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EXHIBIT 99.3
SMITH MICRO SOFTWARE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995 (UNAUDITED)
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(IN THOUSANDS)
SMITH PRO FORMA
MICRO PCI ADJUSTMENTS PRO FORMA
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $19,020 $ 45 $(2,100)(a) $16,965
Accounts receivable, net 3,400 191 3,591
Inventories 443 443
Prepaid expenses and other current assets 207 19 226
Deferred tax asset 40 40
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Total current assets 23,110 255 (2,100) 21,265
EQUIPMENT AND IMPROVEMENTS, net 552 74 626
INTANGIBLE ASSETS 551 (c) 551
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$23,662 $ 329 $(1,549) $22,442
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IABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 987 $ 59 $ - $ 1,046
Accrued liabilities 495 133 600 (a) 1,228
Deferred tax liability 7 7
Note payable to stockholders 1,935 1,935
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Total current liabilities 3,417 199 600 4,216
STOCKHOLDERS' EQUITY:
Common stock, no par value 14 3 3 (a) 14
Additional paid-in capital 18,146 3,265 (a) 21,411
Retained earnings 2,085 127 (5,411)(b) (3,199)
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Total stockholders' equity 20,245 130 (2,149) 18,226
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$23,662 $ 329 $(1,549) $22,442
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SMITH MICRO SOFTWARE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
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(In thousands, except per share data)
SMITH PRO FORMA
MICRO PCI ADJUSTMENTS PRO FORMA
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NET REVENUES $18,012 $ 2,067 $ - $20,079
COSTS AND EXPENSES:
Cost of sales and services 5,887 944 6,831
Selling and marketing 1,995 349 2,344
Research and development 1,621 449 2,070
General and administrative 2,555 307 184 (d) 3,046
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Total costs and expenses 12,058 2,049 184 14,291
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OPERATING INCOME 5,954 18 (184) 5,788
OTHER INCOME, net 308 9 317
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INCOME BEFORE INCOME TAX EXPENSE 6,262 27 (184) 6,105
INCOME TAX EXPENSE 810 5 71 (d) 744
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NET INCOME $ 5,452 $ 22 $ (113) $ 5,361
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SUPPLEMENTAL PRO FORMA INFORMATION
(unaudited) (Note 3):
Historical income before income tax expense $ 6,262 $ 27 $ (184) $ 6,105
Pro forma income tax expense 2,505 5 71 2,439
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Pro forma net income $ 3,757 $ 22 $ (113) $ 3,666
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Pro forma net income per common and
common equivalent share $ 0.30 $ 0.28
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Weighted average common and common
equivalent shares used in pro forma
computation 12,627 12,977
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SMITH MICRO SOFTWARE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
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1. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On March 14, 1996, Smith Micro Software, Inc. (Smith Micro or the
Company) acquired all outstanding shares of Performance Computing, Inc.
(PCI) for cash consideration of $2.1 million and 350,000 shares of the
Company's common stock. In addition, the Company accrued contingent
purchase price obligations of $600,000 as it is highly probable that such
amounts will be paid. The aggregate purchase price was allocated based
on a fair value appraisal obtained by the Company.
The unaudited pro forma consolidated statement of income and unaudited
pro forma consolidated balance sheet give effect on a purchase
accounting basis to the acquisition of 100% of the outstanding common
stock of PCI by Smith Micro.
The pro forma consolidated statement of income for the fiscal year ended
December 31, 1995 assumes that the acquisition occurred at January 1,
1995. The pro forma consolidated balance sheet as of December 31, 1995
assumes that the acquisition occurred on December 31, 1995. The pro
forma consolidated statement of income and balance sheet do not purport
to represent the results of operations or financial position of the
Company had the transactions and events assumed therein occurred on the
dates specified, nor are they necessarily indicative of the results of
operations that may be achieved in the future. The pro forma
adjustments are based on management's preliminary assumptions regarding
purchase accounting adjustments. The actual allocation of the purchase
price will be adjusted to the extent that actual amounts differ from
management's estimates in accordance with Statement of Financial
Accounting Standards No. 38, Accounting for Preacquisition Contingencies
of Purchased Enterprises.
The pro forma consolidated financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma
financial statements. The pro forma consolidated financial information
should be read in conjunction with the historical statements, and
related notes, of Smith Micro, included in its previously filed Annual
Report on Form 10-K for the year ended December 31, 1995, and PCI,
included in this report on Form 8-K.
In accordance with FASB Interpretation No. 4, the Company is required to
write-off the amount allocated to in-process research and development
acquired in the acquisition of $5,169,000. This write-off was reflected
in the period in which the acquisition was consummated and has been
reflected as a reduction in retained earnings in the pro forma
consolidated balance sheet, but has not been reflected in the pro forma
consolidated statement of income, as it is a material nonrecurring
charge which resulted directly from the acquisition.
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SMITH MICRO SOFTWARE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
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2. PRO FORMA ADJUSTMENTS
a. Record the purchase price of the acquisition as follows:
Cash paid $2,100
Fair value of stock issued 3,265
Accrued purchase obligation 600
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$5,965
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b. Record the effect of the write-off of acquired in-process
research and development and eliminate historical stockholders'
equity of PCI.
c. Allocate excess of purchase price over net tangible assets and
acquired in-process research and development.
Intangible assets:
Value of existing technology $ 154
Covenants not-to-compete 381
Goodwill 16
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$ 551
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d. To record amortization of the intangible assets and corresponding
tax benefit, related to existing technology and covenants
not-to-compete, based on the straight-line method over a
three-year useful life.
3. SUPPLEMENTAL PRO FORMA INFORMATION
From November 1992 through September 18, 1995, the Company was treated
as an S corporation pursuant to the Internal Revenue Code. Subsequent
to the effective date of the initial public offering, the Company's tax
status reverted back to that of a C corporation.
The pro forma information presented on the statements of income reflect
a provision for income taxes as if the Company had been taxed as a C
corporation for the entire year, assuming effective tax rates that
would have been in effect at such time. The principal difference
between effective pro forma tax rate and the statutory federal tax rate
relates to state taxes and research and development tax credits.
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SMITH MICRO SOFTWARE, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)(CONTINUED)
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Pro forma net income per share is based on the weighted average number
of shares of common stock and common stock equivalents (stock options)
outstanding during the period. The dilutive effect of such common stock
equivalents is computed using the treasury stock method. For purposes of
such computation, options granted within one year of the initial public
offering have been treated as outstanding for the entire year.
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