<PAGE>
EXHIBIT 99.4
APPLIED DIGITAL SOLUTIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS INTRODUCTION
The accompanying unaudited pro forma condensed combined financial
statements reflect the consolidated financial position of Applied Digital
Solutions, Inc. and subsidiaries ("the Company") as of September 30, 2000,
and the results of its condensed consolidated operations for the nine months
ended September 30, 2000 and the year ended December 31, 1999 after giving
effect to the acquisitions of Bostek, Inc. and Affiliates ("Bostek"),
Computer Equity Corporation ("Compec") and Pacific Decision Sciences
Corporation ("Pacific") and the merger with Destron Fearing Corporation
("Destron"), each as described further below. The unaudited pro forma
condensed combined balance sheet is based on the historical balance sheet of
the Company and gives effect to the acquisition of Pacific on September 30,
2000. The unaudited pro forma condensed combined statement of operations for
the nine months ended September 30, 2000 gives effect to the acquisitions of
Compec and Pacific and the merger with Destron as if they had occurred on
January 1, 2000. The unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1999 gives effect to the
acquisitions of Compec and the merger with Destron as if they had occurred
at the beginning of each company's complete fiscal year and the acquisitions
of Bostek and Pacific as if they had occurred on January 1, 1999. The
Company's, and Bostek's fiscal year ended on December 31, 1999, Pacific's
fiscal year ended on June 30, 2000, while Compec's fiscal year ended
February 29, 2000 and Destron's fiscal year ended on September 30, 1999.
The pro forma adjustments do not reflect any operating efficiencies
and cost savings which may be achievable with respect to the combined
companies. The pro forma adjustments do not include any adjustments to
historical sales for any future price changes nor any adjustments to selling
and marketing expenses for any future operating changes.
Effective June 1, 1999, IntelleSale acquired all of the outstanding
common stock of Bostek. The aggregate purchase price was approximately $27.5
million, of which $10.2 million was paid in cash at closing, $5 million was
paid in cash in January 2000 and $1.8 million for the 1999 earnout was paid
in cash in February 2000. An additional $3.2 million is contingent upon
achievement of certain additional earnings targets. The total purchase price
of Bostek, including the liabilities, was allocated to the identifiable
assets with the remainder of $24.9 million recorded as goodwill, which is
being amortized over 20 years. Under the terms of the agreement, the former
owners of Bostek were entitled to be paid $10.0 million in cash on June 30,
2000. The former Bostek owners filed a lawsuit against the Company and
IntelleSale claiming that their earnout payment was inadequate. The Company
and IntelleSale believe that the claim is without merit and intend to defend
it vigorously and have filed counterclaims alleging, among other things,
fraud on the part of the former Boskek owners. IntelleSale has also filed a
lawsuit in Massachusets seeking to recover damages it has sustained. Due to
the litigation between the Company, IntelleSale and the former Bostek
owners, the $10.0 million payment was not made on June 30, 2000 because the
Company and IntelleSale believe it is not owed. This amount is being
carried as a liability pending the outcome of the litigation.
During June 2000, the Company's subsidiary, Compec Acquisition
Corp, acquired all of the outstanding common shares of Compec in a
transaction accounted for under the purchase method of accounting. The
aggregate purchase price was approximately $24.7 million of which $15.8
million was paid in 4.8 million shares of the Company's common stock and
$8.9 million was paid in cash. The valuation of the common stock issued was
based upon the terms of the agreement. In addition, the stockholders of
Compec shall be entitled to earnout payments contingent upon Compec
achieving certain earnings targets in the twenty-four months following the
acquisition. The purchase price for Compec has preliminarily been assigned
to the assets acquired and the liabilities assumed based on their estimated
fair values at the acquisition date, which approximated their book values.
Based upon such allocations, the aggregate purchase price exceeded the
estimated fair value of the net assets acquired (goodwill) by approximately
$15.9 million, which is being amortized on a straight-line basis over 20
Page 1
<PAGE>
<PAGE>
years. Any additional amounts paid out under the purchase price contingency
provision noted above are expected to result in additional goodwill.
