Veriteq (DIGA) 8-K Digital Angel Completes Sale of Mcmurdo Unit

Exhibit 99.2

UNAUDITED PRO FORMA FINANCIAL DATA

Effective November 20, 2009, pursuant to the terms of the Asset Sale and Purchase Agreement (“McMurdo Purchase Agreement”) dated November 2, 2009, between Digital Angel Corporation (the “Company”), together with its subsidiaries, Signature Industries Limited (“Signature”) and McMurdo Limited, and Orolia SA (the “Purchaser”), Digital Angel Corporation (“the Company’) completed the sale of certain assets of its U.K.-based McMurdo business unit (“McMurdo”). The proceeds totaled approximately $9.6 million, of which $1 million is being held in escrow for up to 12 months. The proceeds from the sale will be used to repay accounts payable, debt and to fund working capital.

The following unaudited pro forma condensed consolidated financial statements illustrate the effect of the McMurdo sale to the extent that the transaction has not yet been fully reflected in the Company’s historical consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet as of September 30, 2009 assumes the transaction occurred on September 30, 2009. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2008 and the nine months ended September 30, 2009, give effect to the sale as if it occurred at the beginning of each period presented. The unaudited pro forma condensed consolidated financial statements have been derived from, and should be read in conjunction with the Company’s historical consolidated financial statements, including the notes thereto, in the Company’s Annual Report of Form 10-K, for the year ended December 31, 2008 filed with the Securities and Exchange Commission (“SEC”) on March 31, 2009, the Company’s Current Report on Form 8-K filed with the SEC on July 8, 2009 in which we represented our financial results for the year ended December 31, 2008 in accordance with the Consolidation Topic of the Financial Accounting Standards Board Accounting Standards Codification and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 filed with the SEC on November 9, 2009.

The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results of operations that would have been achieved had the transaction described above occurred on the date indicated or that may be expected to occur in the future as a result of such transaction.

Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2009
(in thousands, except per share amounts)

	Digital Angel		Pro Forma			Digital Angel
	Corporation		Adjustments			Corporation
	Historical		McMurdo			Pro Forma
Assets
Current Assets
Cash	$	2,027	$	8,350	(a)
				(5,188	)(b)	$	5,189
Restricted cash		196		—			196
Accounts receivable		10,590		(3,123	)(d)		7,467
Note receivable		450		—			450
Inventories		12,846		(2,896	)(a)		9,950
Deferred taxes		143		—			143
Other current assets		1,293		(147	)(d)		1,146
Current assets of discontinued operations		5		3,270	(d)		3,275
Total Current Assets		27,550		266			27,816
Restricted Cash		—		1,000	(a)		1,000
Property and equipment, net		8,352		(353	)(a)		7,999
Goodwill		8,514		(1,121	)(a)		7,393
Intangible assets, net		20,200		(3,719	) (a)		16,481
Note receivable		701		—			701
Other assets, net		624		—			624
Other assets from discontinued operations		5		—			5
	$	65,946	$	(3,927	)	$	62,019
Liabilities and Stockholders’ Equity
Current Liabilities
Notes payable and current maturities of long-term debt	$	10,581	$	—		$	10,581
Accounts payable		14,079		(3,516	)(b)		10,563
Advances from factors		2,632		(1,672	)(b)		960
Accrued expenses		10,186		(1,667	)(d)		8,519
Deferred revenue		687		—			687
Current liabilities of discontinued operations		5		1,667	(d)
				850	(e)		2,522
Total Current Liabilities		38,170		(4,388	)		33,832
Long-term debt and notes payable		2,644		—			2,644
Deferred taxes		2,556		(1,170	)(a)		1,386
Other liabilities		891		—			891
Total Liabilities		44,261		(5,508	)		38,753
Digital Angel Corporation stockholders’ equity		21,591		2,853	(a)
				(850	)(e)		23,594
Noncontrolling interest		94		(422	)(a)		(328	)
Total Stockholders’ Equity		21,685		1,581			23,266
Total Liabilities and Stockholders’ Equity	$	65,946	$	(3,927	)	$	62,019

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine-Months Ended September 30, 2009
(in thousands, except per share amounts)

	Digital Angel			Pro Forma			Digital Angel
	Corporation			Adjustments			Corporation
	Historical			McMurdo			Pro Forma
Revenue	$	50,692		$	(12,816	)(c)	$	37,876
Cost of sales		29,863			(7,285	)(c)		22,578
Gross profit		20,829			(5,531	)		15,298
Selling, general and administrative expenses		21,593			(2,735	)(c)		18,858
Research and development expenses		1,380			(527	)(c)		853
Restructuring, severance and separation expenses		455			—			455
Total operating expenses		23,428			(3,262	)		20,166
Operating loss		(2,599	)		(2,269	)		(4,868	)
Interest and other income (expense), net		671			(501	)(c)		170
Interest expense (income)		(1,738	)		50	(c)		(1,688	)
Loss from continuing operations before taxes		(3,666	)		(2,720	)		(6,386	)
Benefit for income taxes		27			—			27
Loss from continuing operations		(3,639	)		(2,720	)		(6,359	)
Income attributable to the noncontrolling interest, continuing operations		(27	)		(41	)(c)		(68	)
Net loss attributable to Digital Angel Corporation	$	(3,666	)		(2,761	)		(6,427	)
Loss from continuing operations per common share attributable to Digital Angel Corporation — basic and diluted	$	(0.21	)				$	(0.36	)
Weighted average number of common shares outstanding —basic and diluted		17,798						17,798

Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 2008
(in thousands, except per share amounts)

	Digital Angel			Pro Forma			Digital Angel
	Corporation			Adjustments			Corporation
	Historical			McMurdo			Pro Forma
Revenue	$	78,172		$	(15,912	)(c)	$	62,260
Cost of sales		51,850			(9,508	)(c)		42,342
Gross profit		26,322			(6,404	)		19,918
Selling, general and administrative expenses		34,295			(3,880	)(c)		30,415
Research and development expenses		3,146			(1,153	)(c)		1,993
Restructuring, severance and separation expenses		3,678			—			3,678
Goodwill and asset impairments		35,467			—			35,467
Total operating expenses		76,586			(5,033	)		71,553
Operating loss		(50,264	)		(1,371	)		(51,635	)
Interest and other income (expense), net		2,722			—			2,722
Interest expense		(10,892	)		—			(10,892	)
Loss from continuing operations before taxes		(58,434	)		(1,371	)		(59,805	)
Benefit for income taxes		165			—			165
Loss from continuing operations		(58,269	)		(1,371	)		(59,640	)
Income attributable to the noncontrolling interest, continuing operations		(122	)		(21	)(c)		(143	)
Net loss attributable to Digital Angel Corporation	$	(58, 391	)	$	(1,392	)	$	(59, 783	)
Loss from continuing operations per common share attributable to Digital Angel Corporation — basic and diluted	$	(3.85	)				$	(3.94	)
Weighted average number of common shares outstanding —basic and diluted		15,156						15,156

PRO FORMA ADJUSTMENTS FOR THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 2009 AND THE
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
NINE-MONTHS ENDED SEPTEMBER 30, 2009 AND THE YEAR ENDED DECEMBER 31, 2008
ARE AS FOLLOWS:

Note 1 Basis of Presentation

The unaudited pro forma condensed consolidated statements of operations for the twelve months ended December 31, 2008 and the nine months ended September 30, 2009 presented herein have been prepared based on historical reported amounts, adjusted to reflect: (1) the disposition of McMurdo’s operations and the assumed reduction of interest expense from the retirement of advances from factor and payables required to be paid from the proceeds of the sale of McMurdo. In conjunction with the terms of the Asset Sale and Purchase Agreement, $1.0 million will be placed in a twelve-month escrow account to fund indemnification obligations, if any, that may arise during that time.

The unaudited pro forma balance sheet as of September 30, 2009 presented herein has been prepared based on historical reported amounts, adjusted to reflect: (1) the sale of McMurdo’s assets, including estimated proceeds received, net of the costs incurred; assets sold and transferred; and liabilities retired and contractual obligations settled.

Note 2 Sale of McMurdo’s Assets

The estimated net sales price and gain on the sale of McMurdo’s assets is as follows (in thousands):

Base sales price	$	9,550
Less estimated transaction costs (2)		(200	)
Net sales price to the Company, after transaction costs	$	9,350
Consisting of:
Cash	$	8,350
Restricted cash(1)		1,000
Net sales price to the Company, after transaction costs		9,350
Book value of assets sold or transferred		6,919
Estimated gain on sale of McMurdo’ assets (3)	$	2,431

(1)	To be held in escrow after closing for twelve months to fund indemnification obligations, if any.
(2)	Estimate of transaction costs, including legal, banking and accounting fees.
(3)	Excluded from pro forma results of operations.

Note 3 Pro Forma Adjustments

The following are descriptions of the pro forma adjustments related to the transaction, identified as (a) through (e) in the accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet and Unaudited Pro Forma Condensed Consolidated Statements of Operations (in thousands):

(a)	Proceeds to be received from the sale of McMurdo’s assets pursuant to the Asset Sale and Purchase Agreement, less transaction costs of approximately $200 and the elimination of goodwill, intangible assets and the related deferred taxes associated with McMurdo. See Note 2 above for a more complete description of the proceeds and resulting gain on the sale of McMurdo’s assets.
(b)	Payment of McMurdo’s liabilities.

(c)	Elimination of the operating results of McMurdo.
(d)	To reflect the assets and liabilities not included as part of the sale, or required to be paid with the proceeds of the sale, as assets or liabilities of discontinued operations on the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
(e)	To record the estimated United Kingdom taxes due on the sale. Since these are a one-time charge, they are not included in the results of operations. They are reflected on the pro forma balance sheet.