UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2024

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

For the transition period from __________ to __________

Commission File Number: 001-38543

OptimizeRx Corporation

(Exact name of registrant as specified in its charter)

Nevada

26-1265381

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

260 Charles Street, Suite 302

Waltham, MA 02453

(Address of principal executive offices)

248-651-6568

(Registrant’s telephone number, including area code)

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

Securities registered under Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		OPRX		Nasdaq Capital Market

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 (§232.405 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If 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: 18,420,906 common shares as of November 8, 2024.

TABLE OF CONTENTS

		Page

	PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements (unaudited)	1
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4:	Controls and Procedures	26
	PART II — OTHER INFORMATION

Item 1:	Legal Proceedings	28
Item 1A:	Risk Factors	28
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3:	Defaults Upon Senior Securities	28
Item 4:	Mine Safety Disclosure	28
Item 5:	Other Information	28
Item 6:	Exhibits	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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

2		Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 (unaudited);
3		Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (unaudited);
4		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months September 30, 2024 and 2023 (unaudited);
6		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (unaudited);
7		Notes to Condensed Consolidated Financial Statements (unaudited).

OPTIMIZERX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data, unaudited)

	September 30, 2024			December 31, 2023
ASSETS
Current assets
Cash and cash equivalents	$	16,126		$	13,852
Accounts receivable, net of allowance for credit losses of $339 and $239 at September 30, 2024 and December 31, 2023, respectively		26,327			36,253
Taxes receivable		64			1,036
Prepaid expenses and other		4,389			3,190
Total current assets		46,906			54,331
Property and equipment, net		161			149
Other assets
Goodwill		70,869			78,357
Technology assets, net		8,383			9,013
Patent rights, net		5,685			6,185
Tradename and customer relationships, net		32,411			34,198
Operating lease right of use assets, net		422			573
Security deposits and other assets		362			568
Total other assets		118,132			128,894
TOTAL ASSETS	$	165,199		$	183,374
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	2,000		$	2,000
Accounts payable – trade		2,754			2,227
Accrued expenses		5,557			7,755
Revenue share payable		3,210			5,506
Current portion of lease liabilities		195			222
Deferred revenue		786			172
Total current liabilities		14,502			17,882
Non-current liabilities
Long-term debt, net		33,278			34,231
Lease liabilities, net of current portion		242			371
Deferred tax liabilities, net		2,712			4,337
Total liabilities		50,734			56,821
Commitments and contingencies (See note 12)
Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding at September 30, 2024 or December 31, 2023		—			—
Common stock, $0.001 par value, 166,666,667 shares authorized, 20,069,432 and 19,899,679 shares issued at September 30, 2024 and December 31, 2023, respectively		20			20
Treasury stock, $0.001 par value, 1,741,397 shares held at September 30, 2024 and December 31, 2023		(2	)		(2	)
Additional paid-in-capital		198,737			190,793
Accumulated deficit		(84,290	)		(64,258	)
Total stockholders’ equity		114,465			126,553
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	165,199		$	183,374

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

OPTIMIZERX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data, unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023

Net revenue	$	21,309		$	16,331		$	59,811		$	43,153
Cost of revenues, exclusive of depreciation and amortization presented separately below		7,862			6,531			22,456			18,094
Gross profit		13,447			9,800			37,355			25,059

Operating expenses
General and administrative expenses		13,425			12,886			43,971			39,162
Goodwill impairment		7,489			—			7,489			—
Depreciation and amortization		1,095			467			3,235			1,395
Total operating expenses		22,009			13,353			54,695			40,557
Loss from operations		(8,562	)		(3,553	)		(17,340	)		(15,499	)
Other income (expense)
Interest expense		(1,524	)		—			(4,597	)		—
Other income		38			—			113			—
Interest income		107			688			231			2,074
Total other income (expense), net		(1,379	)		688			(4,253	)		2,074
Loss before provision for income taxes		(9,941	)		(2,865	)		(21,593	)		(13,424	)
Benefit from income taxes		817			—			1,561			—
Net loss	$	(9,124	)	$	(2,865	)	$	(20,032	)	$	(13,424	)
Weighted average number of shares outstanding – basic		18,323,542			16,637,606			18,250,775			16,907,482
Weighted average number of shares outstanding – diluted		18,323,542			16,637,606			18,250,775			16,907,482
Loss per share – basic	$	(0.50	)	$	(0.17	)	$	(1.10	)	$	(0.79	)
Loss per share – diluted	$	(0.50	)	$	(0.17	)	$	(1.10	)	$	(0.79	)

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

OPTIMIZERX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

(in thousands, except share data, unaudited)

	Common Stock				Treasury Stock						Additional Paid in			Accumulated
	Shares		Amount		Shares			Amount			Capital			Deficit			Total

Balance January 1, 2024		19,899,679	$	20		(1,741,397	)	$	(2	)	$	190,793		$	(64,258	)	$	126,553

Stock based compensation expense
Options		—		—		—			—			1,353			—			1,353
Restricted stock		—		—		—			—			1,671			—			1,671
Issuance of common stock
For restricted stock units vested		22,200		—		—			—			(140	)		—			(140	)
Net loss		—		—		—			—			—			(6,900	)		(6,900	)