On September 8, 2000, the Company completed the acquisition of
Destron through a merger of its wholly-owned subsidiary, Digital Angel.net
Inc., into Destron. As a result of the merger, Destron is now a wholly-owned
subsidiary of the Company and has been renamed Digital Angel.net, Inc. The
pro forma adjustments reflecting the consummation of the merger are based
upon the purchase method of accounting and upon the assumptions set forth in
the notes hereto. In connection with the merger, each outstanding share of
Destron's common stock was exchanged for 1.5 shares of the Company's common
stock. In addition, outstanding options and warrants to purchase shares of
Destron's stock prior to the date of the merger were converted into a right
to purchase that number of shares of the Company's common stock as the
holders would have been entitled to receive had they exercised such options
and warrants prior to September 8, 2000 and participated in the merger. The
Company issued 20.5 million shares of its common stock in exchange for all
the outstanding common stock of Destron and 0.3 million shares of its common
stock as a transaction fee. The aggregate purchase price of approximately
$84.6 million, including the liabilities was preliminarily allocated to the
identifiable assets based on their estimated fair values at the merger date,
with the remainder of $76.9 million recorded as goodwill, which is being
amortized on a straight-line basis over 20 years. The value of the Company's
shares issued in exchange for Destron's stock was calculated using the
average of the closing price of the Company's stock a few days before and a
few days after, May 25, 2000, which was the date of the amendment to the
definitive merger agreement which fixed the exchange ratio.
Effective October 1, 2000, the Company's subsidiary, PDS
Acquisition Corp, acquired all of the outstanding common shares of Pacific
in a transaction accounted for under the purchase method of accounting. The
aggregate purchase price of approximately $28.0 million was paid in 8.6
million shares of the Company's common stock. The valuation of the common
stock issued was based upon the terms of the agreement. In addition, the
stockholders of Pacific shall be entitled to earnout payments contingent
upon Pacific achieving certain earnings targets in the twenty-four months
following the acquisition. The purchase price for Pacific was preliminarily
assigned to the assets acquired and the liabilities assumed based on their
estimated fair values at the acquisition date, which approximated their book
values. Based upon such allocations, the aggregate purchase price exceeded
the estimated fair value of the net assets acquired (goodwill) by
approximately $24.2 million, which is being amortized on a straight-line
basis over 20 years. Any additional amounts paid out under the purchase
price contingency provision noted above are expected to result in additional
goodwill.
Page 2
<PAGE>
<PAGE>
<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 2000
(In Thousands)
<CAPTION>
PACIFIC
APPLIED DECISION
DIGITAL SCIENCES
SOLUTIONS, INC. CORPORATION PRO FORMA
HISTORICAL HISTORICAL COMBINED
SEPTEMBER 30, SEPTEMBER 30, MERGER SEPTEMBER 30,
2000 2000 ADJUSTMENTS 2000
============================================== =============
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 9,508 $ 2,355 $ $ 11,863
Accounts receivable and unbilled
receivables, net 55,646 2,990 58,636
Inventories 42,577 313 42,890
Notes receivable 4,477 - 4,477
Prepaid expenses and other
current assets 10,796 117 10,913
---------------------------------------------- -------------
Total Current Assets 123,004 5,775 128,779
Property and equipment, net 19,387 128 19,515
Notes receivable 3,260 3,260
Goodwill, net 175,642 24,219 (A) 199,861
Other assets 20,333 283 20,616
---------------------------------------------- -------------
$341,626 $ 6,186 $24,219 $372,031
============================================== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable 632 $ $ $ 632
Current maturities of long-term
debt 5,694 5,694
Due to shareholders of acquired
subsidiary 10,000 10,000
Accounts payable 24,917 79 24,996
Accrued expenses 16,692 420 120 (B) 17,232
Other current liabilities - 1,767 1,767
---------------------------------------------- -------------
Total Current Liabilities 57,935 2,266 120 60,321
Long-Term Debt and other Liabilities 81,673 81,673
---------------------------------------------- -------------
Total Liabilities 139,608 2,266 120 141,994
---------------------------------------------- -------------
Commitments and Contingencies - - - -
---------------------------------------------- -------------
Minority Interest 2,247 2,247
---------------------------------------------- -------------
Stockholders' Equity
Preferred shares
Common stock 83 202 (193)(C) 92
Common stock warrants 1,656 1,656
Additional paid-in capital 209,598 (28,010)(C) 237,608
Retained earnings (deficit) (7,976) 3,718 (3,718)(C) (7,976)
Treasury stock (2,802) (2,802)
Accumulated other
comprehensive loss (788) (788)
---------------------------------------------- -------------
Total Stockholders' Equity 199,771 3,920 24,099 227,790
---------------------------------------------- -------------
$341,626 $ 6,186 $24,219 $372,031
============================================== =============
</TABLE>
The unaudited pro forma condensed combined balance sheet at September 30,
2000 gives effect to the financial position as if the acquisition of Pacific
occurred on September 30, 2000.
