
||||||||
|
Net
operating loss carryover
|
$ | 2,269,000 | $ | 1,513,000 | ||||
|
Valuation
allowance
|
(2,269,000 | ) | (1,513,000 | ) | ||||
|
Net
deferred tax asset
|
$ | -0- | $ | -0- | ||||
|
15.
|
GOING
CONCERN
|
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has sustained
substantial losses since inception.
In view
of this matter, the ability of the Company to continue as a going concern is
dependent upon growth of revenues and the ability of the Company to raise
additional capital. Management believes that its successful ability
to raise capital and increases in revenues will provide the opportunity for the
Company to continue as a going concern.
|
16.
|
SUBSEQUENT
EVENTS
|
The
Company has analyzed its operations subsequent to September 30, 2009 through
November 23, 2009 and has determined that it does not have any material
subsequent events to disclose in these financial statements.
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates,
projections, statements relating to our business plans, objectives, and expected
operating results, and the assumptions upon which those statements are based,
are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of
1934. These forward-looking statements generally are identified
by the words “believes,” “project,” “expects,” “anticipates,” “estimates,”
“intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will
continue,” “will likely result,” and similar expressions. We intend
such forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and are including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements are based on
current expectations and assumptions that are subject to risks and uncertainties
which may cause actual results to differ materially from the forward-looking
statements. Our ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Factors which could have a
material adverse affect on our operations and future prospects on a consolidated
basis include, but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest rates,
competition, and generally accepted accounting principles. These risks and
uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
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.
Since our
formation, we have concentrated on developing our business strategy and
obtaining financing. We plan to expand awareness, traffic and database to our
Site, 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
Site 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
|
We plan
to generate revenues through: (i) advertising sales from our Site 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.
We have
acquired over a million members to date. Upon this, management has been
preparing and addressing all key issues to successfully serve and monetize the
membership database, including: content, procurement of advertising
sponsorships, technology and distribution. We originally planned to extend our
reach and visibility through increased online, print and broadcast marketing to
increase traffic and our database of qualified health care consumers. However,
with our current membership base, along with the short period of time since
acquiring the majority of our members and the sales cycle of attaining
sponsorship and industry advertising programs to this new asset, we have not
engaged in marketing to our database.
Management
continues to believe the OPTIMIZERx database will be a very significant,
on-going revenue stream over time. Currently we have over 10
advertising proposals pending to major pharmaceutical companies and agencies,
including Lilly, AstraZeneca, Publicis and Novartis.
The
company has aggressive plans to initiate advertising programs to its members in
the second half of the year. This includes leveraging our formalized partnership
with Cegedim Dendrite (www.cegedimdendrite.com), ValueClick Media
(www.valueclick.com) and Sudler & Hennessey (http://sudler.com/), a division
of WPP.
Results
of Operations for the Three and Nine Months Ended September 30, 2009 and
2008
Revenues
Our total
revenue reported for three months ended September 30, 2009 was $6,908, an
increase from $1,111 for the three months ended September 30,
2008. Our total revenue reported for nine months ended September 30,
2009 was $11,628, a decrease from $68,317 for the nine months ended September
30, 2008.
Operating
Expenses
Operating
expenses increased to $534,065 for the three months ended September 30, 2009
from $162,519 for the same period ended 2008. Our operating expenses for the
three months ended September 30, 2009 consisted mainly of advertising expenses
of $317,670, payroll of $122,889 and legal and accounting costs of
$60,724. Our operating expenses for the three months ended September
30, 2008 consisted primarily of general and administrative expenses of
$153,249.
Operating
expenses increased to $2,265,831 for the nine months ended September 30, 2009
from $638,285 for the same period ended 2008. Our operating expenses for the
nine months ended September 30, 2009 consisted mainly of consulting fees of
$799,105, advertising expenses of $634,523, payroll of $352,966, development
costs of $73,326 and legal and accounting costs of $86,350. Our
operating expenses for the nine months ended September 30, 2008 consisted
primarily of general and administrative expenses of $610,486.
Other
Income
Other
income was $4,950 for three months ended September 30, 2009 an increase from
other income of $0 for same period ended 2008. Other income was
$29,128 for nine months ended September 30, 2009 an increase from other expenses
of $332,990 for same period ended 2008. The other income for the
three and nine months ended September 30, 2009 is largely attributable to
interest income. The other expenses for the three months ended
September 30, 2008 is largely attributable to warrant based
compensation.
Net
Loss
Net loss
for the three months ended September 30, 2009 was $522,207, compared to net loss
of $161,408 for the same period 2008. Net loss for the nine months ended
September 30, 2009 was $2,225,075, compared to net loss of $902,958 for the same
period 2008.
Liquidity
and Capital Resources
As of
September 30, 2009, we had total current assets of $1,022,080 and total assets
in the amount of $1,133,701. Our total current liabilities as of September 30,
2009 were $11,781. We had working capital of $1,121,920 as of
September 30, 2009.
Operating
activities used $1,492,274 in cash for the nine months ended September 30, 2009.
Our net loss of $2,225,075 was the primary component of our negative operating
cash flow, offset mainly by $921,491 in stock issued for services. We had no
cash flows used by investing activities during the nine months ended September
30, 2009. We used $4,000 in cash flows in financing activities during
the nine months ended September 30, 2009, for payments on loans
payable.
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
September 30, 2009, there were no off balance sheet arrangements.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
A smaller
reporting company is not required to provide the information required by this
Item.
Item 4T. Controls and
Procedures
We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of September 30, 2009. This evaluation
was carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, Mr. David
Lester. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that, as of September 30, 2009, our disclosure
controls and procedures are effective. There have been no significant
changes in our internal controls over financial reporting during the quarter
ended September 30, 2009 that have materially affected or are reasonably likely
to materially affect such controls.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Limitations on the
Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may
deteriorate.
PART
II – OTHER INFORMATION
Item 1. Legal
Proceedings
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 1A: Risk Factors
A smaller
reporting company is not required to provide the information required by this
Item.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
In the
current quarter, we issued five-year warrants to purchase 450,000 shares of our
common stock at a strike price of $2.00 per share.
We also
issued 124,000 shares of our common stock 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 3. Defaults upon Senior
Securities
None
Item 4. Submission of Matters to a
Vote of Security Holders
No
matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the quarterly period ended
September 30, 2009.
Item 5. Other Information
None
Item 6. Exhibits
|
Exhibit
Number
|
Description
of Exhibit
|
SIGNATURES
In
accordance with the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
OptimizeRx
Corporation
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Date:
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November
23, 2009
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By: /s/David
Lester
David
Lester
Title: Chief
Executive Officer, Chief Financial Officer, and
Director
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