10-Q - OPRX - Equibles

UNITEDSTATES

SECURITIESAND EXCHANGE COMMISSION

Washington,DC 20549

FORM10-Q

☒Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Forthe quarterly period ended September 30, 2020

☐Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

Forthe transition period from ________ to ________

CommissionFile Number: 001-38543

OptimizeRxCorporation

(Exact

name of registrant as specified in its charter)

Nevada	26-1265381
(State or other jurisdiction<br><br> of <br><br><br> incorporation or organization)	(IRS Employer <br><br><br> Identification No.)

400Water Street, Suite 200

Rochester,MI, 48307

(Address

of principal executive offices)

248-651-6568

(Registrant’s

telephone number)

(Former

name, former address and former fiscal year, if changed since last report)

Indicate

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days Yes ☒ No

☐

Indicate

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant

to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that

the registrant was required to submit such files). Yes ☒ No ☐

Indicate

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“small reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐<br><br> Large accelerated filer	☐<br><br> Accelerated filer
☐ Non-accelerated<br><br> filer	☒ Smaller reporting<br><br> company
	☐ Emerging growth<br><br> company

an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

State

the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 15,108,646

common shares as of November 5, 2020.

Securities

registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock	OPRX	Nasdaq Capital Market

TABLEOF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
Item<br><br> 1:	Financial<br><br> Statements (unaudited)	1
Item<br><br> 2:	Management’s<br><br> Discussion and Analysis of Financial Condition and Results of Operations	13
Item<br><br> 3:	Quantitative<br><br> and Qualitative Disclosures About Market Risk	18
Item<br><br> 4:	Controls<br><br> and Procedures	18
	PART II – OTHER INFORMATION
Item<br><br> 1:	Legal<br><br> Proceedings	19
Item<br><br> 1A:	Risk<br><br> Factors	19
Item<br><br> 2:	Unregistered<br><br> Sales of Equity Securities and Use of Proceeds	19
Item<br><br> 3:	Defaults<br><br> Upon Senior Securities	20
Item<br><br> 4:	Mine<br><br> Safety Disclosure	20
Item<br><br> 5:	Other<br><br> Information	20
Item<br><br> 6:	Exhibits	20
	Signatures	21

PARTI - FINANCIAL INFORMATION

Item1. Financial Statements

Our

condensed consolidated financial statements included in this Form 10-Q are as follows:

Page<br><br><br> <br>Number
2	Condensed<br><br> Consolidated Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019 (unaudited);
3	Condensed<br><br> Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited);
4	Condensed<br><br> Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2020 (unaudited)
5	Condensed<br><br> Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2019 (unaudited)
6	Condensed<br><br> Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited);
7	Notes<br><br> to Condensed Consolidated Financial Statements (unaudited).

OPTIMIZERxCORPORATION

CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)

			December 31,<br><br> <br> 2019
ASSETS
Current<br><br> Assets
Cash<br><br> and cash equivalents	12,032,538		$	18,852,680
Accounts<br><br> receivable, net	13,332,552			7,418,025
Prepaid<br><br> expenses	1,867,590			871,043
Total<br><br> Current Assets	27,232,680			27,141,748
Property<br><br> and equipment, net	151,809			176,014
Other<br><br> Assets
Goodwill	14,740,031			14,740,031
Technology<br><br> assets, net	5,464,916			6,238,453
Patent<br><br> rights, net	2,388,320			2,550,587
Other<br><br> intangible assets, net	4,677,439			5,151,102
Right<br><br> of use assets, net	474,906			559,863
Other<br><br> assets and deposits	16,013			80,727
Total<br><br> Other Assets	27,761,625			29,320,763
TOTAL<br><br> ASSETS	55,146,114		$	56,638,525
LIABILITIES<br><br> AND STOCKHOLDERS’ EQUITY
Current<br><br> Liabilities
Accounts<br><br> payable – trade	480,502		$	492,995
Accrued<br><br> expenses	1,794,019			1,800,635
Revenue share<br><br> payable	3,642,088			1,618,438
Current<br><br> portion of lease obligations	121,583			115.431
Current<br><br> portion of contingent purchase price payable	1,610,813			1,500,000
Deferred<br><br> revenue	461,277			580,014
Total<br><br> Current Liabilities	8,110,282			6,107,513
Non-current<br><br> Liabilities
Lease<br><br> obligations, net of current portion	356,618			448,753
Contingent<br><br> purchase price payable, net of current portion	-			5,220,000
Total<br><br> Non-current Liabilities	356,618			5,668,753
Total<br><br> Liabilities	8,466,900			11,776,266
Commitments<br><br> and contingencies (See Note 8)	-			-
Stockholders’<br><br> Equity
Preferred<br><br> stock, 0.001 par value, 10,000,000 shares authorized, no issued and outstanding at September 30, 2020 or December 31, 2019	-			-
Common<br><br> stock, 0.001 par value, 500,000,000 shares authorized, 15,072,226 and 14,600,579 shares issued and outstanding at September<br><br> 30, 2020 and December 31, 2019, respectively	15,072			14,601
Additional<br><br> paid-in-capital	83,653,045			78,272,268
Accumulated<br><br> deficit	(36,988,903	)		(33,424,610	)
Total<br><br> Stockholders’ Equity	46,679,214			44,862,259
TOTAL<br><br> LIABILITIES AND STOCKHOLDERS’ EQUITY	55,146,114		$	56,638,525

All values are in US Dollars.

