EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed statement of
operations for the year ended December 31, 1999, and the unaudited pro forma
combined condensed balance sheet as of December 31, 1999 give effect to the VST
acquisition as if it had occurred on (i) January 1, 1999 in the case of the
statement of operations and (ii) December 31, 1999 in the case of the balance
sheet. These unaudited pro forma combined condensed financial statements are
based upon the historical financial information of VST appearing elsewhere in
this Form 8-K/A and of SmartDisk included in its Annual Report on Form 10-K for
the year ended December 31, 1999.
The VST acquisition has been accounted for as a purchase business
combination for financial accounting purposes. The total purchase price of the
acquisition was allocated to the tangible and intangible assets and liabilities
of VST based upon their respective fair values as of the date of the closing of
the acquisition, pending final determination of certain acquired balances. In
the opinion of management, the appropriate adjustments have been made to the
historical financial statements which are necessary to fairly present the pro
forma combined condensed financial statements. These pro forma adjustments are
described in the notes accompanying these unaudited pro forma combined condensed
financial statements. These unaudited pro forma combined condensed financial
statements are provided for information purposes only and do not purport to
represent what our results of operations or financial position would actually
have been had the transactions in fact occurred at such dates or to project our
results of operations or financial position at or for any future date or period.
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SMARTDISK CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
HISTORICAL
-------------------------------------
SMARTDISK VST PRO FORMA PRO FORMA
CORPORATION(1) TECHNOLOGIES(2) ADJUSTMENTS COMBINED
---------------- ---------------- ----------------- ---------------
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments................................... $ 45,720 $ 797 $ (16,434)(a) $ 30,083
Restricted cash................................. 1,050 - - 1,050
Accounts and notes receivable, net.............. 10,168 11,178 - 21,346
Inventories, net................................ 1,475 10,799 - 12,274
Other current assets............................ 1,353 166 - 1,519
Deferred tax asset.............................. - 1,485 - 1,485
------------ ------------ ------------- -----------
Total current assets................................. 59,766 24,425 (16,434) 67,757
Property and equipment, net.......................... 2,623 1,288 - 3,911
Goodwill and other intangible assets, net............ 883 - 93,167 (a) 94,050
Deposits and other assets............................ 172 - - 172
------------ ------------ ------------- -----------
Total Assets......................................... $ 63,444 $ 25,713 $ 76,733 $ 165,890
============ ============ ============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 5,330 $ 9,122 $ - $ 14,452
Bank line of credit and discounted notes........ 4,894 4,500 - 9,394
Other accrued liabilities....................... 2,015 1,624 2,975 (a) 6,614
Income taxes payable............................ 1,110 1,448 - 2,558
Deferred revenue................................ 308 - - 308
------------ ------------ ------------- -----------
Total current liabilities............................ 13,657 16,694 2,975 33,326
Deferred income taxes and other...................... - 5 13,680 (a) 13,685
Redeemable convertible preferred stock............... - 11,974 (11,974)(a) -
Stockholders' equity (deficit): (1)(a)
Common stock.................................... 16 1 1 (a) 17
Capital in excess of par value.................. 71,247 744 (744)(a) 140,338
69,091 (a)
Treasury stock, at cost......................... (58) - - (58)
Accumulated other comprehensive income.......... 712 - - 712
Notes receivable from officers/employees........ (388) - - (388)
Accumulated deficit............................. (21,742) (3,705) 3,705 (a) (21,742)
------------ ------------ ------------- -----------
Total stockholders' equity (deficit)................. 49,787 (2,960) 72,052 118,879
------------ ------------ ------------- -----------
Total Liabilities and Stockholders' Equity........... $ 63,444 $ 25,713 $ 76,733 $ 165,890
============ ============ ============= ===========
<FN>
- --------------------
(1) Represents the balance sheet for SmartDisk as of December 31, 1999.
(2) Represents the balance sheet for VST, which we acquired on March 6,
2000, as of December 31, 1999.