Balance March 31, 2024		19,921,879	$	20		(1,741,397	)	$	(2	)	$	193,677		$	(71,158	)	$	122,537

Stock based compensation expense
Options		—		—		—			—			1,149			—			1,149
Restricted stock		—		—		—			—			1,753			—			1,753
Issuance of common stock
For restricted stock units vested		140,028		—		—			—			(415	)		—			(415	)
Net loss		—		—		—			—			—			(4,008	)		(4,008	)

Balance June 30, 2024		20,061,907	$	20		(1,741,397	)	$	(2	)	$	196,164		$	(75,166	)	$	121,016

Stock based compensation expense
Options		—		—		—			—			992			—			992
Restricted stock		—		—		—			—			1,612			—			1,612
Issuance of common stock
For restricted stock units vested		7,525		—		—			—			(31	)		—			(31	)
Repurchase of common stock		—		—		—			—			—			—			—
Net loss		—		—		—			—			—			(9,124	)		(9,124	)

Balance September 30, 2024		20,069,432	$	20		(1,741,397	)	$	(2	)	$	198,737		$	(84,290	)	$	114,465

OPTIMIZERX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

(in thousands, except share data, unaudited)

	Common Stock				Treasury Stock						Additional Paid in			Accumulated
	Shares		Amount		Shares			Amount			Capital			Deficit			Total

Balance January 1, 2023		18,288,571	$	18		(1,214,398	)	$	(1	)	$	172,786		$	(46,692	)	$	126,111

Stock based compensation expense
Options		—		—		—			—			1,467			—			1,467
Restricted stock		—		—		—			—			2,914			—			2,914
Issuance of common stock
For options exercised		9,668		—		—			—			41			—			41
For restricted stock units vested		33,272		—		—			—			(170	)		—			(170	)
Net loss		—		—		—			—			—			(6,398	)		(6,398	)

Balance March 31, 2023		18,331,511	$	18		(1,214,398	)	$	(1	)	$	177,036		$	(53,090	)	$	123,964

Stock based compensation expense
Options		—		—		—			—			1,655			—			1,655
Restricted stock		—		—		—			—			1,848			—			1,848
Issuance of common stock
For options exercised		10,000		—		—			—			105			—			105
For restricted stock units vested		35,260		—		—			—			(73	)		—			(73	)
Repurchase of common stock						(526,999	)		(1	)		(7,522	)					(7,522	)
Net loss		—		—		—			—			—			(4,161	)		(4,161	)

Balance June 30, 2023		18,376,771	$	18		(1,741,397	)	$	(2	)	$	173,050		$	(57,251	)	$	115,815

Stock based compensation expense
Options		—		—		—			—			1,598			—			1,598
Restricted stock		—		—		—			—			1,608			—			1,608
Issuance of common stock																		—
For options exercised		—		—		—			—			—			—			—
For restricted stock units vested		10,149		—		—			—			(49	)		—			(49	)
Repurchase of common stock						—			—			—						—
Net loss		—		—		—			—			—			(2,865	)		(2,865	)

Balance September 30, 2023		18,386,920	$	18		(1,741,397	)	$	(2	)	$	176,207		$	(60,117	)	$	116,107

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

OPTIMIZERX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	For the Nine Months Ended September 30,
	2024			2023
OPERATING ACTIVITIES:
Net loss	$	(20,032	)	$	(13,424	)
Adjustments to reconcile net loss to net cash provided by (used in) provided by operating activities:
Depreciation and amortization		3,235			1,395
Stock-based compensation		8,530			11,090
Goodwill impairment		7,489			—
Deferred income taxes		(1,625	)		—
Bad debt expense		131			478
Amortization of debt issuance costs		547			—
Changes in:
Accounts receivable		9,795			838
Prepaid expenses and other assets		(1,200	)		(728	)
Accounts payable		527			(859	)
Revenue share payable		(2,296	)		(305	)
Accrued expenses and other liabilities		(1,997	)		509
Tax receivable		972			—
Deferred revenue		615			24
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		4,691			(982	)

INVESTING ACTIVITIES:
Purchase of property and equipment		(95	)		(82	)
Purchases of held-to-maturity investments		—			(162,778	)
Redemptions of held-to-maturity investments		—			165,089
Acquisition of intangible assets, including intellectual property rights		—			(4	)
Capitalized software development costs		(235	)		(1,561	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(330	)		664

FINANCING ACTIVITIES:
Cash paid for employee withholding taxes related to the vesting of restricted stock units		(587	)		(293	)
Proceeds from exercise of stock options		—			146
Repurchase of common stock		—			(7,522	)
Loan origination costs		—			(300	)
Repayment of long-term debt		(1,500	)		—
NET CASH USED IN FINANCING ACTIVITIES		(2,087	)		(7,969	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,274			(8,287	)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		13,852			18,209
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	16,126		$	9,923

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	4,081		$	—
ROU assets obtained in exchange for lease obligations	$	—		$	158
Cash paid for income taxes	$	—		$	—

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

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, 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”).

We are a digital health technology company enabling care-focused engagement between life sciences organizations, healthcare providers, and patients at critical junctures throughout the patient care journey. Connecting over two million U.S. healthcare providers and millions of their patients through an intelligent technology platform embedded within a proprietary point-of-care network, as well as mass digital communications channels, OptimizeRx helps life sciences organizations engage and support their customers.

The condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 have been prepared by us without audit 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 financial position at September 30, 2024, and our results of operations, changes in stockholders’ equity, and cash flows for the nine months ended September 30, 2024 and 2023, have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated balance sheet as of December 31, 2023, has been derived from the audited consolidated condensed balance sheet as of that date. We operate a single reporting segment and, accordingly, use our consolidated net income as our measure of profit and loss and it is not presented separately here.

Certain information and note disclosures, including a detailed discussion about the Company’s significant accounting policies, normally included in our annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with a reading of the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC on April 15, 2024 (“Form 10-K”).

The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for the full year.

On October 24, 2023, the Company acquired 100% of the issued and outstanding preferred and common stock of Healthy Offers, Inc., a Nevada corporation d/b/a Medicx Health (“Medicx Health”) - See Part II, Item 8. Financials Statements and Supplementary Data; Note 3 - Acquisitions in our Form 10-K for additional information regarding this transaction.

The following presents the pro forma consolidated statement of operations as if Medicx Health had been included in the consolidated results of the Company for the three and nine months ended September 30, 2023:

	Three Months Ended			Nine Months Ended
Pro-forma consolidated statement of operations	September 30,
Revenue	$	23,852		$	67,291
Net loss		(3,484	)		(18,141	)

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

These amounts have been calculated after applying the Company’s accounting policies, adjusting Medicx Health results to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2023, interest expense associated with the term loan and elimination of interest income on short-term investments that were used to fund the acquisition,

During the year ended December 31, 2023, the Company disposed of its non-core Access business - See Part II, Item 8. Financials Statements and Supplementary Data; Note 7 - Goodwill and Intangible Assets in our Form 10-K for additional information regarding this transaction. A pro forma statement of operations for the three and nine months ended September 30, 2024 is not presented for this transaction as the pro forma impacts were not material to the Company’s consolidated results.

Revenue presented in the pro forma financial consolidated statement of operations data above includes $1,088 and $4,169, respectively related to the Access and other non-core solutions for which no revenue was recorded in the three and nine months ended September 30, 2024 (see also the discussion under Net Revenues in Results of Operations for the three and nine months ended September 30, 2024 in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations).

Change in Accounting Estimate

In accordance with its policy, the Company periodically reviews the stand-alone selling prices of its performance obligations under Revenue from Contracts with Customers (“ASC Topic 606”) for use in allocating the contract prices. As a result, effective April 1, 2024, the Company updated the methodology for determining the value of program design and consulting services from the residual method to using an adjusted market assessment approach. The effect of this change in estimate was immaterial to the results for the three and nine months ended September 30, 2024, but may become material in future periods.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.

In addition to defining fair value, the disclosure requirements around fair value establish a fair value hierarchy for valuation inputs, which is expanded. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels, which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.

Level 2 – Inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. The Company’s stock options and warrants are valued using Level 3 inputs.

The Company’s carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and other current liabilities, approximate their fair values due to their short maturities.

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

In November 2023, the FASB issued ASU No. 2023-07 (“ASU 2023-07”), Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires annual and interim disclosures that are expected to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07.

In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09.

NOTE 3 – CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Cash equivalents include items almost as liquid as cash comprised of investments in AAA rated money market funds that invest in first-tier only securities, which primarily include domestic commercial paper and securities issued or guaranteed by the U.S. government or its agencies. We account for marketable equity securities in accordance with ASC 321-10, “Investments - Equity Securities”, as the shares have a readily determinable fair value quoted on the national stock exchange and are classified within Level 1 of the fair value hierarchy. At September 30, 2024 and December 31, 2023, we have recorded $8.2 million and none, respectively, of money market funds at approximate fair value.

NOTE 4 – CAPITALIZED SOFTWARE COSTS

The Company capitalizes certain development costs incurred in connection with software development for internal-use software platforms used in operations and for providing services to our customers. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized internal use software development costs are included in intangible assets and are amortized on a straight-line basis over the estimated useful life of the software platforms and are included in depreciation and amortization within operating expenses in the consolidated statements of operations. Amortization of capitalized internal use software expense for the three and nine months ended September 30, 2024 and 2023 was $91 and $233 and $48 and $143, respectively. The Company accumulates capitalizable costs related to current projects in a construction in process (“CIP”) software account, the balance of which was $217 and $696 at September 30, 2024 and December 31, 2023, respectively.

NOTE 5 – GOODWILL

The Company has a single reporting segment. The goodwill is related to the acquisitions of Medicx Health in 2023, EvinceMed in 2022, RMDY Health, Inc. in 2019 and CareSpeak Communications in 2018. Goodwill is not amortizable for financial statement purposes. Goodwill is tested for impairment at a reporting segment level at least annually, as of December 31, or on an interim basis if an event occurs or circumstances change (a “Triggering Event”).

During the third quarter of 2024, the Company experienced a Triggering Event due to a sustained decline in its stock price and overall market capitalization. Accordingly, the Company conducted a quantitative impairment test of its goodwill at September 30, 2024. The Company estimated the implied fair value of its goodwill using a combination of a market approach and income approach.

