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OPRX OptimizeRx

Filed: 9 Nov 21, 4:12pm

 

 

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, 2021

 

or

 

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.)

 

400 Water 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)

 

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

  

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, 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: 17,769,544 common shares as of November 5, 2021.

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page 
   
 PART I – FINANCIAL INFORMATION1
   
Item 1:Financial Statements (unaudited)1
Item 2:Management’s Discussion and Analysis of Financial Condition and Results of Operations14
Item 3:Quantitative and Qualitative Disclosures About Market Risk19
Item 4:Controls and Procedures19
   
 PART II – OTHER INFORMATION20
   
Item 1:Legal Proceedings20
Item 1A:Risk Factors20
Item 2:Unregistered Sales of Equity Securities and Use of Proceeds20
Item 3:Defaults Upon Senior Securities20
Item 4:Mine Safety Disclosure20
Item 5:Other Information20
Item 6:Exhibits21

  

i

 

  

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

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

 

Page

Number

 
2Condensed Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020 (unaudited);
3Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited);
4Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 (unaudited)
5Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2020 (unaudited)
6Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited);
7Notes to Condensed Consolidated Financial Statements (unaudited).

 

1

 

  

OPTIMIZERx CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

  

  September 30,
2021
  December 31,
2020
 
       
ASSETS      
Current Assets      
Cash and cash equivalents $85,056,578  $10,516,776 
Accounts receivable, net  20,747,529   17,885,705 
Prepaid expenses  2,564,711   4,456,611 
Total Current Assets  108,368,818   32,859,092 
Property and equipment, net  130,863   148,854 
Other Assets        
Goodwill  14,740,031   14,740,031 
Technology assets, net  4,784,771   5,251,822 
Patent rights, net  2,205,550   2,349,570 
Other intangible assets, net  4,045,890   4,519,552 
Right of use assets, net  362,024   445,974 
Other assets and deposits  12,859   12,859 
Total Other Assets  26,151,125   27,319,808 
TOTAL ASSETS $134,650,806  $60,327,754 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable – trade $771,645  $618,250 
Accrued expenses  2,460,248   2,420,361 
Revenue share payable  3,891,091   4,969,868 
Current portion of lease obligations  101,063   123,220 
Current portion of contingent purchase price payable  -   1,610,813 
Deferred revenue  348,405   285,795 
Total Current Liabilities  7,572,452   10,028,307 
Non-current Liabilities        
Lease obligations, net of current portion  260,614   325,533 
Total Non-current Liabilities  260,614   325,533 
Total Liabilities  7,833,066   10,353,840 
Commitments and contingencies (See Note 8)  -   - 
Stockholders’ Equity        
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no issued and outstanding at September 30, 2021 or December 31, 2020  -   - 
Common stock, $0.001 par value, 166,666,667 shares authorized, 17,727,769 and 15,223,340 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively  17,728   15,223 
Additional paid-in-capital  162,677,132   85,590,428 
Accumulated deficit  (35,877,120)  (35,631,737)
Total Stockholders’ Equity  126,817,740   49,973,914 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $134,650,806  $60,327,754 

 

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

 

2

 

  

OPTIMIZERx CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

    

  For the Three Months Ended  For the Nine Months Ended 
  September 30,  September 30, 
  2021  2020  2021  2020 
             
NET REVENUE $16,124,951  $10,519,191  $40,979,801  $26,887,022 
COST OF REVENUES  7,047,832   4,504,844   17,733,400   11,385,622 
GROSS MARGIN  9,077,119   6,014,347   23,246,401   15,501,400 
                 
OPERATING EXPENSES  9,038,929   6,191,069   23,506,381   18,993,187 
INCOME (LOSS) FROM OPERATIONS  38,190   (176,722)  (259,980)  (3,491,787)
                 
OTHER INCOME (EXPENSE)                
Interest income  1,704   4,218   14,597   67,884 
Change in fair value of contingent consideration  -   (110,390)  -   (140,390)
                 
TOTAL OTHER INCOME (EXPENSE)  1,704   (106,172)  14,597   (72,506)
                 
INCOME(LOSS)  BEFORE PROVISION FOR INCOME TAXES  39,894   (282,894)  (245,383)  (3,564,293)
                 
