<PAGE>
EXHIBIT 99.2
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OVERVIEW
On September 27, 1999, the Company acquired all of the stock of Portable
Software Solutions Limited ("PSS"), Portable Software Solutions (Maintenance)
Limited ("Maintenance") and Trend Investments Limited ("Trend", and together
with PSS and Maintenance, the "PSS Group"). The PSS Group is a leading provider
of handheld terminal solutions to mobile workers in the U.K., primarily in the
door-to-door insurance and dairy industries. The total purchase price was
approximately $10.1 million, including approximately $5.9 million in cash, two
notes payable of approximately $800,000 each and 1,591,984 unregistered common
shares.
On September 22, 1999, the Company acquired all of the outstanding capital stock
of ICS International AG ("ICS"), a leading provider in Germany of integrated
high-end wireless data capture solutions to industrial users. The total
consideration paid to ICS was $5,161,700 of which $3,570,000 was paid in cash at
the closing and the balance was in the form of three notes payable of $531,000
each. In addition, the Company purchased ICS's headquarters located in Neu
Anspach near Frankfurt, Germany for $1,593,000 of which $372,000 was paid in
cash and the remainder was financed through mortgages, the principal amounts of
which were $1,221,000.
Effective March 1, 2000, the Company acquired all of the outstanding capital
stock of Data Control Systems, a provider of pick to light warehouse management
systems located in New Jersey, and all of the net assets of its commonly owned
sister company -DCS Capital Corp. (Capital and together "DCS") for approximately
$14.3 million in cash.
In June 2000, the Company completed a merger with Positive Developments, Inc.
("PDI"), a designer of software solutions for supply chain applications, by
exchanging 400,000 shares of its common stock (40,000 of which are held in
escrow) for all of the common stock of PDI. Each share of PDI was exchanged for
approximately 57.6 shares of Vertex common stock.
Also in June 2000, the Company completed a merger with Communication Services
International, Incorporated ("CSI"), a designer and installer of wireless
communications and cabling networks, by exchanging 1,317,647 shares of its
common stock (50,000 of which are held in escrow) for all of the common stock of
CSI. Each share of CSI was exchanged for approximately 941.2 shares of Vertex
common stock.
In September 2000, Vertex acquired all the outstanding capital stock of
Renaissance Software, Inc. ("RSI"), a developer of supply chain and warehouse
management systems located in New York. As consideration, Vertex issued
3,571,144 of common stock (263,000 of which are held in escrow), which at the
date of the transaction, had fair value of $13.42 per share. In addition, Vertex
reserved 535,644 shares for issuance upon exercise of RSI stock options. These
options are estimated to have a fair market value of $6,217,000.
The historical consolidated financial statements assume the PSS and ICS
acquisitions closed effective September 30, 1999, the DCS acquisition closed
effective March 1, 2000, and the RSI acquisition closed effective September 30,
2000. The Company has accounted for these acquisitions using the purchase method
of accounting in accordance with APB No. 16 and accordingly, the Vertex
historical financial statements include the results of operations from October
1, 1999 for PSS and ICS, and March 1, 2000 for DCS. The operating results for
RSI will be included in the consolidated financial statements of Vertex
beginning October 1, 2000.
<PAGE>
The PDI and CSI mergers (the "Pooled Entities") were accounted for under the
Pooling of Interest method in accordance with APB No. 16, and as a result, all
prior period Vertex financial statements have been restated to reflect the
Vertex operations with the Pooled Entities.
In addition, Vertex changed its year-end from July 31 to September 30, effective
October 1, 1999.
PRO FORMA FINANCIAL STATEMENTS
The accompanying Vertex unaudited pro forma consolidated statement of operations
for the year ended September 30, 1999 gives effect to the acquisitions of ICS,
PSS, DCS, and RSI, and the financing thereof, as if all such transactions had
occurred at the beginning of the fiscal year (October 1, 1998), and excludes the
estimated in-process R&D write-off of $7.5 million related to the acquisition of
RSI. In addition, the pro forma statement of operations includes the results of
the Pooled Entities combined with Vertex (not previously presented), and does
not include the results of two insignificant acquisitions made during fiscal
2000.
