EX-99.3 5 f8k100419a1ex99-3_optimizerx.htm

Exhibit 99.3

 

 

Unaudited Pro Forma Combined Financial Information

 

The following unaudited pro forma combined financial information of OptimizeRx Corporation, (“Company”) is presented to reflect the acquisition (“Acquisition”) by the Company of all the issued and outstanding shares of RMDY Health Inc. (“RMDY”). The Acquisition was consummated on October 4, 2019. The unaudited pro forma combined balance sheet of the Company at September 30, 2019 reflects the effects of the Acquisition as if it occurred on such date. The unaudited pro forma combined statements of operations for the nine months ended September 30, 2019 and the year ended December 31, 2018 reflect the effects of the Acquisition as if it occurred on January 1, 2018. The unaudited pro forma financial information is based on the historical consolidated financial statements of the Company and RMDY. The historical financial information of RMDY includes the consolidated financial information of RMDY Health, Inc. and its wholly owned subsidiary.

 

Such unaudited pro forma combined financial information should be read in conjunction with the historical consolidated financial statements of the Company for the year ended December 31, 2018, including the notes thereto, which were filed as part of the Company’s Form 10-K filed with the Securities and Exchange Commission on March 12, 2019, and the Company’s Quarterly Report on Form 10-Q for the nine month period ended September 30, 2019, which was filed with the Securities and Exchange Commission on November 5, 2019. Additionally, the unaudited combined financial information includes unaudited historical consolidated financial information of RMDY as of September 30, 2019 and for the nine-month period ended September 30, 2019 and historical consolidated financial information of RMDY for the year ended December 31, 2018, which have been prepared by management of RMDY. The unaudited pro forma combined statements of operations of the Company only include the acquisition of RMDY. In addition, the unaudited combined financial statements are based upon pro forma allocations of the purchase price of RMDY based upon the estimated fair value of the assets and liabilities acquired in connection with the Acquisition. Management believes that all material adjustments necessary to reflect the effect of the Acquisition have been made to the unaudited pro forma combined financial information.

 

The unaudited pro forma combined financial information is for informational purposes only and is not necessarily indicative of the results of operations of the Company that would have occurred if the acquisition of RMDY had been completed on the dates indicated, nor does it purport to represent the Company’s results of operations as of any future date or for any future period.

 

 

 

OptimizeRx Corporation

Unaudited Pro Forma Combined Balance Sheet

September 30, 2019

 

   OptimizeRx   RMDY       Pro Forma     Pro Forma 
   Corporation   Health, Inc.   Combined   Adjustments     Combined 
ASSETS                      
Current Assets                      
Cash and cash equivalents  $29,759,967   $34,952   $29,794,919   $(8,492,534)  [a]  $21,302,385 
Accounts receivable   7,158,390    235,411    7,393,801    -      7,393,801 
Prepaid expenses   973,177    -    973,177    -      973,177 
Employee loans   -    636,576    636,576    (636,576)  [c]   - 
Other current assets   -    24,978    24,978    (20,129)  [l]   4,850 
Total Current Assets   37,891,534    931,918    38,823,452    (9,149,239)     29,674,213 
Property and equipment, net   156,809    19,173    175,982    -      175,982 
Other Assets             -    -      - 
Goodwill   3,678,513    -    3,678,513    12,583,720   [b]   16,262,233 
Patent rights, net   2,604,677    -    2,604,677    -      2,604,677 
Other intangible assets, net   3,542,462    -    3,542,462    9,555,000   [b]   13,097,462 
Right of use assets, net   587,497    -    587,497    -      587,497 
Other assets and deposits   92,239    6,081    98,320    -      98,320 
Severance pay fund   -    255,774    255,774    -      255,774 
Total Other Assets   10,505,388    261,855    10,767,243    22,138,720      32,905,963 
TOTAL ASSETS  $48,553,731   $1,212,945   $49,766,676   $12,989,481     $62,756,157 
                            
