<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8 K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 29, 1999
-------------------------------
DATUM INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in charter)
Delaware 0-6272 95-2512237
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
9975 Toledo Way, Irvine, California 92618-1819
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 598-7500
-----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed, since last report.)
<PAGE> 2
ITEM 2. ACQUISITIONS OR DISPOSITION OF ASSETS.
Acquisition of Digital Delivery, Inc.
On July 29, 1999, Datum Inc., a Delaware corporation ("Registrant"),
acquired Digital Delivery, Inc., a Massachusetts corporation ("DDI"), pursuant
to an Agreement and Plan of Merger, dated as of July 29, 1999 (the "Merger
Agreement"), by and among Registrant, Datum Acquisition Sub., Inc., a wholly
owned subsidiary of Registrant (the "Merger Subsidiary") and DDI. The
acquisition was effected by the merger (the "Merger") of the Merger Subsidiary
with and into DDI, with DDI surviving the Merger. The Merger was approved by the
unanimous written consent of DDI's stockholders ("DDI Stockholders") on July 29,
1999. No vote by Registrant's stockholders was required.
DDI is a leading provider of secure information and management software.
DDI's patented encryption models and leading-edge compression technologies
enable organizations to distribute data and conduct electronic commerce securely
via the Internet, intranet, Extranet, CD-ROM and digital versatile disk.
Pursuant to the Merger Agreement, the Registrant agreed to issue 214,286
shares of its Common Stock, par value $0.25 per share, in return for all the
issued and outstanding shares of DDI Common Stock held by the stockholders of
DDI Stockholders, and paid an aggregate total of $1,500,000 out of cash on hand
(the "Merger Consideration"). The DDI Stockholders will also receive additional
consideration based on certain performance criteria of the Registrant through
March 31, 2002.
The Merger Agreement is more fully described in Exhibit 2 to this
Current Report and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENT OF BUSINESS ACQUIRED
The financial statements of Digital Delivery, Inc. as of
December 31, 1998 and for the year ended December 31, 1998,
together with notes thereto and the report of
PricewaterhouseCoopers LLP, independent accountants, are
located at page F-2 of this Report.
(B) PRO FORMA FINANCIAL INFORMATION
An unaudited pro forma condensed consolidated balance sheet as
of December 31, 1998 and unaudited pro forma condensed
consolidated statements of operations for the year ended
December 31, 1998, and for the six months ended June 30, 1999,
and notes thereto, are located beginning at page F-13 of this
Report.
2
<PAGE> 3
(C) EXHIBITS
Exhibit Number
2 Agreement and Plan of Merger Agreement, dated July
29, 1999, among the Registrant, DDI and the Merger
Subsidiary. Exhibit A (Form of Escrow Agreement),
Exhibit B (Form of Investment Letter), Exhibit C (DDI
Disclosure Schedule), Exhibit D (Datum Disclosure
Schedule), Exhibit E (Form of Employment Agreement),
Exhibit F (Form of Opinion of Counsel of DDI),
Exhibit G (Form of Opinion of Counsel to Datum),
Schedule I (Surviving Corporation Board of Directors
and Officers), and Schedule II (DDI Stockholders)
have been omitted pursuant to Rule 601(b)(2) of
Regulation S-K. A copy of any Exhibit or Schedule
will be submitted to the Commission supplementally
upon request.*
23 Consent of PricewaterhouseCoopers LLP.
* Incorporated by reference to the like referenced exhibit to the Registrant's
Report on Form 8-K filed August 6, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 12, 1999 DATUM INC.
/s/ DAVID A. YOUNG
---------------------------
David A. Young
Chief Financial Officer
3
<PAGE> 4
DIGITAL DELIVERY INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants..........................................F-2
Balance Sheet as of December 31, 1998......................................F-3
Statement of Operations for the Year
Ended December 31, 1998...............................................F-4
Statement of Changes in Stockholders' Deficit
for the Year Ended December 31, 1998..................................F-5
Statement of Cash Flows for the Year
Ended December 31, 1998...............................................F-6
Notes to Financial Statements..............................................F-7
</TABLE>
F-1
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Digital Delivery Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' deficit and of cash flows present
fairly, in all material respects, the financial position of Digital Delivery
Inc. at December 31, 1998, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
As described in Note 13, the Company was acquired on July 29, 1999.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 9, 1999
F-2
<PAGE> 6
DIGITAL DELIVERY, INC.