The accompanying Vertex unaudited pro forma consolidated statement of operations
for the nine months ended June 30, 2000, gives effect to the acquisitions of DCS
and RSI, and the financing thereof, as if such transactions had occurred at the
beginning of the fiscal year (October 1, 1999), and excludes the estimated
in-process R&D write-off of $7.5 million related to RSI. The nine month pro
forma statement of operations does not reflect the results of two insignificant
acquisitions for the periods prior to their purchase dates.
The accompanying unaudited pro forma consolidated balance sheet of Vertex as of
June 30, 2000, gives effect to the acquisition of RSI, as if such transaction
had occurred on June 30, 2000.
The pro forma consolidated financial statements are based upon certain
assumptions and estimates, which are subject to change. These statements are not
necessarily indicative of the actual results of operations that might have
occurred, nor are they necessarily indicative of the expected results in the
future. The pro forma consolidated financial statements should be read in
conjunction with Vertex's historical consolidated financial statements and the
related notes.
<PAGE>
VERTEX INTERACTIVE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRIOR
ACQUISITIONS RSI PROFORMA
VERTEX PRIOR PROFORMA PROFORMA CONSOLIDATED
INTERACTIVE ACQUISITIONS RSI ADJUSTMENTS ADJUSTMENTS VERTEX
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $10,106,332 $38,032,477 $ 6,429,406 $54,568,215
Cost of Sales 5,704,282 21,774,067 3,853,713 31,332,062
--------------------------------------------------------------------------------------------
Gross Margin 4,402,050 16,258,410 2,575,693 -- -- 23,236,153
Selling & Administrative 3,207,702 14,710,896 4,156,443 $ (105,154)(B) 221,755(E) 22,191,642
Research & Development 860,806 185,882 2,064,420 3,111,108
Amortization of Goodwill -- -- -- 1,353,864 (C) 9,600,000(G) 10,953,864
--------------------------------------------------------------------------------------------
Total operating expenses 4,068,508 14,896,778 6,220,863 1,248,710 9,821,755 36,256,614
--------------------------------------------------------------------------------------------
Operating Income 333,542 1,361,632 (3,645,170) (1,248,710) (9,821,755) (13,020,461)
Interest income 62,989 92,877 20,720 176,586
Interest expense (7,191) (224,039) (199,757) (93,463)(A) (524,450)
--------------------------------------------------------------------------------------------
Other income/(expense) 55,798 (131,162) (179,037) (93,463) -- (347,864)
--------------------------------------------------------------------------------------------
Pre-tax income/(loss) 389,340 1,230,470 (3,824,207) (1,342,173) (9,821,755) (13,368,325)
Income tax/(benefit) 549,753 322,484 (9,198) 251,086 (D) (420,400)(H) 693,725
--------------------------------------------------------------------------------------------
Net Income (loss) $(160,413) $ 907,986 $(3,815,009) (1,593,259) $(9,401,355) $(14,062,050)
============================================================================================
Net Income (loss) per share of common stock
Basic ($0.02) ($0.58)
Diluted ($0.02) ($0.58)
Weighted Average number of shares outstanding
Basic 7,498,529 13,094,269 3,571,144 24,163,942
Diluted 7,498,529 13,094,269 3,571,144 24,163,942
</TABLE>
See notes to pro forma consolidated financial statements.
<PAGE>
Vertex Interactive, Inc.
