EX-99.4 5 ea191205ex99-4_optimizerx.htm UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF OPTIMIZERX CORPORATION

Exhibit 99.4

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Unless the context otherwise requires, the “Company” refers to OptimizeRx Corporation, a Nevada Corporation and “Medicx” refers to Healthy Offers, Inc., a Nevada corporation d/b/a Medicx Health.

 

Description of the Business Combination 

 

On October 24, 2023, as a result of the previously announced Agreement and Plan of Merger (the “Merger Agreement”) dated October 11, 2023, the Company’s newly created subsidiary (“Merger Sub”) was merged into Medicx, with Medicx remaining as the surviving entity and a wholly-owned subsidiary of the Company (the “Merger”).

 

In connection with the Merger, each share of Medicx stock, both preferred and common, issued and outstanding prior to the Merger was automatically cancelled and extinguished and converted into the right to receive a portion of the merger consideration. In addition each vested Medicx option was cancelled and automatically converted into the right to receive a cash payment equal to (i) the excess of the per-share merger consideration over the applicable exercise price of such option, multiplied by (ii) the number of shares of Medicx common stock subject to such option.

 

OptimizeRx is considered to be the accounting acquirer, as further discussed in “Note 1 — Basis of Presentation” of this unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined financial statements are presented for informational purposes only, in accordance with Article 11 of Regulation S-X and are not intended to represent or to be indicative of the income or financial position that the Company would have reported had the Merger been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements due to various factors. The unaudited pro forma condensed combined statement of financial position does not purport to represent the future financial position of the Company and the unaudited pro forma condensed combined statements of operations do not purport to represent the future results of operations of the Company.

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2023 combines the historical unaudited condensed balance sheet of the Company as of June 30, 2023 and the historical unaudited balance sheet of Medicx as of June 30, 2023 on a pro forma basis as if the Merger had been consummated on June 30, 2023. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2023 and the unaudited pro forma condensed statement of operations for the year ended December 31, 2022 combines the historical condensed statement of operations of the Company for the six months ended June 30, 2023 and the year ended December 31, 2022 and the historical statement of operations of Medicx for the same periods on a pro forma basis as if the Merger had been consummated on January 1, 2022.

 

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Merger.

 

 

 

The unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the Merger, and should be read in conjunction with the following:

 

The audited financial statements of the Company included in its annual report, on Form 10-K, for the year ended December 31, 2022, filed with the Commission on March 10, 2023.

 

The unaudited financial statements for the six months ended June 30, 2023, included in the Company’s quarterly report, on Form 10-Q, for the quarter ending June 30, 2023, filed with the Commission on August 14, 2023.

 

The audited financial statements of Medicx as of and for the year ended December 31, 2022 and the unaudited financial statements as of and for the six months ended June 30, 2023, included in this Form 8-K/A.

 

The sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s annual report, on Form 10-K, for the year ended December 31, 2022, and quarterly report, on Form 10-Q, for the quarter ended June 30, 2023, filed with the Commission on March 10, 2023 and August 14, 2023, respectively. 

 

Management Investor Shares 

 

As previously disclosed, certain members of Medicx’s management team (“Management Investors”) agreed to use a portion of the consideration received to purchase, in the aggregate, approximately $10.5 million of the Company’s common stock. On October 24, 2023, at the closing of the Merger, each Management Investor executed a common stock purchase agreement (the “Subscription Agreement”). Pursuant to the Subscription Agreement, the Company issued 1,444,581 shares of its common stock in the aggregate to the Management Investors.

 

The fair value of these shares, $12.1 million, based on the quoted market price as of the date of the Merger, has been included in the calculation of the fair value of the consideration transferred in connection with the Merger.

