Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of EMR Technology Solutions, Inc. (herein referred to as the “Company”, “we”, “our”, “us” and similar terms unless the context indicates otherwise) and Digital Medical Solutions, Inc. (“DMSI”), that was completed on March 15, 2017, effective January 1, 2017, (the “Acquisition”), pursuant to which, the Company acquired 100% of the stock of DMSI. The Acquisition was accounted for as a business combination in accordance with the guidance contained in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The unaudited pro forma condensed combined financial information gives effect to the Acquisition based on the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined balance sheet as of December 31, 2016 is presented as if the Acquisition had occurred on January 1, 2016. The condensed combined statements of operations for the year ended December 31, 2016 are presented as if the Acquisition had occurred on January 1, 2016.
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of the U.S. Securities and Exchange Commission’s Regulation S-X. The unaudited pro forma adjustments reflecting the transaction have been prepared in accordance with the guidance for business combinations presented in ASC 805, and reflect the allocation of our preliminary purchase price to the assets acquired and liabilities assumed in the Acquisition based on their estimated fair values. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to unaudited pro forma events that are: (i) directly attributable to the Acquisition; (ii) factually supportable; and (iii) with respect to the condensed combined statements of operations, expected to have a continuing impact on our condensed combined results of operations.
The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Acquisition had been affected on the dates previously set forth, nor is it indicative of the future operating results or financial position in combination. Our preliminary purchase price allocation was made using our best estimates of fair value, which are dependent upon certain valuation and other analyses that are not yet final. As a result, the unaudited pro forma purchase price adjustments related to the Acquisition are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed during the applicable measurement period under ASC 805 (up to one year from the Acquisition date). There can be no assurances that any final valuations will not result in material adjustments to our preliminary estimated purchase price allocation. Further, the unaudited pro forma condensed combined financial information does not give effect to the potential impact of anticipated synergies, operating efficiencies, cost savings or transaction and integration costs that may result from the Acquisition.
The unaudited pro forma condensed combined financial information should be read in conjunction with our historical consolidated financial statements and their accompanying notes presented in our Annual Report on Form 10-K for the year ended December 31, 2016.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2016
| Historical Information | |||||||||||||||||||||||
| EMR Technology | Digital Medical | Pro Forma | Pro Forma | ||||||||||||||||||||
| Solutions, Inc. | Solutions, Inc. | Combined | Adjustments | Combined | Notes | ||||||||||||||||||
| ASSETS | |||||||||||||||||||||||
| Current Assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 42,186 | $ | -- | $ | 42,186 | $ | $ | 42,186 | ||||||||||||||
| Accounts receivable, net | 16,579 | 113,443 | 130,022 | 130,022 | |||||||||||||||||||
| Total Current Assets | 58,765 | 113,443 | 172,208 | 172,208 | |||||||||||||||||||
| Property and equipment, net | 818 | -- | -- | 818 | |||||||||||||||||||
| Other Assets: | |||||||||||||||||||||||
| Software, net | 1,025,169 | -- | 1,025,169 | 1,025,169 | |||||||||||||||||||
| Customer lists, net | 327,596 | -- | 327,596 | 300,000 | 627,596 | a | |||||||||||||||||
| Covenant not to compete, net | 3,767 | -- | 3,767 | 423,847 | 427,614 | a | |||||||||||||||||
| Total other assets | 1,356,532 | -- | 1,356,532 | 2,080,379 | |||||||||||||||||||
| TOTAL ASSETS | $ | 1,416,115 | $ | 113,443 | $ | 1,529,558 | $ | 723,847 | $ | 2,253,405 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |||||||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||||||
