EX-99.2 3 ea191205ex99-2_optimizerx.htm AUDITED FINANCIAL STATEMENTS OF MEDICX AS OF DECEMBER 31, 2022 AND 2021 AND FOR THE FISCAL YEARS ENDED DECEMBER 31, 2022 AND 2021

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HEALTHY OFFERS, INC.

FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2022 AND 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Independent Auditor’s Report
3 Balance Sheets as of December 31, 2022 and 2021;
4 Statements of Income for the years ended December 31, 2022 and 2021;
5 Statements of Changes in Stockholders’ Equity for the years ended December 31, 2022 and 2021;
6 Statements of Cash Flows for the years ended December 31, 2022 and 2021;
7 Notes to Financial Statements.

 

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INDEPENDENT AUDITOR’S REPORT

 

To the Board of Directors of

Healthy Offers, Inc.

 

Opinion

 

We have audited the accompanying financial statements of Healthy Offers, Inc. (the Company), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of income, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

 

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To the Board of Directors of

Healthy Offers, Inc.

Page Two

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with GAAS, we:

 

●Exercise professional judgment and maintain professional skepticism throughout the audit.

 

●Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 

●Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

 

●Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 

●Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

 

 

Sterling Heights, Michigan

December 29, 2023

 

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HEALTHY OFFERS, INC.

BALANCE SHEETS

 

   December 31,
2022		   December 31,
2021		 
ASSETS        
Current assets        
Cash and cash equivalents  $4,701,355   $5,125,511 
Short-term investments   1,595,000    — 
Accounts receivable, net   6,840,793    5,247,376 
Prepaid expenses and other   179,952    115,382 
Employee retention credit receivables   712,779    — 
Total current assets   14,029,879    10,488,269 
Property and equipment, net   49,092    51,588 
Other assets          
Net deferred tax asset   567,652    311,696 
Investments   2,486,103    — 
Intangible assets, net   1,241,786    1,229,942 
Operating right-of-use assets, net   234,943    339,302 
Deposits   11,086    10,392 
Total other assets   4,541,570    1,891,332 
TOTAL ASSETS  $18,620,541   $12,431,189 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Factoring line of credit  $—   $567,742 
Accounts payable – trade   2,460,803    777,347 
Accrued expenses   2,813,961    1,597,887 
Income tax payable   437,725    235,674 
Deferred revenue   270,000    101,771 
Current portion of lease liabilities   113,484    88,958 
Current portion of notes payable   —    4,386 
Total current liabilities   6,095,973    3,373,765 
Non-current liabilities          
Lease liabilities, net of current portion   151,256    261,246 
Notes payable, net of current portion   —    145,614 
Total noncurrent liabilities   151,256    406,860 
Total liabilities   6,247,229    3,780,625 
Stockholders’ equity          
Preferred stock, Series A convertible, $0.001 par value, 10,000,000 shares authorized, 166,667 issued and outstanding at December 31, 2022 and December 31, 2021   250    250 
Common stock, $0.001 par value, 20,000,000 shares authorized, 9,951,000 and 9,950,000 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively   9,951    9,950 
Treasury Stock, $0.001 par value, 25,000 shares held on December 31, 2022 and December 31, 2021   (25)   (25)
Additional paid-in-capital   2,895,929    2,674,293 
Retained earnings   9,467,207    5,966,096 
Total stockholders’ equity   12,373,312    8,650,564 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $18,620,541   $12,431,189 

 

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

 

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HEALTHY OFFERS, INC.

STATEMENTS OF INCOME

 

   For the
year ended
December 31,
2022		   For the
year ended
December 31,
2021		 
         
Net revenue  $28,071,080   $18,549,873 
Cost of revenues, exclusive of depreciation and amortization presented separately below   12,172,546    9,467,667 
Gross profit   15,898,534    9,082,206 
           
Operating expenses          
Selling, general, and administrative   10,520,437    7,673,669 
Depreciation, amortization, and noncash lease expense   298,735    282,430 
Total operating expenses   10,819,172    7,956,099 
Income from operations   5,079,362    1,126,107 
Other income (expense)          
Other income   726,000    - 
Interest Income   33,789    9,710 
Interest expense   (26,461)   (41,596)
Total other income (expense)   733,328    (31,886)
Income before provision for income taxes   5,812,690    1,094,221 
Income tax provision   1,350,329    325,689 
Net income  $4,462,361   $768,532 

 

