EXHIBIT 99.1
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 June 30, 2000, and the
results of its condensed consolidated operations for the six months ended June
30, 2000 and 1999 and the year ended December 31, 1999 after giving effect to
the acquisition of Computer Equity Corporation ("Compec") and the merger with
Destron Fearing Corporation ("Destron"). The unaudited pro forma condensed
combined balance sheet is based on the historical balance sheet of the Company
and gives effect to the merger with Destron as if it had been consummated on
June 30, 2000. The unaudited pro forma condensed combined statement of
operations for the six months ended June 30, 2000 and 1999 gives effect to the
acquisition of Compec and the merger with Destron as if they had occurred on
January 1, 2000 and 1999. The unaudited pro forma condensed combined statement
of operations for the year ended December 31, 1999 gives effect to the
acquisition of Compec and the merger with Destron as if they had occurred at the
beginning of each company's complete fiscal year. The Company's fiscal year
ended on December 31, 1999, 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.
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 $24.6 million of which $15.7 million was paid in shares
of the Company's common stock and $8.9 million was paid in cash. An additional
$10.3 million of purchase price is contingent upon Compec achieving certain
earnings targets in the next twenty-four months. The purchase price for Compec
was 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 years.
Any additional amounts paid out under the purchase price contingency provision
noted above are expected to result in additional goodwill. A final determination
of the required purchase accounting adjustments, including the allocation of the
purchase price to the assets acquired and liabilities assumed based on their
respective fair values, has not yet been made. Accordingly, the purchase
accounting adjustments made in connection with the development of the pro forma
combined financial information are preliminary.
On April 24, 2000, the Company announced that a definitive merger agreement
had been signed pursuant to which the Company will acquire Destron in a tax-free
exchange of common stock. Destron will merge with Digital Angel.net Inc., a
wholly owned subsidiary of the Company, and the combined companies will do
business under the Digital Angel.net Inc. name. 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. Each share of
Destron common stock issued and outstanding immediately prior to the
effectiveness of the merger will be canceled and automatically converted into
the right to receive 1.5 shares of the Company's common stock, $.001 par value
per share, subject to adjustments as set forth in the merger agreement.
Additionally, all of Destron's warrants and stock options will be assumed by the
Company. The merger was approved by the shareholders of the Company on September
2, 2000 and by the shareholders of Destron on September 7, 2000. For purposes of
preparing the Company's consolidated financial statements, the Company will
establish a new basis for Destron's assets and liabilities based upon the fair
values thereof, the value of the Company's shares, warrants and stock options
issued to consummate the merger and the costs of the merger. A final
determination of the
1
<PAGE>
required purchase accounting adjustments, including the allocation of the
purchase price to the assets acquired and liabilities assumed based on their
respective fair values, has not yet been made. Accordingly, the purchase
accounting adjustments made in connection with the development of the pro forma
combined financial information are preliminary and have been made solely for
purposes of developing such pro forma combined financial information.
Accordingly, upon completion of the merger, the actual financial position and
results of operations will differ, perhaps significantly, from the pro forma
amounts reflected herein because of a variety of factors, including access to
additional information and changes in value and operating results between the
dates of the pro forma financial information data and the date on which the
merger is consummated.