 

Term Loan

 

A portion of the cash purchase price was funded through debt financing. The financing agreement provides for a term loan in the aggregate principal amount of $40,000,000. The term loan is repayable in quarterly installments on the last business day of each fiscal quarter commencing on December 31, 2023 in an amount equal to 1.25% of the principal amount. The outstanding unpaid principal amount of the term loan, and all accrued and unpaid interest thereon, shall be due and payable on the earliest of (i) the fourth (4th) anniversary of the closing of the financing agreement and funding of the term loan and (ii) the date on which the term loan is declared due and payable pursuant to the terms of the financing agreement. The term loan bears a variable interest rate which is currently priced at 14.12%.

 

The Company incurred debt issuance costs of $2.1 million in connection with the term loan. These costs are being amortized as interest expense on a straight line basis over the life of the term loan.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 2023

 

   OptimizeRx (Historical)   Medicx (Historical)   Transaction Accounting Adjustments   Notes   Pro Forma Combined 
 
ASSETS                    
Current assets                    
Cash and cash equivalents  $9,808,330   $2,940,782   $37,895,000    A.   $16,552,547 
            (31,150,783)   B.     
            (2,940,782)   D.     
Short-term investments   52,931,831        (52,931,831)   B.     
Investments       2,583,272    (2,583,272)   D.     
Accounts receivable, net   18,281,133    6,696,242             24,977,375 
Prepaid expenses and other   4,052,729    519,097             4,571,826 
Employee retention credit receivables       212,251             212,251 
Income tax receivable       256,890             256,890 
Total current assets   85,074,023    13,208,534    (51,711,668)        46,570,889 
Property and equipment, net   140,968    38,683             179,651 
Other assets                         
Goodwill   22,673,820        53,871,208    C.    76,545,028 
Customer relationships           34,800,000    C.    34,800,000 
Technology assets, net   8,366,375    1,268,146    200,000    D.    8,566,375 
            (1,268,146)   C.      
Patent rights, net   1,831,839        9,300,000    C.    11,131,839 
Operating right-of-use assets, net   14,544    184,254             198,798 
Other intangible assets, net   3,223,305        6,100,000    C.    9,323,305 
Net deferred tax asset       567,652    (567,652)   D.     
Investments       1,759,024    (1,759,024)   D.     
Deposits       9,728             9,728 
Total other assets   36,109,883    3,788,804    100,676,386         140,575,073 
Total Assets  $121,324,874   $17,036,021   $48,964,718        $187,325,613 
                          
LIABILITIES AND STOCKHOLDERS’ EQUITY                         
Current liabilities                         
Current portion of long-term debt  $   $   $2,000,000    A.   $2,000,000 
Accounts payable – trade   817,779    1,242,672             2,060,451 
Accrued expenses   1,503,477    2,753,214             4,256,691 
Revenue share payable   2,722,127                 2,722,127 
Current portion of lease liabilities   14,545    113,384             127,929 
Deferred revenue   451,787    160,331             612,118 
Total current liabilities   5,509,715    4,269,601    2,000,000         11,779,316 
Non-current liabilities                         
Long-term debt, less current portion           35,895,000    A.    35,895,000 
Deferred tax liability           11,649,382    C.    11,649,382 
Lease liabilities, net of current portion       95,630             95,630 
Total liabilities   5,509,715    4,365,231    49,544,382         59,419,328 
Commitments and contingencies                         
Stockholders’ equity                         
Preferred Stock, Series A Convertible       250    (250)   C.     
Preferred stock, $0.001 par value, 10,000,000 shares authorized, none issued and outstanding OptimizeRx (Historical) and Pro Forma Combined                     
Common stock, $0.001 par value, 166,666,667 shares authorized, 18,376,771 and 19,821,352 shares issued OptimizeRx (Historical) and Pro Forma Combined, respectively   18,377    9,951    (9,951)   C    19,822 
            1,445    B     
Treasury stock, $0.001 par value, 1,741,397 and 1,214,398 shares held OptimizeRx (Historical) and Pro Forma Combined, respectively   (1,741)   (25)   25    C.    (1,741)
Additional paid-in-capital   173,049,784    3,099,627    12,089,681    B.    185,139,465 
            (3,099,627)   C.     
Accumulated deficit   (57,251,261)   9,560,987    (9,560,987)   C.    (57,251,261)
Total stockholders’ equity   115,815,159    12,670,790    (579,664)        127,906,285 
Total Liabilities and Stockholder’s Equity  $121,324,874   $17,036,021   $48,964,718        $187,325,613 

