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 |
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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 | ) |
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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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