PROVISION FOR INCOME TAXES  -   -   -   - 
NET INCOME (LOSS) $39,894  $(282,894) $(245,383) $(3,564,293)
                 
WEIGHTED AVERGE SHARES OUTSTANDING                
BASIC  17,639,346   14,900,971   17,028,762   14,726,534 
DILUTED  18,198,412   14,900,971   17,028,762   14,726,534 
                 
EARNINGS (LOSS) PER SHARE                
BASIC $0.00  $(0.02) $(0.01) $(0.24)
DILUTED $0.00  $(0.02) $(0.01) $(0.24)

  

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

  

3

 

  

OPTIMIZERx CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021

(UNAUDITED)

   

        Additional       
  Common Stock  Paid in  Accumulated    
  Shares  Amount  Capital  Deficit  Total 
                
Balance January 1, 2021  15,223,340  $15,223  $85,590,428  $(35,631,737) $49,973,914 
                     
Public offering of common shares, net of offering costs  1,523,750   1,524   70,670,012       70,671,536 
Shares issued for stock options exercised  510,803   511   1,119,500   -   1,120,011 
Shares issued as board compensation  2,695   3   124,991   -   124,994 
Stock-based compensation expense  -   -   582,159   -   582,159 
Net loss  -   -   -   (637,377)  (637,377)
                     
Balance March 31, 2021  17,260,588   17,261   158,087,090   (36,269,114)  121,835,237 
                     
Shares issued for stock options exercised  232,806   232   1,590,535   -   1,590,767 
Shares issued as board compensation  2,035   2   125,089   -   125,091 
Stock-based compensation expense  -   -   771,947   -   771,947 
Net income  -   -   -   352,100   352,100 
                     
Balance June 30, 2021  17,495,429   17,495   160,574,661   (35,917,014)  124,675,142 
                     
Shares issued for stock options exercised  232,340   233   1,094,464   -   1,094,697 
Stock-based compensation expense  -   -   1,008,007   -   1,008,007 
Net income  -   -   -   39,894   39,894 
                     
Balance September 30, 2021  17,727,769  $17,728  $162,677,132  $(35,877,120) $126,817,740 

 

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

 

4

 

  

OPTIMIZERx CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020

(UNAUDITED)

 

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

  

5

 

  

OPTIMIZERx CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

   

  For the Nine Months Ended
September 30,
 
  2021  2020 
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $(245,383) $(3,564,293)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Depreciation, amortization, and non-cash lease expense  1,580,173   1,563,883 
Stock-based compensation  2,362,113   2,066,609 
Stock issued for board services  250,085   325,011 
Provision for loss on accounts receivable  60,000   80,000 
Change in fair value of contingent consideration  -   140,390 
Changes in:        
Accounts receivable  (2,921,824)  (5,994,527)
Prepaid expenses and other assets  1,891,900   (931,833)
Accounts payable  153,395   (12,493)
Revenue share payable  (1,078,777)  2,023,650 
Accrued expenses and other liabilities  (53,710)  704,559 
Deferred revenue  62,610   (118,737)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  2,060,582   (3,717,781)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of equipment  (62,565)  (45,254)
Purchase of intangible assets  (324,413)  - 
NET CASH USED IN INVESTING ACTIVITIES  (386,978)  (45,254)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from public offering of common stock, net of commission costs  70,671,536   - 
Proceeds from the exercise of options  3,805,475   1,332,080 
Payment of contingent consideration  (1,610,813)  (4,389,187)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  72,866,198   (3,057,107)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  74,539,802   (6,820,142)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD  10,516,776   18,852,680 
CASH AND CASH EQUIVALENTS - END OF PERIOD $85,056,578  $12,032,538 
         
SUPPLEMENTAL CASH FLOW INFORMATION:        
Cash paid for interest $-  $- 
Cash paid for income taxes $-  $- 
Acquisition liabilities paid in common stock $-  $1,550,000 
Lease liabilities arising from right of use assets $-  $- 

 

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

  

6

 

  

OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

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 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, 2021 and 2020 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, 2021, and our results of operations, changes in stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and the statements of cash flows for the nine months ended September 30, 2021 and 2020 have been made. Those adjustments consist of normal and recurring adjustments. The condensed consolidated balance sheet as of December 31, 2020 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 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, 2020, as filed with the U.S. Securities and Exchange Commission on March 8, 2021.

