EX-99.4 4 f8k101618a1ex99-4_optimizerx.htm UNAUDITED PRO FORMA FINANCIAL INFORMATION

Exhibit 99.4

  

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 CareSpeak Communications, Inc. (“CareSpeak”). The Acquisition was consummated on October 17, 2018. The unaudited pro forma combined balance sheet of the Company at September 30, 2018 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, 2018 and the year ended December 31, 2017 reflect the effects of the Acquisition as if it occurred at the beginning of each period presented. The unaudited pro forma financial information is based on the historical consolidated financial statements of the Company and CareSpeak. The historical financial information of CareSpeak includes the financial information of CareSpeak Communications, Inc. and CareSpeak Communications, d.o.o. (“CareSpeak Croatia”) as CareSpeak purchased the operations of CareSpeak Croatia in September 2016; accordingly, the combined historical information of both entities are necessary to provide a fair presentation of the historical operations that have been acquired by the Company.

 

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, 2017, 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 8, 2018, and the Company’s Quarterly Report on Form 10-Q for the nine month period ended September 30, 2018, which was filed with the Securities and Exchange Commission on November 5, 2018. Such unaudited pro forma combined financial information includes unaudited historical combined financial information of CareSpeak as of September 30, 2018 and for the nine-month period ended September 30, 2018 and year ended December 31, 2017, which have been prepared by management of CareSpeak. The unaudited pro forma combined statements of operations of the Company only include the acquisition of CareSpeak. In addition, the unaudited pro forma combined financial statements are based upon pro forma allocations of the purchase price of CareSpeak based upon the 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 CareSpeak 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

SEPTEMBER 30, 2018

 

    OptimizeRx     CareSpeak           Pro Forma         Pro Forma  
    Corporation     Communications     Combined     Adjustments         Combined  
ASSETS                                  
Current Assets                                  
Cash and cash equivalents   $ 13,523,002     $ 295,596     $ 13,818,598     $ (5,835,561 )    [a]   $ 7,983,037  
Accounts receivable     3,791,964       134,446       3,926,410       -           3,926,410  
Accounts receivable - related party     1,373,054               1,373,054       -           1,373,054  
Prepaid expenses     201,320               201,320       -           201,320  
Other current assets     -       83,654       83,654       -           83,654  
Total Current Assets     18,889,340       513,696       19,403,036       (5,835,561 )         13,567,475  
Property and equipment, net     149,936       3,340       153,276       5,147      [b]     158,423  
Other Assets                                            
Patent rights, net     587,848       -       587,848       -           587,848  
Web development and other intangible costs, net     128,381       -       128,381       -           128,381  
Security deposit     5,049       -       5,049       -           5,049  
Goodwill                             3,678,513      [c]     3,678,513  
Other intangible assets                             4,678,000      [c]     4,678,000  
Total Other Assets     721,278       -       721,278       8,356,513           9,077,791  
TOTAL ASSETS   $ 19,760,554     $ 517,036     $ 20,277,590     $ 2,526,099         $ 22,803,689  
                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY                                            
                                             
Current Liabilities                                            
Accounts payable - trade   $ 165,458     $ 760     $ 166,218     $ 459,000      [d]   $ 625,218  
Accrued expenses     814,530       106,387       920,917       2,365,000      [e]     3,285,917  
Revenue share payable     763,084       -       763,084       -           763,084  
Deferred revenue     813,316       70,988       884,304       -           884,304  
Total Liabilities     2,556,388       178,135       2,734,523       2,824,000           5,558,523  
                                          -  
Stockholders’ Equity                                         -  
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no issued and outstanding at September 30, 2018     -       -       -       -           --  
Common stock     11,971       -       11,971       31      [f]     12,002  
Additional paid-in-capital     47,361,086       360,099       47,721,185       139,870      [g]     47,861,055  
Accumulated deficit     (30,168,891 )     (21,198 )     (30,190,089 )     (437,802 )    [h]     (30,627,891 )
Total Stockholders’ Equity     17,204,166       338,901       17,543,067       (297,901 )         17,245,166  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 19,760,554     $ 517,036     $ 20,277,590     $ 2,526,099         $ 22,803,689  

 

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OPTIMIZERx CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

 

               Pro Forma      Pro Forma 
   OptimizeRx   CareSpeak   Combined   Adjustments      Combined 
                        
