Exhibit 99.2
CERTICOM CORP.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of July 31, 2000
(In thousands of U.S. dollars) U.S. GAAP
-------------------------------------------------
DRG
Resources
Certicom Group, Pro Forma Pro Forma
Corp. Inc. Adjustment Combined
-------- --------- ---------- ---------
ASSETS
Current assets:
Cash...................... $ 50,251 $444 $ (344) 3(a) $ 50,351
Marketable securities,
available for sale....... 3,585 -- -- 3,585
Accounts receivable, net.. 3,525 522 (601) 3(b)(a) 3,446
Unbilled receivables...... 2,198 -- -- 2,198
Inventories............... 250 -- -- 250
Prepaid expenses and
deposits................. 1,281 1 (1) 3(a) 1,281
-------- ---- ------- --------
Total current assets.... 61,090 967 (946) 61,111
Capital assets.............. 5,794 -- -- 5,794
Patents..................... 953 -- -- 953
Acquired intangibles........ 22,361 -- 10,163 3(c) 32,524
Other assets................ -- 9 (9) 3(a) --
-------- ---- ------- --------
Total assets............ $ 90,198 $976 $ 9,208 $100,382
======== ==== ======= ========
LIABILITIES
Current liabilities:
Accounts payable.......... $ 2,437 $423 $ (502) 3(d)(a) $ 2,358
Accrued liabilities....... 2,742 198 2 3(e)(a) 2,942
Income taxes payable...... 516 -- -- 516
Deferred revenue.......... 1,122 -- -- 1,122
-------- ---- ------- --------
Total current
liabilities............ 6,817 621 (500) 6,938
Lease inducements........... 1,064 -- -- 1,064
-------- ---- ------- --------
Total liabilities....... 7,881 621 (500) 8,002
-------- ---- ------- --------
SHAREHOLDERS' EQUITY
Common shares
Authorized: unlimited..... 133,386 -- 15,482 3(f) 148,868
Additional paid-in capital.. 13,851 -- 2,322 3(f) 16,173
Deferred compensation
expense.................... (1,516) -- (7,741) (o) (9,257)
Accumulated other
comprehensive loss......... (2,464) -- -- (2,464)
Retained earnings
(deficit).................. (60,940) -- -- (60,940)
Members' capital............ -- 355 (355) 3(g) --
-------- ---- ------- --------
Total shareholders'
equity................. 82,317 355 9,708 92,380
-------- ---- ------- --------
Total liabilities and
shareholders' equity... $ 90,198 $976 $ 9,208 $100,382
======== ==== ======= ========
See accompanying notes to financial statements.
1
CERTICOM CORP.
Unaudited Pro Forma Condensed Consolidated
Statement of Operations
Year ended April 30, 2000
(In thousands of U.S. dollars, except share data) U.S. GAAP
-----------------------------------------------------------------
Year
ended
July 31,
Year ended Nine months 2000
April 30, ended DRG
2000 December 31, Resources
Certicom 1999 Group, Pro Forma Pro Forma
Corp. Trustpoint Inc. Adjustments Combined
---------- ------------ --------- ----------- ----------
Revenues................ $ 12,040 $ 724 $2,213 $ (179) 3(h) $ 14,798
---------- ----- ------ ------- ----------
Costs and expenses:
Selling and
marketing............ 6,616 -- -- -- 6,616
Research and
development.......... 4,446 -- -- (179) 3(l) 4,267
Depreciation and
amortization......... 7,861 9 1 3,705 3(i) 11,576
General and
administrative....... 7,099 913 130 -- 8,142
Deferred compensation
amortization......... -- -- -- 5,161 3(p) 5,161
Purchased in-process
research and
development.......... 535 -- -- -- 535
Consulting and systems
integration.......... 2,080 -- 1,826 162 3(j) 4,068
Cost of hardware
sold................. 579 -- -- -- 579
---------- ----- ------ ------- ----------
29,216 922 1,957 8,849 40,944
---------- ----- ------ ------- ----------
Operating income
(loss)................. (17,176) (198) 256 (9,028) (26,146)
Interest income
(expense), net......... (359) -- 2 -- (357)
---------- ----- ------ ------- ----------
Income (loss) before
income taxes........... (17,535) (198) 258 (9,028) (26,503)
Income taxes............ 334 30 -- -- 364
---------- ----- ------ ------- ----------
Net income (loss)....... (17,869) (228) 258 (9,028) (26,867)
Other comprehensive
income:
Unrealized gain on
marketable
securities, available
for sale............. 14 -- -- -- 14
---------- ----- ------ ------- ----------
Comprehensive income
(loss)................. $ (17,855) $(228) $ 258 $(9,028) $ (26,853)
========== ===== ====== ======= ==========
Basic and diluted net
loss per share......... $ (0.80) $ (1.18)
========== ===== ====== ======= ==========
Shares used in computing
basic and diluted net
loss per share......... 22,255,044 450,060 3(k) 22,705,104
========== ===== ====== ======= ==========
See accompanying notes to financial statements.
2
CERTICOM CORP.