The

accompanying notes are an integral part of these condensed consolidated financial statements.

OPTIMIZERxCORPORATION

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For<br><br> the Three Months Ended						For<br><br> the Nine Months Ended
	September<br><br> 30,						September<br><br> 30,
	2020			2019			2020			2019
NET<br><br> REVENUE	$	10,519,191		$	5,002,767		$	26,887,022		$	17,218,492
COST<br><br> OF REVENUES		4,504,844			1,981,143			11,385,622			6,251,766
GROSS<br><br> MARGIN		6,014,347			3,021,624			15,501,400			10,966,726
OPERATING<br><br> EXPENSES		6,191,069			5,008,934			18,993,187			12,341,827
LOSS<br><br> FROM OPERATIONS		(176,722	)		(1,987,310	)		(3,491,787	)		(1,375,101	)
OTHER<br><br> INCOME (EXPENSE)
Interest<br><br> income		4,218			136,368			67,884			192,305
Change<br><br> in fair value of contingent consideration		(110,390	)		280,000			(140,390	)		25,000
TOTAL<br><br> OTHER INCOME (EXPENSE)		(106,172	)		416,368			(72,506	)		217,305
LOSS<br><br> BEFORE PROVISION FOR INCOME TAXES		(282,894	)		(1,570,942	)		(3,564,293	)		(1,157,796	)
PROVISION<br><br> FOR INCOME TAXES		-			-			-			-
NET<br><br> INCOME (LOSS)	$	(282,894	)	$	(1,570,942	)	$	(3,564,293	)	$	(1,157,796	)
WEIGHTED<br><br> AVERGE SHARES OUTSTANDING
BASIC		14,900,971			14,146,489			14,726,534			12,996,590
DILUTED		14,900,971			14,146,489			14,726,534			12,996,590
EARNINGS<br><br> (LOSS) PER SHARE
BASIC	$	(0.02	)	$	(0.11	)	$	(0.24	)	$	(0.09	)
DILUTED	$	(0.02	)	$	(0.11	)	$	(0.24	)	$	(0.09	)

The

accompanying notes are an integral part of these condensed consolidated financial statements.

OPTIMIZERxCORPORATION

CONDENSEDCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

FORTHE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

					Additional
	Common<br><br> Stock				Paid<br><br> in		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance<br><br> January 1, 2020		14,600,579	$	14,601	$	78,272,268	$	(33,424,610	)	$	44,862,259
Shares<br><br> issued for stock options exercised		35,032		35		112,117		-			112,152
Shares issued<br><br> as board compensation		11,136		11		99,989		-			100,000
Stock-based<br><br> compensation expense		-		-		754,512		-			754,512
Net<br><br> loss		-		-		-		(2,203,931	)		(2,203,931	)
Balance<br><br> March 31, 2020		14,646,747		14,647		79,238,886		(35,628,541	)		43,624,992
Shares<br><br> issued for stock options exercised		55,731		56		174,775		-			174,831
Shares issued<br><br> as board compensation		7,748		8		100,019		-			100,027
Stock-based<br><br> compensation expense		42,374		42		680,602		-			680,644
Net<br><br> loss		-		-		-		(1,077,468	)		(1,077,468	)
Balance<br><br> June 30, 2020		14,752,600		14,753		80,194,282		(36,706,009	)		43,503,026
Shares<br><br> issued for stock options exercised		198,024		198		1,044,899		-			1,045,097
Shares issued<br><br> as board compensation		5,915		6		124,978		-			124,984
Stock-based<br><br> compensation expense		21,186		21		631,432		-			631,453
Shares<br><br> issued for contingent purchase price and escrow hold back		94,501		94		1,657,454		-			1,657,548
Net<br><br> loss		-		-		-		(282,894	)		(282,894	)
Balance<br><br> September 30, 2020		15,072,226	$	15,072	$	83,653,045	$	(36,988,903	)	$	46,679,214

The

accompanying notes are an integral part of these condensed consolidated financial statements.

