EXHIBIT 99.2
SMITH MICRO SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed balance sheet as of June
30, 2005 and unaudited proforma combined condensed statements of operations for
the year ended December 31, 2004 and the six month period ended June 30, 2005
give effect to Smith Micro Software, Inc.'s acquisition of certain assets (the
"Acquisition") from Allume Systems, Inc. ("Allume"). In these unaudited pro
forma combined condensed financial statements, Smith Micro Software, Inc. is
referred to as "we," "us," "our," and "Smith Micro."
On July 1, 2005, the Company acquired 100% of the issued and outstanding capital
stock of Allume, Inc. from International Microcomputer Software, Inc. (IMSI) for
$11 million in cash and 397,547 restricted shares of its common stock. The
aggregate purchase price of approximately $13.1 million, which includes $11
million cash paid, the 397,547 shares issued which have been valued using the
average closing market price of the Company's common stock over the two-day
period before and after the sale was announced and $285,000 of direct
acquisition costs.
The Acquisition was accounted for as a business combination in accordance with
Statement of Financial Accounting Standards No. 141 "Business Combinations" and
accordingly, the tangible and intangible assets acquired have been recorded at
their estimated fair values as of the date of the Acquisition. The final
allocation of the purchase price is pending completion of a third party
valuation of the assets acquired. Depending on the outcome of that valuation,
the preliminary purchase price allocation could change.
The following unaudited pro forma combined condensed financial statements have
been prepared to assist you in your analysis of the financial effects of the
Acquisition, and have been presented in accordance with the accounting
principles generally accepted in the United States of America ("US GAAP"). The
unaudited pro forma combined condensed balance sheet as of June 30, 2005 has
been prepared as if the Acquisition had occurred on June 30, 2005. The unaudited
pro forma combined condensed statements of operations for the year ended
December 31, 2004 and the six month period ended June 30, 2005 have been
prepared as if the Acquisition had occurred at the beginning of each period
presented.
The unaudited pro forma combined condensed financial statements should be read
in conjunction with the Company's historical consolidated financial statements
and related notes thereto, "Management's Discussion and Analysis or Plan of
Operation" included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2004, the Quarterly Report on Form 10-Q as of June 30, 2005
and March 31, 2005, the Report on Form 8-K filed July 5, 2005 and the financial
statements and related notes thereto of Allume for the year ended June 30, 2005
and the periods from July 1, 2003 through April 18, 2004, and from April 19,
2004 through June 30, 2005 respectively, contained herein.
This pro forma financial information reflects certain assumptions and estimates
deemed probable by management regarding the acquisition based upon the assets
and liabilities acquired. These estimates and assumptions have been made solely
for purposes of developing this pro forma information. The purchase price
allocation of this acquisition is not finalized at this time. A final
determination of the allocation of purchase price to assets acquired and
liabilities assumed has not
been made, and the purchase price allocation used in connection with preparation
of these pro forma financial statements should be considered preliminary and is
subject to the completion of a more comprehensive evaluation. Amounts
preliminarily allocated to fixed assets, intangible assets, accounts receivable
and accounts payable may change significantly, and amortization methods and
useful lives may differ from the assumptions that we used in this unaudited pro
forma combined condensedfinancial information, any of which could result in a
material change in depreciation and amortization expense and the total assets.
The pro forma adjustments do not reflect any future operating efficiencies and
cost savings that may be achieved with respect to the combined entity. Unaudited
pro forma combined condensedfinancial information is presented for information
purposes only and is not necessarily indicative of the results that actually
would have been realized had the acquisition been completed on the date
indicated or which may be expected to occur in the future.
SMITH MICRO SOFTWARE, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF JUNE 30, 2005
(IN THOUSANDS)
UNAUDITED
SMITH MICRO ALLUME SMITH MICRO
SOFTWARE, INC. SYSTEMS, INC. PRO FORMA SOFTWARE, INC.
