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EXHIBIT 99.2
QUEST SOFTWARE, INC.
UNAUDITED PRO FORMA INFORMATION
On December 17, 1999 the Company, through a wholly owned subsidiary,
acquired all of the outstanding common stock and stock options of MBR
Technologies, Inc. (MBR) in exchange for 93,471 shares of Quest Common Stock
valued at $9,323,732, a cash payment of $1,313,583 and the assumption of net
liabilities of $340,000. The acquisition was accounted for as a purchase and the
results of MBR's operations were included in the Company's statement of
operations from the date of acquisition.
On January 7, 2000 the Company, through a wholly owned subsidiary, acquired
all of the outstanding common stock of Foglight Software, Inc. (Foglight) in
exchange for 1,187,603 shares of Quest Common Stock valued at $104,167,628,
estimated cash payments of $424,182, the assumption of unvested Foglight stock
options valued at $2,088,000 and the assumption of net liabilities estimated to
be $5,112,000. The acquisition will be accounted for as a purchase.
The following unaudited pro forma balance sheet as of December 31, 1999
assumes that the acquisition of Foglight had occurred on December 31, 1999. The
unaudited statement of operations includes the unaudited statement of operations
of MBR for the period from January 1, 1999 to December 17, 1999 and the
unaudited statement of operations of Foglight for the year ended December 31,
1999 and assumes that the acquisitions of MBR and Foglight had occurred on
January 1, 1999. The pro forma combined results of operations is presented for
information purposes only, is based on historical information, and does not
necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of the combined enterprise.
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QUEST SOFTWARE, INC.
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
QUEST FOGLIGHT COMBINED
SOFTWARE SOFTWARE TOTAL PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1999 1999 1999 ADJUSTMENTS 1999
------------ ------------ ------------ ----------- ------------
ASSETS
Current assets:
Cash and cash equivalents.................. $ 39,643 $ 32 $ 39,675 $ (424)(1) $ 39,251
Restricted cash............................ -- 51 51 -- 51
Short-term marketable securities........... 11,000 -- 11,000 -- 11,000
Accounts receivable, net................... 18,771 107 18,878 -- 18,878
Prepaid expenses and other current
assets................................... 5,333 200 5,533 (1,308)(3) 4,225
-------- -------- -------- -------- --------
Total current assets................... 74,747 390 75,137 (1,732) 73,405
Property and equipment, net................ 7,179 866 8,045 -- 8,045
Long-term marketable securities............ 4,484 -- 4,484 -- 4,484
Purchased technology and software licenses,
net...................................... 441 -- 441 4,700(1) 5,141
Goodwill and other intangibles............. 11,452 -- 11,452 103,734(1) 115,186
Deferred income taxes...................... 415 -- 415 3,358(1) 3,773
Other assets............................... 431 34 465 -- 465
-------- -------- -------- -------- --------
Total assets........................... $ 99,149 $ 1,290 $100,439 $110,060 $210,499
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion............. $ -- $ 4,747 $ 4,747 $ (2,808)(3) $ 1,939
Accounts payable........................... 3,436 80 3,516 -- 3,516
Accrued compensation....................... 4,966 -- 4,966 -- 4,966
Other accrued expenses..................... 7,062 752 7,814 -- 7,814
Income taxes payable....................... 2,030 -- 2,030 -- 2,030
Deferred support revenue................... 13,932 236 14,168 -- 14,168
Deferred license revenue................... 4,651 -- 4,651 -- 4,651
Capital lease obligations, current
portion.................................. -- 310 310 -- 310
-------- -------- -------- -------- --------
Total current liabilities.............. 36,077 6,125 42,202 (2,808) 39,394
-------- -------- -------- -------- --------
Notes payable, net of current portion...... -- 1,279 1,279 -- 1,279
Long-term liabilities...................... 403 498 901 -- 901
Shareholders' equity:
Preferred stock............................ -- 4 4 (4)(2) --
Common stock and additional paid in
capital.................................. 94,010 7,892 101,902 98,364(1)(2)(3) 200,266
Warrants to purchase Series C convertible
preferred stock.......................... -- 1,292 1,292 (1,292)(2) --
Retained earnings (deficit)................ 1,864 (14,412) (12,548) 14,412(1) 1,864
Accumulated other comprehensive income
(loss)................................... (26) -- (26) -- (26)
Unearned compensation costs................ -- (1,388) (1,388) 1,388(1) --
Notes receivable from sale of common
stock.................................... (3,115) -- (3,115) -- (3,115)
Capital distribution in excess of basis in
common stock............................. (30,064) -- (30,064) -- (30,064)
-------- -------- -------- -------- --------
