ISSUER DIRECT CORP - FORM 8-K/A - EX-99.3 - UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR ISSUER DIRECT CORPORATION AFTER GI - December 13, 2017

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EX-99.2 - UNAUDITED CONDENSED FINANCIAL STATEMENTS OF INTERWEST TRANSFER COMPANY, INC. AS - ISSUER DIRECT CORPisdr_ex99-2.htm
EX-99.1 - AUDITED FINANCIAL STATEMENTS OF INTERWEST TRANSFER COMPANY, INC. FOR THE FISCAL - ISSUER DIRECT CORPisdr_ex99-1.htm
EX-23.1 - CONSENT OF BURNHAM & SCHUMM P.C. - ISSUER DIRECT CORPisdr_ex23-1.htm
8-K/A - AMENDMENT NO. 1 - ISSUER DIRECT CORPisdr_8ka.htm
  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.
 
The Unaudited Pro Forma Balance Sheet gives effect to the transaction as if it had occurred on September 30, 2017, the last date that Interwest has prepared interim financial statements.  The Unaudited Pro Forma Consolidated Income Statement gives effect to the transaction as if it had occurred at the beginning of the earliest period presented, combining the results of the Company and Interwest for the year ended December 31, 2016 and the nine months ended September 30, 2017.
 
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
 
 
-2-
 
 
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
 
 
-3-
 
 
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 
 
 -4-
 
 
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
 
 
 
-5-

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