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2023

 

   OptimizeRx (Historical)   Medicx (Historical)  

Transaction

Accounting

Adjustments

   Notes  

Pro Forma

Combined

 
 
Net revenue  $26,821,076   $16,618,317   $        $43,439,393 
Cost of revenues, exclusive of depreciation and amortization presented separately below   11,562,766    7,308,166             18,870,932 
Gross profit   15,258,310    9,310,151             24,568,461 
                          
Operating expenses                         
General and administrative expenses   26,274,669    6,357,180             32,631,849 
Depreciation, amortization and noncash lease expense   928,695    196,739    1,950,000    AB.    2,892,668 
            (182,766)   AC.     
Total operating expenses   27,203,364    6,553,919    1,767,234         35,524,517 
Income (loss) from operations   (11,945,054)   2,756,232    (1,767,234)        (10,956,056)
Other income (expense)                         
Interest expense           (3,175,527)   AA.    (3,175,527)
Interest income   1,385,891    141,552    (141,552)   AD.    1,385,891 
Income (loss) before provision for income taxes   (10,559,163)   2,897,784    (5,084,313)        (12,745,692)
Income tax provision       804,019    (804,019)   AE.     
Net income (loss)  $(10,559,163)  $2,093,765   $(4,280,294)       $(12,745,692)
Weighted average number of shares outstanding – basic   17,043,793        1,444,581         18,488,374 
Weighted average number of shares outstanding – diluted   17,043,793        1,444,581         18,488,374 
Loss per share – basic  $(0.62)               $(0.69)
Loss per share – diluted  $(0.62)               $(0.69)

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022

 

   OptimizeRx (Historical)   Medicx (Historical)  

Transaction

Accounting

Adjustments

   Notes 

Pro Forma

Combined

 
 
Net revenue  $62,450,156   $28,071,080          $90,521,236 
Cost of revenues, exclusive of depreciation and amortization presented separately below   23,483,336    12,172,546           35,655,882 
Gross profit   38,966,820    15,898,534           54,865,354 
                        
Operating expenses                       
General and administrative expenses   49,235,529    10,520,437           59,755,966 
Depreciation, amortization and noncash lease expense   2,022,029    298,735    3,900,000   AB.   5,947,031 
              (273,733)  AC.     
Total operating expenses   51,257,558    10,819,172    3,626,267       65,702,997 
Income (loss) from operations   (12,290,738)   5,079,362    (3,626,267)      (10,837,643)
Other income (expense)                       
Interest expense       (26,461)   (6,351,054)  AA.   (6,377,515)
Interest income   852,298    33,789    (33,789)  AD.   852,298 
Other income       726,000            726,000 
Total other income (expense)   852,298    733,328    (6,384,843)      (4,799,217)
Loss before provision for income taxes   (11,438,440)   5,812,690    (10,011,110)      (15,636,860)
Income tax provision       1,350,329    (1,350,329)   AE.    
Net income (loss)  $(11,438,440)  $4,462,361   $(8,660,781)     $(15,636,860)
Weighted average number of shares outstanding – basic   17,783,992        1,444,581       19,228,573 
Weighted average number of shares outstanding – diluted   17,783,992        1,444,581       19,228,573 
Loss per share – basic  $(0.64)             $(0.81)
Loss per share – diluted  $(0.64)             $(0.81)

 

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Note 1. Basis of Presentation

 

In accordance with ASC 805 - Business Combination, the Company will be considered as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Company will record the assets and, identifiable intangibles acquired and liabilities assumed in the Merger at their fair values at the date of acquisition. Any remaining purchase price not allocated to these items will be recorded as goodwill.