Pro Forma Consolidated Statement of Operations
Nine Months Ended June 30, 2000
<TABLE>
<CAPTION>
DCS RSI PROFORMA
VERTEX PROFORMA PROFORMA CONSOLIDATED
INTERACTIVE DCS RSI ADJUSTMENTS ADJUSTMENTS VERTEX
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $32,834,445 $6,163,512 $4,609,961 $43,607,918
Cost of Sales 22,642,626 3,796,625 1,815,794 28,255,045
------------------------------------------------------------------------------------------------
Gross Margin 10,191,819 2,366,887 2,794,167 -- -- 15,352,873
Selling & Administrative 8,966,431 1,022,189 2,883,332 $ 190,861(E) 13,062,813
Research & Development 901,292 91,500 1,993,336 2,986,128
Amortization of Goodwill 724,036 -- -- $ 255,235 (F) 7,200,000(G) 8,179,271
------------------------------------------------------------------------------------------------
Total operating expenses 10,591,759 1,113,689 4,876,668 255,235 7,390,861 24,228,212
------------------------------------------------------------------------------------------------
Operating Income (399,940) 1,253,198 (2,082,501) (255,235) (7,390,861) (8,875,339)
Interest income 210,186 11,019 54,948 276,153
Interest expense (364,517) -- (249,205) (613,722)
------------------------------------------------------------------------------------------------
Other income/(expense) (154,331) 11,019 (194,257) -- -- (337,569)
------------------------------------------------------------------------------------------------
Pre-tax income/(loss) (554,271) 1,264,217 (2,276,758) (255,235) (7,390,861) (9,212,908)
Income tax/(benefit) 276,447 405,251 9,572 100,636 (I) (526,444)(H) 265,462
------------------------------------------------------------------------------------------------
Net income (loss) $ (830,718) $ 858,966 $(2,286,330) $(355,871) $(6,864,417) $(9,478,370)
================================================================================================
Net Income (loss) per share of common stock
Basic ($0.04) ($0.38)
Diluted ($0.04) ($0.38)
Weighted Average number of shares outstanding
Basic 19,924,440 1,341,333 3,571,144 24,836,917
Diluted 19,924,440 1,341,333 3,571,144 24,836,917
</TABLE>
See notes to pro forma consolidated financial statements.
<PAGE>
Vertex Interactive, Inc.
Pro Forma Consolidated Balance Sheet
June 30, 2000
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Vertex RSI Adjustments Consolidated
-----------------------------------------------------------------
CURRENT ASSETS:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 7,198,688 $1,974,867 $ 9,173,555
Accounts receivable, net 9,085,257 2,215,771 11,301,028
Inventories, net 5,808,044 -- 5,808,044
Marketable securities 22,625 -- 22,625
Prepaid expenses and other current assets 1,133,344 67,068 1,200,412
-----------------------------------------------------------------
Total current assets 23,247,958 4,257,706 -- 27,505,664
-----------------------------------------------------------------
PROPERTY, EQUIPMENT, AND CAPITAL LEASES
Property and Equipment 4,914,678 373,735 $ (210,568)(J) 5,077,845
Capital Leases 398,104 -- -- 398,104
-----------------------------------------------------------------
Total property, equipment and capital leases 5,312,782 373,735 (210,568) 5,475,949
Less: Accumulated depreciation and amortization (2,010,244) (210,568) 210,568 (J) (2,010,244)
-----------------------------------------------------------------
Net property, equipment and capital leases 3,302,538 163,167 -- 3,465,705
-----------------------------------------------------------------
OTHER ASSETS:
Intangible Assets, net 30,472,765 -- 48,053,932 (J),(K) 78,526,697
Capitalized software, net 567,536 -- -- 567,536
Other assets 757,289 57,978 (41,634)(J) 773,633
-----------------------------------------------------------------
Total other assets 31,797,590 57,978 48,012,298 79,867,866
-----------------------------------------------------------------
Total assets $58,348,086 $4,478,851 $48,012,298 $110,839,235
=================================================================
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of obligations under capital leases $ 225,644 - $ 225,644
Bank credit lines 2,213,580 - 2,213,580
Notes payable 2,078,671 $1,698,788 $ 223,060(J) 4,000,519
Mortgage notes payable current portion 76,546 - 76,546
Accounts payable 4,713,406 - 4,713,406
Loan payable former shareholder 340,732 - 340,732
Accrued expenses and other liabilities 5,349,773 841,640 1,700,000(J),(K) 7,891,413
Advances from customers 1,078,358 - 1,078,358
Deferred revenue 2,775,850 1,244,215 4,020,065
------------------------------------------------------------------