| Accounts payable | $ | 48,214 | $ | -- | $ | 48,214 | $ | $ | 48,214 | ||||||||||||||
| Accrued expenses | 34,687 | -- | 34,687 | 15,000 | 49,687 | e | |||||||||||||||||
| Deferred revenue | -- | 70,290 | 70,290 | (17,000 | ) | 53,290 | f | ||||||||||||||||
| Accrued Taxes | -- | 130,000 | 130,000 | (130,000 | ) | -- | f | ||||||||||||||||
| Total Current Liabilities | 82,901 | 200,290 | 283,191 | 151,191 | |||||||||||||||||||
| Promissory note – related party | 500,000 | -- | 500,000 | 500,000 | |||||||||||||||||||
| Promissory notes – non-current | 200,000 | -- | 200,000 | 250,000 | 450,000 | b | |||||||||||||||||
| TOTAL LIABILITIES | 782,901 | 200,290 | 983,191 | 1,101,191 | |||||||||||||||||||
| Stockholders’ Equity: | |||||||||||||||||||||||
| Common Stock | 7,974 | -- | 7,974 | 1,388 | 9,362 | c | |||||||||||||||||
| Additional paid in capital | 2,819,326 | -- | 2,819,326 | 748,612 | 3,567,938 | c | |||||||||||||||||
| Accumulated deficit | (2,194,086 | ) | (86,847 | ) | (2,280,933 | ) | (144,153 | ) | (2,427,933 | ) | |||||||||||||
| Total stockholders’ equity (deficit) | 633,214 | (86,847 | ) | 546,367 | 1,152,214 | ||||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’EQUITY (DEFICIT) | $ | 1,416,115 | $ | 113,443 | $ | 1,529,558 | $ | 723,847 | $ | 2,253,405 | |||||||||||||
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UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2016
| Historical Information | |||||||||||||||||||||||
| EMR Technology | Digital Medical | Pro Forma | Pro Forma Combined | ||||||||||||||||||||
| Solutions, Inc. | Solutions, Inc. | Combined | Adjustments | Adjustments | Notes | ||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Service revenues | $ | 20,488 | $ | 15,404 | $ | 35,892 | $ | $ | 35,892 | ||||||||||||||
| Contract revenues | 37,705 | 318,874 | 356,579 | 356,579 | |||||||||||||||||||
| Technical Support | -- | 27,963 | 27,963 | 27,963 | |||||||||||||||||||
| Total revenues | 58,193 | 362,241 | 420,434 | 420,434 | |||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenues | 26,267 | 31,685 | 57,952 | 57,952 | |||||||||||||||||||
| Selling, general, and administrative expense | 2,012,015 | 26,945 | 2,038,960 | 2,038,960 | |||||||||||||||||||
| Amortization expense | 120,902 | -- | 120,902 | 363,000 | 483,902 | d | |||||||||||||||||
| Total operating expenses | 2,159,184 | 58,630 | 2,217,814 | 363,000 | 2,580,814 | ||||||||||||||||||
| Income (Loss) from operations | (2,100,991 | ) | 303,611 | (1,797,380 | ) | (363,000 | ) | (2,160,380 | ) | ||||||||||||||
| Other Income (Expense) | |||||||||||||||||||||||
| Loss on conversion of debt | (72,000 | ) | -- | (72,000 | ) | (72,000 | ) | ||||||||||||||||
| Interest expense (net) | (16,936 | ) | -- | (16,936 | ) | (15,000 | ) | (31,936 | ) | e | |||||||||||||
| Total other income (expense) | (88,936 | ) | -- | (88,936 | ) | (15,000 | ) | (103,936 | ) | ||||||||||||||
| Income (Loss) before income taxes | (2,189,927 | ) | 303,611 | (1,886,316 | ) | (378,000 | ) | (2,264,316 | ) | ||||||||||||||
| Provision for income taxes | -- | (147,000 | ) | (147,000 | ) | 147,000 | -- | f | |||||||||||||||
| Net Income (Loss) | $ | (2,189,927 | ) | $ | 156,611 | $ | (2,033,316 | ) | $ | (231,000 | ) | $ | (2,264,316 | ) | |||||||||
| Basic and diluted net loss per common share | $ | (0.50 | ) | $ | (0.39 | ) | |||||||||||||||||
| Basic and diluted Weighted Average Number of Common Shares | 4,388,597 | 5,776,098 | |||||||||||||||||||||
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| 1. | Basis of Unaudited Pro Forma Presentation |
On March 15, 2017, we entered into a Stock Purchase Agreement (the “Agreement”) with Digital Medical Solutions, Inc. (“DMSI”) pursuant to which the Company acquired 100% of the stock of DMSI. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016 combine our historical condensed consolidated statements of operations with the condensed statements of operations of DMSI as if the Acquisition had occurred on January 1, 2016. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to give effect to unaudited pro forma events that are: (i) directly attributable to the Acquisition; (ii) factually supportable; and (iii) with respect to the condensed combined statements of operations, expected to have a continuing impact on our condensed combined results.
