<PAGE>
Exhibit 99.3
ENTRUST TECHNOLOGIES INC.
Unaudited Pro Forma Combined Condensed Financial Statements
On June 26, 2000, Entrust Technologies Inc. (the "Company") completed the
acquisition of all of the outstanding stock, options and warrants of enCommerce,
Inc. ("enCommerce"), a global portal infrastructure company and a provider of
software and services designed to manage electronic business relationships,
based in Santa Clara, California, with subsidiaries in England and Japan, in
exchange for an aggregate of 10,250,000 shares of Common stock of the Company.
The accompanying unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined financial position or results of operations which may be reported
in future periods or the financial position that actually would have been
realized had the Company and enCommerce been a combined company during the
specified periods, or had the acquisition been consummated on the date
indicated. Actual statements of operations of the companies will be combined
commencing from June 30, 2000, the effective date of the acquisition for
accounting purposes. The unaudited pro forma combined condensed financial
statements, including the related notes, are qualified in their entirety by
reference to, and should be read in conjunction with, the historical financial
statements and related notes of enCommerce, included elsewhere in this filing,
and the historical financial statements and related notes of the Company
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
The accompanying unaudited pro forma combined condensed financial statements
give effect to the acquisition between the Company and enCommerce using the
purchase method of accounting. The unaudited pro forma combined condensed
financial statements are based on the respective historical audited and
unaudited consolidated financial statements and related notes of the Company and
enCommerce. The pro forma adjustments are preliminary and are based on
management's estimates of the value of the tangible and intangible assets
acquired. In addition, management is in the process of assessing and formulating
its integration plans, which may include restructuring actions, the full cost of
which has not yet been determined.
The actual adjustments may differ materially from those presented in these pro
forma financial statements. Actual adjustments may result in a different
allocation of the purchase price which would affect the value assigned to the
tangible and intangible assets, or could result in a change to the statement of
operations. The effect of these changes on the statement of operations will
depend on the nature and amounts of the assets and liabilities adjusted. See the
notes to the unaudited pro forma combined condensed financial statements.
The unaudited pro forma combined condensed balance sheet assumes that the
acquisition took place on March 31, 2000, and combines the Company's unaudited
March 31, 2000 balance sheet with enCommerce's audited March 31, 2000 balance
sheet. The unaudited pro forma combined condensed statements of operations
assume the acquisition took place as of January 1, 1999 and combines the
Company's audited statement of operations for the year ended December 31, 1999
with enCommerce's unaudited statement of operations for the year ended December
31, 1999, and combines the unaudited statements of operations of the Company and
enCommerce for the three months ended March 31, 2000. Reclassifications have
been made to enCommerce's financial statements to conform to the Company's
presentation.
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ENTRUST TECHNOLOGIES INC
Unaudited Pro Forma Combined Condensed Balance Sheet
As at March 31, 2000
(in thousands)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments Pro Forma
---------------------------- ------------------------ Combined
Entrust enCommerce Amount Reference Entrust
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 187,886 $ 33,803 $ - $ 221,689
Short-term marketable investments 56,946 - - 56,946
Accounts receivable, net 25,539 5,353 - 30,892
Other receivables 1,602 - - 1,602
Prepaid expenses 2,767 370 - 3,137
--------------------------- ------------- -------------
Total current assets 274,740 39,526 - 314,266
Long-term marketable investments 1,806 - - 1,806
Goodwill and other intangible assets, net 18,842 - 426,739 (a) 445,581
Purchased product rights, net - - 22,010 (a) 22,010
Property and equipment, net 7,229 2,413 - 9,642
Other long-term assets 3,076 505 - 3,581
--------------------------- ------------- -------------
Total assets $ 305,693 $ 42,444 $ 448,749 $ 796,886
=========================== ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,452 $ 1,300 $ - $ 9,752
Accrued liabilities 11,493 2,658 - 14,151
Accruals related to acquisition - - 32,236 (a) 32,236
Deferred income 11,407 1,720 - 13,127
Due to related party 799 - - 799
--------------------------- ------------- -------------
Total current liabilities 32,151 5,678 32,236 70,065
Long-term liabilities - 621 - 621
--------------------------- ------------- -------------
Total liabilities 32,151 6,299 32,236 70,686
--------------------------- ------------- -------------
Mandatorily redeemable convertible preferred stock - 35,130 (35,130) (a) -
--------------------------- ------------- -------------
Shareholders' equity:
Convertible preferred stock - 25,320 (25,320) (a) -
Common stock 533 2 83 (a) 618
Additional paid-in-capital 289,365 10,490 471,697 (a) 771,552
Unearned deferred compensation (482) (8,502) 8,502 (a) (482)
Note receivable - (100) 100 (a) -
Accumulated other comprehensive income 66 11 (11) (a) 66
Accumulated deficit (15,940) (26,206) (3,408) (a) (b) (45,554)
--------------------------- ------------- -------------
Total shareholders' equity 273,542 1,015 451,643 726,200
--------------------------- ------------- -------------
Total liabilities and shareholders' equity $ 305,693 $ 42,444 $ 448,749 $ 796,886
=========================== ============= =============
</TABLE>
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ENTRUST TECHNOLOGIES INC.