 

The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the full year.

 

NOTE 2 – NEW ACCOUNTING STANDARDS

 

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 Company adopted this standard effective January 1, 2021. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows.

 

NOTE 3 – REVENUES

 

Under ASC 606, Revenue from Contracts with Customers, 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 $757,218 and $77,516 at September 30, 2021, and December 31, 2020, respectively. Amounts billed in advance of revenue recognition are presented as deferred revenue on the condensed consolidated balance sheets.

 

7

 

  

OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

NOTE 3 – REVENUES (continued)

 

The majority of our revenue is earned from life sciences companies, such as pharmaceutical and biotech companies, or medical device makers. A small portion of our revenue is earned from other sources, such as associations and technology companies. A break down is set forth in the table below.

 

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Revenue from:            
Life Science Companies $15,949,517  $10,177,247  $40,059,551  $25,751,278 
Other  175,434   341,944   920,250   1,135,744 
Total Revenue $16,124,951  $10,519,191  $40,979,801  $26,887,022 

 

NOTE 4 – LEASES

 

We 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 condensed consolidated balance sheets. 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. For leases that contain renewal options we have only assumed renewal for the headquarters lease. 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.

 

For the three and nine months ended September 30, 2021, 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:

 

8

 

 

OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

NOTE 4 – LEASES (continued)

 

  Three Months Ended
September 30,
2021
  Nine Months Ended
September 30,
2021
 
       
Operating lease cost $33,365  $100,094 
Short-term lease cost (1)  13,652   46,466 
Total lease cost $47,017  $146,560 

 

(1)Short-term lease cost includes any lease with a term of less than 12 months.

 

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
Ended
September 30,
2020
  Nine Months
Ended
September 30,
2020
 
       
Operating lease cost $32,814  $98,441 
Short-term lease cost (1)  36,602   116,817 
Total lease cost $68,816  $215,258 

 

(1)Short-term lease 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, 2021:

 

As of September 30, 2021   
    
2021(a) $35,436 
2022  104,572 
2023  101,414 
2024  80,742 
2025  70,224 
Total  392,388 
Less: imputed interest  30,711 
Total lease liabilities $361,677 

 

(a)For the three-month period beginning October 1, 2021.

 

9

 

  

OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

NOTE 4 – LEASES (continued)

 

The weighted average remaining lease term at September 30, 2021 for operating leases was 3.76 years and the weighted average discount rate used in calculating the operating lease asset and liability was 4.5%. Cash paid for amounts included in the measurement of lease liabilities was $31,528 and $33,919 for the three months ended September 30, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease liabilities was $93,596 and $105,267 for the nine months ended September 30, 2021 and 2020, respectively. For the three months ended September 30, 2021 and 2020, payments on lease obligations were $35,740 and $28,482, respectively, and amortization on the right of use assets was $30,458 and $28,600, respectively. For the nine months ended September 30, 2021 and 2020, payments on lease obligations were $107,136 and $87,599, respectively, and amortization on the right of use assets was $90,471 and $84,957, respectively.

 

NOTE 5 – STOCKHOLDERS’ EQUITY

 

During the quarter ended March 31, 2021, in an underwritten primary offering, we issued 1,523,750 shares of our common stock for gross proceeds of $75,425,625. In connection with this transaction, we incurred equity issuance costs of $4,754,089 related to payments to the underwriter, advisors and legal fees associated with the transaction, resulting in net proceeds to the Company of $70,671,536.

 

During the quarters ended September 30, 2021, June 30, 2021, and March 31, 2021, we issued 232,340, 232,806 and 510,803 shares of our common stock, respectively, and received proceeds of $1,094,697, $1,590,767, and $1,120,011, respectively, in connection with the exercise of stock options under our 2013 equity incentive plan. Of the shares issued in the quarter ended March 31, 2021, a total of 368,329 shares were issued in a cashless transaction related to 394,739 expiring options using the net settled method whereby 26,410 options were used to pay the purchase price. The remaining 116,064 shares issued in connection with the exercise of options were all issued for cash. No shares were issued in the quarter ended June 30, 2021 in cashless transactions. Of the shares issued in the quarter ended September 30, 2021, a total of 73,501 shares were issued in a cashless transaction related to 78,334 expiring options using the net settled method whereby 4,833 options were used to pay the purchase price. The remaining 158,839 shares issued in connection with the exercise of options were all issued for cash.