At September 30, 2024 and December 31, 2023, the carrying amounts of goodwill were $70.9 million and $78.4 million, respectively. A noncash charge of $7.5 million, representing the amount by which the Company’s book value exceeds its estimated fair value, was recorded as a goodwill impairment in the three months ended September 30, 2024.

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

NOTE 6 – LONG-TERM DEBT

On October 11, 2023, in connection with the acquisition of Medicx Health, we entered into a financing agreement that provided for a $40 million term loan (the “Term Loan”).

Long-term debt, net comprised the following at September 30, 2024 and December 31, 2023:

	September 30, 2024			December 31, 2023
Term Loan, due in 2027	$	36,790		$	38,290
Less: current portion		(2,000	)		(2,000	)
Less: unamortized issuance costs		(1,512	)		(2,059	)
Long-term debt, net	$	33,278		$	34,231

As of September 30, 2024, the Term Loan bears interest at 14.0%, with an effective rate of 16.1%, including the impact of the amortization of debt issuance costs of $182 and $547 for the three and nine months ended September 30, 2024, respectively.

On September 30, 2024, we entered into Amendment No. 2 to the financing agreement, which extended the test period for measurement of the leverage ratio and qualified cash measurements from September 30, 2024 to October 15, 2024.

As of September 30, 2024, the Company was in full compliance with the financial covenants associated with the Term Loan.

The Term Loan is repayable in quarterly installments, beginning December 31, 2023, equivalent to 1.25% or $0.5 million, of the original principal amount, with the outstanding unpaid principal and all accrued but unpaid interest due and payable on the earlier of (i) the fourth anniversary of the closing date of the Term Loan or (ii) the date on which the Term Loan is declared due and payable pursuant to the terms of the financing agreement.

In addition, the Company is required to make a mandatory prepayment on March 31, of each year, commencing with 2025, equivalent to Excess Cash Flow multiplied by a percentage factor of 25%, if the leverage ratio is 3.60 to 1.00 or less, 50% if the leverage ratio is greater than 3.60 to 1 or less than or equal; to 4.10 to 1.00 and 75%, if the leverage ratio is greater than 4.10 to 1.00. Excess Cash Flow is defined in the financing agreement as Consolidated EBITDA for the previous fiscal year less scheduled principal and interest payments, capital expenditure, cash taxes and any cash expenses/gains added back to net income in the calculation of Consolidated EBITDA, adjusted for any increase/decrease in working capital during the fiscal year.

Repayments of the Term Loan due under the terms of the financing agreement, including an estimate of the amount associated with the Excess Cash Flow calculation discussed above, for the remainder of the current and in each of the next three fiscal years are as follows:

As of September 30, 2024
2024 (remainder)	$	500
2025		2,000
2026		2,000
2027		32,290
	$	36,790

OPTIMIZERX CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, excepts share and per share data, unaudited)

NOTE 7 – LEASES

We had operating leases with terms greater than 12 months for office space in four multi-tenant facilities, which are recorded as Operating lease right-of-use assets and Operating lease liabilities.

For the three and nine months ended September 30, 2024 and 2023, the Company’s lease costs consist of the following components, each of which is included in operating expenses within the Company’s condensed consolidated statements of operations:

	Three months ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Operating lease cost	$	62	$	11	$	186	$	61
Short-term lease cost		1		19		2		27
Total lease cost	$	63	$	30	$	188	$	88

The table below presents the future minimum lease payments to be made under operating leases in each of the remainder of the current and next four fiscal years and thereafter:

As of September 30, 2024
2024 (remainder)	$	67
2025		188
2026		114
2027		67
2028		46
Thereafter		—
Total		482
Less: discount		45
Total lease liabilities	$	437

The weighted average remaining lease term at September 30, 2024 for the operating leases is 2.7 years, and the weighted average discount rate used in calculating the operating leases assets and liabilities is 6.96%. Cash paid for amounts included in the measurement of lease liabilities was $168 and $53 for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, payments on lease obligations were $193 and $60, respectively, and amortization on the right of use assets was $175 and $61, respectively.

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

NOTE 8 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company had 10,000,000 shares of preferred stock, $0.001 par value per share, authorized as of September 30, 2024. No shares were issued or outstanding in either 2024 or 2023.

Common Stock

The Company had 166,666,667 shares of common stock, $0.001 par value per share, authorized as of September 30, 2024. There were 18,328,035 and 18,158,282 shares of common stock outstanding, net of shares held in treasury of 1,741,397 at September 30, 2024 and December 31, 2023, respectively.

During each of the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024, no shares of our common stock were issued, and no proceeds were received in connection with the exercise of options under our 2013 Incentive Plan and our 2021 Equity Incentive Plan.

During the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024, 22,200, 140,028 and 7,525 shares of common stock, respectively, were issued in connection with the vesting of restricted stock units under our 2013 Incentive Plan and our 2021 Equity Incentive Plan. Some of the participants utilized a net withhold settlement method, in which shares were surrendered to cover payroll withholding taxes. Of the shares issued to participants during the nine months ended September 30, 2024, a total of 52,092 shares, valued at $585,571, were surrendered and subsequently cancelled.

During the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, the Company issued 9,668, 10,000 and 0 shares of our common stock and received proceeds of $40, $105 and $0, respectively, in connection with the exercise of options under our 2013 Incentive Plan.