OPTIMIZERxCORPORATION

CONDENSEDCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

FORTHE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

					Additional
	Common<br><br> Stock				Paid<br><br> in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance<br><br> January 1, 2019		12,038,618	$	12,039	$	48,725,211		$	(30,278,805	)	$	18,458,445
Cumulative<br><br> effect of change in accounting principle related to lease accounting		-		-		-			(3,229	)		(3,229	)
Shares<br><br> issued for previous year restricted stock awards		130,001		130		(130	)		-			-
Shares<br><br> issued for stock options exercised		101,878		102		343,683			-			343,785
Shares issued<br><br> as board compensation		8,336		8		106,026			-			106,034
Stock-based<br><br> compensation expense		-		-		530,312			-			530,312
Net<br><br> income		-		-		-			6,529			6,529
Balance<br><br> March 31, 2019		12,278,833		12,279		49,705,102			(30,275,505	)		19,441,876
Public<br><br> offering of common shares for cash, net of offering costs		1,769,275		1,769		21,302,057			-			21,303,826
Shares<br><br> issued for stock options exercised		60,295		61		214,253			-			214,314
Shares issued<br><br> as board compensation		8,336		8		135,035			-			135,043
Stock-based<br><br> compensation expense		-		-		408,087			-			408,087
Net<br><br> income		-		-		-			406,617			406,617
Balance<br><br> June 30, 2019		14,116,739		14,117		71,764,534			(29,868,888	)		41,909,763
Shares<br><br> issued for stock options exercised		48,775		49		206,275			-			206,324
Shares issued<br><br> as board compensation		8,336		8		120,697			-			120,705
Stock-based<br><br> compensation expense		-		-		469,539			-			469,539
Net<br><br> loss		-		-		-			(1,570,942	)		(1,570,942	)
Balance<br><br> September 30, 2019		14,173,850	$	14,174	$	72,561,045		$	(31,439,830	)	$	41,135,389

The

accompanying notes are an integral part of these condensed consolidated financial statements.

OPTIMIZERxCORPORATION

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For<br><br> the Nine Months Ended <br> September 30,
	2020			2019
CASH<br><br> FLOWS FROM OPERATING ACTIVITIES:
Net<br><br> Loss	$	(3,564,293	)	$	(1,157,796	)
Adjustments<br><br> to reconcile net loss to net cash used in operating activities:
Depreciation,<br><br> amortization, and non-cash lease expense		1,563,883			745,928
Stock-based<br><br> compensation		2,066,609			1,407,938
Stock<br><br> issued as board compensation		325,011			361,782
Provision<br><br> for loss on accounts receivable		80,000			-
Change<br><br> in fair value of contingent consideration		140,390			(25,000	)
Changes<br><br> in:
Accounts<br><br> receivable		(5,994,527	)		(700,549	)
Prepaid<br><br> expenses and other assets		(931,833	)		(469,623	)
Accounts<br><br> payable		(12,493	)		184,464
Revenue share<br><br> payable		2,023,650			(240,329	)
Accrued<br><br> expenses and other liabilities		704,559			(772,953	)
Deferred<br><br> revenue		(118,737	)		505,279
NET<br><br> CASH USED IN OPERATING ACTIVITIES		(3,717,781	)		(160,859	)
CASH<br><br> FLOWS FROM INVESTING ACTIVITIES:
Purchase<br><br> of equipment		(45,254	)		(61,457	)
Purchase<br><br> of intangible assets		-			(1,000,000	)
NET<br><br> CASH USED IN INVESTING ACTIVITIES		(45,254	)		(1,061,457	)
CASH<br><br> FLOWS FROM FINANCING ACTIVITIES:
Proceeds<br><br> from issuance of common stock, net of commission costs		1,332,080			22,369,960
Expenses<br><br> related to issuance cost of common stock		-			(301,711	)
Payment<br><br> of contingent consideration		(4,389,187	)		-
NET<br><br> CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(3,057,107	)		22,068,249
NET<br><br> INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(6,820,142	)		20,845,933
CASH<br><br> AND CASH EQUIVALENTS – BEGINNING OF PERIOD		18,852,680			8,914,034
CASH<br><br> AND CASH EQUIVALENTS – END OF PERIOD	$	12,032,538		$	29,759,967
SUPPLEMENTAL<br><br> CASH FLOW INFORMATION:
Cash<br><br> paid for interest	$	-		$	-
Cash<br><br> paid for income taxes	$	-		$	-
Intangible<br><br> asset additions included in accounts payable	$	-		$	500,000
Acquisition<br><br> liabilities paid in common stock	$	1,550,000		$	-
Non-cash<br><br> effect of cumulative adjustments to accumulated deficit	$	-		$	3,229
Lease<br><br> liabilities arising from right of use assets	$	-		$	672,809

The

accompanying notes are an integral part of these condensed consolidated financial statements. ****

OPTIMIZERxCORPORATION

NOTESTO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE

1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

The

accompanying condensed consolidated financial statements include OptimizeRx Corporation and its wholly owned subsidiaries (collectively,

the “Company”, “we”, “our”, or “us”).

are a digital health company that provides communications solutions for life science companies, physicians and patients. Connecting

over half of healthcare providers in the U.S. and millions of patients through a proprietary network, the OptimizeRx digital

health platform helps patients afford and stay on medications. The platform unlocks new patient and physician touchpoints for

life science companies along the patient journey, from point-of-care, to retail pharmacy, through mobile patient engagement.

The

condensed consolidated financial statements for the three and nine months ended September 30, 2020 and 2019 are unaudited and

have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In

the opinion of management, all adjustments necessary to present fairly our consolidated financial position as of September 30,

2020, and our results of operations, changes in stockholders’ equity for the three and nine months ended September 30, 2020

and 2019 and the statements of cash flows for the nine months ended September 30, 2020 and 2019 have been made. Those adjustments

consist of normal and recurring adjustments. The condensed consolidated balance sheet as of December 31, 2019 has been derived

from the audited consolidated balance sheet as of that date.