-------------- ------------- ----------- ------------------
JUNE 30, 2005 JUNE 30, 2005 ADJUSTMENTS PRO FORMA COMBINED
-------------- ------------- ----------- ------------------
ASSETS
Current assets:
Cash and cash equivalents $ 29,946 $ 46 $ (11,000) (1) $ 18,992
Receivables, net 2,660 856 - 3,516
Inventories, net 26 310 - 336
Note receivable - 6 - 6
Income tax receivable 35 - - 35
Other current assets 271 245 - 516
Deferred tax assets - 378 - 378
-------- -------- ---------- --------
Total current assets 32,938 1,841 (11,000) 23,779
Property and equipment, net 108 209 - 317
Intangible assets, net - 3,705 (3,705) (2) -
4,798 (3) 4,798
Goodwill 1,715 6,810 (6,810) (2) 1,715
8,393 (3) 8,393
Other assets 19 43 - 62
-------- -------- ---------- --------
TOTAL ASSETS $ 34,780 $ 12,608 $ (8,324) $ 39,064
========= ======== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - $ 68 $ - $ 68
Trade accounts payable 1,048 569 - 1,617
Accrued and other liabilities 1,020 373 285 (5) 1,678
-------- -------- ---------- --------
Total current liabilities 2,068 1,010 285 3,363
Long-term debt - 27 - 27
Deferred tax liabilities - 1,104 - 1,104
-------- -------- ---------- --------
TOTAL LIABILITIES 2,068 2,141 285 4,494
-------- -------- ---------- --------
SHAREHOLDERS' EQUITY:
Common stock 22 47 (47) (2) 22
1 (4) 1
Additional paid-in capital 48,723 10,129 (10,129) (2) 48,723
1,857 (4) 1,857
Retained earnings (deficit) (16,033) 291 (291) (2) (16,033)
-------- -------- ---------- --------
TOTAL SHAREHOLDERS' EQUITY 32,712 10,467 (8,609) 34,570
-------- -------- ---------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 34,780 $ 12,608 $ (8,324) $ 39,064
======== ======== ========== ========
SMITH MICRO SOFTWARE, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
UNAUDITED
YEAR ENDED DECEMBER 31, 2004
-------------------------------------------------------------
SMITH MICRO
SMITH MICRO ALLUME PRO FORMA SOFTWARE, INC.
SOFTWARE INC. SYSTEMS,INC. ADJUSTMENS COMBINED
------------- ------------ ---------- --------------
Sales $ 13,316 $ 9,586 $ - $ 22,902
Cost of Sales 2,910 1,818 513 (6) 5,241
-------- ------- ---- --------
Gross Profit 10,406 7,768 (513) 17,661
Operating Expenses 6,943 7,405 319 (6) 14,667
-------- ------- ---- --------
Income (loss) from operations 3,463 362 (832) 2,993
Interest and Other, Net 53 44 - 97
-------- ------- ------ --------
Net Income before taxes 3,516 406 (832) 3,090
Income tax expense (benefit) 71 (45) 45 (7) 71
-------- ------- ------ --------
Net income (loss) $ 3,445 $ 451 $ (877) $ 3,019
======== ======= ======= ========
Net Income per share, basic $ 0.20 - - $ 0.17
======== ========
Weighted average number of
common shares outstanding, basic 17,267 - 398 (4) 17,665
======== ====== ========
Net Income per share, diluted $ 0.19 - - $ 0.16
======== ========
Weighted average number of
common shares outstanding, diluted 18,412 - 398 (4) 18,810
======== ====== ========
SMITH MICRO SOFTWARE, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
UNAUDITED
SIX MONTHS ENDED JUNE 30, 2005
-------------------------------------------------------------
SMITH MICRO
SMITH MICRO ALLUME PRO FORMA SOFTWARE, INC.