2
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<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2000
(In Thousands)
<CAPTION>
APPLIED DESTRON
DIGITAL FEARING
SOLUTIONS, INC. CORPORATION PRO FORMA
HISTORICAL HISTORICAL MERGER COMBINED
JUNE 30, 2000 JUNE 30, 2000 ADJUSTMENTS JUNE 30, 2000
============================================== =============
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 12,688 $ 2,236 $ - $ 14,924
Accounts receivable and unbilled
receivables, net 50,122 2,481 52,603
Inventories 39,009 3,909 42,918
Notes receivable 4,463 - 4,463
Prepaid expenses and other current assets 9,912 562 10,474
-------------------------------------- --------
Total Current Assets 116,194 9,188 125,382
Property and equipment, net 17,410 1,859 19,269
Notes receivable 3,345 - 3,345
Goodwill, net 97,359 1,770 77,126(A) 176,255
Other assets 17,782 110 17,892
-------------------------------------- --------
$252,090 $12,927 77,126 342,143
====================================== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 31,627 $ - $ - $ 31,627
Current maturities of long-term debt 8,953 581 9,534
Due to shareholders of acquired subsidiary 18,864 - 18,864
Accounts payable 23,683 685 24,368
Accrued expenses 16,353 424 3,000(B) 19,777
Other current liabilities - - -
-------------------------------------- --------
Total Current Liabilities 99,480 1,690 3,000 104,170
Long-Term Debt 35,050 66 - 35,116
-------------------------------------- --------
Total Liabilities 134,530 1,756 3,000 139,286
-------------------------------------- --------
Commitments and Contingencies - - - -
-------------------------------------- --------
Minority Interest 2,272 - 2,272
-------------------------------------- --------
Stockholders' Equity
Preferred shares - - -
Common stock 59 136 (115)(C) 80
Common stock warrants - 100 (100)(C) -
Additional paid-in capital 129,211 20,300 64,976 (C) 214,487
Retained earnings (deficit) (6,236) (9,365) 9,365 (C) (6,236)
Treasury stock (7,310) - (7,310)
Accumulated other comprehensive loss (436) - (436)
-------------------------------------- --------
Total Stockholders' Equity 115,288 11,171 74,126 200,585
-------------------------------------- --------
$252,090 $12,927 $77,126 $342,143
====================================== ========
The unaudited pro forma condensed combined balance sheet at June 30, 2000 gives
effect to the financial position as if the merger of Destron occurred on June
30, 2000.
3
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PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET AT JUNE 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 net tangible assets and liabilities approximates the
historical valuation of Destron'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 Destron's
common stock has been calculated using the share price of $3.84. This price
represents the closing price of the Company's stock as of September 7,
2000, the date that Destron's shareholders approved the merger. For
purposes of this presentation, the fair value of Destron's 1,804,274 stock
options and warrants to be assumed by the Company has been calculated
utilizing the Black- Scholes option pricing model, Destron's outstanding
options and warrants and their weighted average exercise price as of
September 7, 2000, a 1.5 exchange ratio and a stock price of $3.84, which
was the closing price of the Company's common stock on September 7, 2000.
Under these assumptions, the merger consideration and related goodwill is
as follows:
Fair Value of Stock Issued (Including Shares Issued for
Transaction Fee) $ 79,724
Fair Value of Options and Warrants Assumed 5,573
Estimated Transaction Costs (Excluding Shares Issued for
Transaction Fee) 3,000
--------
Merger Consideration 88,297
Net Tangible Assets Acquired (Excluding Goodwill) 9,401
--------
Goodwill 78,896
Destron Historical Goodwill (1,770)
--------
Goodwill Merger Adjustment $ 77,126
========
(B) The accrued expense adjustment represents the accrued estimated transaction
costs to be incurred as the Merger is completed. The costs are primarily
for financial advisory, 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 Merger and the elimination of Destron's
historical equity accounts as follows:
Fair Value of Stock Issued $ 85,297
Destron's Historical Stockholders' Equity (11,171)
--------
$ 74,126
========
</FN>
</TABLE>
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<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the six months ended June 30, 2000
(In thousands, except per share data)
<CAPTION>
COMPUTER
EQUITY
APPLIED CORPORATION DESTRON
DIGITAL HISTORICAL FEARING
SOLUTIONS, INC. (JANUARY 1, PRO FORMA CORPORATION PRO FORMA
HISTORICAL 2000 - COMBINED HISTORICAL COMBINED
JUNE 30, MAY 31, PRO FORMA JUNE 30, JUNE 30, MERGER JUNE 30,
2000 2000) (A) ADJUSTMENTS 2000 2000 ADJUSTMENTS 2000
======================================== ====================================== ============
<S> <C> <C> <C> <C> <C> <C> <C>
Net operating revenue $149,016 $10,453 $ - $159,469 $10,807 $ - $170,276
Cost of goods sold 108,570 7,776 116,346 6,420 122,766
-------------------------------- -------------------------------- --------
Gross profit 40,446 2,677 43,123 4,387 47,510
Selling, general and administrative
expenses (44,524) (2,848) (47,372) (2,344) (49,716)
Depreciation and amortization (4,399) (178) (330)(B) (4,907) (267) (1,930)(G) (7,104)
Unusual and restructuring charges (17,000) (17,000) - (17,000)
Interest and other income 566 566 111 677
Interest expense (2,467) (310)(C) (2,777) (48) (2,825)
-------------------------------- -------------------------------- --------
Income (loss) before provision