Certain

information and note disclosures, including a detailed discussion about the Company’s significant accounting policies, normally

included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”)

have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with a reading

of the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31,

2019, as filed with the U.S. Securities and Exchange Commission on March 26, 2020.

operate in one reportable segment. The results of operations for the three and nine months ended September 30, 2020 are not necessarily

indicative of the results to be expected for the full year. Certain reclassifications have been made in the prior period’s

condensed consolidated financial statements to conform to the current period’s presentation.

NOTE

2 – NEW ACCOUNTING STANDARDS

Recentlyadopted

June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit

Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model that

requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including

but not limited to accounts receivable and available for sale debt securities. ASU 2016-13 was effective for the Company on January

1, 2020. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash

flows.

August 2019, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements

for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements and became effective for

the Company on January 1, 2020. The adoption of this standard did not have a material effect on our financial position, results

of operations, or cash flows.

OPTIMIZERxCORPORATION

NOTESTO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE

2 – NEW ACCOUNTING STANDARDS (continued)

January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.

ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test.

The second step measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with

the carrying amount of that goodwill. Under ASU 2017-04, a company will record an impairment charge based on the excess of a reporting

unit’s carrying amount over its fair value. ASU 2017-04 will be applied prospectively and is effective for annual or interim

goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual

goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard did not have a material

effect on our financial position, results of operations, or cash flows.

Notyet Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to improve consistent application and simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 15, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position, results of operations, or cash flows.

NOTE

3 – LEASES

have operating leases for office space in three multitenant facilities with lease terms greater than 12 months, which are recorded

as assets and liabilities on our balance sheet. These leases include our corporate headquarters, located in Rochester, Michigan,

a customer service facility in Cranbury, New Jersey, and a technical facility in Zagreb, Croatia. Certain leases contain renewal

options and, for the headquarters lease, we have assumed renewal. Lease-related assets, or right-of-use assets, are recognized

at the lease commencement date at amounts equal to the respective lease liabilities, adjusted for prepaid lease payments, initial

direct costs, and lease incentives received. Lease-related liabilities are recognized at the present value of the remaining contractual

fixed lease payments, discounted using our incremental borrowing rate. Amortization of the right of use assets is recognized as

non-cash lease expense on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Short

term lease costs include month to month leases in shared office space facilities, such as WeWork, or similar locations.

For

the three and nine months ended September 30, 2020, the Company’s lease cost consisted of the following components, each

of which is included in operating expenses within the Company’s condensed consolidated statements of operations:

	Three Months<br><br><br><br> Ended <br><br><br> September 30, <br> 2020		Nine Months<br><br><br><br> Ended <br><br><br> September 30, <br> 2020
Operating<br><br> lease cost	$	32,814	$	98,441
Short-term<br><br> lease cost (1)		36,002		116,817
Total<br><br> lease cost	$	68,816	$	215,258
(1)	Short-term lease<br><br> cost includes any lease with a term of less than 12 months.
---	---

OPTIMIZERxCORPORATION

NOTESTO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE

3 – LEASES (continued)

For

the three and nine months ended September 30, 2019, the Company’s lease cost consisted of the following components, each

of which is included in operating expenses within the Company’s condensed consolidated statements of operations:

	Three Months<br><br> <br><br>Ended <br> September 30, <br> 2019		Nine Months<br><br><br><br> Ended <br> September 30, <br> 2019
Operating lease cost	$	33,868	$	98,043
Short-term lease<br><br> cost (1)		11,771		30,663
Total lease cost	$	45,639	$	128,706
(1)	Short-term lease<br><br> cost includes any lease with a term of less than 12 months.
---	---

The

table below presents the future minimum lease payments to be made under operating leases as of September 30, 2020:

As<br><br> of September 30, 2020
2020<br><br> (a)	$	34,636
2021		140,367
2022		102,367
2023		99,209
2024		80,375
Thereafter		70,224
Total		527,177
Less:<br><br> imputed interest		48,977
Total<br><br> lease liabilities	$	478,200
(a)	For<br><br> the three-month period beginning October 1, 2020.
---	---

The

weighted average remaining lease term at September 30, 2020 for operating leases is 4.5 years and the weighted average discount

rate used in calculating the operating lease asset and liability is 4.5%. Cash paid for amounts included in the measurement of

lease liabilities was $105,267 and $94,105 for the nine months ended September 30, 2020 and 2019, respectively. Cash paid for

amounts included in the measurement of lease liabilities was $33,919 and $29,930 for the three months ended September 30, 2020

and 2019, respectively. For the three months ended September 30, 2020 and 2019, payments on lease obligations were $28,482 and

$27,134, respectively, and amortization on the right of use assets was $28,600 and $27,430, respectively. For the nine months

ended September 30, 2020 and 2019, payments on lease obligations were $87,599 and $79,071, respectively, and amortization on the

right of use assets was $84,957 and $80,022, respectively.

OPTIMIZERxCORPORATION

NOTESTO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE

4 – CONTINGENT PURCHASE PRICE PAYABLE

The

contingent purchase price payable relates to the acquisitions of CareSpeak Communications in 2018 and RMDY Health in 2019. The

CareSpeak contingent amount is based on the CareSpeak product line achieving certain revenue targets in 2019 and 2020. The revenue

target for 2019 was achieved and the revenue target for 2020 has been achieved as of September 30, 2020. The maximum amount payable

under the agreement is $3.0 million. A total of $1,389,187 has been paid so far in 2020 and the remaining balance of $1,610,813

is payable in early 2021 and is reflected as a short-term liability on the consolidated balance sheet.