During the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, the Company issued 33,272, 35,260 and 10,149 shares of common stock in connection with the vesting of restricted stock units under our 2013 Incentive Plan and our 2021 Equity Incentive Plan. 28,157 shares valued at $121 were surrendered in connection with the net withhold settlement method, and were subsequently cancelled.

Treasury Stock

During the quarter ended March 31, 2023, the Board authorized a share repurchase program, under which the Company could repurchase up to $15.0 million of its outstanding common stock. This stock repurchase authorization expired on March 12, 2024. There were no shares repurchased in 2024 prior to the expiration.

During the three and nine months ended September 30, 2023, the Company repurchased none and 526,999 shares of common stock, respectively, under this program for a total of $7,522, including commissions paid on repurchases. These shares were recorded as treasury shares using the par value method.

NOTE 9 – STOCK BASED COMPENSATION

On June 5, 2024, at the 2024 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the 2021 Equity Incentive Plan to increase the number of shares of common stock available for awards under the 2021 Equity Incentive Plan by 1,950,000 shares for a total of 4,450,000 shares.

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

Stock Options

The compensation expense related to options for the nine months ended September 30, 2024 and 2023 was $3,494 and $4,720, respectively. The fair value of these instruments was calculated using the Black-Scholes option pricing model. There is $4,115 of remaining expense related to unvested options to be recognized in the future over a weighted average period of 1.57 years. The total intrinsic value of outstanding options at September 30, 2024 was $8.

During 2022, the Company granted certain performance-based stock options, the expense for which will be recorded over time once the achievement of the performance is deemed probable. There was $8 and $16 in expense related to these options recorded during the three and nine months ended September 30, 2024.

Restricted Stock Units

The Company recorded $5,036 and $6,370 in compensation expense related to restricted stock units for the nine months ended September 30, 2024 and 2023, respectively. A total of $6,793 remains to be recognized at September 30, 2024 over a weighted average period of 1.6 years.

During 2022, the Company granted certain performance based restricted stock units, the expense for which will be recorded over time once the achievement of the performance is deemed probable. There was $8 and $16 in expense related to these restricted stock units recorded during the three and nine months ended September 30, 2024.

The director’s compensation program calls for the grant of restricted stock units with a one year vesting period. There was $591 and $541 included in the compensation expense discussed above related to director’s compensation for the periods ended September 30, 2024 and 2023, respectively.

NOTE 10 – REVENUES

Under ASC Topic 606, we record revenue when earned, rather than when billed. From time to time, we may record revenue based on our revenue recognition policies in advance of being able to invoice the customer, or we may invoice the customer prior to being able to recognize the revenue. Included in accounts receivable are unbilled amounts of $6,002 and $3,288 at September 30, 2024, and December 31, 2023, respectively. Amounts billed in advance of revenue recognition are presented as deferred revenue on the condensed consolidated balance sheets.

Revenues are primarily generated from content delivery activities in which the Company delivers financial, clinical, or brand messaging through a distribution network of ePrescribers and electronic health record technology providers (channel partners), directly to consumers, or from reselling services that complement the business. This content delivery for a customer is referred to as a program. Unless otherwise specified, revenue is recognized based on the selling price to customers. The Company’s contracts are generally less than one year and the primary performance obligation is delivery of messages, or content, but the contract may contain additional services. Additional services may include program design, which is the design of the content delivery program, set up, and reporting.

We consider set up and reporting services to be complimentary to the primary performance obligation and recognized through performance of the delivery of content. We consider program design and related consulting services to be performance obligations separate from the delivery of messages. Revenue is recognized at the point in time when the work product is delivered to the customer. The net contract balance for contracts in progress at September 30, 2024 and December 31, 2023, was $23,191 and $2,021, respectively. The outstanding performance obligations are expected to be satisfied during the year ended December 31, 2024.

In certain circumstances, the Company will offer sales rebates to customers based on spend volume. Rebates are contracted based on a quarterly or annual spend amount and on a volume threshold or tiered model. At the beginning of the year, the rebate percentage is estimated based on input from the sales team and analysis of prior year sales. Thereafter, the open contract balance for the customer is assessed quarterly to ensure the estimated rebate percentage being used for the rebate accrual remains reasonable. The estimated amount of variable consideration will be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. For the year ended 2023 and during the first nine months of 2024, there were two contracts with customers that included a rebate clause.

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

As the content is distributed through the platform and network of channel partners (a transaction), these transactions are recorded, and transaction revenue is recognized over time as the distributions occur. Revenue for transactions can be realized based on a price per message, a price per redemption, as a flat fee occurring over a period of time, or upon completion of the program, depending on the client contract. The Company recognizes setup fees that are required for integrating client offerings and campaigns into the rule-based content delivery system and network over the life of the initial program, based either on time, or units delivered, depending upon which is most appropriate in the specific situation. Should a program be cancelled before completion, the balance of set up revenue is recognized at the time of cancellation, as set up fees are nonrefundable. Additionally, the Company also recognizes revenue for providing program performance reporting and maintenance. This reporting revenue is recognized over time as the messages are delivered. Program design, which is the design of the content delivery program, and related consulting services are recognized as services are performed.