(benefit) for income taxes,
minority interest and
extraordinary loss (27,378) (349) (640) (28,367) 1,839 (1,930) (28,458)
Provision (benefit) for income taxes (8,721) (187) (124)(D) (9,032) 38 - (H) (8,994)
-------------------------------- -------------------------------- --------
Income (loss) before minority interest
and extraordinary loss (18,657) (162) (516) (19,335) 1,801 (1,930) (19,464)
Minority interest 243 243 - 243
-------------------------------- -------------------------------- --------
Income (loss) before extraordinary
loss $(18,900) $ (162) $ (516) $(19,578) $ 1,801 $(1,930) $(19,707)
================================ ================================ ========
Earnings (loss) per common share -
basic
Income (loss) before extraordinary
loss $ (0.38) $ (0.36) $ (0.26)
Earnings (loss) per share - diluted
Income (loss) before extraordinary
loss $ (0.38) $ (0.36) $ (0.26)
Weighted average number of common
shares outstanding - basic 50,003 4,804 54,807(E) 20,761 75,568(I)
Weighted average number of common
shares outstanding - diluted 50,003 4,804 54,807(F) 20,761 75,568(J)
The unaudited pro forma condensed combined statement of operations for the six
months ended June 30, 2000 gives effect to the consolidated results of
operations for the six month period as if the acquisition of Compec and the
merger of Destron occurred on January 1, 2000.
5
<PAGE>
PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 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 $330 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded assuming
straight line amortization of the $15,853 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
an 8.41% interest rate.
(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 4,804 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 diluted common shares assumed by the Company in
connection with the acquisition of Compec.
(G) The $1,930 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded for the
six month period from January 1, 2000 to June 30, 2000, assuming straight
line amortization of the $78,896 of goodwill over a 20 year period and
taking into consideration the $42 of goodwill amortization expense included
in Destron's historical statement of operations.
(H) The amortization of goodwill related to the Destron acquisition is not
deductible and therefore receives no tax benefit.
(I) The number of shares of the Company's common stock to be issued were
determined under the assumption that all of the 13,667,278 shares of
Destron common stock outstanding on September 7, 2000, the date Destron's
shareholders approved the merger, are exchanged for common stock of the
Company at an exchange ratio of 1.5, that approximately 260,420 shares of
the Company's common stock will be issued for payment of a finder's fee and
without taking into account the exercise of options and warrants of Destron
assumed by the Company. For purposes of this pro forma presentation the
Company's common stock were deemed to be outstanding for the entire pro
forma period.
(J) 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.
</FN>
</TABLE>
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<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the six months ended June 30, 1999
(In thousands, except per share data)
<CAPTION>
APPLIED BOSTEK, INC. APPLIED COMPUTER
DIGITAL AND AFFILIATE DIGITAL EQUITY
SOLUTIONS, INC. HISTORICAL SOLUTIONS, INC. CORPORATION
HISTORICAL (JANUARY 1, 1999 - PRO FORMA HISTORICAL
JUNE 30, MAY 31, 1999) PRO FORMA JUNE 30, JUNE 30, PRO FORMA
1999 (A) ADJUSTMENTS 1999 1999 ADJUSTMENTS
============================================== ===========================================
<S> <C> <C> <C> <C> <C> <C>
Net operating revenue $124,528 $33,400 $ $157,928 $15,050 $
Cost of goods sold 79,782 29,596 109,378 11,477
-----------------------------------------------------------------------------------
Gross profit 44,746 3,804 48,550 3,573
Selling, general and administrative
expenses (37,816) (3,424) (447)(B) (41,687) (2,002) (396)(E)
Depreciation and amortization (3,761) (10) (3,771) (257)
Unusual and restructuring charges (2,550) - (2,550) -
Interest and other income 278 - 278 140
Interest expense (1,135) (151) (352)(C) (1,638) (2) (372)(F)
-------------------------------------- -----------------------------------
Income (loss) before provision (benefit)
for income taxes, minority interest
and extraordinary loss (238) 219 (799) (818) 1,452 (768)
Provision (benefit) for income taxes 442 74 (320)(D) 196 590 (149)(G)
-------------------------------------- -----------------------------------
Income (loss) before minority interest
and extraordinary loss (680) 145 (479) (1,014) 862 (619)
Minority interest 464 464 -
-------------------------------------- -----------------------------------
Income (loss) before extraordinary loss $ (1,144) $ 145 $(479) $ (1,478) $ 862 $ (619)
====================================== ===================================
Earnings (loss) per common share - basic
Income (loss) before extraordinary
loss $ (0.03) N/A N/A $ (0.03)
Earnings (loss) per share - diluted
Income (loss) before extraordinary
loss $ (0.03) N/A N/A $ (0.03)
Weighted average number of common
shares outstanding - basic 45,347 N/A N/A 45,347 4,804
Weighted average number of common
shares outstanding - diluted 45,347 N/A N/A 45,347 4,804
</TABLE>
The unaudited pro forma condensed combined statement of operations for the six
months ended June 30, 1999 gives effect to the consolidated results of
operations for the six month period as if the acquisitions of Bostek, Inc. and
Affiliate ("Bostek") and Compec and the merger of Destron occurred on January 1,
1999.