Total shareholders' equity (deficit)... 62,669 (6,612) 56,057 112,868 168,925
-------- -------- -------- -------- --------
Total liabilities and shareholders'
equity.............................. $ 99,149 $ 1,290 $100,439 $110,060 $210,499
======== ======== ======== ======== ========
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QUEST SOFTWARE, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
MBR
TECHNOLOGIES
FOR THE
QUEST PERIOD FOGLIGHT COMBINED
SOFTWARE JANUARY 1, SOFTWARE TOTAL PRO FORMA
YEAR ENDED 1999 TO YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 17, DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
1999 1999 1999 1999 ADJUSTMENTS 1999
------------ ------------ ------------ ------------ ----------- ------------
Revenues:
Licenses............... $54,269 $ 380 $ 2,433 $57,082 $ -- $ 57,082
Services............... 16,599 190 383 17,172 -- 17,172
------- ----- ------- ------- -------- --------
Total revenues.... 70,868 570 2,816 74,254 -- 74,254
Cost of Revenues:
Licenses............... 2,998 346 109 3,453 1,567(4) 5,020
Services............... 4,195 195 207 4,597 -- 4,597
------- ----- ------- ------- -------- --------
Total cost of
revenues....... 7,193 541 316 8,050 1,567 9,617
------- ----- ------- ------- -------- --------
Gross profit............. 63,675 29 2,500 66,204 (1,567) 64,637
Operating expenses:
Sales and marketing.... 32,078 149 3,734 35,961 -- 35,961
Research and
development......... 15,980 209 3,680 19,869 -- 19,869
General and
administrative...... 9,906 524 1,233 11,663 -- 11,663
Other compensation
costs and goodwill
amortization........ 1,243 -- 409 1,652 23,038(4) 24,690
------- ----- ------- ------- -------- --------
Total operating
expenses....... 59,207 882 9,056 69,145 23,038 92,183
------- ----- ------- ------- -------- --------
Income (loss) from
operations............. 4,468 (853) (6,556) (2,941) (24,605) (27,546)
Other income (expense),
net.................... 1,202 (31) (865) 306 (87)(5) 219
------- ----- ------- ------- -------- --------
Income (loss) before
income tax provision... 5,670 (884) (7,421) (2,635) (24,692) (27,327)
Income tax provision
(benefit).............. 2,273 1 1 2,275 (3,397)(6) (1,122)
------- ----- ------- ------- -------- --------
Net income (loss)........ 3,397 (885) (7,422) (4,910) (21,295) (26,205)
Preferred stock
dividends, value of
beneficial conversion
feature, and accretion
on preferred stock..... 590 -- 679 1,269 -- 1,269
------- ----- ------- ------- -------- --------
Net income (loss)
applicable to common
shareholders........... $ 2,807 $(885) $(8,101) $(6,179) $(21,295) $(27,474)
======= ===== ======= ======= ======== ========
Basic and diluted net
income (loss) per
share.................. $ 0.07 $ (0.71)
======= ========
Weighted average shares:
Basic.................. 37,677 1,281(7) 38,958
Diluted................ 41,800 (2,847)(7) 38,958
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NOTES TO PRO FORMA FINANCIAL STATEMENTS
(1) To reflect the elimination of Foglight's equity accounts and the allocation
of the purchase price of $111,791,810 as follows:
Goodwill................................................... $103,233,810
Deferred tax asset, net.................................... 3,358,000
Purchased technology....................................... 4,700,000
Workforce.................................................. 500,000
The allocation may change once the audit of Foglight's closing balance sheet
is completed and other valuation information is received.
(2) To reflect the conversion of all outstanding shares of preferred stock to
common stock and exercise and conversion of Series C preferred stock
warrants prior to the close of the Foglight acquisition.
(3) To eliminate the note payable to Quest of $1,308,000 and the forgiveness of
the Cap Tech note payable of $1,500,000.
(4) To reflect the amortization of goodwill over five years on a straight-line
basis, and workforce over three years on a straight-line basis ($20,813,429)
and the amortization of purchased technology over three years on a
straight-line basis ($1,566,667)for the Foglight transaction. Also includes
the amortization of goodwill related to the MBR purchase for the period
January 1, 1999 to December 17, 1999 of $2,225,000.
(5) To reflect the decrease in interest income due to the use of cash in the
acquisitions at a 5% annual yield.
(6) To reflect the establishment of a deferred tax asset anticipated from the
utilization of the operating loss of Foglight for the year and to adjust the
income tax provision to reflect the estimated income tax benefit on a
combined basis.
(7) To adjust for the 1,187,719 and 93,471 shares of Quest common stock issued
in the acquisitions of Foglight and MBR, respectively, in the basic net
income per share calculation and reduce the number of weighted average
shares for the diluted net loss per share calculation.
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