</FN>
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SMARTDISK CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL
SMARTDISK VST PRO FORMA PRO FORMA
CORPORATION(1) TECHNOLOGIES(2) ADJUSTMENTS COMBINED
REVENUES
Product sales.............................. $ 37,262 $ 61,526 $ - $ 98,788
Research and development revenue................ 2,587 - - 2,587
Royalties....................................... 470 - - 470
------------ ------------ ------------- ------------
Total revenues.............................. 40,319 61,526 - 101,845
COST OF REVENUES..................................... 24,820 45,774 - 70,594
------------ ------------ ------------- ------------
GROSS PROFIT......................................... 15,499 15,752 - 31,251
OPERATING EXPENSES
Research and development........................ 5,869 2,608 - 8,477
Sales and marketing............................. 1,608 3,765 - 5,373
General and administrative...................... 6,259 2,902 - 9,161
Amortization of goodwill and other intangible
assets - - 28,169 (b) 28,169
------------ ------------ ------------- ------------
Total operating expenses.................... 13,736 9,275 28,169 51,180
------------ ------------ ------------- ------------
OPERATING INCOME (LOSS).............................. 1,763 6,477 (28,169) (19,929)
Interest and other income (expense), net............. 562 (265) (1,300)(c) (1,003)
------------ ------------ ------------- ------------
Net income (loss) before income taxes................ 2,325 6,212 (29,469) (20,932)
Income tax expense (benefit)......................... 1,965 (d)
1,367 - (6,593)(e) (3,261)
------------ ------------ ------------- ------------
NET INCOME (LOSS)................................... $ 958 $ 6,212 $ (24,841) $ (17,671)
============ ============ ============= ============
Earnings (loss) per share - basic.............. $ 0.09 $ (1.50)
Earnings (loss) per share - diluted............ $ 0.07 $ (1.50)
Weighted average shares used to calculate
earnings (loss) per share amounts
Basic........................................... 10,725 1,073(f) 11,798
Diluted......................................... 13,349 1,073(f) 11,798
<FN>
- -------------
(1) Represents actual results of operations for SmartDisk for the year
ended December 31, 1999.
(2) Represents the actual results of operations for VST, which we acquired
on March 6, 2000, for the year ended December 31, 1999.
</FN>
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
The pro forma combined condensed balance sheet gives effect to the
acquisition as if it had occurred on December 31, 1999.
On March 6, 2000, SmartDisk Corporation acquired all the outstanding
shares of VST stock in exchange for approximately 1.073 million shares of
SmartDisk common stock and approximately $16.4 million in cash. In addition,
SmartDisk issued options to purchase a total of approximately 443,000 shares of
SmartDisk common stock in exchange for all issued and outstanding VST options.
The following adjustment has been reflected in the unaudited pro forma combined
condensed balance sheet.
(a) To reflect cash, common stock and options issued to the shareholders of
VST, and applicable purchase accounting entries, including the
elimination of VST's common stock, capital in excess of par value and
retained earnings. The Company also recorded additional goodwill and a
deferred income tax liability associated with separately identified
intangible assets.
Under purchase accounting, the total purchase price of the acquisition
was allocated to VST's assets and liabilities based on their relative fair
values as of the date of the closing of the acquisition, pending final
determination of certain acquired balances. The amounts and components of the
purchase price along with the allocation of the purchase price to net assets
acquired are presented below (in thousands).
PURCHASE PRICE
Cash................................................ $ 16,434
Common stock........................................ 1
Capital in excess of par............................ 49,299
Value of SmartDisk options issued................... 19,792
Transaction costs................................... 2,975
--------
Total purchase price................................ $ 88,501
========
NET ASSETS ACQUIRED
Book value of net tangible assets of VST............ $ 9,551
Intangible assets:
Non-compete agreements.......................... 21,300
Distribution channels........................... 4,900
VST trade name.................................. 4,800
Patents......................................... 2,200
Workforce in place.............................. 1,000
Deferred income taxes............................... (13,680)
Goodwill............................................ 58,430
--------
Net assets acquired................................. $ 88,501
========
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NOTE 2. UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
The pro forma combined condensed statement of operations gives effect
to the acquisition as if it had occurred on January 1, 1999.
(b) Adjustment to reflect the amortization of goodwill and other intangible
assets resulting from the allocation of purchase price. The pro forma
adjustment assumes goodwill and other intangible assets will be
amortized on a straight-line basis over the following lives. Historical
amortization of goodwill and other intangible assets for SmartDisk has
been included in general and administrative expenses.
Intangible assets:
Non-compete agreements 2 years
Distribution channels 2 years
VST trade name 2 years
Patents 3 years
Workforce in place 4 years
Goodwill 5 years
(c) To reflect an increase in interest expense assuming we borrowed the
approximately $16.4 million cash paid to VST security holders at
SmartDisk's effective borrowing rate of 8.5% on January 1, 1999 until
the date of our IPO at which time we would have paid down the debt. The
resulting decrease in cash proceeds would correspondingly decrease
interest income associated with cash, cash equivalents and short-term
investments.
(d) To reflect income tax expense at a rate of approximately 40% on income
earned by VST less pro forma interest expense.
(e) To reflect an income tax benefit at a rate of approximately 40% on
amortization expense on separately identified intangible assets.
(f) To reflect the shares issued as consideration for the acquisition.
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