7
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<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS (Continued)
For the six months ended June 30, 1999
(In thousands, except per share data)
<CAPTION>
DESTRON
FEARING
PRO FORMA CORPORATION PRO FORMA
COMBINED HISTORICAL COMBINED
JUNE 30, JUNE 30, MERGER JUNE 30,
1999 1999 ADJUSTMENTS 1999
============ ============================= =============
<S> <C> <C> <C> <C>
Net operating revenue $172,978 $10,720 $ $183,698
Cost of goods sold 120,855 6,060 126,915
------------------------------------- --------
Gross profit 52,123 4,660 56,783
Selling, general and administrative expenses (44,085) (1,739) (45,824)
Depreciation and amortization (4,028) (241) (1,930)(J) (6,199)
Unusual and restructuring charges (2,550) - (2,550)
Interest and other income 418 463 881
Interest expense (2,012) (191) (2,203)
------------------------------------- --------
Income (loss) before provision (benefit)
for income taxes, minority interest and
extraordinary loss (134) 2,952 (1,930) 888
Provision (benefit) for income taxes 637 70 - (K) 707
------------------------------------- --------
Income (loss) before minority interest and
extraordinary loss (771) 2,882 (1,930) 181
Minority interest 464 - 464
------------------------------------- --------
Income (loss) before extraordinary loss $ (1,235) $ 2,882 $(1,930) $ (283)
===================================== ========
Earnings (loss) per common share - basic
Income (loss) before extraordinary
loss $ (0.02) $ (0.00)
Earnings (loss) per share - diluted
Income (loss) before extraordinary
loss $ (0.02) $ (0.00)
Weighted average number of common
shares outstanding - basic 50,151(H) 20,761 70,912 (L)
Weighted average number of common
shares outstanding - diluted 50,151(I) 20,761 70,912 (M)
8
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PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT
OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 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 $447 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded assuming
straight line amortization of the $21,458 of goodwill recorded on the
Company's books 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
an 8.41% interest rate.
(D) The $320 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 $396 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense, assuming straight line
amortization of the $15,853 of goodwill recorded on the Company's books
related to the Compec acquisition over a twenty year period.
(F) The $372 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
an 8.41% interest rate.
(G) The $149 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 4,804 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 diluted common shares assumed by the Company in
connection with the acquisition of Compec.
(J) The $1,930 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded for the
six month period from January 1, 1999 to June 30, 1999, assuming straight
line amortization of the $78,896 of goodwill related to the Destron
acquisition over a 20 year period and taking into consideration the $42 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) The number of shares of the Company's common stock to be issued were
determined under the assumption that all of the 13,667,278 shares of
Destron common stock outstanding on September 7, 2000, the date Destron's
shareholders approved the merger, are exchanged for common stock of the
Company at an exchange ratio of 1.5, that approximately 260,420 shares of
the Company's common stock will be issued for payment of a finder's fee and
without taking into account the exercise of options and warrants of Destron
assumed by the Company. 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 were not included in the computation of
diluted loss per share because to do so would have been anti-dilutive.