In some instances, we also resell messaging solutions that are available through channel partners that are complementary to the core business and client base. These partner specific solutions are frequently similar to our own solutions and revenue recognition for these programs is the same as described above. In instances where we sell solutions on a commission basis, net revenue is recognized based on the commission-based revenue split that we receive. In instances where we resell these messaging solutions and have all financial risk and significant operation input and risk, we record the revenue based on the gross amount sold and the amount paid to the channel partner as a cost of sales.

The Company has several signed contracts with customers for the distribution of messaging, or other services, which include payment in advance. The payments are not recorded as revenue until the revenue is earned under our revenue recognition policy. Deferred revenue was $786 and $172 as of September 30, 2024 and December 31, 2023, respectively. The contracts are all short term in nature and all revenue is expected to be recognized within 12 months, or less. The following is a summary of activity for the deferred revenue account for the nine months ended September 30:

	2024			2023
Balance January 1	$	172		$	164
Revenue recognized		(3,228	)		(2,444	)
Amount collected		3,961			3,015
Balance March 31	$	905		$	735
Revenue recognized		(1,853	)		(3,171	)
Amount collected		2,002			2,887
Balance June 30	$	1,054		$	451
Revenue recognized		(2,721	)		(3,043	)
Amount collected		2,453			2,780
Balance September 30	$	786		$	188

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

Disaggregation of Revenue

Consistent with ASC Topic 606, we have disaggregated our revenue by timing of revenue recognition. The majority of our revenue is recognized over time as solutions are provided. A small portion of our revenue related to program development, solution architect design, and other solutions is recognized at a point in time upon delivery to customers. A break down is set forth in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue recognized over time	$	20,441	$	14,815	$	54,189	$	40,421
Revenue recognized at a point in time		868		1,516		5,622		2,732
Total Revenue	$	21,309	$	16,331	$	59,811	$	43,153

Accounts receivable are reported at realizable value, net of allowances for credit losses, which is estimated and recorded in the period the related revenue is recorded. The Company does not seek collateral to secure its accounts receivable and amounts billed are generally due within a short period of time based on terms and conditions normal for our industry. The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for credit losses. In addition, the Company regularly assesses the state of its billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates. If current or expected future economic trends, events, or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due receivable balances are written off when the Company’s collection efforts have been exhausted.

The following is a summary of changes in the allowance for credit losses for the nine months ended September 30,:

	2024			2023
Balance at January 1,	$	239		$	352
Bad debt expense		132			128
Write-offs		—			—
Balance at March 31,	$	371		$	480
Bad debt expense		—			111
Write-offs		—			—
Balance at June 30,	$	371		$	591
Bad debt expense		(1	)		239
Write-offs		31			9
Balance at September 30,	$	339		$	821

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

Related Party Transactions

Related party transactions include transactions between the Company and its shareholders, management, or affiliates. The following transactions were in the normal course of operations and were measured and recorded at the exchange amount, which is the amount of consideration established and agreed to by the parties. During the three months ended September 30, 2024 we sold to Eversana and LifeMD resulting in $0.2 million recognized revenue where one or more of our executive officers or members of our Board of Directors were, during the periods presented, an executive officer or a board member. All of the related party transactions were made at current market rates.

NOTE 11 – LOSS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.

The number of shares related to options and restricted stock units included in diluted EPS is based on the “Treasury Stock Method” prescribed in ASC 260-10, Earnings per Share. This method assumes the theoretical repurchase of shares using proceeds of the respective stock options exercised, and for restricted stock units, the amount of compensation cost attributed to future services which have not yet been recognized, and the amount of current and deferred tax benefit, if any, that would be credited to additional paid in capital upon the vesting of the restricted stock units, at a price equal to the issuer’s average stock price during the related earnings period. Accordingly, the number of shares that could be included in the calculation of EPS in respect of the stock options and restricted stock units is dependent on this average stock price and will increase as the average stock price increases.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Numerator
Net loss	$	(9,124	)	$	(2,865	)	$	(20,032	)	$	(13,424	)

Denominator
Weighted average shares outstanding used in computing net loss per share
Basic		18,323,542			16,637,606			18,250,775			16,907,482
Effect of dilutive stock options, warrants, and stock grants		—			—			—			—
Diluted		18,323,542			16,637,606			18,250,775			16,907,482

Net loss per share
Basic	$	(0.50	)	$	(0.17	)	$	(1.10	)	$	(0.79	)
Diluted	$	(0.50	)	$	(0.17	)	$	(1.10	)	$	(0.79	)

The number of common shares potentially issuable upon the exercise of certain options and the vesting of certain restricted stock units that were excluded from the diluted loss per common share calculation are reflected in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
Weighted average number of shares for the periods ended	2024		2023		2024		2023
Options		2,645		7,433		8,850		17,736
Unvested restricted stock unit awards		73,938		3,739		138,074		23,341
Total		76,583		11,172		146,924		41,077

OPTIMIZERX CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, excepts share and per share data, unaudited)

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are currently not a party to any material legal or administrative proceedings, and we are not aware of any pending or threatened material legal or administrative proceedings against us.