 

During the quarters ended September, 30, 2020, June 30, 2020, and March 31, 2020, we issued 198,024, 55,731, 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 2020 and the first two quarters of 2021, each of our non-employee directors received approximately $25,000 of fully vested shares of common stock on a quarterly basis. In 2021, we issued 2,695 shares of common stock valued at $124,994 to our non-employee directors in the quarter ended March 31, 2021 and 2,035 shares valued at $125,091 in the quarter ended June 30, 2021. In the quarter ended September 30, 2021 we changed our non-employee director compensation program and began issuing restricted stock units to our non-employee directors on a quarterly basis which vest at the end of one year. 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.

 

We also issued 63,560 shares of our common stock in the nine months ended September 30, 2020, in connection with restricted stock unit awards as described in more detail in Note 6 – Stock Based Compensation. No shares other than the previously described non-employee director shares were issued in 2021 in connection with restricted stock unit awards.

 

10

 

 

OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

NOTE 6 – STOCK BASED COMPENSATION

 

We use the fair value method to account for stock-based compensation. We recorded $1,711,075 and $1,447,826 in compensation expense in the nine months ended September 30, 2021 and 2020, respectively, related to options issued under our equity compensation plans. 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 $8,654,678 of remaining expense related to unvested options to be recognized in the future over a weighted average remaining period of approximately 2.5 years. The total intrinsic value of outstanding options at September 30, 2021 was $51,205,814.

 

In addition to the grants to non-employee directors described in Note 5 – Stockholders’ Equity, we also recorded $651,038 and $618,783 in compensation expense related to restricted stock unit awards that vest over time in the nine months ended September 30, 2021, and 2020, respectively. There is $4,407,269 of remaining expense related to unvested restricted stock unit awards to be recognized in the future over a weighted average period of 3.6 years.

 

NOTE 7 – EARNINGS (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 option 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 includable 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 earnings (loss) per share.

 

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OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

NOTE 7 – EARNINGS (LOSS) PER SHARE (continued)

 

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
Numerator            
Net income (loss) $39,894  $(282,894) $(245,383) $(3,564,293)
                 
Denominator                
Weighted average shares outstanding used in computing earnings per share                
Basic  17,639,346   14,990,971   17,028,762   14,726,534 
Effect of dilutive stock options, and unvested restricted stock unit awards  559,066   -   -   - 
Diluted  18,198,412   14,900,917   17,028,762   14,726,534 
                 
Earnings (loss) per share                
Basic $0.00  $(0.02) $(0.01) $(0.24)
Diluted $0.00  $(0.02) $(0.01) $(0.24)

 

No calculation of diluted earnings per share is included for either 2020 period or for the nine months ended September 30, 2021, as the effect of the calculation would be antidilutive.

 

The number of common shares potentially issuable upon the exercise of certain options or for unvested restricted stock unit awards are reflected in the table below.

 

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
             
Weighted average number of shares excluded from calculation            
Unvested restricted stock unit awards  113,886   111,186   120,509   111,186 
Options  445,180   984,084   406,322   802,330 
Total  559,066   1,095,270   526,831   913,516 

 

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OPTIMIZERx CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021

 

NOTE 8 – CONTINGENCIES

 

Litigation

 

The Company is not currently involved in any legal proceedings.

 

NOTE 9 – INCOME TAXES

 

As discussed in our annual report on Form 10-K for the year ended December 31, 2020, we had net operating losses carryforwards for federal income tax purposes of $19.3 million as of December 31, 2020. Accordingly no federal income tax expense is recorded in the current period.

 

NOTE 10 – SUBSEQUENT EVENTS

 

In October 2021, we received proceeds of $302,033 and issued 41,775 shares of common stock in conjunction with the exercise of stock options.