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

 

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HEALTHY OFFERS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

 

   Series A Convertible Preferred Stock   Common Stock   Treasury Stock  

Additional

Paid in

   Retained    
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Earnings   Total 
Balance December 31, 2020   166,667   $250    9,950,000   $9,950    (25,000)  $(25)  $2,412,445   $5,212,564   $7,635,184 
Stock based compensation expense   —    —    —    —    —    —    246,848    —    246,848 
Accretion of preferred stock dividends   —    —    —    —    —    —    15,000    (15,000)   — 
Net income   —    —    —    —    —    —    —    768,532    768,532 
Balance December 31, 2021   166,667    250    9,950,000    9,950    (25,000)   (25)   2,674,293    5,966,096    8,650,564 
                                              
Equity incentive common shares exercised   —    —    1,000    1    —    —    2,429    —    2,430 
Stock based compensation expense   —    —    —    —    —    —    257,957    —    257,957 
Preferred stock dividend   —    —    —    —    —    —    (53,750)   (946,250)   (1,000,000)
Accretion of preferred stock dividends   —    —    —    —    —    —    15,000    (15,000)   — 
Net income   —    —    —    —    —    —    —    4,462,361    4,462,361 
Balance December 31, 2022   166,667   $250    9,951,000   $9,951   (25,000)  $(25)  $2,895,929   $9,467,207   $12,373,312 

 

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

 

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HEALTHY OFFERS, INC.

STATEMENTS OF CASH FLOWS

 

   For the
year ended
December 31,
2022		   For the
year ended
December 31,
2021		 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $4,462,361   $768,532 
Adjustments to reconcile net income to cash          
Depreciation and amortization   298,735    282,430 
Stock-based compensation expense   257,957    246,848 
Noncash lease expense   18,894    306 
Deferred income taxes   (255,956)   41,485 
Effects of changes in operating assets and liabilities:          
Accounts receivable   (1,593,417)   2,050,340 
Prepaid expenses and other current assets   (65,264)   36,253 
Employee retention credit receivables   (712,779)   — 
Accounts payable   1,683,456    (744,325)
Accrued expenses   1,216,074    (1,096,950)
Income taxes payable / receivable   202,051    635,143 
Deferred revenue   168,229    (124,521)
NET CASH PROVIDED BY OPERATING ACTIVITIES   5,680,341    2,095,541 
           
CASH FLOWS USED IN INVESTING ACTIVITIES:          
Purchases of property and equipment   (22,505)   (20,959)
Capitalized software development costs   (285,577)   (457,845)
Purchases of held-to-maturity securities   (4,746,103)   — 
Proceeds from the sale of held-to-maturity securities   665,000    — 
NET CASH USED IN INVESTING ACTIVITIES   (4,389,185)   (478,804)
           
CASH FLOWS (USED IN ) / PROVIDED BY FINANCING ACTIVITIES:          
Net advances (payments) on factoring line of credit   (567,742)   189,862 
Payments on notes payable   (150,000)   — 
Proceeds from exercise of stock options   2,430    — 
Dividends paid   (1,000,000)   — 
NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES   (1,715,312)   189,862 
NET (DECREASE) /  INCREASE IN CASH AND CASH EQUIVALENTS   (424,156)   1,806,599 
CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD   5,125,511    3,318,912 
CASH AND CASH EQUIVALENTS – END OF PERIOD  $4,701,355   $5,125,511 
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for interest  $33,583   $35,999 
Income taxes paid  $1,405,118   $79,166 
Noncash accretion of preferred stock dividend  $15,000   $15,000 

 

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

 

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HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

Healthy Offers, Inc. (the Company) is a specialized data-driven company designed to offer advertisers solutions for addressable media in the pharmaceutical and health industries for any cross-channel media campaign. As data and technology are driving enormous change in the structure and economics of media across all channels, the Company was created to assist advertisers in navigating the new landscape. The Company offers the strategic thinking of a boutique agency with addressable audience scale, leverage, and reach. The Company is headquartered in Scottsdale, Arizona.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the carrying value of assets, depreciable and amortizable lives of tangible and intangible assets, the carrying value of liabilities, the timing of revenue recognition and related revenue share expenses, and inputs used in the calculation of stock based compensation. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents consist of cash on deposit with a bank.

 

Cash is held in depository accounts at financial institutions. The combined account balances at the financial institutions often exceed the Federal Deposit Insurance Corporation (FDIC) insurance coverage of $250,000 and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes, based on the quality of the financial institutions, that the risk is not significant.