LIABILITIES AND STOCKHOLDERS’ EQUITY                           
Current Liabilities                           
Accounts payable - trade  $1,095,474   $145,513   $1,240,987   $355,964   [d]  $1,596,951 
Accrued expenses   607,000    -    607,000    -      607,000 
Revenue share payable   1,668,287    -    1,668,287    -      1,668,287 
Current portion of lease obligations   113,476    -    113,476    -      113,476 
Current portion of contingent purchase price payable   810,000    -    810,000    -      810,000 
Deferred revenue   1,115,904    -    1,115,904    -      1,115,904 
Loans payable   -    129,199    129,199    (129,199)  [e]   - 
Short term bank debts   -    17,056    17,056    (17,056)  [e]   - 
Other payables   -    761,736    761,736    (761,736)  [e]   - 
Shareholder loans   -    872,015    872,015    (872,015)  [e]   - 
Total Current Liabilities   5,410,141    1,925,519    7,335,660    (1,424,042)     5,911,618 
                          - 
Non-current Liabilities                           
Lease obligations, net of current portion   478,201    -    478,201    -      478,201 
Contingent purchase price payable, net of current portion   1,530,000    -    1,530,000    6,693,000   [f]   8,223,000 
Warrant liability   -    173,288    173,288    (173,288) [m]   - 
Severance pay liability   -    289,188    289,188    -      289,188 
Deferred tax liability   -              1,166,550  [n]   1,166,550 
Total Non-current liabilities   2,008,201    462,476    2,470,677    7,686,262      10,156,939 
Total Liabilities   7,418,342    2,387,995    9,806,337    6,262,220      16,068,557 
Stockholders’ Equity                           
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no issued and outstanding at September 30, 2019 or December 31, 2018   -              -      - 
Common stock, $0.001 par value, 500,000,000 shares authorized, 14,173,850 and 12,038,618 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively   14,174         14,174    383  [g]   14,557 
Ordinary shares of USD 0.001 par value 35,696,414 shares issued  and outstanding at December 31, 2018 and September 30, 2019        35,496    35,496    (35,496) [h]   - 
Series A Preferred  Shares USD 0.001 par value 1,085,521 shares issued and outstanding  at December 31, 2018 and September 30, 2019        1,086    1,086    (1,086) [h]   - 
Series B Preferred Shares USD 0.001 par value 15,373,131 shares issued and outstanding at December 31, 2018 and September 30, 2019        15,373    15,373    (15,373) [h]   - 
Series C Preferred shares USD 0.001 par value 8,333,880  shares issued and outstanding at December 31, 2018 and September 30, 2019        8,334    8,334    (8,334) [h]   - 
Additional paid-in-capital   72,561,045    3,809,224    76,370,269    2,098,569   [i]   78,468,838 
Accumulated deficit   (31,439,830)   (5,044,563)   (36,484,393)   4,688,599   [j]   (31,795,794)
Total Stockholders’ Equity   41,135,389    (1,175,050)   39,960,339    6,727,261      46,687,601 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $48,553,731   $1,212,945   $49,766,676   $12,989,481     $62,756,157 

 

2

 

 

OptimizeRx Corporation

Unaudited Pro Forma Combined Statement of Operations

For the Nine Months Ended September 30, 2019

 

   OptimizeRx   RMDY       Pro Forma     Pro Forma 
   Corporation   Health, Inc.   Combined   Adjustments     Combined 
                       
NET REVENUE  $17,218,492   $1,519,789   $18,738,281   $-     $18,738,281 
COST OF REVENUES   6,251,766    511,632    6,763,398    -      6,763,398 
GROSS MARGIN   10,966,726    1,008,157    11,974,883    -      11,974,883 
                            
OPERATING EXPENSES   12,341,827    1,735,696    14,077,523    441,194   [b], [k]   14,518,717 
INCOME FROM OPERATIONS   (1,375,101)   (727,539)   (2,102,640)   -      (2,102,640)
                          - 
OTHER INCOME                         - 
Interest income   192,305    -    192,305    -      192,305 
Change in Fair Value of Contingent Consideration   25,000    -    25,000    -      25,000 
                            
TOTAL OTHER INCOME   217,305    -    217,305    -      217,305 
                            
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES   (1,157,796)   (727,539)   (1,885,335)   -      (1,885,335)
                            
Financial Expenses, net        218,160    218,160    -      218,160 
                            
PROVISION FOR INCOME TAXES   -    -    -    -      - 
NET INCOME  $(1,157,796)  $(945,698)  $(2,103,494)  $-     $(2,103,494)
                            
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:                           
BASIC   12,996,590                    13,379,483 
DILUTED   12,996,590                    13,379,483 
NET INCOME PER SHARE                           
BASIC  $(0.09)                $(0.16)
DILUTED  $(0.09)                $(0.16)

 

3

 

 

OptimizeRx Corporation

Unaudited Pro Forma Combined Statement of Operations

For the Year ended December 31, 2018

 

   OptimizeRx   RMDY       Pro Forma     Pro Forma 
   Corporation   Health, Inc.   Combined   Adjustments     Combined 
                       
Revenue  $21,206,363   $2,367,813   $23,574,176   $-     $23,574,176 
Cost of revenues   8,999,666    603,435    9,603,101    -      9,603,101 
Gross Margin   12,206,697    1,764,378    13,971,075    -      13,971,075 
                            