| 2. | Preliminary Consideration Transferred |
Pursuant to the Agreement, the Company purchased all of the Capital Stock (as defined in the Agreement) of DMSI from the Seller (the “DMSI Shares”) in exchange for (i) $1,000,000, subject to certain post-closing adjustments for working capital and deferred revenue, consisting of (a) $750,000 in cash, and (b) a Convertible Promissory Note (the “Note”) issued in favor of the Seller in the principal amount of $250,000 payable over a 36 month period, with 6% annual interest, convertible into common stock of the Company at a price of $3.00 per share (the “Purchase Price”).
| 3. | Preliminary Purchase Price Allocation |
Under the acquisition method of accounting outlined in ASC 805, the identifiable assets acquired and liabilities assumed in the Acquisition are recorded at their Acquisition-date fair values and are included in the Company’s consolidated financial position. Our unaudited pro forma adjustments are preliminary in nature and based on the estimates of fair value for all assets acquired and liabilities assumed to illustrate the estimated effect of the Acquisition on our condensed consolidated balance sheet at December 31, 2016. Accordingly, the unaudited pro forma purchase price allocation is subject to further adjustments as additional information becomes available and as additional analyses are performed. The primary areas that are not yet finalized relate to our estimated fair values for inventory and identifiable intangible assets. There can be no assurances that any final valuations will not result in material adjustments to our preliminary estimated purchase price allocation.
The following table summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed in connection with the Acquisition:
| Tangible assets acquired | $ | 113,443 | ||
| Liabilities assumed | (200,290 | ) | ||
| Net tangible assets | (86,847 | ) | ||
| Customer list | 636,847 | |||
| Software | 450,000 | |||
| Total purchase price | $ | 1,000,000 |
Our unaudited pro forma purchase price allocation includes certain identifiable intangible assets with an estimated fair value of approximately $1,000,000. The fair value of the identifiable intangible assets acquired was estimated using a combination of asset-based and income-based valuation methodologies. The asset-based valuation methodology established a fair value estimate based on the cost of replacing the asset, less amortization from functional use and economic obsolescence, if present and measurable. The income-based valuation methodology utilizes a discounted cash flow technique where the expected future economic benefits of ownership of an asset are discounted back to present value. This valuation technique requires us to make certain assumptions about, including, but not limited to, future operating performance and cash flow, and other such variables which are discounted to present value using a discount rate that reflects the risk factors associated with future cash flow, the characteristics of the assets acquired, and the experience of the acquired business. Such estimates are subject to change, possibly materially, as additional information becomes available and as additional analyses are performed.
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| 4. | Pro Forma Adjustments |
The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:
| (a) | Adjustment to reflect the fair value of the total consideration. |
| (b) | Adjustment to reflect $250,000 paid through the delivery of unsecured convertible promissory note with 6% annual interest, convertible into common stock of the Company at a price of $3.00 per share and payable over a 36 month period. | |
| (c) | Adjustment to reflect 1,387,501 shares of our Common Stock valued at $750,000 that was used to close the DMSI acquisition. |
The following table summarizes the impact of pro forma adjustments to operating expense classifications presented in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016:
| Operating | Interest | Provision for Income | ||||||||||||||
| Expenses | Expenses | Taxes | Total | |||||||||||||
| For the Year Ended December 31, 2016 | ||||||||||||||||
| (d) Amortization | $ | 363,000 | - | - | $ | 363,000 | ||||||||||
| (e) Interest | - | 15,000 | - | 15,000 | ||||||||||||
| (f) Income Tax Expense | - | - | (147,000 | ) | (147,000 | ) | ||||||||||
| $ | 363,000 | $ | 15,000 | (147,000 | ) | $ | 231,000 | |||||||||
(d) Adjustment to recognize amortization expense on acquired definite-lived intangible assets.
(e) Adjustment to recognize interest expense on the unsecured promissory note issued for acquisition.
(f) Adjustment to reduce taxable income and deferred tax liability.
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