 

Investments

 

We account for marketable securities in accordance with ASC 320, “Investments - Debt Securities”, which require that certain debt securities be classified into one of three categories: held-to-maturity, available-for-sale, or trading securities, and depending upon the classification, value the security at amortized cost or fair market value.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon 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.

 

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HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 are valued using level 3 inputs.

 

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

 

Accounts Receivable

 

Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. 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 doubtful accounts. 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. Because the Company’s customers are primarily large well-capitalized companies, historically there has been very little bad debt expense.

 

Management recognizes an allowance for uncollectible accounts that reflects their best estimate of amounts that will not be collected based on management’s assessment of the collectibility of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience, management’s estimates of the recoverability of amounts due the Company could be adversely affected. Management has determined an allowance for doubtful accounts is not required as of December 31, 2022 and 2021.

 

Property and Equipment

 

Property and equipment are stated at historical cost. Depreciation is provided using straight-line methods over the estimated useful lives of the assets ranging from 3 to 7 years. Amortization of leasehold improvements is provided over the shorter of the lease term or the estimated useful lives of the improvements.

 

Software Development

 

Expenditures for software development costs during preliminary project and post-implementation phases are expensed as incurred. Capitalization of internally developed software occurs during the application development stage. Once a project has reached application development, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready to be placed in service. The Company capitalized approximately $285,577 and $457,845 of software development costs during the years ended December 31, 2022 and 2021, respectively. Amortization of software development costs is provided using straight-line methods over the estimated useful life, generally three to five years.

 

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HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Costs incurred related to implementation in a cloud computing arrangement are capitalized and recognized over the expected term of the hosting arrangement, generally five years.

 

Impairment of long-lived assets

 

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

 

Stock-Based Compensation

 

The Company recognizes stock-based compensation expense in the statement of income for share-based awards granted to employees based on their fair values at the time of grant over the vesting period.

 

Revenue Recognition

 

Recognition of revenue requires evidence of a contract, probable collection of proceeds, and completion of substantially all performance obligations. We use a 5-step model to recognize revenue. These steps are: identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when or as the performance obligations are satisfied.

 

Revenues are primarily generated from contracts with advertisers for its performance based advertising services, which include the use of data analytics technology and other advertising products and services. Customers typically receive the benefit of the Company’s services as they are performed and substantially all of the Company’s revenue is recognized over time as the services are performed. Solutions include the creation of and access to custom audience data; campaign management, including custom audience targeting; and custom analytics.

 

Under Topic 606, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under Topic 606. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for such products or services.

 

Costs incurred in fulfillment of customer contracts principally consist of the cost of media placements. General and administrative costs are charged to expense as incurred. Deferred revenue consists of billings or cash receipts from customers in advance of providing services.

 

The Company records the accounts receivable and deferred revenue when it has the contractual right to invoice the customer. Deferred revenue is recognized as revenue when obligations on customers contracts are completed. In some instances, the Company collaborates with third parties to perform campaign management. In these instances, the Company provides customer audience data to be used in the execution of media campaigns. Revenue is recorded net of all revenue share agreements and fees. Substantially all revenue is recorded over time as the audience data is accessed and messages are delivered.

 

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HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in accounts receivable and deferred revenue (contract liabilities) on the balance sheets. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, generally on a monthly basis. However, advance deposits are sometimes received before revenue is recognized, resulting in contract liabilities. These deposits are recorded as deferred revenue on the balance sheets and are recognized as revenue when the services are provided.

 

The following is a summary of the Company’s accounts receivable and contract liabilities:

 

   December 31,
2022		   December 31,
2021		   January 1,
2021		 
Accounts receivable, net  $6,840,793   $5,247,376   $7,297,716 
Deferred revenue   270,000    101,771    226,292 

 

Amounts recorded in deferred revenue are generally recognized within 12 months.

 

Advertising Expenses

 

Advertising and marketing expenses primarily consist of marketing event participation and business promotions. In fulfillment of customer contracts, the Company incurs advertising and marketing expenses. Advertising and marketing costs incurred on behalf of a customer are recorded as cost of sales on a gross basis as the Company is ultimately responsible for paying the expense to the vendor. Advertising and marketing costs presented in the financial statements of $91,868 and $102,715 for the years ended December 31, 2022 and 2021, respectively, are expenses incurred for the benefit of the Company.