Balance Sheet
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
ASSETS
Current assets:
Accounts receivable $ 24,300
Prepaid expenses and other current assets 1,800
-----------
Total current assets 26,100
-----------
Fixed assets, net 58,800
Other assets, net 39,000
-----------
$ 123,900
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Checks written in excess of bank balance $ 5,200
Accounts payable 248,400
Accounts payable - related party 255,000
Accrued expenses 14,900
Line of credit 8,600
Deferred revenue 15,000
Accrued royalties - related party 257,900
Notes payable - related parties 415,700
-----------
Total current liabilities 1,220,700
-----------
Commitments and contingencies (Note 10)
Stockholders' deficit:
Common stock, $1.00 par value; 200,000 shares authorized,
2,626 shares issued and outstanding 2,600
Additional paid-in capital 2,060,800
Accumulated deficit (3,160,200)
-----------
Total stockholders' deficit (1,096,800)
-----------
$ 123,900
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 7
DIGITAL DELIVERY, INC.
Statement of Operations
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Revenues $ 115,700
Costs and expenses:
Cost of revenues 67,600
Research and development 289,000
Selling and marketing 369,200
General and administrative 179,300
---------
905,100
---------
Loss from operations (789,400)
Interest expense 30,700
---------
Net loss $(820,100)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 8
DIGITAL DELIVERY, INC.
Statement of Changes in Stockholders' Deficit
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL
PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 1,822 $1,800 $ 344,500 $(2,340,100) $(1,993,800)
Issuance of common stock for
conversion of debt 735 700 907,000 907,700
Issuance of common stock 69 100 124,900 125,000
Contributed capital
(Note 5) 684,400 684,400
Net loss (820,100) (820,100)
----- ------ ---------- ----------- -----------
Balance at December 31, 1998 2,626 $2,600 $2,060,800 $(3,160,200) $(1,096,800)
===== ====== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 9
DIGITAL DELIVERY, INC.
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(820,100)
Adjustment to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 22,000
Changes in assets and liabilities:
Accounts receivable (8,300)
Prepaid expenses and other current assets (1,800)
Other assets (18,800)
Accounts payable 225,700
Accrued expenses 24,700
Deferred revenue 15,000
Accrued royalties - related party 1,100
---------
Net cash used in operating activities (560,500)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (19,100)
---------
Net cash used in investing activities (19,100)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Checks written in excess of bank balance 5,200
Bank borrowings under line of credit, net 2,200
Proceeds from issuance of common stock 125,000
Advances from related parties 455,600
Repayment of notes payable to related party (8,500)
---------
Net cash provided by financing activities 579,500
---------
Net decrease in cash (100)
Cash, beginning of year 100
---------
Cash, end of year $ --
=========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
CONVERSION OF DEBT TO EQUITY
During 1998, the Company converted $907,700 of debt due to a related a party
into 735 shares of Common Stock.
FORGIVENESS OF ACCRUED SALARY AND INTEREST
During the year ended December 31, 1998, the Company owed $582,400 of accrued
salaries and $102,000 of accrued interest to officers and shareholders. In April
1998, the Company entered into an agreement with the shareholders which included
the forgiveness of amounts owed to the shareholders for salaries and interest.
The amounts were recorded as contributed capital.
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 10
DIGITAL DELIVERY, INC.
Notes to Financial Statements
1. BUSINESS
Digital Delivery Inc. (the "Company") was incorporated in September
1992. The Company develops, markets and distributes software which
provides a secure method to manage access to confidential or
proprietary information. The Company's products are sold to various
industries worldwide.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue earned from the sale of licenses to use the Company's software
products is recognized upon delivery of the product provided that no
significant obligations remain, the fee is fixed and determinable and
collectibility is probable. Revenue derived from software maintenance
arrangements is recognized ratably over the period the services are
provided.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk are primarily comprised of accounts
receivable. Management believes its credit policies are prudent and
reflect normal industry terms and business risk. The Company does not
anticipate nonperformance by the counterparties and, accordingly, does
not require collateral.
At December 31, 1998, 56%, 17%, 10% and 10% of the Company's accounts
receivable were due from four customers.
FIXED ASSETS
Fixed assets are recorded at cost and consist primarily of computer
equipment, software and office equipment. Depreciation of fixed assets
is computed using the straight-line method over the estimated useful
life.
