Exhibit 99.3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Financial Information reflects financial information, which gives effect to the October 2, 2017 acquisition of Interwest Transfer Company, Inc. (“Interwest”) by Issuer Direct Corporation (the “Company”) whereby the Company paid $1,935,000 and 25,235 shares of the Company’s common stock at closing and agreed to pay $320,000 on each anniversary date for the subsequent three years to the sole shareholder of Interwest.
The Unaudited Pro Forma Financial Information appearing below is presented for illustrative purposes only, is based upon a number of assumptions and estimates and is subject to uncertainties, and the data does not purport to be indicative of the actual results of the operations or financial condition that would have occurred had the transactions described above in fact occurred on the dates indicated, nor does it purport to be indicative of the results of operations or financial condition that the combined company may achieve in the future.
The Unaudited Pro Forma Financial Information appearing below also does not consider any potential effects of changes in market conditions on revenues or expense efficiencies, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the pro forma condensed combined financial data is subject to adjustment and may vary significantly from the actual purchase price allocation once completed.
Issuer Direct Corporation & Interwest Transfer Company | |||||
Unaudited Pro Forma Consolidated Income Statement | |||||
For the Nine Months Ended September 30, 2017 | |||||
Issuer Direct Corp | Interwest | Pro Forma | |||
(Numbers in 000's except per share information) | Actual | Actual | Adjusments | Pro Forma | |
Income Statement | |||||
Revenues | $9,229 | $1,223 | $10,452 | ||
Cost of services | 2,476 | 502 | (243) | (1) | 2,735 |
Gross profit | 6,753 | 721 | 243 | 7,717 | |
Operating costs and expenses: | |||||
General and administrative | 2,525 | 344 | (213) | (1) | 2,656 |
Sales and marketing | 1,920 | - | | 1,920 | |
Product Development | 410 | - | 410 | ||
Depreciation and amortization | 310 | 6 | (6) | (2) | 310 |
Total operating costs and expenses | 5,165 | 350 | (219) | 5,296 | |
Operating income | 1,588 | 371 | 462 | 2,420 | |
Other income (expense): | | ||||
Other Income, net | (24) | - | (24) | ||
Interest Income | - | - | - | | - |
Total other income (expense) | (24) | - | - | (24) | |
Income (loss), before income taxes | 1,564 | 371 | 462 | 2,396 | |
Income tax expense | (438) | - | (291) | (3) | (729) |
Net income (loss) | 1,126 | 371 | 170 | | 1,667 |
| |||||
Income per share - basic | $0.38 | $0.56 | |||
Income per share - fully diluted | $0.37 | $0.55 | |||
Weighted average number of common shares outstanding - basic | 2,931 | - | 25 | (4) | 2,956 |
Weighted average number of common shares outstanding - fully diluted | 3,013 | - | 25 | (4) | 3,038 |
See notes to unaudited pro forma financial information
Issuer Direct Corporation & Interwest Transfer Company | |||||
Unaudited Pro Forma Consolidated Income Statement | |||||
For the Year Ended December 31, 2016 | |||||
Issuer Direct Corp | Interwest | ||||
(Numbers in 000's except per share information) | Actual | Actual | Eliminations | Pro-Forma | |
Income Statement | |||||
Revenues | $12,059 | $1,647 | $- | $13,706 | |
Cost of services | 3,024 | 537 | (143) | (5) | 3,418 |
Gross profit | 9,035 | 1,110 | 143 | 10,288 | |
Operating costs and expenses: | |||||
General and administrative | 3,185 | 404 | (257) | (5) | 3,332 |
Sales and marketing | 2,601 | - | - | 2,601 | |
Product Development | 404 | - | - | 404 | |
Depreciation and amortization | 910 | 11 | (11) | (2) | 910 |
Total operating costs and expenses | 7,100 | 415 | (268) | 7,247 | |
Operating income | 1,935 | 695 | 412 | | 3,042 |
Other income (expense): | |||||
Other Income, net | 80 | - | 80 | ||
Interest Income | 4 | - | 4 | ||
Total other income (expense) | 84 | - | 84 | ||
Income (loss), before income taxes | 2,019 | 695 | 412 | 3,126 | |
Income tax expense | (464) | - | (387) | (3) | (851) |
Net income (loss) | 1,555 | 695 | 24 | 2,274 | |
| |||||
Income per share - basic | $0.55 | $0.80 | |||
Income per share - fully diluted | $0.54 | $0.78 | |||
Weighted average number of common shares outstanding - basic | 2,820 | - | 25 | (4) | 2,845 |
Weighted average number of common shares outstanding - fully diluted | 2,903 | - | 25 | (4) | 2,928 |
See notes to unaudited pro forma financial information
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Issuer Direct Corporation & Interwest Transfer Company | |||||
Unaudited Pro Forma Consolidated Balance Sheet | |||||
As of September 30, 2017 | |||||
Consolidated Balance Sheets (USD $000's) | Issuer Direct Corp | Interwest | Eliminations | ProForma | |
Current assets: | |||||
Cash and cash equivalents | $6,407 | $63 | $(1,935) | (6) | $4,535 |
Accounts receivable, net | 1,067 | 85 | 1,152 | ||
Deferred income tax asset - current | - | - | - | ||
Other current assets | 396 | 17 | 413 | ||
Total current assets | 7,870 | 164 | (1,935) | 6,099 | |
Capitalized Software, net | 2,767 | 2,767 | |||
Fixed Assets, net | 159 | 12 | (12) | (2) | 159 |
Deferred income tax - noncurrent | 137 | - | 137 | ||
Goodwill & Intangible assets | 3,373 | 3,064 | (7) | 6,437 | |
Other noncurrent assets | 18 | - | 18 | ||
Total assets | $14,324 | $176 | $1,117 | $15,617 | |
Current liabilities: | |||||
Current maturities of notes payable and long-term debt | $- | $- | $- | ||
Accounts payable | 481 | 3 | 484 | ||
Advance postage fees | - | - | - | ||
Accrued expenses | 680 | 9 | 689 | ||
Income taxes payable | 80 | - | 80 | ||
Line of credit | - | - | - | ||
Deferred revenue | 958 | 21 | 979 | ||
Total current liabilities | 2,199 | 33 | - | 2,232 | |
Deferred Income taxes | 54 | - | 54 | ||
Other long-term liabilities | 86 | - | 928 | (6) | 1,014 |
Total liabilities | 2,339 | 33 | 928 | 3,300 | |