 

Income Taxes

 

Deferred income taxes are provided for temporary differences between financial statements and income tax reporting. Temporary differences are differences between the amounts of the assets and liabilities reported for financial statement purposes and their tax bases.

 

Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are recognized only if it is more likely than not that a tax position will be realized or sustained upon examination by the relevant taxing authority. A tax position that meets the more likely than not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that ha a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.

 

Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in the future years’ tax returns.

 

Management believes there are no material uncertain tax positions for which a liability (unrecognized tax benefit) should be recognized. The federal and state income tax returns of the Company from 2019 to 2022 are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they were filed.

 

10

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Recently Issued Accounting Guidance

 

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

 

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides for a new impairment model that requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable and available for sale debt securities. ASU 2016-13 was effective for us on January 1, 2020. The adoption of this standard did not have a material effect on our financial position, results of operations, or cash flows.

 

Not Yet Adopted

 

ASU Topic 2021-08 Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The standard is effective for the Company’s fiscal year beginning January 1, 2023, with early adoption permitted. The adoption of this standard is not expected to have a material effect on our financial position, results of operations, or cash flows.

 

NOTE 3 – INVESTMENTS

 

We account for marketable securities in accordance with ASC 320, “Investments - Debt Securities”, which require that certain debt securities be classified into one of three categories: held-to-maturity, available-for-sale, or trading securities, and depending upon the classification, value the security at amortized cost or fair market value. At December 31, 2022 and December 31, 2021, we have recorded $4.1 million and $0.0 million, respectively, of held-to-maturity government bonds, U.S. Treasury notes, and certificates of deposit at amortized cost basis. Our held-to-maturity investments have maturity dates between March 2024 and July 2025.

 

   Amortized
Cost		   Gross
Unrealized
Gains		   Gross
Unrealized
Losses		   Fair Value 
Bonds  $3,386,767   $      —   $35,149   $3,351,618 
Treasury notes   550,336    —    2,264    548,072 
Certificates of deposit   144,000    —    543    143,457 
Total  $4,081,103   $—   $37,956   $4,043,147 

 

11

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following at December 31:

 

   2022   2021 
Office furniture and equipment  $82,948   $82,948 
Leasehold improvements   118,809    118,809 
Equipment   180,463    157,957 
    382,220    359,714 
Less accumulated depreciation   (333,128)   (308,126)
Property and equipment, net  $49,092   $51,588 

 

Depreciation expense was $25,002 and $38,362 for the years ended December 31, 2022 and 2021, respectively.

 

NOTE 5 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following at December 31:

 

   2022   2021 
Internally developed software  $1,833,892   $1,195,302 
Software development in process   182,892    535,905 
    2,016,784    1,731,207 
Less accumulated amortization   (774,998)   (501,265)
Total  $1,241,786   $1,229,942 

 

Amortization expense was $273,733 and $244,069 for the years ended December 31, 2022 and 2021, respectively.

 

Estimated amortization expense for each of the next five years is as follows:

 

Year Ending December 31  Amount 
2023  $319,113 
2024   278,111 
2025   233,919 
2026   127,719 
2027   100,032 
   $1,058,894 
Software development in process  $182,892 
Total  $1,241,786 

 

12

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 6 – FACTORING LINE OF CREDIT

 

The Company had a $4,000,000 factoring credit facility. The Company, from time to time, submitted selected accounts receivable invoices for the ability to draw up to 90% of the outstanding invoice balance (remaining 10% placed in reserve until the corresponding invoice was paid). Under the factoring arrangement, in addition to having the facility secured by the Company’s accounts receivable, the Company had full liability on any uncollected balances advanced under the facility. Additionally, the Company paid an interest rate at the prime rate plus 3.75%, but not less than 7%, plus a fixed discount of between 0.25%-0.75% depending on the age of the receivable factored and a monthly service charge for the use of the line of credit. As of December 31, 2022 and 2021, the balance due under the factoring credit facility was $0 and $567,742, respectively. The total balance of receivables factored under the agreement as of December 31, 2022 and 2021 was $0 and $1,187,061, respectively. In October 2022, all the outstanding principal and interest was paid in full and the account was closed.

