EXHIBIT 99.3
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements have been prepared to give effect the acquisition of Iridian
Technologies, Inc. (Iridian), consummated on August 16, 2006, as if this
transaction had been consummated on June 30, 2006 for purposes of the pro forma
condensed consolidated balance sheet and January 1, 2005 for purposes of the pro
forma condensed consolidated statements of operations.
The historical financial statements for L-1 Identity Solutions, Inc. (L-1)
formerly known as Viisage Technology, Inc. and Iridian have been derived from
their respective financial statements as of the date and for the periods
indicated.
The pro forma adjustments are based on preliminary purchase price
allocations. Actual allocations will be based on final appraisals and other
analyses of the fair value of, among other items, identifiable intangible
assets, goodwill, income taxes and litigation. The allocations will be finalized
after the data necessary to complete the appraisal and analyses of the fair
values of acquired assets and liabilities is obtained and analyzed. Differences
between the preliminary and final allocations are not expected to have a
material impact on the unaudited pro forma condensed consolidated financial
statements.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with L-1's audited consolidated financial statements as
of and for the year ended December 31, 2005 and its unaudited condensed
consolidated financial statements as of and for the six months ended June 30,
2006, included in L-1's Annual Report on Form 10-K/A for the year ended December
31, 2005 and its quarterly report on Form 10-Q for the six months ended June 30,
2006, respectively, and Iridian's audited consolidated financial statements as
of and for the years ended December 31, 2005 and 2004 and its unaudited
condensed consolidated financial statements for six months ended June 30, 2006
and 2005 are included in this Report on Form 8-K/A.
The unaudited pro forma condensed consolidated financial information is
not necessarily indicative of the financial position or results of operations
presented as of the date or for the periods indicated, or the results of
operations or financial position that may be achieved in the future.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2006
(IN THOUSANDS)
IRIDIAN PRO
FORMA
L-1 AS IRIDIAN AS ADJUSTMENTS
REPORTED REPORTED (1) (5) PRO FORMA
-------- -------- -------- --------
ASSETS
Current Assets:
Cash and equivalents $ 43,640 $ 165 $(34,820) $ 8,985
Accounts receivable, net 16,088 521 -- 16,609
Inventory 6,634 53 -- 6,687
Other current assets 1,151 174 -- 1,325
-------- -------- -------- --------
Total current assets 67,513 913 (34,820) 33,606
Property and equipment, net 19,380 66 -- 19,446
Goodwill 176,275 3,844 19,368 199,487
Intangible assets, net 30,218 14 11,186 41,418
Other assets 5,033 141 -- 5,174
-------- -------- -------- --------
Total assets $298,419 $ 4,978 $ (4,266) $299,131
======== ======== ======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 14,012 $ 2,667 $ (1,961) $ 14,718
Convertible notes payable -- 5,000 (5,000) --
Current deferred revenue 3,343 718 (718) 3,343
Other current liabilities 663 -- -- 663
-------- -------- -------- --------
Total current liabilities 18,018 8,385 (7,679) 18,724
Deferred tax liability 3,002 -- -- 3,002
Deferred revenue 1,936 5,445 (5,445) 1,936
Other liabilities 236 6 -- 242
-------- -------- -------- --------
Total liabilities 23,192 13,836 (13,124) 23,904
Shareholders' equity (deficit) 275,227 (8,858) 8,858 275,227
-------- -------- -------- --------
Total Liabilities and Shareholders' Equity $298,419 $ 4,978 $ (4,266) $299,131
======== ======== ======== ========
The accompanying notes are an integral part of these unaudited pro
forma condensed consolidated financial statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDING JUNE 30, 2006
(IN THOUSANDS)
IRIDIAN PRO
FORMA
L-1 AS IRIDIAN AS ADJUSTMENTS
REPORTED REPORTED (3)(4)(6) PRO FORMA
-------- -------- --------- ---------
TOTAL REVENUES $ 48,306 $ 1,533 $ -- $ 49,839
TOTAL COST OF REVENUES 34,667 46 459 35,172
-------- -------- -------- --------
Gross profit 13,639 1,487 (459) 14,667
-------- -------- -------- --------
OPERATING EXPENSES:
Total operating expenses 17,257 3,951 -- 21,208
-------- -------- -------- --------
OPERATING LOSS (3,618) (2,464) (459) (6,541)
Interest and other income, net 1,145 (358) (321) 466
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (2,473) (2,822) (780) (6,075)
Provision for income taxes (1,315) (2) -- (1,317)
-------- -------- -------- --------
NET LOSS $ (3,788) $ (2,824) $ (780) $ (7,392)