INTANGIBLE ASSETS
Intangible assets, comprised primarily of legal costs and registration
fees for trademarks and patents, are recorded at their cost less
accumulated amortization. Amortization is based on the estimated useful
lives of 15 years.
RESEARCH AND DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company incurs costs to develop computer software to be licensed or
otherwise marketed to customers. Costs incurred in the research and
development of new software products and enhancements to existing
products, other than certain software development costs that qualify
for capitalization, are expensed as incurred. Software development
costs incurred subsequent to the establishment of technological
feasibility, but prior to general release of the product, are
capitalized and amortized to cost of software license revenues over the
estimated useful life of the related products. As of and for the year
ended December 31, 1998, no software development costs have been
capitalized since costs eligible for capitalization under SFAS No. 86
were insignificant.
ADVERTISING EXPENSE
The Company expenses advertising costs as they are incurred. During the
year ended December 31, 1998 advertising expense totaled $164,400.
F-7
<PAGE> 11
DIGITAL DELIVERY, INC.
Notes to Financial Statements (Continued)
COMPREHENSIVE INCOME
SFAS No. 130 requires that a full set of general purpose financial
statements include the reporting of "comprehensive income."
Comprehensive income is comprised of two components: net income and
other comprehensive income, with other comprehensive income being
comprised principally of foreign currency items and unrealized gains
and losses on certain investments in debt and equity securities. During
the year ended December 31, 1998 the Company had no other comprehensive
income items. Accordingly, the adoption of SFAS No. 130 had no impact
on the Company's financial statements.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires that all derivative instruments be recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and,
if it is, the type of hedge transaction. SFAS No. 133 will be effective
for the Company beginning with the year ended December 31, 1999. As the
Company has no derivative instruments and is not involved in hedging
activity, the Company does not expect the adoption of SFAS No. 133 to
have an impact on the Company's financial position or results of
operations.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
(YEARS)
------------
<S> <C> <C>
Computer equipment 5 $103,000
Furniture and fixtures 7 10,400
Office equipment 5 12,700
Software 3 30,900
--------
157,000
Less - Accumulated depreciation 98,200
--------
$ 58,800
========
</TABLE>
Depreciation expense for the year ended December 31, 1998 was $20,900.
F-8
<PAGE> 12
DIGITAL DELIVERY, INC.
Notes to Financial Statements (Continued)
4. LINE OF CREDIT
The Company entered into a line of credit agreement with a bank in
1992. The Company is allowed to borrow up to $10,000, accruing interest
at 12.75% annually. The line provides for monthly payments of 5%
against the outstanding balance. At December 31, 1998, borrowings under
the line were $8,600.
5. NOTES PAYABLE TO RELATED PARTIES
Since incorporation of the Company, a founding shareholder of the
Company has made several one-year loans to the Company. These loans are
represented by one-year promissory notes accruing interest at 12% per
year. On April 30, 1998, the Company entered into a settlement
agreement with the shareholder whereby the Company issued the
shareholder 735 shares of common stock for the conversion of
approximately $907,700 of debt and the release of the Company from
paying his accrued salary of approximately $433,400 and any related
interest. The Company recorded the forgiveness of salary and interest
as contributed capital. The remaining balance of loans made to the
Company by the shareholder totaled approximately $94,600 at December
31, 1998 and is payable upon demand.
Since the inception of the Company, a founding shareholder of the
Company made several advances to the Company. As of December 31, 1998,
the Company owed the shareholder approximately $245,100 for these
loans. The loans are interest-free and payable upon demand.
On July 26, 1994, the Company entered into a Settlement and Amendment
Agreement with a founding shareholder of the Company whereby the
Company owes the shareholder an aggregate of $225,000 ($149,000 in
accrued salary and $76,000 in principal and interest on loans made by
the shareholder to the Company). According to the 1994 agreement, the
balance owed to the shareholder at July 1, 1996 was to accrue interest
annually at the minimum applicable federal rate. On April 30, 1998, the
Company entered into an amendment to the agreement with the shareholder
releasing the Company from payment of the accrued salary of $149,000
and any related interest as well as all interest related to the $76,000
in loans owed to the shareholder. The Company recorded the forgiveness
of salary and interest as contributed capital. The Company owed the
shareholder $76,000 related to debt at December 31, 1998.
Interest expense on related party loans totaled $29,000.