 

NOTE 7 – NOTES PAYABLE

 

On June 14, 2020, the Company received an Economic Injury Disaster Loan (EIDL) from the SBA in the amount of $150,000 under the Small Business Act. The loan bore interest at a fixed rate of 3.75% per annum, had a term of 30 years, and was secured by the assets of the Company. Payment of principal and interest was deferred until 24 months from the date of the note, at which time the balance was scheduled to be repaid in monthly payments of principal and interest totaling $731. During the year ended December 31, 2022, the note balance was paid in full.

 

On April 14, 2020, the Company received a Paycheck Protection Program Loan (“PPP”) from a bank in the amount of $908,400 to fund payroll, rent, utilities, and interest on existing debt. The Company recognized $916,222 of other income related to this agreement during the year ended December 31, 2020, which represents the full principal and interest that would have been payable under the program.

 

NOTE 8 – LEASES

 

During the years ended December 31, 2022 and 2021, we had operating leases for office space in one multi tenant facilities in Scottsdale, Arizona. We also had a vehicle lease which expires January 2024. The Company also had a storage space lease in New York, New York.

 

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 and occasional rent for transient meeting and office spaces in shared office space facilities.

 

13

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 8 – LEASES (CONTINUED)

 

For the twelve months ended December 31, 2022 and 2021, the Company’s operating lease cost was $118,180 and $126,308, respectively. Operating lease costs are included in operating expenses within the Company’s statements of income:

 

As of December 31, 2022

   
    
2023 $122,601 
2024  116,651 
2025  38,908 
Total  278,160 
Less: discount  (13,420)
Total lease liabilities $264,740 

 

The weighted average remaining lease term at December 31, 2022 for operating leases is 2.18 years and the weighted average discount rate used in calculating the operating lease asset and liability is 4.47%. Cash paid for amounts included in the measurement of lease liabilities was $99,285 and $140,095 for the twelve months ended December 31, 2022 and 2021, respectively. For the twelve months ended December 31, 2022 and 2021, payments on lease obligations were $118,180 and $126,308, respectively, and amortization on the right of use assets was $104,358 and $108,560, respectively.

 

NOTE 9 – DEFERRED REVENUES

 

Under ASC 606, Revenue from Contracts with Customers, we record revenue when earned, rather than when billed. From time to time, we may invoice the customer prior to being able to recognize the revenue. Amounts billed in advance of revenue recognition are presented as deferred revenue on the balance sheets.

 

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 its revenue recognition policy. Deferred revenue was $270,000 and $101,771 as of December 31, 2022 and December 31, 2021, 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 during each of the twelve months ended December 31, 2022 and 2021.

 

   2022   2021 
Balance January 1  $101,771   $226,292 
Revenue recognized   (542,027)   (673,127)
Amount collected   710,256    548,606 
Balance December 31  $270,000   $101,771 

 

14

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 10 – STOCKHOLDERS’ EQUITY

 

Series A Convertible Preferred Stock

 

The Company had 10,000,000 shares of preferred stock with 200,000 shares for Series A convertible preferred stock, authorized as of December 31, 2022 and 2021. The shares have a par value of $0.001. The Company issued 166,667 shares of Series A preferred Stock during 2015, at $1.50 per share for a total of $250,000. The stock accrues dividends at 6% per annum, paid quarterly for the first two years. Thereafter, the dividends will accrue and will be payable in preference to any dividends paid on the common stock. During the years ended December 31, 2022 and 2021, the Company recorded an accretion of undeclared dividends of $15,000, which is reflected as an increase in additional paid in capital on the preferred stock.

 

There were dividends of $53,750 paid in 2022. There were no dividends paid in 2021.

 

Each share of Series A convertible preferred Stock is convertible at the option of the holder into one share of common stock. Upon any liquidation, dissolution, or winding up of the Company, after all creditors are paid in full and before any liquidation distribution is made to the holders of common stock, each holder of Series A preferred will be entitled to receive a liquidation preference equal to $2.25 per share, plus accrued and unpaid dividends. As of December 31, 2022, there were $12,500 of undeclared dividends.

 

Common and Treasury Stock

 

The Company has authorized the issuance of 20,000,000 shares, $0.001 par value per share, of which 9,975,000 were issued in connection with a tax-free reorganization and exercise of stock options. During 2019, 25,000 shares were repurchased for $50,000 and are maintained as treasury stock as of December 31, 2022.