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2023, gives pro forma effect to the Merger as if it had occurred on June 30, 2023. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2023, and for the year ended December 31, 2022, gives pro forma effect to the Merger as if it had been completed on January 1, 2022. These periods are presented on the basis of the Company as the accounting acquirer.

 

The pro forma adjustments reflecting the consummation of the Merger and related transactions are based on certain currently available information and certain assumptions and methodologies that the Company believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the differences may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Merger and related transactions based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Merger. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Merger and related transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Company. They should be read in conjunction with the historical financial statements and notes thereto of the Company and Medicx.

 

Note 2. Accounting Policies

 

In connection with the consummation of the Merger, management is performing a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the Company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies. 

 

Note 3. Preliminary Purchase Price Allocation and Intangible Assets

 

The following table summarizes the components of the purchase consideration.

 

Base purchase price  $95,000,000 
Cash adjustment   950,000 
Working capital adjustment   (1,433,193)
Management investment in common stock   (10,434,193)
Net cash transferred   84,082,614 
Fair value of common stock transferred   12,091,126 
Fair value of consideration transferred  $96,173,740 

 

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A preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed by the Company in connection with the Merger is as follows:

 

   Medicx (Historical)   Estimated useful life 
Assets Acquired        
Accounts receivable, net  $6,696,242           
Prepaid expenses and other   988,238     
Property and equipment, net   38,683     
Right of use assets   184,254     
Customer relationship intangible   34,800,000   15 years 
Patent intangible   9,300,000   10 years 
Trademark intangible   6,100,000   10 years 
Technology intangible   200,000     
Deposits   9,728     
    58,317,145     
Liabilities Assumed         
Accounts payable   1,242,672     
Accrued Expenses   2,753,214     
Lease liabilities   209,014     
Deferred revenue   160,331     
Deferred tax liabilities   11,649,382     
    16,014,613     
Goodwill   53,871,208     
Fair value of consideration transferred  $96,173,740     

 

The pro-forma purchase price allocation presented above is preliminary and, as a result, the amounts presented could change materially when the purchase price allocation is finalized.

 

Note 4. Adjustments to Unaudited Pro Forma Condensed Combined Financial Statements

 

The adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2023, are as follows: 

 

A. Reflects the issuance of the $40 million term loan, net of debt issuance costs of $2.1 million.
   
B. Represents the net cash payment of $84.1 million and issuance of 1,444,581 shares of the Company’s common stock in connection with the Merger and the agreement with the Management Investors to use a portion of the Merger consideration received to purchase, in the aggregate, approximately $10.4 million of the Company’s common stock.
   
C. Reflects preliminary purchase price allocation and elimination of Medicx’s historical shareholders’ equity.
   
D. Reflects elimination of assets not included in the Merger and elimination of historical balance of Medicx intangibles, which were recorded at fair value in C. above.

 

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The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for year ended December 31, 2022 and for the six month period ended June 30, 2023 are as follows:

 

AA. Represents interest payable on the term loan.

 

AB. Represents the amortization of the identifiable intangibles acquired in the Merger.

 

AC. Represents elimination of the amortization of Medicx’s historical intangibles.

 

AD. Represents elimination of interest income as Medicx’s historical cash and investments balances did not transfer in the Merger.

 

AE. Represents the reversal of Medicx’s historical tax provision due to the combined net loss position.

 

The Company’s net deferred tax assets as of June 30, 2023, are subject to a full valuation allowance, therefore the Condensed Combined Statements of Operation do not reflect any income tax benefit that may arise from the adjustments in AA above.

 

Note 5. Loss per Share

 

Loss per share was calculated using the Company’s historical weighted average basic and diluted shares outstanding for the periods ended December 31, 2022, and June 30, 2023, adjusted for the impact of 1,444,581 shares issued to the Management Investors in connection with the Merger, assuming the shares were outstanding since January 1, 2022.

 

As the Merger related transactions are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted loss per share assumes that the shares issuable to the Management Investors have been outstanding for the entirety of all periods presented.

 

 

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