Unaudited Pro Forma Condensed Consolidated
Statement of Operations
Three Months ended July 31, 2000
(in thousands of U.S. dollars, except share data) U.S. GAAP
--------------------------------------------------
DRG
Resources
Certicom Group, Pro Forma Pro Forma
Corp. Inc. Adjustments Combined
---------- --------- ----------- ----------
Revenues................... $ 5,053 $ 793 $ (117) 3(h) $ 5,729
---------- --------- ----------- ----------
Costs and expenses:
Selling and marketing.... 3,139 -- -- 3,139
Research and
development............. 2,428 -- (117) 3(l) 2,311
Depreciation and
amortization............ 2,748 1 529 3(m) 3,278
General and
administrative.......... 2,472 34 -- 2,506
Deferred compensation
amortization............ 111 -- 1,290 3(q) 1,401
Consulting and systems
integration............. 1,019 618 60 3(j) 1,697
Cost of hardware sold.... 232 -- -- 232
---------- --------- ----------- ----------
12,149 653 1,762 14,564
---------- --------- ----------- ----------
Operating income (loss).... (7,096) 140 (1,879) (8,835)
Non-cash interest income
(expense)................. (423) (423)
Interest income (expense),
net....................... 952 1 -- 953
---------- --------- ----------- ----------
Income (loss) before income
taxes..................... (6,567) 141 (1,879) (8,305)
Income taxes............... 80 -- -- 80
---------- --------- ----------- ----------
Net income (loss).......... (6,647) 141 (1,879) (8,385)
Other comprehensive income:
Unrealized gain on
marketable securities,
available for sale...... 33 -- -- 33
---------- --------- ----------- ----------
Comprehensive income
(loss).................... $ (6,614) $ 141 $(1,879) $ (8,352)
========== ========= =========== ----------
Basic and diluted net loss
per share................. $ (0.26) $ (0.32)
========== ========= =========== ==========
Shares used in computing
basic and diluted net loss
per share................. 25,571,708 347,872 3(n) 25,919,580
========== ========= =========== ==========
See accompanying notes to financial statements.
3
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements
U.S. GAAP
1. Basis of Presentation
The unaudited pro forma condensed consolidated balance sheet and condensed
consolidated statements of operations for the year ended April 30, 2000 and the
three months ended July 31, 2000 have been prepared by Management in accordance
with accounting principles generally accepted in the United States of America
("U.S. GAAP") to reflect Certicom Corp.'s ("the Corporation") acquisition of
all of the outstanding common shares of Trustpoint ("Trustpoint"), effective
January 26, 2000 and all of the outstanding common shares of DRG Resources
Group, Inc. ("DRG Resources Group"), formerly Digital Resources Group, LLC,
effective September 12, 2000. The acquisitions have been accounted for using
the purchase method. The unaudited pro forma condensed consolidated statement
of operations for the year ended April 30, 2000 gives effect to the acquisition
of Trustpoint and DRG Resources Group as if they had occurred on May 1, 1999.
The unaudited pro forma condensed consolidated statement of operations for the
three months ended July 31, 2000 gives effect to the acquisition of DRG
Resources Group as if it had occurred on May 1, 1999. The unaudited pro forma
condensed balance sheet as of July 31, 2000 gives effect to the acquisition of
DRG Resources Group as if it had occurred on that date.
The financial information has been derived from the following financial
statements which have been prepared in accordance with U.S. GAAP:
For the year ended April 30, 2000:
(a) The consolidated financial statements of the Corporation for the year ended
April 30, 2000 incorporated herein.
(b) The unaudited interim statement of operations of Trustpoint for the nine-
month period ended December 31, 1999. The results of operations of Trustpoint
for the period subsequent to January 26, 2000 are included in the results of
operations of the Corporation for the year ended April 30, 2000. Therefore,
only nine months of operations are being added for the purpose of pro forma
condensed consolidated statements of operations for the year ended April 30,
2000.
(c) The audited statement of operations of DRG Resources Group for the year
ended July 31, 2000 incorporated herein.
For the three-months ended July 31, 2000:
(a) The unaudited interim statement of operations of the Corporation for the
three months ended July 31, 2000 incorporated herein.
(b) The unaudited interim statement of operations of DRG Resources Group for
the three months ended July 31, 2000.
For the balance sheet as of July 31, 2000:
(a) The unaudited balance sheet of the Corporation as of July 31, 2000
incorporated herein.
(b) The audited balance sheet of DRG Resources Group as of July 31, 2000
incorporated herein.
The pro forma condensed consolidated financial statements, including the notes
thereto, should be read in conjunction with the financial statements referred
to above prepared in U.S. dollars. The pro forma condensed consolidated
financial statements may not be indicative either of the results that would
actually have occurred if the business combinations had taken place on the
dates indicated, or the results which may be achieved in the future.
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Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements-(Continued)
U.S. GAAP
2. Description of Transactions
Acquisition of Trustpoint
On January 26, 2000, the Corporation acquired all of the outstanding common
shares of Trustpoint, a corporation based in Mountain View, California.