Operating expenses   12,026,565    2,220,658    14,247,223    1,006,133   [b]   15,253,356 
Income (loss) from opreations   180,132    (456,279)   (276,147)   (1,006,133)     (1,282,281)
Other income             -    -      - 
Interest income   46,212    -    46,212    -      46,212 
Total other income   46,212    -    46,212    -      46,212 
Other expense                           
Financial expense   -    24,382    24,382    -      24,382 
Total other expense   -    24,382    24,382    -      24,382 
Income (loss) before provision for income taxes   226,344    (480,661)   (254,317)   (1,006,133)     (1,260,451)
Provision for income taxes   -    1,542    1,542    -      1,542 
Net income (loss)  $226,344   $(482,203)  $(255,859)  $(1,006,133)    $(1,261,993)
Weighted average number of shares outstanding - basic   10,832,209                    11,215,102 
Weighted average number of shares outstanding - diluted   11,862,991                   12,245,884 
Net income (loss) per share - basic  $0.02                 $(0.11)
Net income (loss) per share - diluted  $0.02                 $(0.11)

 

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Notes to Unaudited Pro Forma Combined Financial Statements

 

Note 1 - Basis of Presentation

 

On October 4, 2019, OptimizeRx Corp. (the “Company”) entered into, and consummated the transactions contemplated by, a Stock Purchase Agreement (the “Purchase Agreement”) by and among the Company, RMDY (collectively, the “Sellers”), each of Amir Kishon and Elad Levran, as “Seller Indemnitors” and Amir Kishon in his capacity as seller’s representative, which agreement provided for the purchase of all equity of RMDY by the Company. All outstanding RMDY options and warrants were converted to common stock immediately prior to the transaction and were included in the equity acquired.

 

The consideration for the acquisition costs of $8.72 million in cash, as adjusted for estimated working capital, estimated indebtedness, escrow amounts and Sellers’ estimated transaction expenses, as well as shares of the Company’s common stock equal to $5.11 million divided by the closing date share price, and earnout payments not to exceed $30 million, as a result of achieving certain revenue targets for 2020 and 2021. In addition, the Company incurred its own expenses for the transaction of approximately $670,000.

 

The unaudited pro forma combined financial statements have been prepared to give effect to the acquisition by the Company of RMDY using the historical consolidated financial statements of the Company and the historical consolidated financial statements RMDY. Please note that the unaudited pro forma combined financial statements should be read in conjunction with the audited and unaudited historical financial statements of the Company and RMDY, respectively. This information can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2019, and in Item 99.1 and 99.2 of this Current Report on Form 8-K.

 

The historical financial information of RMDY includes the consolidated financial information of RMDY Health, Inc. and its wholly owned subsidiary.

 

The unaudited pro forma combined balance sheet as of September 30, 2019, combines the unaudited consolidated balance sheets of the Company and RMDY on September 30, 2019, and gives effect to the Acquisition as if it had occurred on September 30, 2019.

 

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2019 combines the unaudited results of operations of the Company and RMDY to give the effect as if the Acquisition occurred the first day of the period presented (January 1, 2018). The unaudited pro forma combined statement of operations for the year ended December 31, 2018 combines the audited consolidated statements of operations of the Company for the year ended December 31, 2018, with the audited consolidated statement of operations of RMDY for the year ended December 31, 2018, to give the effect as if the Acquisition occurred the first day of the period presented (January 1, 2018).

 

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Note 2 - Unaudited Pro Forma Adjustments

 

The following are explanations that correspond by letter to the pro forma adjustments in the accompanying unaudited pro forma combined financial statements:

 

[a]

 

Cash impact upon paying the Closing Amount to the Sellers:    
1)      Payment for RMDY working capital (9/30)  $(149,829)
2)      Payment of cash purchase consideration per closing statement  $(8,719,738)
      
  Working capital per closing statement  $236,110 
  Actual 9/30 working capital   149,829 
3)      Add back working capital not paid per closing to adjust for 9/30   86,281 
      
  Indebtedness per closing statement   1,466,801 
  Actual 9/30 indebtedness   1,780,006 
4)      Decrease cash for debt not paid per closing to adjust for 9/30   (313,205)
      
5)      Officer loans collected from other assets   636,576 
      
6)      Cash balance per closing statement   2,333 
  Actual 9/30 cash balance   34,952 
  Decrease cash for additional amount that would have been paid   (32,619)
      
Net impact on cash    (8,492,534)

 

[b]The following table summarizes the estimated fair values of the RMDY assets acquired and liabilities assumed and the allocation of the excess purchase price to certain identifiable intangible assets. The two periods presented represent the pro forma balance sheet date of this report on September 30, 2019 and the actual Closing Date of October 4, 2019.