 

In accordance with ASC 855-10, we have analyzed events and transactions that occurred subsequent to September 30, 2021 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.

  

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

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse 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, 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

 

COVID-19

 

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.

 

We continue to abide by federal, state, and local safety regulations, including having unvaccinated employees work from home, and providing protective measures for our vaccinated employees who choose to work in our offices, including hygiene best practices as recommended by the Centers for Disease Control and local authorities. 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.

 

We will continue to closely monitor the updates regarding the spread of COVID-19 and its variants, the distribution of vaccines developed to combat COVID-19, and applicable vaccine mandates, and we will adjust our business operations according to guidelines from federal, state, local or foreign authorities. In light of the foregoing, we may take actions that alter our business operations, or that we determine are in the best interests of our employees, customers, partners and stockholders.

 

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Company Highlights through October 2021

 

1.Generated sales of $16.1 million for the quarter ended September 30, 2021, a 53% increase over the same period in 2020.
2.Generated sales of $41.0 million for the nine months ended September 30, 2021, a 52% increase over the same period in 2020.
3.Achieved positive cash flow from operations of $2.1 million for the nine months ended September 30, 2021.
4.Completed all integration work for previous two acquisitions and paid last earnout payment related to acquisitions in the quarter ended March 31, 2021.
5.Raised an additional $70.7 million of capital in a public offering during the quarter ended March 31, 2021.
6.Enhanced our leadership team by adding a  new Chief Operating Officer and Chief Financial Officer in October 2021.
7.Expanded our pipeline for our new Real World Evidence (“RWE”) messaging solution that we launched in Q2.
8.We continued to execute on our omnichannel strategy by partnering with Demandbase, which leverages the combination of institutional and in-workflow behavioral data at the point-of-care, and now expands our platform to personalize support and engagement of providers and patients at all care points along the patient journey and enables our customers to tailor account-based engagement experiences.
9.We implemented Therapy Initiation Workflow solution which allows life sciences companies to simplify therapy initiation by presenting healthcare providers with a fully electronic option to synchronize enrollment, benefits verification, prior authorization, and patient support onboarding. This new solution continues to expand the breadth of our platform beyond digital communications by enabling patients to obtain the therapies they need through life sciences’ support which is facilitated through our Therapy Initiation and Persistence Platform.

 

Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

 

Revenues

 

Our total revenue reported for the three months ended September 30, 2021 was approximately $16.1 million, an increase of 53% over the approximately $10.5 million from the same period in 2020. Our total revenue for the nine months ended September 30, 2021 was approximately $41.0 million, an increase of 52% over the approximately $26.9 million from the same period in 2020. The increased revenue resulted from increases in sales throughout our solutions.

Cost of Revenues

 

Our cost of revenue, comprised primarily of revenue share expense, increased slightly as a percentage of revenue in the quarter and nine months ended September 30, 2021, as compared to the same periods in 2020. These changes were the result of solution mix, both as it relates to solutions itself and the partners through which the solutions are delivered. Additional discussion is included in the gross margin section below.

 

  Three Months Ended
September 30
  Nine Months Ended
September 30
 
  2021  2020  2021  2020 
             
Cost of Revenues %  43.7%  42.8%  43.3%  42.3%
Gross Margin %  56.3%  57.2%  56.7%  57.7%

 

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Gross Margin

 

As reflected in the table above, our gross margin decreased slightly in both the three and nine months ended September 30, 2021 compared with the prior year. This is the result of solution mix. In general, there has been an increase in the percentage of activity flowing through our higher cost channels compared with a year ago. This was offset by the launch of our RWE solution. Our RWE solution includes a much higher percentage of program design, which carries a higher margin than the delivery of the actual messages. We expect our gross margin to remain relatively constant for the balance of the year.

 

Operating Expenses

 

Operating expenses increased from approximately $6.2 million for the three months ended September 30, 2020 to approximately $9.0 million for the same period in 2021. Operating expenses increased from approximately $19.0 million for the nine months ended September 30, 2020 to approximately $23.5 million for the same period in 2021. Overall, this increase results from our efforts to expand our product line and build out our organization to establish a strong base for current and future growth. Our expenses increased at a lower rate than our revenues as a result of the operating leverage of our model. The detail of expenditures by major category is reflected in the table below. 