6. COMMON STOCK
Each share of common stock entitles the holder to one vote on all
matters submitted to a vote of the Company's stockholders. Common
stockholders are not entitled to receive dividends unless declared by
the Board of Directors.
F-9
<PAGE> 13
DIGITAL DELIVERY, INC.
Notes to Financial Statements (Continued)
7. STOCK OPTION PLAN
At December 31, 1998, the Company had 280 shares of its common stock
reserved for issuance upon exercise of options issued or issuable under
the Company's stock option plans.
On July 31, 1998, the Company approved the 1998 Stock Option Plan (the
"Plan") which is administered by the Board of Directors. The Plan
provides for the issuance of a maximum of 280 shares of common stock.
Awards granted under the Plan may include incentive stock options or
nonqualified stock options, awards of stock, or opportunities to make
direct purchases of stock. For incentive stock options ("ISO's"), the
exercise price must be greater than or equal to the fair market value
of a share of common stock on the date of grant. Options expire no
later than ten years after the date of grant.
The Company applies the disclosure only provisions of SFAS No. 123
"Accounting for Stock-Based Compensation," and applies Accounting
Principles Board No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its stock option plan. At
December 31, 1998, no stock options have been granted by the Company's
Board of Directors. On July 29, 1999, the Company revoked the prior
approval of the 1998 Stock Option/Stock Issuance Plan.
8. INCOME TAXES
Effective September 30, 1998, the Company's election to be taxed under
Subchapter S provisions of the Internal Revenue Code was revoked. Prior
to the revocation, no provision had been made for federal or state
income taxes as the Company itself did not pay such income taxes. The
stockholders, however, were required to report their respective shares
of the company's loss in their individual income tax returns.
At December 31, 1998, the Company had gross deferred tax assets of
$114,800 and liabilities of $7,100, respectively. Gross deferred tax
assets and liabilities consist primarily of net operating loss
carryforward and intangible assets that are deductible or taxable in
future reporting periods. The Company has provided a valuation
allowance for the full amount of the net deferred tax assets totaling
$107,700 at December 31, 1998 since realization of these future
benefits cannot be sufficiently assured.
At December 31, 1998, the Company has available for federal income tax
purposes unused net operating loss carryforwards of $287,000. The
operating loss carryforwards expire in 2019.
Under the Internal Revenue Code, certain substantial changes in the
Company's ownership could result in an annual limitation on the amount
of net operating loss carryforwards which can be utilized in future
years to offset future taxable income or liability.
9. SIGNIFICANT CUSTOMER
Revenue from one customer represented 12% of total revenue during the
year ended December 31, 1998.
F-10
<PAGE> 14
DIGITAL DELIVERY, INC.
Notes to Financial Statements (Continued)
10. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases its office space under a noncancelable operating
lease which expires through September 30, 1999. The Company has no
other leases at December 31, 1998.
Future minimum lease obligations under operating leases as of December
31, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING
YEAR LEASES
---- ---------
<S> <C>
1999 $32,600
-------
Total minimum lease payments $32,600
=======
</TABLE>
Rent expense under operating leases was $44,800 for the year ended
December 31, 1998.
11. 401(k) SAVINGS PLAN
The Company has established a retirement savings plan under Section
401(k) of the Internal Revenue Code (the "401(k) Plan"). The 401(k)
Plan covers substantially all employees of the Company who meet minimum
age and service requirements, and allows participants to defer a
portion of their annual compensation on a pre-tax basis. Company
contributions to the 401(k) Plan may be made at the discretion of the
Board of Directors. The Company has not made any contributions to the
401(k) Plan through December 31, 1998.
12. ROYALTY AGREEMENT - RELATED PARTY
On June 18, 1993, the Company entered into a software development
agreement last amended in April 1998 which provided for the development
of two commercial versions of a prototype software system in exchange
for royalties of 5% of the first $10,237,800 of Royalty Bearing
Revenues collected by the Company. Under the amended agreement, the
Company owed approximately $257,900 in royalties at December 31, 1998.
In addition, the Company owed approximately $255,000 for services
performed related to the development of the software.
13. SUBSEQUENT EVENTS
On July 29, 1999, Datum Inc. acquired 100% of the outstanding common
stock of the Company for $1.5 million in cash, 214,286 shares of Datum
common stock as well as additional consideration based on certain
performance criteria through March 31, 2002. Accordingly, the Company
became a wholly owned subsidiary of Datum. The acquisition of the
Company will be accounted for by Datum using the purchase method.