The

RMDY Health contingent amount was based on that product line achieving certain revenue targets in 2020 and 2021. The minimum amount

payable under the agreement was $2.0 million and the maximum amount payable was $30 million. As of the acquisition date in 2019,

we estimated the contingent purchase price payable to be $3.72 million and recorded that amount in 2019. During the quarter ended

September 30, 2020, we reached an agreement with the RMDY Health shareholders to fix the liability at $3.75 million payable in

a combination of cash and stock. A total of $3.0 million was paid in cash and $750,000 in common stock. There is no further liability

to the former shareholders of RMDY Health as of September 30, 2020.

The

income statement includes a charge of $140,390 related to the change in fair value of the contingent consideration. There are

three components to this charge. The first is the $30,000 recorded as of June 30, 2020 to adjust the initial estimate of $3.72

million to $3.75 million. The second component relates to the payment in common stock. Under the terms of the agreement, the number

of shares to be issued was calculated based on a volume weighted average price. On the date of the agreement, the value of the

stock exceeded the volume weighted average price, so the difference was recorded as a change in the fair value. The third component

was a deferred payment related to potential claims, previously included in accrued expenses, that was payable either in stock

or cash of $800,000. We chose to make this payment in stock and the number of shares was also based on a volume weighted average

price. On the date of the agreement, the value of the stock exceeded the volume weighted average price, so the difference was

recorded as a change in the fair value. The change in the fair value of contingent consideration recorded in the quarter ended

September 30, 2020, was entirely related to the variance between the volume weighted average prices and actual price of the common

stock on the date of the agreement.

NOTE

5 – STOCKHOLDERS’ EQUITY

During the quarters ended September, 30, 2020, June 30, 2020, and March 31, 2020, we issued 198,024 shares, 55,731 shares, and 35,032 shares of our common stock, and received proceeds of $1,045,097, $174,831 and $112,152, respectively, in connection with the exercise of stock options under our 2013 incentive plan.

During the quarters ended September 30, 2019, June 30, 2019 and March 31, 2019, we issued 48,775 shares, 60,295 shares and 101,878 shares of our common stock, and received proceeds of $206,324, $214,314 and $343,785, respectively, in connection with the exercise of stock options under our 2013 incentive plan. We also issued 130,001 shares of our common stock in the quarter ended March 31, 2019 in connection with restricted stock awards awarded in 2018.

also issued 63,560 shares of our common stock in the nine months ended September 30, 2020 in connection with restricted stock

awards as described in more detail in Note 6 – Stock Based Compensation.

Our

Director Compensation Plan calls for issuance of shares of common stock each quarter to each independent director. In 2020, we

issued 11,136 shares valued at $100,000 in the quarter ended March 31, 2020, 7,748 shares valued at $100,027 in the quarter ended

June 30, 2020, and 5,915 shares valued at $124,984 in the quarter ended September 30, 2020. In 2019, we issued 8,336 shares each

quarter, valued at $106,034, $135,043 and $120,705 for the quarters ended March 31, June 30 and September 30, respectively.

During

the quarter ended June 30, 2019, in an underwritten primary offering, we issued 1,769,275 shares of our common stock for gross

proceeds of $23,000,575. In connection with this transaction, we incurred equity issuance costs of $1,696,749 related to payments

to the underwriter, advisors and legal fees associated with the transaction, resulting in net proceeds to our company of $21,303,826.

OPTIMIZERxCORPORATION

NOTESTO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE

6 – STOCK BASED COMPENSATION

We use the fair value method to account for stock-based compensation. We recorded $1,447,826 and $1,329,713 in compensation expense in the nine months ended September 30, 2020 and 2019, respectively, related to options issued under our 2013 incentive plan. This includes expense related to options issued in prior years for which the requisite service period for those options includes the current period as well as options issued in the current period. The fair value of these instruments was calculated using the Black-Scholes option pricing model. There is $1,603,417 of remaining expense related to unvested options to be recognized in the future over a weighted average remaining period of approximately 1.7 years. The total intrinsic value of outstanding options at September 30, 2020 was $22,611,933.

The

Company also recorded expense related to restricted stock awards of $618,783 and $78,225 for the nine months ended September 30,

2020 and 2019, respectively. As of September 30, 2020, there was $832,473 of remaining expense related to unvested restricted

stock awards to be recognized in the future related to 111,186 shares of restricted stock awards that were unvested at September

30, 2020. A total of 63,560 shares related to these restricted stock awards vested in 2020 and were issued during the nine months

ended September 30, 2020.

NOTE

7 – EARNINGS (LOSS) PER SHARE

The

following table sets forth the computation of basic and diluted loss per share.