SOFTWARE INC. SYSTEMS,INC. ADJUSTMENS COMBINED
------------- ------------ ---------- --------------
Sales $ 5,360 $ 4,389 $ - $ 9,749
Cost of Sales 890 928 152 (6) 1,970
-------- ------- ------ --------
Gross Profit 4,470 3,461 (152) 7,779
Operating Expenses 4,140 3,536 88 (6) 7,764
-------- ------ ------ --------
Income (loss) from operations 330 (75) (240) 15
Interest and Other, Net 314 - (109)(8) 205
-------- ------- ------ --------
Net Income before taxes 644 (75) (349) 220
Income tax expense (benefit) 8 146 (146)(7) 8
-------- ------- ------ --------
Net income (loss) $ 636 $ (221) $ (203) $ 212
======== ======= ====== ========
Net Income per share, basic $ 0.03 - - $ 0.01
======== ========
Weighted average number of
common shares outstanding, basic 20,629 - 398 (4) 21,027
======== ====== ========
Net Income per share, diluted $ 0.03 - - $ 0.01
======== ========
Weighted average number of
common shares outstanding, diluted 21,901 - 398 (4) 22,299
======== ====== ========
NOTES TO THE PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS:
(1) Reflects the uses of cash in the acquisition of Allume Systems, Inc.
("Allume") as if the acquisition occurred on June 30, 2005.
(2) Represents the elimination of Allume's existing intangible assets, goodwill,
common stock, additional paid-in capital, and retained earnings, as a result of
the application of purchase accounting.
(3) The fair value adjustments made herein and the allocation of purchase price
is preliminary. The final allocation will be based on estimates and appraisals
that will be finalized within one year of the closing of the Allume acquisition
and based on Smith Micro Software, Inc.'s (the "Company") final evaluation of
Allume's assets and liabilities, including both tangible and intangible assets.
The final allocation of purchase price and the resulting effect on net income
may differ significantly from the pro forma amounts included herein. If the
Company's final purchase price allocation differs from the allocation used in
preparing these pro forma combined condensed financial statements, our pro forma
tangible and intangible assets and pro forma net income could be significantly
higher or lower. Pro forma adjustments include allocations to complete
technologies, customer lists, distribution agreements, and trade name and
trademarks with lives ranging from 5 to 10 years. Goodwill represents the excess
purchase price after all other intangible assets have been identified.
Components of the estimated purchase price and the estimated allocation thereof
are as follows:
(In thousands)
Cash $11,000
SMSI common stock 1,858
Acquisition costs 285
-------
Total purchase price 13,143
=======
Cash acquired $ 46
Receivables, net 856
Inventories, net 310
Note receivable 6
Other current assets 245
Deferred tax assets 378
Property and equipment, net 209
Other assets 43
Capitalized software 2,630
Distribution rights 485
Capitalized customer lists 923
Trademarks 760
Goodwill 8,393
-------
Total assets acquired 15,284
Other liabilities
Long term debt 95
Accounts payable 569
Other liabilities 373
Deferred tax liability 1,104
-------
Net Assets acquired $13,143
=======
(4) Represents 397,547 shares of the Company's common stock issued in connection
with the Allume acquisition. The value is based on the average closing market
price for five days. The five day period includes the day the acquisition
occurred, two days before and after the acquisition.
(5) Represents closing costs associated with the acquisition of Allume.
(6) Represents the elimination of Allume's historical amortization of intangible
assets and the addition of amortization of intangibles established based on our
preliminary valuation estimates and appraisals. The intangibles, as described in
note 3 above, have estimated useful lives ranging from 5 to 10 years. Estimated
capitalized software expense is included in cost of sales and amortization of
distribution rights, customer lists, and trademarks are included in operating
expenses.
(7) Estimated tax effect of pro-forma adjustments taken as a whole. It is
assumed that the Company will avail itself of its substantial net operating loss
carryforwards.
(8) Estimated reduction in interest income from $11 million of cash used to
purchase Allume. Average interest rate assumed for the months of March, April,
May and June is 3%.