 

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
             
Salaries, Wages, & Benefits $4,619,320  $3,304,388  $12,106,933  $9,686,985 
Stock-Based Compensation  1,008,007   756,437   2,612,198   2,391,620 
Contractors and Consultants  541,663   568,535   1,327,615   1,590,771 
Travel  178,711   21,802   237,466   309,424 
Board Compensation  61,250   61,250   183,750   164,000 
Professional Fees  469,272   199,262   1,239,090   871,565 
Investor Relations  60,630   28,356   157,936   76,483 
Advertising and Promotion  337,778   85,085   722,343   374,152 
Technology Infrastructure Costs  313,711   180,014   783,281   579,805 
Integration and Exclusivity Costs  431,266   208,806   994,423   624,753 
Data Costs  186,583   42,108   731,980   166,662 
Office, Facility, and Other Expenses  304,703   211,606   829,193   593,084 
Depreciation and Amortization  526,035   523,420   1,580,173   1,563,883 
                 
Total Operating Expense $9,038,929  $6,191,069  $23,506,381  $18,993,187 

 

The increase in operating expenses related to salaries, wages, and benefits and other human resource related costs is due to the expansion of our team to support additional growth. Through the end of September, we have hired 32 new people this year, largely in areas focused on increasing revenue. This increase is partly offset by the decrease in contractors and consultants, as we have brought functions in house that were previously outsourced.

 

We expect salaries, wages, and benefits to continue to increase in the fourth quarter due to the full impact of new hires already in place, as well as new hires in the pipeline.

 

Travel expense remains down on a year to date basis as a result of pandemic-related travel restrictions, We reopened travel at the end of the second quarter and incurred significantly more travel expenses in the quarter ended September 30, 2021 than in the prior year due relaxed travel restrictions.

 

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Professional fees increased in both the three and nine months ended September 30, 2021 compared with the prior year. With the assistance of an outside legal firm, we undertook a comprehensive governance review of our bylaws, board charters, equity compensation plan, and overall corporate policies to enhance and improve our overall governance. This review accounts for the majority of the year to date increase. In addition, due to the increase in our market cap, our outside auditors are now required to render an opinion on our internal controls. Our expenditures on professional fees in connection with the preparation for and work related to that audit in 2021 increased in the quarter ended September 30, 2021. We would expect professional fees to remain at a similar level for the balance of the year.

 

Investor relations expense increased due to the expansion of our communication efforts to reach retail investors and expand our shareholder base.

 

Technology infrastructure costs increased due to continued investment in our operating systems to facilitate new products as well as the implementation of additional software products to increase efficiency and information dissemination.

 

Data costs increased as we have purchased more data, primarily to aid in our selling effort and allow customers to target their messages more appropriately, thereby increasing our ability to charge premium prices for more highly targeted messages.

 

Integration and exclusivity costs represent payments to partners for access and/or exclusivity and increased because of new agreements signed. 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.

 

Our office, facility and other expenses increased primarily because of the addition of new employees, including recruiter fees, as well as the reopening of our offices.

 

All other variances in the table above are the result of fluctuations in the ordinary course of business.

 

We expect our overall operating expenses to increase on a quarterly basis for the balance of the year as we further implement our business plan. We do not expect human resource costs to increase as quickly as revenues, however we do expect to hire additional employees to support and accelerate our anticipated growth.

 

Net Income (Loss)

 

We had net income of $.04 million for the three months ended September 30, 2021, as compared to a net loss of $0.3 million during the same period in 2020. We had a loss of approximately $0.2 million for the nine months ended September 30, 2021, as compared to net loss of approximately $3.6 million during the same period in 2020. The reasons and specific components associated with the change are discussed above. Overall, the net income for three months ended September 30, 2021 and decreased loss for the nine month period ended September 30, 2021 resulted from the increased margin generated by our higher revenues, partially offset by the increased operating expenses.

 

Liquidity and Capital Resources

 

As of September 30, 2021, we had total current assets of $108.4 million, compared with current liabilities of $7.6 million, resulting in working capital of approximately $100.8 million and a current ratio of 14.8 to 1. This represents an increase from our working capital of approximately $23 million and current ratio of 3 to 1 at December 31, 2020.