On January 27, 1999, the Company entered into a bridge financing
agreement with Datum, Inc. for $100,000 which together with an
additional advance of $300,000 was converted into a $400,000 bridge
loan on April 9, 1999. On June 30, 1999, the bridge loan was amended to
allow for advances up to a maximum of $530,000. The loan accrued
interest equal to the
F-11
<PAGE> 15
DIGITAL DELIVERY, INC.
Notes to Financial Statements (Continued)
prime rate plus 1% per year and was to mature in 90 days unless the
companies enter into a merger agreement.
On July 29, 1999, in conjunction with the merger, the Company entered
into the following agreements: A shareholder agreed that if the Company
paid the shareholder $38,000 within five business days of the merger,
the shareholder would forgive and release the Company from the
remaining $38,000 of the loan; a shareholder of the Company forgave and
released the Company from payments of $20,800 of loans; a related party
agreed that the Company would pay $253,500 within five business days
following the effective date of the merger, and the Company would have
no further obligations for any other royalties due per the original
Agreement.
F-12
<PAGE> 16
PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
On July 29, 1999, the Company acquired all of the outstanding capital
stock of Digital Delivery, Inc. ("Digital Delivery") The purchase price included
$1.5 million in cash, 214,286 shares of Datum common stock, as well as
additional consideration based on certain performance criteria through March 31,
2002. The acquisition has been accounted for using the purchase method of
accounting.
The unaudited condensed pro forma combined statements of income for the
year ended December 31, 1998 and for the six months ended June 30, 1999, present
the historical and pro forma combined results for Datum's and Digital Delivery's
operations for those periods assuming the Digital Delivery Acquisition had
occurred on January 1, 1998. The unaudited condensed pro forma balance sheet at
June 30, 1999, presents the historical and pro forma combined financial position
of Datum and Digital Delivery assuming the Digital Delivery Acquisition had
occurred on that date. The unaudited condensed pro forma combined financial
information has been prepared by adjusting the historical statements of income
and balance sheets for the estimated effects of the allocation of the Datum
purchase consideration to the acquired net assets, and the stock issuance of
Datum common stock, as if each had occurred and as though the Digital Delivery
Acquisition had been effected on the dates indicated above. The purchase price
resulted in an excess of the cost of acquisition over the net assets acquired of
$5,276,000. The final allocation of the purchase price may vary as additional
information is obtained, and accordingly, the ultimate allocation may differ
from that used in the unaudited condensed pro forma combined financial
information.
The unaudited condensed pro forma combined financial information is
provided for informational purposes only and does not purport to be indicative
of the future results or financial position of Datum or what the results of
operations or financial position would have been had the acquisition been
effected on the dates indicated. This information should be read in conjunction
with the audited financial statements of both organizations, which are
incorporated by reference or included herein.
F-13
<PAGE> 17
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DIGITAL
DATUM DELIVERY PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
(In thousands, except share and per share information)
<S> <C> <C> <C> <C>
Net sales $ 101,233 $ 115 $ 101,348
Cost of goods sold 65,172 68 65,240
Selling 15,003 369 15,372
Product development 11,903 288 12,191
General and administrative 9,946 179 $ 1,319(1) 11,444
Interest expense 2,051 31 2,082
Interest income (434) (434)
---------- -------- ------- ----------
Loss before taxes (2,408) (820) (1,319) (4,547)
Income tax benefit (951) (324)(2) (1,275)
---------- -------- ------- ----------
Net loss $ (1,457) $ (820) $ (995) $ (3,272)
========== ======== ======= ==========
Loss per share - Basic $ (0.27) $ (0.58)
========== ==========
Loss per share - Diluted $ (0.27) $ (0.58)
========== ==========
Shares outstanding - Basic 5,414,075 214,277(3) 5,628,352
========== ======= ==========
Shares outstanding - Diluted 5,414,075 214,277(3) 5,628,352
========== ======= ==========
</TABLE>
(1) To reflect amortization of intangibles of $5,276 over four years.
(2) To reflect the income tax effect of Digital Delivery's actual results
calculated at applicable federal and state statutory rates.
(3) Shares issued in connection with the acquisition (excluding fractional
shares paid in cash).