Unaudited Pro Forma Combined Condensed Statements of Operations
For the Three Months Ended March 31, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments Pro Forma
--------------------------- ---------------------- Combined
Entrust enCommerce Amount Reference Entrust
<S> <C> <C> <C> <C>
Revenues:
License $ 20,889 $ 1,794 $ - $ 22,683
Services and maintenance 8,173 2,072 - 10,245
-------------------------- ----------- ----------
Total revenues 29,062 3,866 - 32,928
-------------------------- ----------- ----------
Cost of revenues:
License 937 44 - 981
Services and maintenance 4,568 1,746 - 6,314
-------------------------- ----------- ----------
Total cost of revenues 5,505 1,790 - 7,295
-------------------------- ----------- ----------
Gross profit 23,557 2,076 - 25,633
-------------------------- ----------- ----------
Operating expenses:
Sales and marketing 12,857 4,205 - 17,062
Research and development 4,993 2,349 - 7,342
General and administration 2,192 1,020 (221)(f) 2,991
Amortization of goodwill and other purchased intangibles 661 - 28,598 (c) 29,259
-------------------------- ----------- ----------
Total operating expenses 20,703 7,574 28,377 56,654
-------------------------- ----------- ----------
Income (loss) from operations 2,854 (5,498) (28,377) (31,021)
Interest income 1,886 259 - 2,145
-------------------------- ----------- ----------
Income (loss) before income taxes 4,740 (5,239) (28,377) (28,876)
Provision for income taxes (1,422) (154) - (1,576)
-------------------------- ----------- ----------
Net income (loss) $ 3,318 $(5,393) $ (28,377) $ (30,452)
========================== =========== ==========
Net income (loss) per share
Basic $ 0.07 $ (0.53)
Diluted $ 0.06 $ (0.53)(e)
Weighted average common shares outstanding
used in per share computations
Basic 49,250 8,548 (d) 57,798
Diluted 57,760 8,548 (d) 57,798 (e)
</TABLE>
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ENTRUST TECHNOLOGIES INC.
Unaudited Pro Forma Combined Condensed Statements of Operations
For the Year Ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments Pro Forma
-------------------------- ------------------------ Combined
Entrust enCommerce Amount Reference Entrust
<S> <C> <C> <C> <C>
Revenues:
License $ 61,482 $ 6,789 $ - $ 68,271
Services and maintenance 23,732 4,787 - 28,519
-------------------------- ------------- ------------
Total revenues 85,214 11,576 - 96,790
-------------------------- ------------- ------------
Cost of revenues:
License 2,286 113 - 2,399
Services and maintenance 13,016 5,129 - 18,145
-------------------------- ------------- ------------
Total cost of revenues 15,302 5,242 - 20,544
-------------------------- ------------- ------------
Gross profit 69,912 6,334 - 76,246
-------------------------- ------------- ------------
Operating expenses:
Sales and marketing 40,900 10,942 - 51,842
Research and development 16,605 5,599 - 22,204
General and administration 7,752 3,275 (886)(f) 10,141
Amortization of goodwill and other purchased
intangibles 712 - 114,393 (c) 115,105
-------------------------- ------------- ------------
Total operating expenses 65,969 19,816 113,507 199,292
-------------------------- ------------- ------------
Income (loss) from operations 3,943 (13,482) (113,507) (123,046)
Interest income 3,776 199 - 3,975
-------------------------- ------------- ------------
Income (loss) before income taxes 7,719 (13,283) (113,507) (119,071)
Provision for income taxes (1,800) (13) - (1,813)
-------------------------- ------------- ------------
Net income (loss) $ 5,919 $ (13,296) $(113,507) $ (120,884)
========================== ============= ============
Net income (loss) per share
Basic $ 0.13 $ (2.31)
Diluted $ 0.11 $ (2.31)(e)
Weighted average common shares outstanding
used in per share computations
Basic 43,847 8,548 (d 52,395
Diluted 54,803 8,548 (d) 52,395 (e)
</TABLE>
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ENTRUST TECHNOLOGIES INC.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
1. Pro Forma Adjustments
Certain pro forma adjustments have been made to the accompanying
unaudited pro forma condensed combined financial statements, based on
the acquisition of all of the outstanding capital stock of
enCommerce for approximately $504.6 million, which includes
$406.6 million representing 8.548 million shares of the Company's
Common stock (the number of shares issued on June 26, 2000 in
exchange for all of the outstanding shares of enCommerce, valued
using the average market value of the Company's stock for the
period from three days before April 18, 2000 to three days after
April 18, 2000, the date of public announcement of the acquisition),
$75.6 million in assumed enCommerce stock options and warrants (based
on outstanding options and warrants as of April 18, 2000) and
approximately $22.4 million in acquisition expenses, and based on the
allocation of $36.1 million to the book value of the net assets of
enCommerce less $9.9 million related to accruals associated with the
acquisition, $29.6 million to in-process research and development and
$448.7 million to goodwill and other purchased intangibles.