 

Assets acquired 

September

30, 2019

  

October

4, 2019

 
Non-cash current assets   235,411    286,110 
Other non-cash current assets   4,850    -   
Other assets   6,081    6,081 
Fixed assets   19,173    19,173 
Customer Relationship   1,004,000    1,004,000 
Tradename   2,673,000    2,673,000 
Technology/Software (Patent)   5,445,000    5,445,000 
Non-Compete Agreement   433,000    433,000 
Goodwill   12,583,720    12,583,720 
Total assets acquired  $22,404,235   $22,450,084 
Liabilities assumed          
Non-debt current liabilities   145,513    50,000 
Total liabilities assumed   145,513    50,000 
Net assets acquired  $22,258,722   $22,400,084 
Purchase consideration:          
Closing Cash Consideration   5,824,604    5,965,966 
Closing Common Stock Consideration   5,107,793    5,107,793 
Closing Indebtedness   1,466,775    1,466,775 
Purchase Price Adjustment Escrow Amount   150,000    150,000 
Indemnification Escrow Amount   1,600,000    1,600,000 
Stockholder Representative Expense Amount   250,000    250,000 
Contingent Payment   6,693,000    6,693,000 
Deferred Tax Liability   1,166,550    1,166,550 
   $22,258,722   $22,400,084 

 

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The Company has allocated the purchase price to the tangible and identified intangible assets acquired and liabilities assumed based on their fair values in accordance with generally accepted accounting principles in accordance with ASC 805. ASC 805 considers the existence of intangible assets in the following areas: marketing, customer relationships, proprietary software, artistic creations, contracts, and technology. The Company has identified and valued a patented technology, customer relationships, tradename and non-compete agreements as RMDY’s principal intangible assets in accordance with ASC 805 requirements.

 

As of the unaudited pro forma combined balance sheet date, below are the fair values of the identified intangible assets and their respective amortization periods for their useful life:

 

   Fair Value   Estimated Useful life 
Technology (Patent)  $5,445,000    10 years 
Non-Compete Agreement   433,000    2 years 
Tradename   2,673,000    15 years 
Customer Relationship   1,004,000    15 years 
   $9,555,000      

 

Amortization of technology, non-compete agreements, tradename, and customer relationships are amortized on a straight-line basis. For the unaudited pro forma combined periods presented, monthly amortization would have been $83,844, based upon their respective useful lives. Total amortization for the nine months ended September 30, 2019 and the year ended December 31, 2018, was $754,600 and $1,006,133, respectively.

 

The estimated total amortization expenses for the five years after the closing are as follows:

 

Years Ending December 31:    
2019   251,532 
2020   1,006,128 
2021   952,011 
2022   789,636 
2023   789,636 
Thereafter   5,766,057 

 

There is no pro forma adjustment for depreciation expense as assets were fully depreciated.

 

[c]Represents loans to RMDY officers repaid as part of acquisition closing in the amount of $636,576

 

[d]Impact on accounts payable:

 

Impact on accounts payable    
1) Total estimated acquisition related costs  $669,370 
2) Costs reflected in OptimizeRx historical financial statements as of September 30, 2019   (313,406)
Pro Forma acquisition costs reflected through the recordation of accounts payable at September 30, 2019  $355,964 

 

[e]Represents debt and other payables repaid as part of closing

 

[f]Represents the estimated fair value of the future potential contingent earn-out the Sellers may earn based upon RMDY achieving certain revenue targets. Fair value of the earnout was estimated utilizing a Monte Carlo simulation with an asset volatility of 40% and a risk-free rate of 1.40%.

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[g]Represents 382,893 shares of Common Stock issued as purchase consideration

 

[h]Represents removal of RMDY shares issued and outstanding

 

[i]Impact on Additional paid-in capital:

 

1) Reflects the issuance of 382,893 shares of common stock as consideration in the purchase price. Shares were valued at $13.34 per share or $5,107,793. Shares are assumed to be fully outstanding in the periods presented  $5,107,793 
2) Reflects removal of $3,809,224 additional paid-in-capital of RMDY in the acquisition   (3,809,224)
3) Parent stock holdback amount   800,000 
   $2,098,569 

 

[j]Impact on accumulated deficit:

 

1) Total estimated acquisition related costs  $669,370 
2) Costs reflected in OptimizeRx historical financial statements as of September 30, 2019   (313,406)
3) Total acquisition costs not recorded in historical financial statements as of September 30, 2019  $355,964 
4) Reflects removal of $5,044,563 in accumulated deficit of RMDY in the acquisition   (5,044,563)
Pro Forma reduction to accumulated deficit  $(4,688,599)

 

[k]Pro forma add back of one-time transaction costs expensed in the historical period ended September 30, 2019 of $313,406

 

[l]Prepaid directors and officers insurance purchased during September 2019 not to be included as an asset in OptimizeRx financial statements in the amount of $20,129

 

[m]Represents removal of warrant liability as part of closing

 

[n]Represents the deferred tax liability related to intangible assets acquired excluding goodwill less the existing RMDY deferred tax asset

 

 

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