Page 3
<PAGE>
<PAGE>
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET AT SEPTEMBER 30, 2000 ARE AS FOLLOWS:
[FN]
(A) The adjustment to goodwill represents the amount required to reflect the
goodwill associated with the excess of the purchase price paid by the
Company over the sum of the amounts assigned to identifiable assets acquired
and liabilities assumed. It is assumed that the new book basis of the
acquired tangible assets and liabilities approximates the historical
valuation of Pacific's tangible assets and liabilities, using the purchase
method of accounting. For purposes of this presentation, the fair value of
the Company's shares issuable in exchange for Pacific's common stock has
been calculated using the share price of $3.27 per share.
(B) The accrued expense adjustment represents the accrued estimated transaction
costs to be incurred. The costs are primarily for legal, accounting,
printing and similar expenses.
(C) The stockholders' equity adjustment represents the fair value of the
Company's stock to be issued in the acquisition and the elimination of
Pacific's historical equity accounts as follows:
<TABLE>
<S> <C>
Fair Value of Stock Issued (8,569 shares at $3.27 per share) $ 28,019
Pacific's Historical Stockholders' Equity (3,920)
--------
$ 24,099
========
</TABLE>
Page 4
<PAGE>
<PAGE>
<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the nine months ended September 30, 2000
(In thousands, except per share data)
<CAPTION>
DESTRON
APPLIED COMPUTER FEARING
DIGITAL EQUITY CORPORATION
SOLUTIONS, INC. CORPORATION HISTORICAL
HISTORICAL HISTORICAL (JANUARY 1,
NINE (JANUARY 1, PRO FORMA 2000 -
MONTHS ENDED 2000 - COMBINED SEPTEMBER 7,
SEPTEMBER 30, MAY 31, 2000) PRO FORMA SEPTEMBER 30, 2000) MERGER
2000 (A) ADJUSTMENTS 2000 (G) ADJUSTMENTS
============================================ ======================================
<S> <C> <C> <C> <C> <C> <C>
Net operating revenue $ 222,862 $ 10,453 $ - $233,315 $ 12,655 $ -
Cost of goods sold $ 159,384 $ 7,776 $167,160 $ 7,755
Unusual Inventory charge 8,500 8,500
-------------------------------------------- --------------------------------------
Gross profit 54,978 2,677 57,655 4,900
Selling, general and administrative
expenses (65,751) (2,848) (68,599) (3,241)
Depreciation and amortization (7,535) (178) (332)(B) (8,045) (2,585)(H)
Unusual and restructuring charges (8,500) (8,500)
Interest and other income 676 676 58
Interest expense (4,103) (310)(C) (4,413) (63)
-------------------------------------------- --------------------------------------
Income (loss) before provision
(benefit) for income taxes,
minority interest and
extraordinary loss (30,235) (349) (642) (31,226) 1,654 (2,585)
Provision (benefit) for income taxes (9,940) (187) (124)(D) (10,251) 38 - (I)
-------------------------------------------- --------------------------------------
Income (loss) before minority
interest and extraordinary loss (20,295) (162) (518) (20,975) 1,616 (2,585)
Minority interest 345 345 -
-------------------------------------------- --------------------------------------
Income (loss) before
extraordinary loss $ (20,640) $ (162) $ (518) $(21,320) $ 1,616 (2,585)
============================================ ======================================
Earnings (loss) per common share -
basic $ (0.38)
Income (loss) before
extraordinary loss
Earnings (loss) per share - diluted $ (0.38)
Income (loss) before
extraordinary loss
Weighted average number of common 54,623 4,829 (E) 20,821 (J)
shares outstanding - basic
Weighted average number of common 54,623 4,829 (F) 20,821 (K)
shares outstanding - diluted
<CAPTION>
The unaudited pro forma condensed combined statement of operations for the
nine months ended September 30, 2000 gives effect to the consolidated
results of operations for the nine month period as if the acquistions of
Compec and Pacific and the merger of Destron occurred on January 1, 2000.