======== ======== ======== ========
BASIC AND DILUTED LOSS PER SHARE: $ (0.13) $ (0.25)
======== ========
WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES
OUTSTANDING 29,042 29,042
======== ========
The accompanying notes are an integral part of these unaudited pro
forma condensed consolidated financial statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
(IN THOUSANDS)
IRIDIAN PRO
FORMA
L-1 AS IRIDIAN AS ADJUSTMENTS
REPORTED REPORTED (3)(4)(6) PRO FORMA
-------- -------- --------- ---------
TOTAL REVENUES $ 66,224 $ 5,101 $ -- $ 71,325
TOTAL COST OF REVENUES 46,132 249 937 47,318
-------- -------- -------- --------
Gross profit 20,092 4,852 (937) 24,007
-------- -------- -------- --------
OPERATING EXPENSES:
Total operating expenses 26,635 6,075 -- 32,710
-------- -------- -------- --------
OPERATING LOSS (6,543) (1,223) (937) (8,703)
Interest and other income, net 572 (470) 498 600
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (5,971) (1,693) (439) (8,103)
(Provision) benefit for income taxes (1,382) 491 -- (891)
-------- -------- -------- --------
NET LOSS $ (7,353) $ (1,202) $ (439) $ (8,994)
======== ======== ======== ========
BASIC AND DILUTED LOSS PER SHARE: $ (0.37) $ (0.46)
======== ========
WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES
OUTSTANDING 19,630 19,630
======== ========
The accompanying notes are an integral part of these unaudited pro
forma condensed consolidated financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. On August 16, 2006 L-1, pursuant to an Agreement and Plan of Merger,
consummated the acquisition of Iridian for $34.8 million in cash, including
estimated transaction costs of $300,000, and net of $0.5 million for a
"Holdback Amount" representing the tentative adjustment to the purchase
price, subject to the adjustment based on the closing final net asset
value.
2. The preliminary estimated excess of the acquisition cost of Iridian over
the fair value of the identifiable net assets acquired approximates $23.2
million. The pro forma balance sheet also reflects identifiable intangible
assets have been estimated to be $11.2 million and relate principally to
acquired technology intangibles and the elimination of historical
intangible assets primarily goodwill of $3.9 million. The pro forma balance
sheet also reflects the settlement of debt of $5.0 million and accrued
liabilities of $2.0 million not assumed by L-1, the elimination of current
and long term deferred income for which there are no performance
obligations of $6.2 million and the elimination Iridian' historical
stockholders' deficit of $8.9 million.
3. The preliminary estimate of identifiable intangible assets of Iridian is
$11.2 million with an assumed useful life of 11 years and
will be amortized on a straight line basis. The preliminary adjustments to
L-1's pro forma cost of revenues to give effect to the Iridian
acquisition are presented below:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2006 2005
--------------- ---------------
Amortization expense for estimated
identifiable intangible assets $ 0.5 $ 1.1
Elimination of Iridian's historical
identifiable intangible assets and
deferred offering cost amortization -- (0.2)
--------------- ---------------
Total adjustment to pro forma cost of
revenues $ 0.5 $ 0.9
--------------- ---------------
4. The unaudited pro forma condensed consolidated statements of operations
include a pro forma adjustment to eliminate the interest expense of $0.4
million and $0.5 million for the periods presented related to debt repaid
from proceeds of the sale at closing of the transaction.
5. L-1 and Iridian have significant net operating loss carryovers subject to
Section 382 limitations. L-1, based on a preliminary analysis, believes
that a portion of these net operating losses will be available to offset
future taxable income within the carryforward period. The related deferred
tax assets have a full valuation allowance. The reduction in the valuation
allowance resulting from the utilization of net operating losses, if
applicable will be recorded as a reduction of goodwill related to the
transaction.
6. The unaudited pro forma condensed consolidated statements of operations
include pro forma adjustments to eliminate the interest income of $0.7
million for the six months ended June 30, 2006 related to the cash
consideration paid as if the transaction occurred at the beginning of 2005.
Due to the investment by L-1 Investment Partners in Viisage Technology,
Inc. (now known as L-1) occurring at the end of 2005, the proceeds to pay
for Iridian came directly from this investment, which resulted in no
adjustment to interest income for 2005.