NET REVENUE                       
Revenue  $9,951,743   $906,599   $10,858,342   $-      $10,858,342 
Revenue - Related Party   4,675,351         4,675,351    -       4,675,351 
TOTAL NET REVENUE   14,627,094    906,599    15,533,693    -       15,533,693 
REVENUE SHARE EXPENSE   6,513,810    -    6,513,810    -       6,513,810 
GROSS MARGIN   8,113,284    906,599    9,019,883    -       9,019,883 
EXPENSES                            
Operating Expenses   7,807,705    707,558    8,515,263    295,183    [c], [i]   8,810,446 
INCOME FROM OPERATIONS   305,579    199,040    504,619    (295,183)      209,437 
                             
OTHER INCOME                            
Interest income   30,679    2    30,681    -       30,681 
TOTAL OTHER INCOME   30,679    2    30,681    -       30,681 
INCOME BEFORE PROVISION FOR INCOME TAXES   336,258    199,042    535,300    (295,183)      240,118 
PROVISION FOR INCOME TAXES   -    -    -    -       - 
NET INCOME  $336,258   $199,042   $535,300   $(295,183)     $240,118 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:                            
BASIC   10,840,584    1,087    -    -       10,871,222 
DILUTIVE   11,766,754    1,087    -    -       11,797,392 
NET INCOME PER SHARE                            
BASIC  $0.03   $183.11    -    -      $0.02 
DILUTIVE  $0.03    -    -    -      $0.02 

 

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OPTIMIZERx CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

 

               Pro Forma      Pro Forma 
   OptimizeRx   CareSpeak   Combined   Adjustments      Combined 
                        
NET REVENUE                       
Revenue  $8,431,208   $800,459   $9,231,667   $-      $9,231,667 
Revenue - Related Party   3,696,214         3,696,214    -       3,696,214 
TOTAL NET REVENUE   12,127,422    800,459    12,927,881    -       12,927,881 
REVENUE SHARE EXPENSE   6,174,614         6,174,614    -       6,174,614 
GROSS MARGIN   5,952,808    800,459    6,753,267    -       6,753,267 
EXPENSES                            
Operating Expenses   8,082,774    755,245    8,838,019    454,217   [c]   9,292,236 
INCOME (LOSS) FROM OPERATIONS   (2,129,966)   45,214    (2,084,752)   (454,217)      (2,538,969)
OTHER INCOME             -    -       - 
Interest income   25,937    3    25,940    -       25,940 
TOTAL OTHER INCOME   25,937    3    25,940    -       25,940 
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES   (2,104,029)   45,217    (2,058,812)   (454,217)      (2,513,029)
PROVISION FOR INCOME TAXES   -    -    -    -       - 
NET INCOME (LOSS)  $(2,104,029)  $45,217   $(2,058,812)  $(454,217)     $(2,513,029)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC & DILUTIVE   29,459,259    1,087    -    -       29,489,897 
NET INCOME (LOSS) PER SHARE BASIC AND DILUTED  $(0.07)  $41.60    -    -      $(0.09)

 

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Notes to Pro Forma Financial Statements

 

Note 1 - Basis of Presentation

 

On October 17, 2018, OptimizeRx Corp. (the “Company”) entered into, and consummated the transactions contemplated by, a Stock Purchase Agreement (the “Purchase Agreement”) by and among the Company, CareSpeak (collectively, the “Sellers”), each of Srdjan Loncar, United Healthcare Services, Inc., Christopher DiCostanzo and Kresimir Nesek as “Seller Indemnitors” and Srdjan Loncar in his capacity as seller’s representative, which agreement provided for the purchase of all equity of CareSpeak by the Company.

 

The consideration for the acquisition costs of $5.5 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 $500,000 divided by the VWAP for the thirty (30) trading day period ending the day prior to Closing and earnout payments of up to $3 million, if any become payable, as a result of achieving certain revenue targets for 2019 and 2020. In addition, the Company incurred its own expenses for the transaction at approximately $500,000.

 

The unaudited pro forma combined financial statements have been prepared to give effect to the acquisition by the Company of CareSpeak using the historical consolidated financial statements of the Company and the historical combined financial statements CareSpeak. 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 CareSpeak, respectively. This information can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and Quarterly Report on Form 10-Q for the nine months ended September 30, 2018, and in Exhibits 99.2 and 99.3 of this Current Report on Form 8-K.

 

The historical financial information of CareSpeak includes the financial information of CareSpeak Communications, Inc. and CareSpeak Communications, d.o.o. (“CareSpeak Croatia) as CareSpeak purchased the operations of CareSpeak Croatia in September 2016; accordingly, the combined historical information of both entities is necessary to provide a fair presentation of the historical operations that have been acquired by the Company.

 

The unaudited pro forma combined balance sheet as of September 30, 2018, combines the unaudited consolidated balance sheets of the Company and CareSpeak on September 30, 2018, and gives effect to the Acquisition as if it had occurred on September 30, 2018.