Page 5
<PAGE>
<PAGE>
PACIFIC
DECISION SCIENCES
CORPORATION
PRO FORMA HISTORICAL PRO FORMA
COMBINED NINE MONTHS ENDED COMBINED
SEPTEMBER 30, SEPTEMBER 30, MERGER SEPTEMBER 30,
2000 2000 ADJUSTMENTS 2000
============= ================= =========== =============
<S> <C> <C> <C> <C>
Net operating revenue $245,970 $ 6,248 $ $252,218
Cost of goods sold $174,915 $ 1,871 $176,786
Unusual Inventory charge 8,500 8,500
------------- ---------------- -------------
Gross profit 62,555 4,377 66,932
Selling, general and administrative
expenses (71,840) (3,541) (75,381)
Depreciation and amortization (10,630) (25) (908)(L) (11,563)
Unusual and restructuring charges (8,500) (8,500)
Interest and other income 734 79 813
Interest expense (4,476) (4,476)
------------- ------------------------------- -------------
Income (loss) before provision
(benefit) for income taxes,
minority interest and
extraordinary loss (32,157) 890 (908) (32,175)
Provision (benefit) for income taxes (10,213) 386 - (M) (9,827)
------------- ------------------------------- -------------
Income (loss) before minority
interest and extraordinary loss (21,944) 504 (908) (22,348)
Minority interest 345 - 345
------------- ------------------------------- -------------
Income (loss) before
extraordinary loss $(22,289) $ 504 $ (908) $(22,693)
============= =============================== =============
Earnings (loss) per common share -
basic $ (0.26)
Income (loss) before
extraordinary loss
Earnings (loss) per share - diluted $ (0.26)
Income (loss) before
extraordinary loss
Weighted average number of common 8,569 (N) 88,842
shares outstanding - basic
Weighted average number of common 8,569 (O) 88,842
shares outstanding - diluted
</TABLE>
Page 6
<PAGE>
<PAGE>
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 ARE AS
FOLLOWS:
[FN]
(A) Represents the historical unaudited condensed combined results of
Compec for the five months ended May 31, 2000. Compec was acquired by
the Company effective June 1, 2000.
(B) The $332 increase in depreciation and amortization expense represents
the estimated amount of goodwill amortization expense to be recorded
assuming straight line amortization of the $15,935 of goodwill
recorded on the Company's books related to the Compec acquisition
over a twenty year period.
(C) The $310 increase in interest expense represents the increase to
interest expense associated with debt issued in connection with the
purchase of Compec, based upon borrowing the $8,848 paid to the
sellers at closing at the Company's effective interest rate of 8.41%.
(D) The $124 adjustment to the provision for income taxes results from
providing for taxes at a 40% rate (net federal and state) against the
pre-tax pro-forma adjustment for interest expense. The amortization
of goodwill is not deductible and therefore receives no tax benefit.
(E) Includes the 4,829 shares of the Company's common stock issued to
Compec's shareholders. For purposes of this pro forma presentation,
such shares of the Company's common stock were deemed to be
outstanding for the entire pro forma period.
(F) There were no potential dilutive common shares issued or assumed by the
Company in connection with the acquisition of Compec.
(G) Represents the historical unaudited condensed combined results of
Destron for the period from January 1, 2000 to September 7, 2000.
Destron was acquired by the Company effective September 8, 2000.
(H) The $2,585 increase in depreciation and amortization expense
represents the estimated amount of goodwill amortization expense to
be recorded for the period from January 1, 2000 to September 7, 2000,
assuming straight line amortization of the $76,855 of goodwill over a
20 year period and taking into consideration the $58 of goodwill
amortization expense included in Destron's historical statement of
operations.
(I) The amortization of goodwill related to the Destron acquisition is not
deductible and therefore receives no tax benefit.
(J) Includes the 20,501 shares of the Company's common stock issued to
Destron shareholders. Each share of Destron's common stock was
exchanged for 1.5 shares of the Company's common stock. Also includes
320 shares of the Company's common stock that were issued in payment
of a finder's fee. For purposes of this pro forma presentation the
Company's common stock were deemed to be outstanding for the entire pro
forma period.
(K) The diluted potential common shares were not included in the
computation of diluted loss per share because to do so would have
been anti-dilutive. The dilutive potential common shares consist of
Destron options and warrants of 1,804 which were converted into 1.5
shares of the Company's common stock.
(L) The $908 increase in depreciation and amortization expense represents
the estimated amount of goodwill amortization expense to be recorded,
assuming straight line amortization of the $24,219 of goodwill over a
20 year period.