Total current liabilities 18,852,560 3,784,643 1,923,060 24,560,263
------------------------------------------------------------------
LONG-TERM LIABILITIES:
Obligations under capital leases 326,169 - 326,169
Mortgage notes payable 1,527,921 - 1,527,921
Other long term liabilities 132,844 126,580 259,424
------------------------------------------------------------------
Total long-term liabilities 1,986,934 126,580 - 2,113,514
------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
Redeemable preferred stock - 8,672,464 (8,672,464)(K) -
STOCKHOLDERS' EQUITY:
Preferred stock -
Common stock 112,211 12,412 5,444(K) 130,067
Additional paid-in capital 42,704,653 - 54,139,010(K) 96,843,663
Accumulated deficit (4,209,418) (8,117,248) 617,248(K) (11,709,418)
Accumulated other comprehensive income (1,053,685) - (1,053,685)
------------------------------------------------------------------
37,553,761 (8,104,836) 54,761,702 84,210,627
Less: Treasury stock, 10,000 shares at cost (45,169) - (45,169)
------------------------------------------------------------------
Total stockholders' equity 37,508,592 (8,104,836) 54,761,702 84,165,458
------------------------------------------------------------------
Total liabilities and stockholders' equity $58,348,086 $4,478,851 $48,012,298 $110,839,235
==================================================================
</TABLE>
See notes to pro forma consolidated financial statements.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. Background
Until the acquisitions of ICS and PSS on September 22, 1999 and
September 27, 1999, Vertex sold and distributed bar code scanners,
printers, data collection terminals, software, automated card devices
and precision weighing equipment to customers primarily within the
United States. Vertex has also provided systems integration for turnkey
automated data collection solutions in real-time systems and warehouse
management systems. In addition, through the Netweave license
agreement, Vertex has sold the Netweave middleware product. Through the
acquisition of ICS and PSS, Vertex is now also a provider of integrated
high-end wireless data capture solutions to industrial users and
handheld terminal solutions to mobile workers, substantially in
Germany, the United Kingdom and Ireland. A Form 8K Filing was made in
September, 1999 and amended in December 1999 to present the audited
financial statements of ICS and PSS and to present pro forma financial
statements.
<PAGE>
Effective March 1, 2000, Vertex acquired all of the outstanding capital
stock of DCS, a provider of pick to light warehouse management systems
located in New Jersey. A Form 8K Filing was made in March, 2000 and
amended in June 2000 to present the audited financial statements of DCS
and to present pro forma financial statements.
In September 2000, Vertex acquired all the outstanding capital stock of
RSI, a developer of supply chain and warehouse management systems
located in New York. As consideration, Vertex issued 3,571,144 of
common stock (263,000 of which are held in escrow), which at the date
of the transaction, had fair value of $13.42 per share. In addition,
Vertex reserved 535,644 shares for issuance upon exercise of RSI stock
options. These options are estimated to have a fair market value of
$6,217,000.
2. Historical financial statements
The historical data in these pro forma consolidated financial
statements are derived from the accounting records of Vertex, ICS, PSS,
DCS and RSI. The historical financial data presented in the pro forma
consolidated statements of operations for the year ended September 30,
1999 represent the results of operations of (i) Vertex (including the
Pooled Entities), ICS and PSS for the year ended September 30, 1999,
(ii) DCS for its fiscal year ended November 30, 1999, and (iii) RSI for
its fiscal year ended December 31, 1999. The historical financial data
presented in the pro forma consolidated statement of operations for the
nine months ended June 30, 2000 represent the results of operations of
(i) Vertex for the nine months ended June 30, 2000 (which includes ICS,
PSS and the Pooled Entities for the nine months ended June 30, 2000,
and DCS for the period from March 1, 2000 to June 30, 2000) as
previously reported, (ii) DCS for the five months ended February 29,
2000, and (iii) RSI for the nine months ended September 30, 2000. The
historical financial data in the pro forma consolidated balance sheet
as of June 30, 2000, represent the Vertex (including the Pooled
Entities) and RSI historical balance sheets as of June 30, 2000, and
September 30, 2000, respectively.
