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EXHIBIT 99.1
DELANO TECHNOLOGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the acquisition by Delano Technology Corporation ("Delano") of
all outstanding shares of Digital Archaeology Corporation ("Digarch") in a
transaction accounted for as a purchase.
The unaudited pro forma combined condensed statements of operations of
Delano for the twelve months ended March 31, 2000 and for the six months ended
September 30, 2000 assume that the acquisition of Digarch took place as of the
beginning of the earliest period presented. The statements combine Delano's
statements of operations for the twelve months ended March 31, 2000 and for the
six months ended September 30, 2000 with Digarch's statements of operations for
the twelve months ended December 31, 1999 and for the six months ended June 30,
2000.
The unaudited pro forma combined condensed balance sheet as of September
30, 2000 combines Delano's September 30, 2000 balance sheet with Digarch's June
30, 2000 balance sheet as if the acquisition had been consummated on September
30, 2000.
The unaudited pro forma combined condensed information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have actually occurred if the
acquisition had been consummated as of the dates indicated, nor is it
necessarily indicative of future operating results or financial position. The
pro forma adjustments are based on the information available at the date of this
filing and are subject to change based upon the finalization of the purchase
price allocation, including completion of third party appraisals.
Delano's condensed financial information included in these pro forma
financial statements is derived from its March 31, 2000 audited financial
statements and from its 10Q filing for September 30, 2000. Digarch's condensed
balance sheet included in the accompanying pro forma unaudited combined
condensed balance sheet is derived from its unaudited historical consolidated
balance sheet as of June 30, 2000 included elsewhere in this filing. The results
of operations of Digarch included in the unaudited pro forma condensed combined
statements of operations of the year ended March 31, 2000 and the six months
ended September 30, 2000 were derived from Digarch's audited financial
statements for the year ended December 31, 1999 and from its unaudited financial
statements for the six months ended June 30, 2000 included elsewhere in this
filing.
The unaudited condensed financial information of Digarch has been prepared
in accordance with generally accepted accounting principles applicable to
interim financial information and, in the opinion of Digarch's management,
includes all adjustments necessary for a fair presentation of the financial
information for such interim periods.
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DELANO TECHNOLOGY CORPORATION
PRO FORMA UNAUDITED COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DELANO DIGARCH ADJUSTMENTS COMBINED
---------- ------- ------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 85,204 $ 4,819 $ (17,364) (B) $ 72,659
Short-term investments............................ 1,142 -- -- 1,142
Accounts receivable, net.......................... 8,612 647 -- 9,259
Prepaid expenses and other assets................. 3,339 458 -- 3,797
-------- ------- --------- --------
Total current assets........................... 98,297 5,924 (17,364) 86,857
Property and equipment, net....................... 9,587 757 -- 10,344
Goodwill and purchased intangibles................ 19,067 -- 94,055 (A) 113,122
Other assets...................................... -- 170 -- 170
-------- ------- --------- --------
Total assets................................... $126,951 $ 6,851 $ 76,691 $210,493
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.......... $ 10,398 $ 1,005 $ 1,493 (B) 12,896
Deferred revenue.................................. 1,042 144 -- 1,186
Current portion of capital lease obligation....... 180 46 -- 226
-------- ------- --------- --------
Total current liabilities...................... 11,620 1,195 1,493 14,308
Capital lease obligations, less current portion... 163 -- -- 163
-------- ------- --------- --------
Total liabilities.............................. 11,783 1,195 1,493 14,471
Stockholders' equity:
Convertible preferred stock....................... -- 41 (41) (B) --
Common stock...................................... 153,943 21,844 56,340 (B) 232,127
Warrants.......................................... 506 -- -- 506
Deferred stock compensation....................... (9,808) -- (2,568) (B) (12,376)
Accumulated other comprehensive income............ (260) -- -- (260)
Accumulated deficit............................... (29,213) (16,229) 21,467 (B) (23,975)
-------- ------- --------- --------
Total stockholders' equity..................... 115,168 5,656 75,198 196,022
-------- ------- --------- --------
Total liabilities and stockholders equity...... $126,951 $ 6,851 $ 76,691 $210,493
======== ======= ========= ========
</TABLE>
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DELANO TECHNOLOGY CORPORATION
PRO FORMA UNAUDITED COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DELANO DIGARCH ADJUSTMENTS COMBINED
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Product license................................... $ 8,799 $ 717 $ -- $ 9,516
Services.......................................... 690 140 -- 830
-------- -------- --------- ---------
Total revenues................................. 9,489 857 -- 10,346
-------- -------- --------- ---------
Cost of revenues:
Product licenses.................................. 59 13 -- 72
Services.......................................... 1,239 140 -- 1,379
-------- -------- --------- ---------
Total cost of revenues......................... 1,298 153 -- 1,451
-------- -------- --------- ---------
Gross profit......................................... 8,191 704 -- 8,895
-------- -------- --------- ---------
Operating expenses
Research and development.......................... 11,732 2,249 -- 13,981
Sales and marketing............................... 3,649 2,296 -- 5,945
General and administrative........................ 1,515 1,482 -- 2,997
Amortization of goodwill and intangibles.......... -- -- 31,352 (C) 31,352
Stock-based compensation.......................... 1,671 -- 794 (C) 2,465