</FN>
</TABLE>
9
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<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 BOSTEK, INC. APPLIED COMPUTER
DIGITAL AND AFFILIATE DIGITAL EQUITY
SOLUTIONS, INC. HISTORICAL SOLUTIONS, INC. CORPORATION
HISTORICAL (JANUARY 1, 1999 - PRO FORMA HISTORICAL
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) (447)(B) (10,144) (498) (793)(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 (799) 8,567 3,310 (1,537)
Provision for income taxes 3,160 74 (320)(D) 2,914 1,273 (298)(G)
-----------------------------------------------------------------------------------
Income (loss) before minority interest
and extraordinary loss 5,987 145 (479) 5,653 2,037 (1,239)
Minority interest 395 - - 395 -
-----------------------------------------------------------------------------------
Income (loss) before extraordinary loss $ 5,592 $ 145 $(479) $ 5,258 $ 2,037 $(1,239)
===================================================================================
Earnings (loss) per common share - basic
Income (loss) before extraordinary
loss $ 0.12 N/A N/A $ 0.11
Earnings (loss) per share - diluted
Income (loss) before extraordinary
loss $ 0.11 N/A N/A $ 0.10
Weighted average number of common
shares outstanding - basic 46,814 N/A N/A 46,814 4,804
Weighted average number of common
shares outstanding - diluted 50,086 N/A N/A 50,086 4,804
</TABLE>
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 Compec
and the merger of Destron had occurred on January 1, 1999.
10
<PAGE>
<TABLE>
APPLIED DIGITAL SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(Continued) For the year ended December 31, 1999
(In thousands, except per share data)
<CAPTION>
DESTRON
FEARING
PRO FORMA CORPORATION PRO FORMA
COMBINED HISTORICAL COMBINED
DECEMBER 31, SEPTEMBER 30, MERGER DECEMBER 31,
1999 1999 ADJUSTMENTS 1999
============ ============================ ============
<S> <C> <C> <C> <C>
Net operating revenue $403,199 $18,548 $ $ 421,747
Cost of goods sold 296,146 10,996 307,142
------------------------------------- ---------
Gross profit 107,053 7,552 114,605
Selling, general and administrative expenses (98,330) (3,929) (102,259)
Depreciation and amortization (11,435) (214) (3,861)(J) (15,510)
Restructuring and unusual charges (2,550) (2,550)
Gain on sale of subsidiary 20,075 20,075
Interest income 616 18 634
Interest expense (5,089) (273) (5,362)
------------------------------------- ---------
Income (loss) before provision for income
taxes, minority interest and
extraordinary loss 10,340 3,154 (3,861) 9,633
Provision for income taxes 3,889 80 - (K) 3,969
------------------------------------- ---------
Income (loss) before minority interest and
extraordinary loss 6,451 3,074 (3,861) 5,664
Minority interest 395 395
------------------------------------- ---------
Income (loss) before extraordinary loss $ 6,056 $ 3,074 $(3,861) $ 5,269
===================================== =========
Earnings (loss) per common share - basic
Income (loss) before extraordinary
loss $ 0.12 $ 0.07
Earnings (loss) per share - diluted
Income (loss) before extraordinary
loss $ 0.11 $ 0.07
Weighted average number of common
shares outstanding - basic 51,618(H) 20,761 72,379(L)
Weighted average number of common
shares outstanding - diluted 54,890(I) 22,250 77,140(M)
11
<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 $447 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded assuming
straight line amortization of the $21,458 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
an 8.41% interest rate.
(D) The $320 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 $793 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded assuming
straight line amortization of the $15,853 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
an 8.41% interest rate.
(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 4,804 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 diluted common shares assumed by the Company in
connection with the acquisition of Compec.
(J) The $3,861 increase in depreciation and amortization expense represents the
estimated amount of goodwill amortization expense to be recorded, assuming
straight line amortization of the $78,896 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) The number of shares of the Company's common stock to be issued were
determined under the assumption that all of the 13,667,278 shares of
Destron common stock outstanding on September 7, 2000, the date Destron's
shareholders approved the merger, are exchanged for common stock of the
Company at an exchange ratio of 1.5, that approximately 260,420 shares of
the Company's common stock will be issued for payment of a finder's fee and
without taking into account the exercise of options and warrants of Destron
assumed by the Company. 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 the estimated
number of Destron options and warrants of 1,804,274 outstanding as of
September 7, 2000. The Destron options and warrants as of September 7,
2000, adjusted for an assumed ratio of 1.5, are those that are assumed to
be acquired by the Company.
</FN>
</TABLE>
12