	Three<br><br> Months Ended <br> September 30,						Nine<br><br> Months Ended<br> September 30,
	2020			2019			2020			2019
Numerator
Net<br><br> loss	$	(282,894	)	$	(1,570,942	)	$	(3,564,293	)	$	(1,157,796	)
Denominator
Weighted<br><br> average shares outstanding used in computing earnings per share
Basic		14,900,971			14,146,489			14,726,534			12,996,590
Diluted		14,900,971			14,146,489			14,726,534			12,996,590
Loss per<br><br> share
Basic	$	(0.02	)	$	(0.11	)	$	(0.24	)	$	(0.09	)
Diluted	$	(0.02	)	$	(0.11	)	$	(0.24	)	$	(0.09	)

calculation of diluted earnings per share is included as the effect of the calculation would be antidilutive. The number of common

shares potentially issuable upon the exercise of certain options that were excluded from the diluted loss per common share calculation

was 984,084 and 802,330 shares in the three and nine months ended September 30, 2020, respectively, related to options, and 111,186

shares related to restricted stock for the three and nine months ended September 30, 2020. This results in total shares excluded

from the calculation of 1,095,270 and 913,516 for the three and nine months ended September 30, 2020, respectively. Total shares

excluded from the calculation were 1,039,598 and 955,740 for the three and nine months ended September 30, 2019.

OPTIMIZERxCORPORATION

NOTESTO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE

8 – CONTINGENCIES

Litigation

The

Company is not currently involved in any legal proceedings

NOTE

9 – SUBSEQUENT EVENTS

October 2020, we received proceeds of $201,855 and issued 36,420 shares of common stock in conjunction with the exercise of stock

options.

accordance with ASC 855-10, we have analyzed events and transactions that occurred subsequent to September 30, 2020 through

the date these financial statements were issued and have determined that we do not have any other material subsequent events to

disclose or recognize in these financial statements.

Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-LookingStatements

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 effect 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, cybersecurity, 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

The

full extent of the impact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving

factors that we may not be able to accurately predict at the present time. In an effort to contain COVID-19 or slow its spread,

governments around the world have enacted various measures, including orders to close all businesses not deemed “essential,”

isolate residents to their homes or places of residence, and practice social distancing when engaging in essential activities.

We anticipate that these actions and the global health crisis caused by COVID-19 will negatively impact business activity across

the globe. While we have not observed any noticeable impact on our revenue related to these conditions in the recently completed

fiscal quarter, or through the date of this filing, we cannot estimate the impact COVID-19 will have in the future if business

and consumer activity decelerates across the globe.

March 2020, we enacted precautionary measures to protect the health and safety of our employees and partners. These measures include

closing all offices, having employees work from home, and eliminating virtually all travel. While having employees work from home

may have a negative impact on efficiency and may result in negligible increases in costs, it does not impact our ability to execute

on our contracts or deliver our core services. Our offices remain closed and we continue to prohibit travel through the date of

this filing and expect to continue operating in this fashion for the foreseeable future. Our customers provide essential services

in the healthcare industry and we believe that our digital communication technology is more important than ever in this environment.

However, our revenue often comes from advertising or marketing budgets, and in a sustained economic downturn, those categories

of spending may be cut.

will continue to actively monitor the situation and may take further actions that alter our business operations as may be required

by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers, partners

and stockholders. It is not clear what the potential effects any such alterations or modifications may have on our business, including

the effects on our customers, partners, or vendors, or on our financial results.

CurrentYear Company Highlights through October 2020

1.	Revenue was a record<br><br> $10.5 million in the third quarter of 2020, up 110% versus the same year-ago quarter.
2.	Revenue for the<br><br> nine months ended September 30, 2020 was $26.9 million, a 56% increase over the same period in 2019.
3.	Gross profit was<br><br> $6.0 million in the third quarter of 2020, up 99% as compared to the same year-ago quarter.
4.	Finalized an agreement<br><br> with a partner with a large Epic and Cerner footprint, bringing access to additional healthcare providers in a hospital setting.
5.	We launched a new<br><br> technology solution aimed at increasing speed to therapy for patients by providing timely access to enrollment forms for specialty<br><br> drugs within the provider workflow and we already have three active programs.
6.	We introduced TelaRep™,<br><br> a digital health tool that enables physicians to connect to pharmaceutical sales representatives via on-demand video consults<br><br> within a physician’s existing EHR workflow.
7.	We focused on the<br><br> process of converting our active clients to enterprise contracts covering multiple brands and products to further entrench<br><br> our longstanding relationships.
8.	We expanded our<br><br> Board of Directors, adding Greg Wasson, former President and CEO of Walgreens Boots Alliance, a veteran of the retail pharmacy<br><br> industry and a valuable and timely addition to our board as we look to enhance patient connectivity at the point-of-dispense.

Our

success in acquiring, integrating and expanding into new EHR/eRx platforms, as well as other direct to patient partners, continues

to grow as well. For the remainder of 2020, we expect to expand our reach to physicians, pharmacies and patients, and also increase

the utilization of our existing partners as they improve their workflow and provider reach. With the growth of both our pharmaceutical

products and our distribution network, we expect that our messaging solutions, as well as our patient engagement activities, will

continue to increase and show strong growth throughout the year.