F-14
<PAGE> 18
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
DIGITAL
DATUM DELIVERY PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
--------- -------- ----------- -----------
(In thousands, except share and per share information)
<S> <C> <C> <C> <C>
Net sales $ 24,552 $ 90 $ 24,642
Cost of goods sold 15,313 7 15,320
Selling 3,478 375 3,853
Product development 3,410 145 3,555
General and administrative 2,270 160 $ 660(1) 3,090
Interest expense 517 517
Interest income (120) (120)
--------- ----- ------- -----------
Loss before taxes (316) (597) (660) (1,573)
Income tax benefit (125) (236)(2) (361)
--------- ----- ------- -----------
Net loss $ (191) $(597) $ (424) $ (1,212)
========= ===== ======= ===========
Loss per share - Basic $ (0.03) $ (0.21)
========= ===========
Loss per share - Diluted $ (0.03) $ (0.21)
========= ===========
Shares outstanding - Basic 5,557,299 214,277(3) 5,771,576
========= ======= =========
Shares outstanding - Diluted 5,557,299 214,277(3) 5,771,576
========= ======= =========
</TABLE>
(1) To reflect amortization of intangibles of $5,276 over four years.
(2) To reflect the income tax effect of Digital Delivery's actual results
calculated at applicable federal and state statutory rates.
(3) Shares issued in connection with the acquisition (excluding fractional
shares paid in cash).
F-15
<PAGE> 19
UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
DIGITAL TOTAL
DATUM DELIVERY PRO FORMA
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
------- -------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Cash $10,561 $ 57 $ (1,500)(1) $ 9,118
Accounts receivable 21,181 27 21,208
Prepaid & other current assets 27,813 3 (18)(2) 27,798
------- ------- -------- -------
Current assets 59,555 87 (1,518) 58,124
Land, buildings, and equipment, net 15,566 68 -- 15,634
Excess of purchase price over net assets acquired, net 10,784 -- 5,276(3) 16,060
Other assets 941 39 (450)(4) 530
------- ------- -------- -------
Total assets $86,846 $ 194 $ 3,308 $90,348
======= ======= ======== =======
Note payable $ $ 541 $ $ 541
Note payable-Datum -- 450 (450)(4) --
Accounts payable 5,840 618 -- 6,458
Accrued expenses and other current liabilities 8,055 279 149(2) 8,483
Current liabilities 13,895 1,888 (301) 15,482
------- ------- -------- -------
Long-term liabilities 15,781 -- -- 15,781
------- ------- -------- -------
Stockholders' equity 57,170 (1,694) 3,609(5) 60,779
------- ------- -------- -------
Total liabilities and stockholders' equity $86,846 $ 194 $ 3,308 $92,042
======= ======= ======== =======
</TABLE>
(1) Cash portion of Digital Delivery purchase price.
(2) Estimated acquisition expenses.
(3) Reflects the estimated excess of purchase price over fair value of net
assets acquired.
(4) Reflects bridge-financing loan that was included in the Digital
Delivery purchase price.
(5) Reflects the issuance of Datum common stock valued at $1,915 in
connection with the acquisition and the elimination of Digital
Delivery's accumulated deficit $1,694.
F-16
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Page No.
----------- --------
<C> <S> <C>
2 Agreement and Plan of Merger Agreement, dated July 29, 1999,
among the Registrant, DDI and the Merger Subsidiary. Exhibit A
(Form of Escrow Agreement), Exhibit B (Form of Investment
Letter), Exhibit C (DDI Disclosure Schedule), Exhibit D (Datum
Disclosure Schedule), Exhibit E (Form of Employment
Agreement), Exhibit F (Form of Opinion of Counsel of DDI),
Exhibit G (Form of Opinion of Counsel to Datum), Schedule I
(Surviving Corporation Board of Directors and Officers), and
Schedule II (DDI Stockholders) have been omitted pursuant to
Rule 601(b)(2) of Regulation S-K. A copy of any Exhibit or
Schedule will be submitted to the Commission supplementally
upon request.*
23 Consent of PricewaterhouseCoopers LLP.
</TABLE>
* Incorporated by reference to the like referenced exhibit to the Registrant's
Report on Form 8-K filed August 6, 1999.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-96564, 33-10035, 33-41709, 33-79772 and
333-46365) of Datum Inc. of our report dated September 9, 1999 related to the
financial statements of Digital Delivery, Inc. appearing on page F-2 of this
Form 8-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 8, 1999