Commitments

From time to time, the Company enters into arrangements with partners to acquire minimum amounts of media, data or messaging capabilities. As of September 30, 2024, the Company had commitments for future minimum payments of $16.7 million that will be reflected in cost of revenues during the years from 2024 through 2028. Minimum payments are due in the remainder of 2024 and fiscal 2025, 2026, 2027 and 2028 in the amounts of $1.8 million, $8.8 million, $3.6 million, $2.4 million and $0.1 million, respectively.

NOTE 13 – INCOME TAXES

The Company reported a benefit from income taxes of $817 and $1,561 for the three and nine months ended September 30, 2024, representing an effective tax rate of 8.2% and 7.2%. The effective tax rate for the three and nine months ended September 30, 2024 reflects the impact of certain permanent items, projected increases in our valuation allowance during the year and discrete items for the quarter related to stock based compensation.

There was no provision for or benefit from taxes in the three and nine months ended September 30, 2023, as we carried a full valuation allowance against our net deferred tax assets due to our history of losses.

As discussed in our annual report on Form 10-K for the year ended December 31, 2023, we had net operating loss carry-forwards for federal income tax purposes of approximately $16.7 million as of December 31, 2023.

NOTE 14 – SUBSEQUENT EVENTS

Subsequent to September 30, 2024, we made a voluntary principal payment of $2 million on our Term Loan balance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that relate to future events and expectations and, as such, constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements, other than purely historical information, including estimates, projections, statements relating to our strategies, outlook, business and financial prospects, business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” 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.

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. Forward-looking statements are not guarantees of future performance. Although OptimizeRx believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, these expectations may not be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and changes in circumstances, many of which are beyond OptimizeRx’s control.

Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including: our history of losses, seasonal trends in the pharmaceutical brand marketing industry; the inability to support our technology and scale our operations successfully, developing and implementing new and updated applications, features and services for our solutions may be more difficult and expensive and take longer than expected; the inability to offer high-quality customer support for our solutions; dependence on a concentrated group of customers; inability to maintain contracts with electronic prescription platforms, agreements with electronic prescription platforms and electronic health record systems being subject to audit; inability to attract and retain customers; inability to comply with laws and regulations that affect the healthcare industry; competition; developments in the healthcare industry; inability to manage growth; inability to identify suitable acquisition targets, complete acquisitions, or integrate acquisitions successfully; acquisition activities may disrupt ongoing business and may involve increased expenses; inability to realize the financial and strategic goals contemplated at the time of a transaction; inability to realize any synergies or other anticipated benefits of an acquisition or that such synergies or benefits may take longer than anticipated to be realized; risk that the integration with an acquired entity may be more costly or difficult than expected; impairment charges for goodwill or other intangible assets may be increased as we shift our focus away from our non-core businesses; inability to comply with the restrictions in our credit agreement; inability to generate sufficient cash to service debt and fund other obligations; inability to attract and retain senior management and other key employees; economic, political, regulatory and other risks arising from our international operations; inability to protect our intellectual property; cybersecurity incidents; reduction in the performance, reliability and availability of our network infrastructure; increases in costs due to inflation and other adverse economic conditions; decreases in customer demand due to macroeconomic factors; lack of a consistent active trading market for our common stock; volatility in the market price of our common stock; and the failure to remediate the identified material weakness or any other material weaknesses identified in the future.

The risks and uncertainties included here are not exhaustive. 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, including our Annual Report on Form 10-K for the year ended December 31, 2023. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.

Further, it is not possible to assess the effect of all risk factors on our businesses or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this report.

Overview

We are a digital health technology company enabling care-focused engagement between life sciences organizations, healthcare providers, and patients at critical junctures throughout the patient care journey. Connecting over two million U.S. healthcare providers and millions of their patients through an intelligent omnichannel technology platform embedded within a proprietary point-of-care network, as well as mass digital communications channels, OptimizeRx helps life sciences organizations engage and support their customers.

Historically, our revenue was generated primarily through the facilitation of various types of messages to health care providers via their EHR systems and ERx platforms using the OptimizeRx proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives and healthcare providers that have presented in the rapidly changing healthcare industry. Over time, the demand for different types of communication and marketing solutions among life sciences organizations, healthcare providers, and patients led us to expand upon our initial solutions to increase the variety of health-related information we deliver, as well as the platforms, technology, media distribution channels, and audiences through and to which we deliver. In addition, the October 2023 acquisition of Medicx Health provided the Company with a significant footprint for direct-to-consumer healthcare marketing. Today, we offer diverse tech-enabled marketing solutions through our AI-generated DAAP, using sophisticated machine-learning algorithms to find the best audiences in the correct channels at the right time. Customers are able to execute traditional marketing campaigns on our proprietary digital point-of-care network, as well as dynamic marketing campaigns that optimize audiences in real time to increase the value of treatment information for healthcare professionals and patients in response to clinical care events. We employ a “land and expand” strategy focused on growing our existing client base and generating greater and more consistent revenues in part through the continued shift in our business model toward enterprise level engagements, while also broadening our omnichannel network. Our strategy for driving revenue growth is also expected to work in tandem with our efforts to increase margin and profitability as revenue drivers such as DAAP have inherently higher margins than most other messaging solutions we offer.