Resultsof Operations for the Three and Nine Months Ended September 30, 2020 and 2019

Revenues

Our

total revenue reported for the three months ended September 30, 2020 was $10.5 million, an increase of 110% over the $5.0 million

from the same period in 2019. Our total revenue for the nine months ended September 30, 2020 was $26.9 million, an increase of

56% over the $17.2 million from the same period in 2019. The increased revenue in both periods resulted primarily from increases

in sales in our messaging products and patient engagement products, including from our acquisition of RMDY Health in 2019.

Costof Revenues

Our cost of revenue percentage, comprised primarily of revenue share expense, increased as a percentage of revenues in both the three and nine month periods ended September 30, 2020, as compared to the same periods in 2019, as set forth in the table below. This increase was a result of product mix. The 2019 nine-month period contained an unusually high percentage of launch assistance services and other nonrecurring revenue that was not subject to revenue share expense. As we have previously discussed, we expect our cost of revenues to decrease slightly in the fourth quarter.

	Three<br><br> Months Ended <br> September 30,						Nine<br><br> Months Ended <br> September 30,
	2020			2019			2020			2019
Cost<br><br> of Revenues %		42.9	%		39.6	%		42.3	%		36.3	%
Gross<br><br> Margin %		57.1	%		60.4	%		57.7	%		63.7	%

GrossMargin

reflected in the table above, our gross margin decreased in both 2020 periods from the prior year periods. As discussed under

cost of revenues above, we had an unusually favorable product mix in the nine-month 2019 period that had a positive impact on

our margin in 2019. Our gross margin for the full year of 2019 was 62.7%. Our gross margin was 57.3% in the first quarter of 2020,

improved to 58.0% in the second quarter, and declined to 57.1% in the third quarter. We expect our gross margin to improve in

the fourth quarter.

OperatingExpenses

Operating

expenses increased from $5.0 million for the three months ended September 30, 2019 to $6.2 million for the same period in 2020.

Operating expenses increased from $12.3 million for the nine months ended September 30, 2019 to $19.0 million for the same period

in 2020. Overall, the increase resulted from our efforts to expand our product line and build out our organization to establish

a strong base for current and future growth. The detail by major category is reflected in the table below.

	Three<br><br> Months Ended <br> September 30,				Nine<br><br> Months Ended <br> September 30,
	2020		2019		2020		2019
Salaries,<br><br> Wages, & Benefits	$	3,304,388	$	1,882,433	$	9,686,985	$	5,672,775
Stock-based<br><br> Compensation		756,437		590,244		2,391,620		1,769,720
Professional<br><br> Fees		199,262		525,284		871,564		899,915
Board<br><br> Fees		61,250		34,250		164,000		102,750
Investor<br><br> Relations		28,356		19,258		76,483		63,075
Consultants		196,396		81,411		492,116		176,911
Advertising<br><br> and Promotion		101,295		137,276		511,605		491,989
Depreciation,<br><br> Amortization, and Non-cash Lease Expense		523,420		320,055		1,563,883		745,928
Development<br><br> and Maintenance		578,054		1,034,281		1,707,670		1,432,390
Integration<br><br> Incentives		208,807		47,032		624,753		136,825
Office,<br><br> Facility, and Other		211,602		108,640		593,084		339,607
Travel<br><br> and Entertainment		21,802		228,770		309,424		509,942
Total<br><br> Operating Expenses	$	6,191,069	$	5,008,934	$	18,993,187	$	12,341,827

The

largest increases in operating expenses are related to salaries, wages, and benefits and other human resource related costs. Since

the beginning of the first quarter of 2019, we have significantly expanded our sales force, made an acquisition to expand our

product portfolio, and added to our product development, data, and finance teams. These new hires have established a strong basis

for significant future growth and have also resulted in increases in benefits, payroll taxes, and related travel. The increased

stock-based compensation results from the grant of new options and the increased number of team members. We expect salaries, wages,

& benefits, as well as stock-based compensation to remain at similar levels, or only increase slightly, for the balance of

the year. We expect travel expense to remain low for the balance of the year as a result of the COVID-19 pandemic.

Professional

fees in 2020 are similar to 2019 levels for the nine-month periods ended September 30. Professional fees in the quarter ended

September 30, 2020 were much less than the same period in 2019. The 2019 quarter included costs related to our acquisition of

RMDY Health.

Depreciation

and amortization increased because of the amortizable assets acquired in connection with our acquisition of RMDY in the fourth

quarter of 2019. Office, facility, and other expenses also increased as a result of the acquisition, which resulted in an additional

office location for us, as well as the normal increased costs associated with increased business activity.

Research,

development, and maintenance costs increased primarily because our efforts to expand and enhance our patient engagement platforms

and products, as well as integration costs related to the combination, improvement and optimization of IT systems.

Integration

and exclusivity costs represent payments to partners for access and/or exclusivity. These payments are usually made in lump sums

and expensed over the term of the contracts. These expenses are an important part of our ability to expand our network and increased

in 2020 as a result of new agreements signed.

The

purchase price allocations for both of our recent acquisitions included potential additional consideration to be paid if certain

revenue levels are achieved in 2019, 2020, and 2021. That liability is required to be adjusted to fair value each quarter. The

increase or decrease in the fair value of contingent consideration in 2019 related to our acquisition of CareSpeak Communications

in 2018. The maximum amount of potential contingent consideration related to CareSpeak was recorded as of December 31, 2019 and

we still expect the maximum amount to be paid. The increase in contingent consideration in 2020 relates to our acquisition of

RMDY Health, Inc. in 2019. The amount due under the RMDY agreement was finalized and paid in 2020, so there will be no future

adjustments to the contingent purchase payable.