(M) The amortization of goodwill is not deductible and therefore receives no
tax benefit.
(N) Includes the 8,569 shares of the Company's common stock issued to
Pacific's shareholders. For purposes of this pro forma presentation,
such shares of the Company's common stock were deemed to be
outstanding for the entire pro forma period.
(O) There were no potential dulited common shares issued or assumed by the
Company in connection with the acquisition of Pacific.
Page 7
<PAGE>
<PAGE>
<TABLE>
Applied Digital Solutions, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1999
(In thousands, except per share data)
<CAPTION>
APPLIED COMPUTER
DIGITAL BOSTEK, INC. EQUITY
SOLUTIONS, AND AFFILIATE CORPORATION
INC. HISTORICAL HISTORICAL
HISTORICAL (JANUARY 1, PRO FORMA FISCAL
YEAR ENDED 1999 - COMBINED YEAR ENDED
DECEMBER 31, MAY 31, 1999 PRO FORMA DECEMBER 31, FEBRUARY 29, PRO FORMA
1999 (A) ADJUSTMENTS 1999 2000 ADJUSTMENTS
================================================= =============================================
<S> <C> <C> <C> <C> <C> <C>
Net operating
revenue $336,741 $33,400 $ $370,141 $33,058 $
Cost of goods sold 241,790 29,596 271,386 24,760
------------------------------ ---------------------------
Gross profit 94,951 3,804 98,755 8,298
Selling, general and
administrative expenses (90,416) (3,424) (93,840) (4,490)
Depreciation and amortization (9,687) (10) (518)(B) (10,215) (498) (797)(E)
Restructuring and unusual
charges (2,550) (2,550)
Gain on sale of subsidiary 20,075 20,075
Interest income 616 616
Interest expense (3,842) (151) (352)(C) (4,345) (744)(F)
---------------------------------------------------------------------------------------------------
Income (loss) before
provision for income taxes,
minority interest and
extraordinary loss 9,147 219 (870) 8,496 3,310 (1,541)
Provision for income taxes 3,160 74 (348)(D) 2,886 1,273 (298)(G)
---------------------------------------------------------------------------------------------------
Income (loss) before minority
interest and extraordinary
loss 5,987 145 (522) 5,610 2,037 (1,243)
Minority interest 395 395
---------------------------------------------------------------------------------------------------
Income (loss) before
extraordinary loss $ 5,592 $ 145 $ (522) $ 5,215 $ 2,037 $ (1,243)
===================================================================================================
Earnings per common share -
basic
Income before
extraordinary loss $ 0.12
Earnings per share - diluted
Income before
extraordinary loss $ 0.11
Weighted average number of
common shares outstanding -
basic 46,814 4,829 (H)
Weighted average number of
common shares outstanding -
diluted 50,086 4,829 (I)
<CAPTION>
The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1999 gives effect to the consolidated results of
operations for the year ended December 31, 1999 as if the acquisitions of
Bostek and Pacific occurred on January 1, 1999 and acquisition of Compec and
the merger of Destron had occurred at the beginning of their respective 1999
fiscal years.
Page 8
<PAGE>
<PAGE>
PACIFIC
DESTRON DECISION
FEARING SCIENCES
CORPORATION CORPORATION
HISTORICAL HISTORICAL
PRO FORMA FISCAL PRO FORMA TWELVE PRO FORMA
COMBINED YEAR ENDED COMBINED MONTHS ENDED COMBINED
DECEMBER 31, SEPTEMBER 30, MERGER DECEMBER 31, DECEMBER 31, MERGER DECEMBER 31,
1999 1999 ADJUSTMENTS 1999 1999 ADJUSTMENTS 1999
============ ========================= ============ ========================== ============
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating
revenue $403,199 $18,548 $ $ 421,747 $ 8,779 $ $ 430,526
Cost of goods sold 296,146 10,996 307,142 2,776 309,918
------------ ------------- ------------ ------------ ------------
Gross profit 107,053 7,552 114,605 6,003 120,608
Selling, general and
administrative expenses (98,330) (3,929) (102,259) (4,019) (106,278)
Depreciation and amortization (11,510) (214) (3,759)(J) (15,483) (31) (1,211)(N) (16,725)
Restructuring and unusual
charges (2,550) (2,550) (2,550)
Gain on sale of subsidiary 20,075 20,075 20,075
Interest income 616 18 634 44 678
Interest expense (5,089) (273) (5,362) (5,362)
-------------------------------------- ----------- -------------------------- ------------
Income (loss) before
provision for income
taxes, minority interest
and extraordinary loss 10,265 3,154 (3,759) 9,660 1,997 (1,211) 10,446
Provision for income taxes 3,861 80 - (K) 3,941 691 - (O) 4,632
--------------------------------------- ----------- -------------------------- ------------
Income (loss) before minority
interest and extraordinary
loss 6,404 3,074 (3,759) 5,719 1,306 (1,211) 5,814