 

NOTE 11 – STOCK BASED COMPENSATION

 

Stock Options

 

In September 2012, the Company adopted the Healthy Offers, Inc. 2012 Stock Option Plan Agreement (the 2012 Plan). Under the 2012 Plan, the Company could make grants to employees, officers, directors, consultants, and advisors of the Company. The 2012 Plan included provisions for the issuance of up to 2,000,000 shares of common stock. Vesting terms and the option expiration were specified in each award as granted, with the term not to exceed 10 years.

 

15

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)

 

In 2015, the Company adopted the 2015 Option Plan (the 2015 Plan). Under the 2015 Plan, awards of the Company’s equity may be granted to officers, employees, directors, and other key persons (including consultants and prospective employees) of the Company to provide such individuals with an incentive for performance to generate returns to Company stockholders. An award is an incentive stock option, or a nonqualified stock option granted pursuant to the 2015 Plan. The Company initially reserved 3,000,000 shares of common stock for issuance under the 2015 Plan. The term of the stock options granted under the Plan may not exceed 10 years.

 

The compensation expense related to options for the years ended December 31, 2022 and 2021 was $257,957 and $246,848, respectively. The fair value of these instruments was calculated using the Black-Scholes option pricing model.

 

During 2021, 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 no expense related to these options recorded during the period.

 

Summary information related to the stock option plans are as follows:

 

   2022   2021 
   Options
Outstanding		   Weighted
average
exercise
price		   Options
Outstanding		   Weighted
average
exercise
price		 
Outstanding at beginning of year   1,292,652   $2.15    1,314,872   $2.10 
Granted   720,900    4.73    52,500    3.79 
Exercised   (1,000)   2.43    —    — 
Expired or forfeited   (771,354)   2.22    (74,720)   2.43 
Outstanding at end of year   1,241,198   $3.61    1,292,652   $2.15 

 

16

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)

 

The table below reflects information for the total options outstanding at December 31, 2022

 

    Options Outstanding   Options Exercisable 
Range of Exercise Prices   Number of
Options		   Weighted
average
remaining
contractual life
(years)		   Weighted
average
exercise price		   Options
Exercisable		   Weighted
Average
Remaining
Life (Years)		   Weighted
Average
Exercise Price		 
$1.00    150,000    0.6   $1.00    150,000    0.6   $1.00 
 1.50    12,500    2.8    1.50    12,500    2.8    1.50 
 2.00    102,500    3.6    2.00    102,500    3.6    2.00 
 2.43    192,798    7.1    2.43    87,620    7.0    2.43 
 2.70    10,000    6.1    2.70    10,000    6.1    2.70 
 3.79    167,500    9.1    3.79    17,500    8.7    3.79 
$4.91    605,900    9.7    4.91    —    —    4.91 
 Total    1,241,198    7.5   $3.61    380,120    3.5   $1.79 

 

The value of each common stock option granted is estimated on the date of grant using the Black-Scholes method with the following weighted-average assumptions for the years ended December 31:

 

   2022   2021 
Expected Term (Years)   3    6 
Dividend Yield   —%   —%
Risk-Free Interest Rate   1.99%   1.07%
Volatility   65%   60%

 

A summary of the status of the Company’s nonvested options as of December 31, 2022, and changes during the year ended December 31, 2022, is presented below.

 

Nonvested Options  Options   Weighted
average exercise
price		 
Nonvested at January 1, 2022   361,969   $2.74 
Granted   720,900   $4.73 
Vested   (187,438)  $2.56 
Forfeited   (34,353)  $2.43 
Nonvested at December 31, 2022   861,078   $4.41 

 

There is $1,590,086 of expense remaining to be recognized over a period of approximately 2.5 years related to options outstanding at December 31, 2022.

 

17

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 12 – CONTINGENCIES AND COMMITMENTS

 

The Company has contracts with various media channel and data partners. From time to time the Company enters into arrangements with a partner to acquire minimum amounts of media or data. As of December 31, 2022, the Company had commitments under long term agreements totaling $13.5 million through 2028. Of this total, $3.6 million is due in 2023.

 

The Company is not currently involved in any material legal proceedings.