 

Our operating activities provided approximately $2.1 million in cash flow during the nine months ended September 30, 2021, compared with cash used of approximately $3.7 million in the same period in 2020. The cash provided in the 2021 period was the result of our net loss increased by noncash expenses, which resulted in positive cash flow. This was partially offset by working capital used in the reduction of liabilities and to support growth in accounts receivable due to our increased revenue levels. The cash used in the 2020 period was primarily the result of increased investment in working capital; in particular, we made a $2.0 million prepayment to a partner that was expensed over the balance of the year.

 

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We used insignificant amounts in investing activities in both the nine months ended September 30, 2021 and 2020. These investments related to purchases of equipment as well as investments related to the expansion of our network capabilities in our adherence solution. 

 

Our financing activities provided $72.9 million in the nine months ended September 30, 2021, compared with cash used of approximately $3.1 million in the same period in 2020. We raised $70.7 million in a public offering of our common stock as well as generated $3.8 million from the issuance of shares related to the exercise of stock options. These were partially offset by the payment of $1.6 million in earnout payments from a previous acquisition. We have no remaining earnout payments due in the future. In the 2020 period, financing activities used approximately $4.4 million related to earnout payments from a previous acquisition, offset by $1.3 million from the issuance of shares related to the exercise of stock options.

 

Our main source of liquidity has historically been from the issuance of common stock. We 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.

 

Related Party Transaction

 

Jim Lang, one of our Board Members, is the CEO of Eversana, a leading global provider of services to the life sciences industry. Eversana is similar to other customers we generate revenue from, such as agencies or resellers. In 2021 we have recognized revenue of $150,000 from Eversana and have open contracts as of September 30, 2021 that will result in an additional $160,000. These contracts were sourced by Eversana on behalf of life science customers of theirs. The contracts are at market rates and were generated in the normal course of business.

 

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. There have been no material changes to our critical accounting policies as described in the footnotes to our financial statements included in our annual report on Form 10-K for the year ended December 31, 2020; 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.  

 

Recently Issued Accounting Pronouncements

 

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 was effective for annual and interim reporting periods beginning after December 12, 2020, with early adoption permitted. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows.

 

18

 

 

Off Balance Sheet Arrangements

 

As of September 30, 2021, there were no off-balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

 

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures, as defined in Rule 13a-15(e), were effective at the reasonable assurance level.

  

Changes in Internal Control over Financial Reporting

 

During the quarter ended September 30, 2021, we made routine ongoing improvements in our internal control and processes and hired an additional finance department team member, however, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), that occurred during the quarter ended September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Controls

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not a party to any material pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A: Risk Factors

 

There have been no material changes from the risk factors previously reported in Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-K for the year ended December 31, 2020.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None 

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosure

 

Not applicable

 

Item 5. Other Information

 

None 

 

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Item 6. Exhibits

 

Exhibit 
Number
 Description of Exhibit
10. 1* OptimizeRx 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
   
10.2* Form of Stock Option Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan.  Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
   
10.3* Form of Performance Stock Option Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
   
10.4* Form of Restricted Stock Unit Award for grants under the OptimizeRx Corporation 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
   
10.5* Form of Performance Restricted Stock Unit Award for grants under the OptimizeRx Corporation 2021. Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on August 25, 2021.
   
10.6* Offer Letter by and between the Company and Edward Stelmakh. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 30, 2021.
   
31.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
101.INS** Inline XBRL Instance Document
   
101.SCH Inline XBRL Taxonomy Extension Schema Document
   
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
   
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*Exhibits have been omitted to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted exhibit to the SEC upon request.
**Provided herewith

 

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SIGNATURES

 

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 OptimizeRx Corporation
  
Date: November 9, 2021 By:/s/ William J. Febbo
  William J. Febbo
 Title:   Chief Executive Officer and
Principal Executive Officer

  

 OptimizeRx Corporation
  
Date: November 9, 2021 By:/s/ Edward Stelmakh
  Edward Stelmakh
 Title:  Chief Financial Officer,
Principal Financial Officer and
Principal Accounting Officer

 

 

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