OptimizeRx Corp (OPRX) FY 2023 MD&A

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

Overview

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

Historically, our revenue was generated primarily
through the facilitation of various types of messages to health care providers via their EHR systems and ERx platforms using the OptimizeRx
proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives and healthcare providers
that have presented in the rapidly changing healthcare industry. Over time, as the demand for communication of an increasing variety of
different health information between life science companies, providers, and patients continued to rise, our platform has evolved to provide
Audience Development and Audience Creation and Media Execution across numerous different messaging types that leverage our technology
platform and media distribution channels. In addition, the October 2023 acquisition of Medicx Health provided the Company with a significant
footprint for direct-to-consumer healthcare marketing. We employ a “land and expand” strategy focused on growing our existing
client base and generating greater and more consistent revenues in part through the continued shift in our business model toward enterprise
level engagements, while also broadening our platform with innovative proprietary virtual communication solutions such as our AI-powered
DAAP, expanding on previous iterations of the RWD.AI technology, which uses sophisticated machine-learning algorithms to find the best
audiences in the correct channels at the right time. Our strategy for driving revenue growth is also expected to work in tandem with our
efforts to increase margin and profitability as revenue drivers such as DAAP have inherently higher margins than most other messaging
solutions we offer.

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Customer
Concentration

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

Seasonality

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

Impact
of Macroeconomic Events

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

Key
Performance Indicators

We
monitor the following key performance indicators to help us evaluate our business, measure our performance, identify trends affecting
our business and make strategic decisions. We have updated the definition of “top 20 pharmaceutical manufacturers” in our
key performance indicators to be based upon Fierce Pharma’s most updated list of “The top 20 pharma companies by 2022
revenue”. We previously used “The top 20 pharma companies by 2020 revenue”. As a result of this change, prior periods
have been restated for comparative purposes.

Average revenue per top 20 pharmaceutical manufacturer.
Average revenue per top 20 pharmaceutical manufacturer is calculated by taking the total revenue the company recognized through pharmaceutical
manufacturers listed in Fierce Pharma’s “The top 20 pharma companies by 2022 revenue” over the last twelve months, divided
by the total number of the aforementioned pharmaceutical manufacturers that our solutions helped support over that time period. The Company
uses this metric to monitor its progress in “landing and expanding” with key customers within its largest customer vertical
and believe it also provides investors with a transparent way to chart our progress in penetrating this important customer segment. The
increase in the average in 2023 as compared to 2022 is primarily the result of stronger DAAP related revenue streams and the Company’s
October 2023 acquisition of Medicx Health, which added to 2023 revenues and was not included in the 2022 amounts.

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Percent
of top 20 pharmaceutical manufacturers that are customers. Percent of top 20 pharmaceutical manufacturers that are customers is calculated
by taking the number of revenue generating customers that are pharmaceutical manufacturers listed in Fierce Pharma’s “The
top 20 pharma companies by 2022 revenue” over the last 12 months, which is then divided by 20 - which is the number of pharmaceutical
manufacturers included in the aforementioned list. The Company uses this metric to monitor its progress in penetrating key customers
within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating
this important customer segment.

Percent
of total revenue attributable to top 20 pharmaceutical manufacturers. Percent of total revenue attributable to top 20 pharmaceutical
manufacturers is calculated by taking the total revenue the company recognized through pharmaceutical manufacturers listed in Fierce
Pharma’s “The top 20 pharma companies by 2022 revenue” over the last twelve months, divided by our consolidated revenue
over the same period. The Company uses this metric to monitor its progress in “landing and expanding” with key customers
within its largest customer vertical and believes it also provides investors with a transparent way to chart our progress in penetrating
this important customer segment. Our revenue from customers that aren’t top 20 pharmaceutical manufacturers stayed relatively consistent
year over year.

Net
revenue retention. Net revenue retention is a comparison of revenue generated from all customers in the previous twelve-month period
to total revenue generated from the same customers in the following twelve-month period (i.e., excludes new customer relationships for
the most recent twelve-month period). The Company uses this metric to monitor its ability to improve its penetration with existing customers
and believes it also provides investors with a metric to chart our ability to increase our year-over-year penetration and revenue with
existing customers. The retention rate in 2023 increased due to stronger DAAP related revenue streams from existing clients and the Company’s
2023 acquisition of Medicx Health.

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

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Results
of Operations for the Years Ended December 31, 2023 and 2022

The
following table sets forth, for the periods indicated, the dollar value and percentage of total return represented by certain items in
our consolidated statements of operations:

Net
Revenue

Our net revenue increased 15% to $71.5 million
for the year ended December 31, 2023 from $62.5 million for the year ended December 31, 2022. Of the 15% increase, 7.3% resulted
from the acquisition of Medicx Health, in October, with the remaining increase due to stronger DAAP related sales.

Cost
of Revenues

Our total cost of revenues, composed primarily
of revenue-share expense paid to our network partners, increased in the year ended December 31, 2023, compared to the year ended
December 31, 2022. Our cost of revenues as a percentage of revenue increased to approximately 40% in the year ended December 31,
2023, from approximately 38% in the year ended December 31, 2022. This increase in our cost of revenues as a percentage of revenue
resulted primarily due to an unfavorable channel partner mix.

Gross
Margin

Our
gross margin, which is the difference between our revenues and our cost of revenues, increased from 2022 to 2023 but our gross margin
percentage decreased to 60.0% in 2023 from 62% in 2022 We had higher revenues in 2023, which increased gross margin but during 2023,
there was a decrease in the percentage of activity flowing through our lower cost channels compared with 2022.