 

NOTE 13 – INCOME TAXES

 

The provision (benefit) for Federal income tax consists of the following for the years ended December 31, 2022 and 2021:

 

   2022   2021 
Federal income tax benefit (expense) attributable to:        
Current tax expense  $1,606,285   $284,204 
Deferred tax (benefit) expense   (255,956)   41,485 
Total tax expense  $1,350,329   $325,689 

 

Income tax expense differs from the amounts computed by applying the U.S. federal income tax rate of 21 percent to pretax income as a result of the following:

 

   2022   2021 
         
Computed income tax expense at the statutory rate  $1,220,664   $229,786 
State and local income taxes, net of federal income tax   122,712    44,076 
Effect of other permanent differences   53,375    51,838 
Research and development credits   (48,391)   — 
Other adjustments   1,969    (11)
Total income tax expense  $1,350,329   $325,689 

 

18

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 13 – INCOME TAXES (CONTINUED)

 

The cumulative tax effect of significant items comprising our net deferred tax amount at the expected rate of 21% is as follows as of December 31, 2022 and 2021:

 

   2022   2021 
Deferred Tax Assets        
Research and development credit carryovers  $355,052   $267,906 
Net operating loss carryovers   154,446    190,820 
ERC credit   —    123,232 
Accruals   104,721    66,109 
Lease liability  - operating   65,311    86,132 
Other   213    15 
Total deferred tax assets   679,743    734,214 
           
Deferred Tax Liabilities          
Intangible assets   —    (300,773)
Right of use assets   (57,960)   (83,450)
Prepaid expenses and other current assets   (42,020)   (25,607)
Property and equipment   (12,111)   (12,688)
Total deferred tax liabilities   (112,091)   (422,518)
Net deferred tax asset  $567,652   $311,696 

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets.

 

Management does not believe that there are significant uncertain tax positions in 2021. There are no interest and penalties related to uncertain tax positions in 2021.

 

NOTE 14 – CONCENTRATIONS

 

For the year ended December 31, 2022, two of the Company’s customers represented approximately 58% of total sales. For the year ended December 31, 2021, three of the Company’s customers represented approximately 65% of total sales. Accounts receivable related to these customers was approximately 56% and 51% of total accounts receivable as of the years ended December 31, 2022 and 2021, respectively.

 

For the year ended December 31, 2022, there were four vendors that represented approximately 79% of cost of sales. For the year ended December 31, 2021, three vendors represented approximately 66% of cost of sales.

 

19

 

 

HEALTHY OFFERS, INC.

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2022 AND 2021

 

NOTE 15 – GOVERNMENT GRANTS

 

During 2022, the Company qualified to receive Employee Retention Credits (ERC) which are funded from the Internal Revenue Service (IRS). The Company recognized $726,000 of other income related to performance requirements being met and costs being incurred in compliance with the program.

 

Small Business Administration Loan

 

During the year ended December 31, 2021, the Company received full forgiveness for a loan from the U.S. Small Business Administration (“SBA”). According to the rules of the SBA, the Company is required to retain documentation for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request. Should the SBA conduct such a review and reject all or some of the Company’s judgements pertaining to satisfying conditions of the loan, the Company may be required to adjust previously reported amounts and disclosures in the consolidated financial statements.

 

NOTE 16 – BENEFIT PLAN

 

The Company has a defined contribution 401(k) plan (the Plan) providing for matching contributions of 4%. Employees 21 years of age are eligible to participate in the Plan. The Company incurred expenses related to the matching contributions of $230,171 and $147,413 to the Plan for the years ended December 31, 2022 and 2021, respectively.

 

NOTE 17 – RELATED-PARTY TRANSACTIONS

 

In July 2018, the Company entered into a data licensing agreement with one of the minority owners of the Company which expired July 2023. The agreement required payments based on prescription claims data that ranged from $750,000 to $950,000 per year. The related party also provided ad hoc data reporting to the Company which was contracted on an individual program basis. During the years ended December 31, 2022 and 2021, the Company incurred expenses of approximately $1,419,297 and $1,404,012. The Company had balances due to the related party totaling $699,526 and $579,750 at December 31, 2022 and 2021, respectively, which were included in accrued expenses on the accompanying balance sheets.

 

NOTE 18 – SUBSEQUENT EVENTS

 

In October 2023, the OptimizeRx Corporation acquired 100% of the outstanding shares of Healthy Offers, Inc. (d/b/a Medicx Health), a Nevada corporation. On October 24, 2023, a newly formed wholly-owned subsidiary of OptimizeRx Corporation consummated the merger with and into Medicx Health, with Medicx Health continuing as the surviving company and a wholly-owned subsidiary of OptimizeRx Corporation (the “Merger”). The aggregate merger consideration the Company paid to the securityholders of Medicx at the closing was $95,000,000, subject to certain customary post-acquisition purchase price adjustments.

 

 

20