Trustpoint is a provider of comprehensive, flexible, cross-platform public key
infrastructure products that allow OEMs to develop applications with built-in
digital certificate services. Details of the consideration and the fair values
of the net assets acquired are as follows:
Net assets acquired
Non-cash working capital (net of cash of $302).................. $ (34)
Capital assets.................................................. 29
Other acquired intangibles...................................... 878
Goodwill........................................................ 9,633
-------
$10,506
=======
Consideration
Common shares (201,120 shares issued)........................... $ 7,306
Options to acquire 98,884 common shares......................... 3,080
Acquisition costs............................................... 120
-------
$10,506
=======
Acquisition of DRG Resources Group
On September 12, 2000, the Corporation acquired all of the outstanding common
shares of DRG Resources Group, a corporation based in Redwood City, California.
DRG Resources Group is a professional consulting organization specializing in
security for the Internet. Prior to the acquisition, Digital Resources Group,
LLC merged into DRG Resources Group, Inc. At the time these two companies
merged, Digital Resources Group LLC transferred $100 in assets into the new
corporation. The remaining assets and liabilities remained with the members of
Digital Resources Group, LLC. Certicom purchased the corporation. All of the
assets and liabilities of DRG Resources Group, with the exception of $100 in
assets, have been eliminated as pro forma adjustments in order to properly
reflect net assets purchased. Details of the consideration and the fair values
of the net assets acquired are as follows:
Net assets acquired
Current assets (net equity per agreement)........................ $ 100
Other acquired intangibles....................................... 634
Goodwill......................................................... 9,529
Deferred compensation expense.................................... 7,741
-------
$18,004
=======
Consideration
Common shares (397,595 shares issued)............................ $15,482
Options to acquire 103,100 common shares......................... 2,322
Acquisition costs................................................ 200
-------
$18,004
=======
3. Pro Forma Adjustments
(a) Reflects the elimination of assets and liabilities of DRG Resources Group
to properly reflect net assets purchased.
(b) Reflects the elimination of inter-company accounts receivable of DRG
Resources Group from the Corporation.
(c) Reflects the excess of purchase price less amounts recorded as deferred
compensation over the estimated fair market value of the net tangible assets
acquired on the acquisition of DRG Resources Group that has been allocated to
acquired intangibles. This amount is being amortized on a straight-line basis
over a period ranging from two to five years.
(d) Reflects the elimination of inter-company accounts payable between the
Corporation and DRG Resources Group.
5
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements-(Continued)
U.S. GAAP
(e) Reflects DRG Resources Group acquisition costs.
(f) Reflects the 397,595 common shares of the Corporation and stock options
exercisable to acquire a total of 103,100 common shares of the Corporation
issued in connection with the acquisition of DRG Resources Group.
(g) Reflects the elimination of DRG Resources Group members' capital.
(h) Reflects the elimination of inter-company revenue of DRG Resources Group
from the Corporation.
(i) Reflects nine months amortization of acquired intangibles in connection
with the acquisition of Trustpoint and one year amortization of acquired
intangibles in connection with the acquisition of DRG Resources Group. The
goodwill is amortized over a five-year period and other acquired intangibles
are amortized over a three-year period.
(j) Reflects payroll taxes for DRG Resources Group consultants and owner
members.
(k) Reflects the issuance of 298,181 shares of the Corporation, which are not
subject to contingencies as of April 30, 2000, in connection with the
acquisition of DRG Resources Group, as if the shares had been outstanding for
the entire period and reflects the issuance of 201,120 common shares of the
Corporation in connection with the acquisition of Trustpoint for an additional
nine months, as if the shares had been outstanding for the entire period. The
effect of stock options assumed in the acquisitions has not been included as
their inclusion would be anti-dilutive.
(l) Reflects the elimination of inter-company expenses of the Corporation from
DRG Resources Group.
(m) Reflects three months amortization of acquired intangibles in connection
with the acquisition of DRG Resources Group.
(n) Reflects the issuance of 347,872 common shares of the Corporation, which
are not subject to contingencies as of July 31, 2000 in connection with the
acquisition of DRG Resources Group as if the shares had been outstanding for the
entire period. The effect of stock options assumed in the acquisition has not
been included as their inclusion would be anti-dilutive.
(o) Reflects deferred compensation recorded in connection with the acquisition
of DRG Resources Group for restricted shares totaling 198,797 which are subject
to a repurchase agreement with the former members of DRG Resources Group, LLC.
As part of the repurchase agreement, these shares can be repurchased by the
Corporation if these individuals fail to provide services to the Corporation.
The shares begin vesting six months from the date of the acquisition at a rate
of 8.333% per month.
(p) Reflects one year of amortization of deferred compensation recorded in
connection with the acquisition of DRG Resources Group.
(q) Reflects three months of amortization of deferred compensation recorded in
connection with the acquisition of DRG Resources Group.
4. Income Taxes
The pro forma condensed consolidated financial statements do not reflect income
taxes related to the operations of DRG Resources Group as the Corporation has
current net operating losses greater than the taxable income that would be
generated by DRG Resources Group as a taxable entity.
The Corporation has not recorded a pro forma adjustment for the deferred tax
liability arising from the purchase of DRG Resources Group due to the
Corporation's deferred tax position.
6