3. The acquisitions
a) The aggregate consideration paid by Vertex for ICS, PSS and
DCS, including transactions costs, was approximately $32.7
million. The purchase price was in excess of the fair
market value of ICS, PSS and DCS net assets acquired as
summarized below:
<TABLE>
<S> <C>
ICS purchase price $ 6,754,818
PSS purchase price 10,087,300
DCS purchase price 14,430,000
Transaction costs 1,579,434
-----------
32,851,552
Fair market value of ICS, PSS
and DCS net assets acquired 3,914,732
-----------
Purchase price in excess of net
tangible assets acquired $28,936,820
-----------
-----------
</TABLE>
<PAGE>
b) The aggregate consideration paid by Vertex for RSI,
including transaction costs, was approximately $55.9
million. Based on management's preliminary analysis, it is
estimated that the purchase price was in excess of the fair
market value of net assets acquired as summarized below:
<TABLE>
<S> <C>
RSI purchase price $54,156,866
Transaction costs 1,700,000
-----------
55,856,866
Fair market value of RSI net assets
acquired 302,934
-----------
Purchase price in excess of net tangible
assets acquired 55,553,932
Estimated in-process R&D write-off 7,500,000
-----------
Intangible assets to be allocated based
upon an independent valuation $48,053,932
===========
4. Pro forma adjustments
Statement of operations:
A) Record interest related to mortgage on building acquired.
B) Record reversal of operating lease expense for the building net
of depreciation expense on the building acquired.
C) Record the amortization of the excess of cost over the fair
value of net assets acquired using estimated useful lives of 25
years for ICS, PSS and DCS.
D) Record additional income tax provision to reflect the
incremental tax provision resulting from the loss of the
S-Corporation benefit.
E) Record amortization of incremental deferred compensation
expense for RSI stock options converted to Vertex stock
options.
F) Record additional amortization expense of the excess cost over
net assets acquired for DCS.
G) Record the amortization of the excess of cost over the fair
value of net assets acquired using an estimated useful life
of 5 years for RSI.
H) Record adjustment to income tax provision to reflect federal
benefit of consolidated U.S. tax return including losses
of RSI.
I) Record adjustment to income tax provision to reflect federal
benefit of consolidated U.S. tax return, net of increase
resulting from the loss of the S-Corporation benefit.
Balance sheet:
J) Record fair market value adjustments to certain RSI assets and
liabilities.
K) Record consideration paid by Vertex for RSI, elimination of
RSI's equity, write-off of in-process R&D, and purchase price
in excess of net assets acquired.
<PAGE>
5. Earnings per share
Earnings (loss) per share is calculated by dividing the net income
(loss) by the weighted average outstanding shares during the period.
The weighted average shares outstanding during the period are
calculated as follows:
a) For the year ended September 30, 1999
</TABLE>
<TABLE>
<CAPTION>
Basic and
Fully Diluted
-------------
<S> <C>
Average shares outstanding for the fiscal year ended September 30, 1999,
adjusted to reflect the shares issued to the Pooled Entities 7,363,018
Issued in connection with the PSS acquisition, adjusted for 13 days
outstanding in 1999 1,197,575
Issued to Edwardstone and MidMark Capital, adjusted for 15 days
outstanding in 1999 10,020,205
Assumed number of private placement shares sold to fund DCS
acquisition 2,012,000
Issued in connection with the RSI acquisition 3,571,144
-----------
Pro forma average shares outstanding 24,163,942
===========
</TABLE>
b) For the nine months ended June 30, 2000
<TABLE>
<CAPTION>
Basic and
Fully Diluted
-------------
<S> <C>
Average shares outstanding per Vertex's June 30, 2000 financial
statements 19,924,440
Adjustment to reflect assumed private placement shares sold to fund
DCS acquisition as if shares were sold on October 1, 1999 1,341,333
Issued in connection with the RSI acquisition 3,571,144
-----------
Pro forma average shares outstanding 24,836,917
===========
</TABLE>
