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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