Minority interest 395 395 395
--------------------------------------- ----------- -------------------------- ------------
Income (loss) before
extraordinary loss $ 6,009 $ 3,074 $(3,759) $ 5,324 $ 1,306 $(1,211) $ 5,419
======================================= =========== ========================== ============
Earnings per common share -
basic
Income before
extraordinary loss $0.07
Earnings per share - diluted
Income before
extraordinary loss $0.06
Weighted average number of
common shares outstanding -
basic 20,821 (L) 8,569 (P) 81,033
Weighted average number of
common shares outstanding -
diluted 22,309 (M) 8,569 (Q) 85,793
</TABLE>
Page 9
<PAGE>
<PAGE>
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 ARE AS FOLLOWS:
[FN]
(A) Represents the historical unaudited condensed combined results of
Bostek for the five months ended May 31, 1999. Bostek was acquired by
the Company's subsidiary, Intellesale.com, Inc., effective June 1, 1999.
(B) The $518 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded assuming
straight line amortization of the $24,876 of goodwill recorded by the
Company related to the Bostek acquisition over a twenty year period.
(C) The $352 increase in interest expense represents the increase to
interest expense associated with debt issued in connection with the purchase
of Bostek, based upon borrowing the $10,055 paid to the sellers at closing
at the Company's effective interest rate of 8.41%.
(D) The $348 adjustment to the provision for income taxes results from
providing for taxes at a 40% rate (net federal and state) against the
pre-tax pro-forma adjustments.
(E) The $797 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded assuming
straight line amortization of the $15,935 of goodwill recorded by the
Company related to the Compec acquisition over a twenty year period.
(F) The $744 increase in interest expense represents the increase to
interest expense associated with debt issued in connection with the purchase
of Compec, based upon borrowing the $8,848 paid to the sellers at closing
at the Company's effective interest rate of 8.41%.
(G) The $298 adjustment to the provision for income taxes results from
providing for taxes at a 40% rate (net federal and state) against the
pre-tax pro-forma adjustment for interest expense. The amortization of
goodwill is not deductible and therefore receives no tax benefit.
(H) Includes the 4,829 shares of the Company's common stock issued to
Compec's shareholders. For purposes of this pro forma presentation, such
shares of the Company's common stock were deemed to be outstanding for the
entire pro forma period.
(I) There were no potential dilutive common shares issued or assumed by the
Company in connection with the acquisition of Compec.
(J) The $3,759 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded, assuming
straight line amortization of the $76,855 of goodwill over a 20 year period
and taking into consideration the $84 of goodwill amortization expense
included in Destron's historical statement of operations.
(K) The amortization of goodwill is not deductible and therefore receives no
tax benefit.
(L) Includes the 20,501 shares of the Company's common stock issued to Destron
shareholders. Each share of Destron's common stock was exchanged for 1.5
shares of the Company's common stock. Also includes 320 shares of the
Company's common stock that were issued in payment of a finder's fee.
For purposes of this pro forma presentation the Company's common stock were
deemed to be outstanding for the entire pro forma period.
(M) The diluted potential common shares outstanding were determined utilizing
the treasury stock method under the assumption that all potentially dilutive
potential common shares were outstanding for the entire pro forma period.
The dilutive potential common shares consist of Destron options and warrants
of 1,804 which were converted into 1.5 shares of the Company's common
stock.
(N) The $1,211 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded, assuming
straight line amortization of the $24,219 of goodwill over a 20 year period.
(O) The amortization of goodwill is not deductible and therefore receives no
tax benefit.
(P) Includes the 8,569 shares of the Company's common stock issued to
Pacific's shareholders. For purposes of this pro forma presentation, such
shares of the Company's common stock were deemed to be outstanding for the
entire pro forma period.
(Q) There were no potential dilutive common shares issued or assumed by the
Company in connection with the acquisition of Pacific.
Page 10