Stockholders' equity: | |||||
Preferred stock | - | - | - | ||
Common stock | 3 | - | 3 | ||
Additional paid-in capital | 9,776 | 6 | 328 | (4),(8) | 10,109 |
Other accumulated comprehensive income | 29 | - | 29 | ||
Retained earnings (accumulated deficit) | 2,177 | 138 | (138) | (8) | 2,177 |
Total stockholders' equity | 11,985 | 143 | 190 | 12,318 | |
Total liabilities and stockholders' equity | $14,324 | $176 | $1,117 | $15,617 |
See notes to unaudited pro forma financial information
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Notes to Unaudited Pro Form Financial Information (All numbers in 000's except per share information)
Note 1 - Basis of Presentation
The Unaudited Pro Forma Financial Information and explanatory notes have been prepared to illustrate the effects of the acquisition under the acquisition method of accounting with the Company as the acquirer. The Unaudited Pro Forma Financial Information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the periods presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of the combined entities. Under the acquisition method of accounting, the assets and liabilities of Interwest, as of the effective date of the acquisition, will be recorded by the Company at their respective fair values and the excess of the consideration over the fair value of Interwest’s net assets will be allocated to goodwill.
The acquisition price consists of $1,935 and 25.235 shares of the Company’s common stock paid at closing and $320 to be paid on each anniversary date for the subsequent three years to the sole shareholder of Interwest. This purchase price is subject to a working capital adjustment based on a working capital target of $75.
The pro forma allocation of the purchase price reflected in the Unaudited Pro Forma Financial Information is subject to adjustment and may vary from the actual purchase price allocation once completed. Adjustments may include, but not limited to, adjustments of Interwest’s balance sheet through the effective date of the acquisition; the aggregate value of consideration paid if the price of shares of the Company’s common stock varies from the assumed $13.20 per share, which represents the closing price of the Company’s common stock on the date of the acquisition; revisions to estimated fair value of fixed assets and intangible assets acquired. Accordingly, the preliminary estimated fair values of these assets and liabilities are subject to change pending additional information that may be developed by the Company and Interwest. Allocation of an increased portion of the purchase price to identifiable intangible assets with a finite life will reduce the amount of purchase price allocated to goodwill in the Unaudited Pro Forma Financial Information and may result in increased depreciation and/or amortization expense, which could be material.
The accounting policies of Interwest are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments of financial statement reclassifications may be determined.
Note 2 - Preliminary Purchase Price Allocation
The purchase price reflected in the Unaudited Pro Forma Financial Information consists of the following:
Purchase price paid in cash at closing | $1,935 |
Purchase price paid in stock (25,235 shares valued at $13.20*) | 333 |
Future anniversary payments | 960 |
Working capital adjustment | (32) |
Total Purchase Price | $3,196 |
* The fair value of the common stock issued was determined using the closing price on NYSE American exchange on October 2, 2017.
The stock consideration portion of the purchase was determined based on the formula (i) $320 divided by (ii) the per share value, with the per share value being a price per share equal to the average closing price of the common stock for the ninety (90) trading days immediately prior to October 2, 2017.
Unaudited Preliminary Purchase Price Allocation
The estimated allocation of the purchase price on the date of acquisition (October 2, 2017) consists of the following:
Cash | $63 |
Accounts Receivable, net | 85 |
Goodwill & other intangible assets | 3,064 |
Other current assets | 17 |
Accounts payable | (3) |
Accrued expenses | (9) |
Deferred revenue | (21) |
Total purchase price | $3,196 |
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Note 3 - Pro Forma Adjustments
Notes to unaudited pro forma financial information
(1)
Eliminates salaries, bonuses and benefits of $281 for employees whose positions have been eliminated; rent, insurance and other office costs of $75 that will no longer be necessary due to current agreements the Company has in place and professional fees of $100 related to acquisition costs or other services no longer required.
(2)
Eliminates depreciation and cost of fixed assets which will either not be conveyed to the Company or for which the value has been written down
(3)
Includes additional tax expense for Interwest operations as well as proforma adjustments at the Company's current estimated tax rate of 35%
(4)
Amount of shares issued to the principal of Interwest at time of closing. Additional paid in capital is based on the closing price of the shares on of $13.20 on October 2, 2017.
(5)
Eliminates salaries, bonuses and benefits of $248 for employees whose positions have been eliminated; rent, insurance and other office costs of $116 that will no longer be necessary due to current agreements the Company has in place and professional fees of $36 related to acquisition costs or other services no longer required.
(6)
Purchase price consisted of $1,935 cash paid at closing, working capital adjustment of ($32) to be applied against first anniversary payment of $320 as well as anniversary payments of $320 on each of the second and third anniversary dates.
(7)
Expected amount of goodwill and intangible assets once the purchase price allocation is completed
(8)
Elimination of equity and retained earnings of Interwest
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