Operating
Expenses

Total operating expenses increased to $69.3 million
for the year ended December 31, 2023, from $51.3 million for the year ended December 31, 2022, an increase of approximately
35%. The increase includes approximately $6.7 million, related to impairment charges, approximately $4.5 million of transaction costs
associated with the purchase of Medicx Health, and a loss on the disposal of a business of $2.1 million.

The
detail by major category is reflected in the table below.

Stock-based compensation decreased to $13.7 million
for the year ended December 31, 2023, from $15.7 million for the year ended December 31, 2022, as a result of the lower grant
date fair value of awards due to declines in the Company’s stock price.

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Depreciation and amortization increased to $2.4
million for the year ended December 31, 2023, from $2.0 million for the year ended December 31, 2022, as a result of the amortization
associated with the identifiable intangibles arising from the Medicx Health acquisition.

The
impairment charges recorded during 2023 relate to intangible assets, primarily technology and patent and trademarks relating to certain
non-core products. The Company determined that the carrying value of these long-lived assets was not recoverable on an undiscounted basis
and accordingly, an impairment charge was recognized to the extent fair value exceeds carrying value. The fair value of the assets was
determined based on various estimates and assumptions including internal estimates of cash flows directly attributable to the assets,
the useful life of the assets and residual value, if any.

The
loss on disposal of a business is discussed in Part II, Item 8. Financials Statements and Supplementary Data; Note 7 - Goodwill and Intangibles.

Transaction related costs arose due to the acquisition
of Medicx Health, discussed in Part II, Item 8. Financials Statements and Supplementary Data; Note 3 - Acquisitions.

Other sales, sales general, and administrative
expense increased to $39.8 million for the year ended December 31, 2023 from $33.5 million for the year ended December 31,
2022. The acquisition of Medicx Health increased Operating expense, primarily compensation and amortization, by approximately $2.5 million
year on year. In addition, within the other sales, general and administrative expenses, there were a variety of increases, the largest
of which was in compensation, which increased by $3.3 million from $20.8 million in 2022 to $24.1 million in 2023. The increase is due
to the addition of Medicx Health employees since the acquisition date and higher severance, employee benefit and commission costs.

Other
income (expense)

Other
Income (Expense) was comprised of the following:

Interest expense represents interest charges on
our Term Loan, which was raised during the year to partially fund the acquisition of Medicx Health, together with the amortization of
the related issuance costs, (see Part II, Item 8. Financials Statements and Supplementary Data; Note 12 - Long Term Debt for further details
concerning our Term loan).

Other
income represents the net proceeds from the sale of customer assets, primarily contracts, relating to two non-core products.

Interest income represents interest earned on
our short-term investments, which were realized during 2023 in order to partially fund the acquisition of Medicx Health. Interest earned
in 2022 reflects the shorter period and lower average balance on amounts held in short-term investments during that period.

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Income
tax benefit

The income tax benefit recorded in 2023 represents
the partial reversal of our valuation allowance, previously recorded against the value of our net operating loss (“NOL”) carryforwards.
In evaluating our ability to recover our deferred tax assets, in full or in part, we consider all available positive and negative evidence,
including our past operating results, the impact of the Medicx Health transaction on our consolidated tax returns, and our forecast of
future earnings, future taxable income and prudent and feasible tax planning strategies.

The assumptions utilized in determining future
taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses.
Actual operating results in future years could differ from our current assumptions, judgments and estimates.

Net Income (Loss)

We finished the year ended December 31, 2023
with a net loss of $17.6 million, compared to $11.4 million during the year ended December 31, 2022. The reasons for specific components
are discussed above. Overall, we had an increase in revenue and gross margin partially offset by increased operating expenses. In addition,
the loss in both periods included significant noncash items. We had $25.0 million in noncash operating expenses in 2023 compared to $17.8
million in noncash operating expenses in 2022.

Liquidity and Capital Resources

Historically, our primary sources of liquidity
have been cash receipts from customers and proceeds from equity offerings. On October 11, 2023, we entered into a financing agreement
that provided for a $38 million term loan (the “Term Loan”), the proceeds of which were to fund, in part, the acquisition
of Medicx Health. See Part II, Item 8. Financials Statements and Supplementary Data; Note 12 - Long Term Debt.

As of December 31, 2023, we had total current
assets of $54.3 million, compared with current liabilities of $17.9 million, resulting in working capital of $36.4 million and a current
ratio of 3.0 to 1. This compares with a working capital balance of $90.2 million and a current ratio of 11.7 to 1 at December 31,
2022. This decrease in working capital, as discussed in more detail below, is primarily the result of our common stock buyback program
and the acquisition of Medicx Health, which was funded from a combination of cash on hand, short-term investments and the Term Loan.

We believe that funds generated from operations,
together with existing cash and cash equivalents, will be sufficient to finance our current operations and planned growth for the next
twelve months. We do not anticipate the need to raise any additional cash to support operations. However, we could require additional
debt or equity financing if we were to make any significant acquisitions for cash during that period. In addition, we believe we can generate
the cash needed to operate beyond the next 12 months from operations.

Contractual
Obligations

The
Company’s contractual obligations and cash commitments at December 31, 2023, consisted of long term debt, operating lease
liabilities, and payments to partners to acquire minimum amounts of media, data or messaging capabilities as follows:

[table omitted - see filing]