-------- -------- --------- ---------
Total operating expenses....................... 18,567 6,027 32,146 56,740
-------- -------- --------- ---------
Loss from operations................................. (10,376) (5,323) (32,146) (47,845)
Other income (expense)............................... 1,099 (96) -- 1,003
-------- -------- --------- ---------
Net loss............................................. (9,277) (5,419) (32,146) (46,842)
Less: accretion of dividends on redeemable
convertible special shares............... (313) -- -- (313)
-------- -------- --------- ---------
Loss applicable to common shares............... $ (9,590) $ (5,419) $ (32,146) $ (47,155)
======== ======== ========= =========
Basic and diluted net loss per share................. $ (1.50) $ (4.28)
======== ========
Shares used in computing basic and diluted net
loss per share................................... 6,381 11,011
======== ========
</TABLE>
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DELANO TECHNOLOGY CORPORATION
PRO FORMA UNAUDITED COMBINED CONDENSED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DELANO DIGARCH ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product license................................... $ 12,370 $ 519 $ -- $ 12,889
Services.......................................... 1,682 175 -- 1,857
--------- --------- --------- ---------
Total revenues................................. 14,052 694 -- 14,746
--------- --------- --------- ---------
Cost of revenues:
Product licenses.................................. 181 5 -- 186
Services.......................................... 1,970 137 -- 2,107
--------- --------- --------- ---------
Total cost of revenues......................... 2,151 142 -- 2,293
--------- --------- --------- ---------
Gross profit......................................... 11,901 552 -- 12,453
--------- --------- --------- ---------
Operating expenses
Research and development.......................... 6,176 1,283 -- 7,459
Sales and marketing............................... 21,504 3,932 -- 25,436
General and administrative........................ 2,140 735 -- 2,875
Amortization of goodwill and intangibles.......... -- -- 15,676 (C) 15,676
In-process research and development............... 360 -- -- 360
Stock-based compensation.......................... 2,480 -- 397 (C) 2,877
--------- --------- --------- ---------
Total operating expenses....................... 32,660 5,950 16,073 54,683
--------- --------- --------- ---------
Loss from operations................................. (20,759) (5,398) (16,073) (42,230)
Other income......................................... 2,926 82 -- 3,008
--------- --------- --------- ---------
Net loss...................................... $ (17,833) $ (5,316) $(16,073) $ (39,222)
========= ======== ======== =========
Basic and diluted net loss per share................. $ (0.59) $ (1.13)
======== =========
Shares used in computing basic and diluted net
loss per share................................... 30,112 34,742
======== ========
</TABLE>
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NOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
The total purchase price of Digarch reflects the issuance of approximately
4.6 million shares of our common stock and the assumption of options to purchase
approximately 1.2 million shares of our common stock. The total purchase price
was determined as follows (in thousands):
<TABLE>
<S> <C>
Value of Delano common stock and options.............................. $ 75,616
Cash paid............................................................. 17,364
Other direct acquisition expenses..................................... 1,493
--------
$ 94,473
========
</TABLE>
The valuation of our common stock is based on its weighted average closing
price five days prior to and five days following the announcement of the
acquisition. The valuation of options to purchase our common stock is based upon
the Black-Scholes valuation model.
The total purchase price of the Digarch acquisition has been allocated to
acquired assets based on estimates of their fair values. The purchase price of
approximately $94.5 million has been assigned to the assets acquired as follows
(in thousands):
<TABLE>
<S> <C>
Tangible net assets acquired.......................................... $ 349
Acquired in-process research and development.......................... 69
Assembled work force and customer list................................ 1,933
Developed technology.................................................. 2,920
Goodwill.............................................................. 89,202
---------
$ 94,473
========
</TABLE>
We expect to allocate approximately $69,000 of the purchase price to
Digarch's in-process research and development, which will be expensed upon
consummation of the merger as it has not reached technological feasibility and,
in the opinion of management, has no alternative future use. The estimated
amount is subject to adjustment based upon completion of third party appraisals.
This amount has not been reflected in the accompanying pro forma statements of
operations as it is a nonrecurring charge, but has been reflected as an
adjustment to accumulated deficit in the accompanying pro forma balance sheet.
The adjustments to the pro forma combined condensed balance sheet as of
September 30, 2000 are as follows:
(A) To reflect goodwill and other intangibles of approximately $94.1
million resulting from the acquisition of Digarch.
(B) To reflect the purchase price paid as follows: cash paid of
$17.4 million, issuance of our common stock and assumptions of options valued at
approximately $75.6 million and acquisition-related expenses of approximately
$1.5 million.
The adjustments to the unaudited pro forma combined condensed statements of
operations for the year ended March 31, 2000 and for the six months ended
September 30, 2000 assume the acquisition occurred as of April 1, 1999 and are
as follows:
(C) To reflect the amortization of approximately $94.1 million of estimated
goodwill and other intangibles resulting from the acquisition. The intangible
assets will be amortized ratably over an estimated useful life of three years.
To reflect the amortization of deferred stock-based compensation relating to the
unvested Digarch options.