All

other variances in the table above are the result of normal fluctuations in activity.

expect our overall operating expenses to continue at approximately the third quarter of 2020 level as we further implement our

business plan and expand our operations to grow the business in a very dynamic and active marketplace. However, we have established

a strong team as a base to support growth and we are seeing the results of the investment in our team last year in our strong

revenue growth this year. We do not expect human resource costs to increase as quickly as revenues.

NetIncome (Loss)

had a net loss of $0.3 million for the three months ended September 30, 2020, as compared to net loss of $1.6 million during the

same period in 2019, and down from the $2.2 million loss in the three months ended March 31, 2020 and the $1.1 million loss in

the three months ended June 30, 2020. We had a loss of approximately $3.6 million for the nine months ended September 30, 2020,

as compared to a net loss of approximately $1.2 million during the same period in 2019. The reasons and specific components associated

with the change are discussed above. Overall, the increased loss in the nine month period resulted from increased operating expenses

to support strong revenue growth throughout 2020 and beyond. That strong revenue growth resulted in a reduced loss in the three

months ended September 30, 2020.

Liquidityand Capital Resources

of September 30, 2020, we had total current assets of $27.2 million, compared with current liabilities of $8.1 million, resulting

in working capital of approximately $19.1 million and a current ratio of 3.4 to 1. This represents a slight decrease from our

working capital of approximately $21.0 million and current ratio of 4.4 to 1 at December 31, 2019.

Our

operating activities used approximately $3.7 in cash flow during the nine months ended September 30, 2020, compared with cash

used of approximately $0.2 million in the same period in 2019. This use of cash was primarily all in the first quarter. In the

2020 period, operating activities used $3.7 million in the first quarter, provided approximately $0.1 million in the quarter ended

June 30, 2020 and used approximately $0.1 million in the quarter ended September 30, 2020. The cash used in the 2020 period was

primarily the result of increased investment in working capital; in particular, we made a prepayment to a partner that accounts

for the bulk of the increase in prepaid expenses and will be expensed over the balance of the year as revenue is generated through

that channel. In addition, as a result of our strong revenue growth of 110% in the third quarter, our trade receivables increased

by $6.0 million, which was partially offset by increased revenue share of $2.0 million owed to our channel partners. Only a portion

of our revenue is subject to revenue share and the payment terms to our partners are different than the terms that we receive

from customers. While there is an indirect relationship between changes in accounts receivable and revenue share payable, they

are both dependent on product and customer mix and relative changes in a particular period are impacted by such factors.

This

increase in accounts receivable does not reflect on our customers’ ability to pay. Our customers are large multinational

companies and many dictate extended payment terms, but also offer discounts for quick payment. Since we have sufficient cash reserves,

we do not take advantage of the discounts, which translate to extremely high implied rates of interest. The cash used in the 2019

period was the result of our net loss during the period, offset by non-cash expenses.

used approximately $45,000 and $1.1 million in investing activities for the nine months ended September 30, 2020, and 2019, respectively.

These investments related to purchases of equipment, as well as investments in software to expand our network capabilities.

had a net use of cash in financing activities in the nine months ended September 30, 2020. This included proceeds from financing

activities of approximately $1.3 million related to the exercise of stock options offset by approximately $4.4 million in payments

related to contingent consideration. We had net proceeds of $22.1 million from financing activities during the nine months ended

September 30, 2019, primarily from a secondary offering of common stock in June 2019. There have been no proceeds from investment

offerings in 2020.

do not anticipate the need to raise additional capital in the short or long term for operating purposes or to fund our growth

plans. We are focused on growing our revenue, channel and partner network. However, as a company in a market that is active with

merger and acquisition activity, we may have opportunities, such as for acquisitions or strategic partner relationships, which

may require additional capital. We will assess these opportunities as they arise with the view of maximizing shareholder value.

CriticalAccounting Policies

December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management

Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the

portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or

complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our accounting policies are discussed in the footnotes to our financial statements included in our annual report on Form 10-K

for the year ended December 31, 2019; however, we consider our critical accounting policies to be those related to determining

the amount of revenue to be billed, the timing of revenue recognition, calculation of revenue share expense, stock-based compensation,

capitalization and related amortization of intangible assets, impairment of assets, and the fair value of liabilities.****

RecentlyIssued Accounting Pronouncements

June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit

Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model that

requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including

but not limited to accounts receivable and available for sale debt securities. ASU 2016-13 was effective for the Company on January

1, 2020. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash

flows.

August 2019, the FASB issued ASU 2019-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements

for Fair Value Measurement. ASU 2019-13 modifies the disclosure requirements on fair value measurements and became effective for

the Company on January 1, 2020. The adoption of this standard did not have a material effect on our financial position, results

of operations, or cash flows.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to improve consistent application and simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance. ASU 2019-12 is effective for annual and interim reporting periods beginning after December 12, 2020, with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position, results of operations, or cash flows.