Customer Concentration

Because the pharmaceutical industry is dominated by large companies with multiple brands, our revenue is concentrated in a relatively small number of companies. We have approximately 100 pharmaceutical companies as customers, and our revenues are concentrated in these customers. Loss of one of more of our larger customers could have a negative impact on our operating results. Our top five customers represented approximately 44% and 39% of our revenue for the years ended December 31, 2023 and December 31, 2022, respectively. In each of 2023 and 2022, we had one customer that each represented more than 10% of our revenues.

Seasonality

In general, the pharmaceutical brand marketing industry experiences seasonal trends that affect the vast majority of participants in the pharmaceutical digital marketing industry. Many pharmaceutical companies allocate the largest portion of their brand marketing to the fourth quarter of the calendar year. As a result, the first quarter tends to reflect lower activity levels and lower revenue, with gradual increases in the following quarters. We generally expect these seasonality trends to continue and our ability to effectively manage our resources in anticipation of these trends may affect our operating results.

Impact of Macroeconomic Events

Unfavorable conditions in the economy may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including volatility of inflation and interest rates have led to economic uncertainty. In addition, high levels of employee turnover across the pharmaceutical industry as well as a fewer number of U.S. drug approvals could create additional uncertainty within our target customer markets. Historically, during periods of economic uncertainty and downturns, businesses may slow spending, which may impact our business and our customers’ businesses. Adverse changes in demand could impact our business, collection of accounts receivable and our expected cash flow generation, which may adversely impact our financial condition and results of operations.

Key Performance Indicators

We monitor the following key performance indicators to help us evaluate our business, measure our performance, identify trends affecting our business and make strategic decisions. We have updated the definition of “top 20 pharmaceutical manufacturers” in our key performance indicators to be based upon Fierce Pharma’s most updated list of “The top 20 pharma companies by 2023 revenue”. We previously used “The top 20 pharma companies by 2022 revenue”. As a result of this change, prior periods have been restated for comparative purposes.

Average revenue per top 20 pharmaceutical manufacturer. Average revenue per top 20 pharmaceutical manufacturer is calculated by taking the total revenue the Company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2023 revenue” over the last twelve months, divided by the total number of the aforementioned pharmaceutical manufacturers that our solutions helped support over that time period. The Company uses this metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical and believe it also provides investors with a transparent way to chart our progress in penetrating this important customer segment. The increase in the average in twelve months ended September 30, 2024 as compared to the twelve months ended September 30, 2023 is primarily the result of stronger DAAP related revenue streams and the Company’s October 2023 acquisition of Medicx Health, which added to 2024 revenues and was not included in the 2023 amounts (in thousands).

	Rolling Twelve Months Ended September 30,
	2024		2023
Average revenue per top 20 pharmaceutical manufacturer	$	2,824	$	1,902

Percent of top 20 pharmaceutical manufacturers that are customers. Percent of top 20 pharmaceutical manufacturers that are customers is calculated by taking the number of revenue generating customers that are pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2023 revenue” over the last 12 months, which is then divided by 20 - which is the number of pharmaceutical manufacturers included in the aforementioned list. The Company uses this metric to monitor its progress in penetrating key customers within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment. Our penetration within this core customer group stayed consistent from the twelve months ended September 30, 2023 to the twelve months ended September 30, 2024.

	Rolling Twelve Months Ended September 30,
	2024			2023
Percent of top 20 pharmaceutical manufacturers that are customers		100	%		100	%

Percent of total revenue attributable to top 20 pharmaceutical manufacturers. Percent of total revenue attributable to top 20 pharmaceutical manufacturers is calculated by taking the total revenue the Company recognized through pharmaceutical manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2023 revenue” over the last twelve months, divided by our consolidated revenue over the same period. The Company uses this metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating this important customer segment.

	Rolling Twelve Months Ended September 30,
	2024			2023
Percent of total revenue attributable to top 20 pharmaceutical manufacturers		64	%		61	%

Net revenue retention. Net revenue retention is a comparison of revenue generated from all customers in the previous twelve-month period to total revenue generated from the same customers in the following twelve-month period (i.e., excludes new customer relationships for the most recent twelve-month period). The Company uses this metric to monitor its ability to improve its penetration with existing customers and believes it also provides investors with a metric to chart our ability to increase our year-over-year penetration and revenue with existing customers. The retention rate in the twelve months ended September 30, 2024 was higher due to increased adoption of DAAP year over year as well as the acquisition of Medicx Health in the fourth quarter of 2023.

	Rolling Twelve Months Ended September 30,
	2024			2023
Net revenue retention		127	%		93	%

Revenue per average full-time employee. We define revenue per average full-time employee (“FTE”), as total revenue over the last twelve months divided by the average number of employees over the last twelve months (i.e., the average between the number of FTEs at the end of the reported period and the number of FTEs at the end of the same period of the prior year). The Company uses this metric to monitor the productivity of its workforce and its ability to scale efficiently over time and believes the metric provides investors with a way to chart our productivity and scalability. Our revenue rate per employee increased year over year due to revenue growing at a higher rate than the average number of FTEs over the last 12 month period (in thousands).

	Rolling Twelve Months Ended September 30,
	2024		2023
Revenue per average full-time employee	$	630	$	568

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

The following tables sets forth, for the periods indicated, the dollar value and percentage of net revenue represented by certain items in our consolidated statements of operations (in thousands):

Three Months Ended September 30,

SEC Form 10-Q filed by OptimizeRx Corporation