The unaudited pro forma combined condensed balance sheet as at March
31, 2000 gives effect to the acquisition as if it had occurred on
March 31, 2000. The unaudited pro forma combined condensed statements
of operations for the year ended December 31, 1999 and the three
months ended March 31, 2000 give effect to the acquisition as if it
had occurred at January 1, 1999.
The following adjustments have been reflected in the unaudited pro
forma combined condensed financial statements:
(a) Reflects the issuance of Common stock of the Company
to the shareholders of enCommerce and the recording of
the entries required under the purchase method of
accounting. Accordingly, the total purchase price has
been allocated to the tangible assets and liabilities
of enCommerce based on their relative fair values. The
fair value of the tangible assets and liabilities
approximated their historical book values at March 31,
2000. The amounts and components of the purchase
price, along with the allocation of the purchase price
to the net assets acquired and associated acquisition
accruals is presented below.
<TABLE>
<CAPTION>
Purchase Price
(in thousands)
<S> <C>
Common stock 85
Additional paid-in capital 406,552
Fair value of enCommerce stock options and warrants assumed 75,635
Brokers' fees and other acquisition expenses 22,355
----------------
504,627
================
Net Assets Acquired
Book value of net tangible assets of enCommerce 36,145
Less: Accruals for estimated severance and other
costs attributable to the acquisition (9,881)
----------------
26,264
Intangible assets:
Purchased product rights 22,010
Assembled work force 3,360
Customer list 23,105
Goodwill 400,274
-------------------
448,749
In-process research and development 29,614
---------------
504,627
================
</TABLE>
The value assigned to in-process research and development, in
accordance with generally accepted accounting principles, has
been written off at the time of acquisition of enCommerce and
is reflected in the unaudited pro forma combined condensed
balance sheet adjustments as a pro forma reduction of
shareholders' equity. However, this write off has not been
reflected as an adjustment to the unaudited pro forma combined
condensed statements of operations for the year ended December
31, 1999 and for the three months ended March 31, 2000, as
presented here, as it represents a non-recurring charge
directly attributable to this acquisition.
(b) Reflects the write-off of the acquired in-process
research and development prior to the 1999 fiscal year to
give effect to the acquisition as if it had occurred
prior to January 1, 1999 based on the allocation of the
purchase price.
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(c) Reflects the adjustment to record the amortization of goodwill
and other purchased intangibles resulting from the allocation
of the purchase price. The pro forma adjustment assumes
goodwill and other purchased intangibles will be amortized on a
straight-line basis over the following estimated lives:
Other intangible assets:
Purchased product rights 4 years
Assembled work force 3 years
Customer list 3 years
Goodwill 4 years
(d) Reflects the impact of the shares of Common stock of the
Company issued as consideration in the acquisition as
if outstanding from January 1, 1999.
(e) The dilutive effect of the Company's exchangeable Special
Voting stock, (which were exchanged into Common stock during
the three months ended March 31, 2000) options and warrants to
purchase the Company's Common stock has been excluded from the
computation of diluted net income (loss) per share because the
effect is antidilutive.
(f) Reflects the elimination of the stock based compensation
recorded in the enCommerce historical statements of
operations. The estimated fair value of the
outstanding options assumed is included in the
purchase price.