 

The unaudited pro forma combined statement of operations for the nine months ended September 30, 2018 combines the unaudited results of operations of the Company and CareSpeak to give the effect as if the Acquisition occurred the first day of the period presented (January 1, 2017). The unaudited pro forma combined statement of operations for the twelve months ended December 31, 2017, combines the audited consolidated statements of operations of the Company for the twelve months fiscal year ended December 31, 2017, with the unaudited combined statement of operations of CareSpeak for the twelve months ended December 31, 2017, to give the effect as if the Acquisition occurred the first day of the period presented (January 1, 2016).

 

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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 CareSpeak working capital  $(335,561)
    2)  Payment of cash purchase consideration   (5,500,000)
    Net impact on cash  $(5,835,561)

 

(b)Represents the fair value adjustment of property and equipment purchased from CareSpeak.

 

  (c) The following table summarizes the fair values of the CareSpeak 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, 2018 and the actual Closing Date of October 17, 2018.

 

  Assets acquired  September 30, 2018   October 17, 2018 
  Cash  $295,596      
  Accounts Receivable   134,446    112,617 
  Other current assets   83,654    57,823 
  Property and Equipment   8,487    8,487 
  Customer Relationship   492,000    492,000 
  Tradename   982,000    982,000 
  Technology/Software (Patent)   2,227,000    2,227,000 
  Non-Compete Agreement   977,000    977,000 
  Goodwill   3,678,513    3,678,513 
  Total assets acquired  $8,878,696   $8,535,440 
             
  Liabilities assumed          
  Accounts payable and other accrued liabilities   760    57,459 
  Deferred revenue   177,375    21,570 
  Total liabilities assumed   178,135    79,029 
  Net assets acquired  $8,700,561   $8,456,411 
             
  Purchase consideration:          
  Cash paid at closing   4,850,000    4,850,000 
  Earn out consideration   2,365,000    2,365,000 
  Common Stock   500,000    500,000 
  Escrow Amount   600,000    600,000 
  Est Working Capital   335,561    91,411 
  Seller Reserve Amount   50,000    50,000 
     $8,700,561   $8,456,411 

 

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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 CareSpeak’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)  $2,227,000   15 years
  Non-Compete Agreement   977,000   4 years
  Tradename   982,000   infinite
  Customer Relationship   492,000   8 years
     $4,678,000    

 

Amortization of technology, non-compete agreements and customer relationships are amortized on a straight-line basis. For the unaudited pro forma combined periods presented, monthly amortization would have been $37,851, based upon their respective useful lives. Total amortization for the nine months ended September 30, 2018 and the year ended December 31, 2017, was $340,659 and $454,212, respectively.

 

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

 

  Years Ending December 31:      
  2018     94,628  
  2019     454,212  
  2020     454,212  
  2021     454,212  
  2022     441,400  
  Thereafter     1,797,337  

 

There is no pro forma adjustment for depreciation expense since the historical depreciation is comparable.

 

(d)Impact on accounts payable:

 

  1) Total estimated acquisition related costs  $504,000 
  2) Costs reflected in OptimizeRx historical financial statements as of September 30, 2018   (45,000)
  Pro Forma acquisition costs reflected through the recordation of accounts payable at September 30, 2018  $459,000 

 

 

(e)Represents the present value of the future potential contingent earn-out the Sellers may earn based upon CareSpeak achieving certain revenue targets.

 

(f)Represents 30,638 shares of Common Stock issued as purchase consideration.

 

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(g)Impact on Additional paid-in capital:

 

  1) Reflects the issuance of 30,638 shares of common stock as consideration in the purchase price. Shares were valued at $16.32 per share or $500,000.  Shares are assumed to be fully outstanding in the periods presented  $499,969 
  2) Reflects removal of $360,099 additional paid-in-capital of CareSpeak in the acquisition   (360,099)
     $139,870 

 

(h)Impact on retained earnings:

 

  1) Total estimated acquisition related costs  $504,000 
  2) Costs reflected in OptimizeRx historical financial statements as of September 30, 2018   (45,000)
  3) Total acquisition costs not recorded in historical financial statements as of September 30, 2018  $459,000 
  Acquisition costs which are expensed and thus reflected as a reduction to retained earnings     
  4.) Reflects removal of $21,196 in retained earnings of CareSpeak in the acquisition   (21,198)
  Pro Forma reduction to retained earnings  $437,802 

 

(i)Pro forma add back of one-time transaction costs expensed in the historical period ended September 30, 2018 of $45,480.

 

 

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