Exhibit 99.4
VASCO DATA SECURITY INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED PRO FORMA
FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)
The Unaudited Consolidated Pro Forma Statement of Operations combines the
historical consolidated statements of operations of VASCO Data Security
International, Inc. ("VASCO") and AOS-Hagenuk B.V. ("A.O.S.") as if the merger
had occurred on January 1, 2004. The Unaudited Consolidated Pro Forma Balance
Sheet combines the historical consolidated balance sheet of VASCO and the
historical consolidated balance sheet of A.O.S., giving effect to the merger as
if it had occurred on December 31, 2004. VASCO has adjusted the historical
consolidated financial information to account for pro forma events that are (1)
directly attributable to the merger, (2) factually supportable, and (3) with
respect to the statements of operations, expected to have a continuing impact on
the combined results.
On February 4, 2005, pursuant to a Share Sale and Purchase Agreement (the
"Purchase Agreement") by and among VASCO, A.O.S. Holding B.V. ("Seller"),
Filipan Beheer B.V. ("Guarantor"), Mr. Mladen Filipan ("Surety") and Pijnenburg
Beheer N.V. ("Guarantor"), VASCO completed its acquisition of 100% of the issued
share capital of A.O.S., a private limited liability company organized and
existing under the laws of the Netherlands.
The base purchase price paid to the Seller for the acquisition was EUR
5,000, of which EUR 3,750 was paid in cash ("Consideration Cash") and the
remainder of which was paid in VASCO common stock ("Consideration Shares"). The
Consideration Shares will be held in escrow for the benefit of the Seller for a
period of twelve (12) months, pursuant to the terms of an Escrow Agreement.
Twelve (12) months after the Closing Date and five days prior to the expiration
of the Escrow Agreement (the "Re-measurement Date") the value of the
Consideration Shares will be re-measured as of the Re-measurement Date by
reference to the average closing price of VASCO's common stock during a period
of thirty (30) trading days prior to the Re-measurement Date less five percent
(5%) (the "Final Value'). If: (a) the Final Value is 90% or greater, then there
shall be no adjustment of the amount of Closing Consideration Shares; (b) the
Final Value is 80% or greater but less than 90% of the initial value then the
amount of Consideration Shares shall be increased to the number of Consideration
Shares multiplied by a fraction consisting of the initial value divided by the
Final Value; (c) the Final Value is less than 80% of the initial value then the
amount of Consideration Shares shall be increased to the number of Closing
Shares multiplied by 1.25. Six (6) months after closing, the Seller shall have
the right to pay EUR 1,250 into the escrow account against release of the
Consideration Shares, pursuant to the terms set forth in the Purchase Agreement.
In addition to the base purchase price, a variable amount related to the gross
profits collected on the sales of certain equipment will be paid to the Seller
over a period of two (2) years following the closing, pursuant to the terms of
the Purchase Agreement.
The following Unaudited Consolidated Pro Forma financial information gives
effect to VASCO's acquisition of A.O.S. as if the transaction had occurred on
December 31, 2004 for purposes of the Unaudited Consolidated Pro Forma Balance
Sheet, and as of January 1, 2004 for purposes of the Unaudited Consolidated Pro
Forma Statement of Operations. The acquisition of A.O.S. will be recorded using
the purchase method of accounting. The following unaudited consolidated pro
forma financial statements are based on the historical statements of VASCO and
A.O.S. during the periods presented, adjusted to give effect to the acquisition.
The total purchase price of A.O.S. has been allocated on a preliminary basis to
identifiable assets acquired and liabilities assumed based on valuation
procedures performed to date. This allocation is subject to change pending a
final analysis of the total purchase price paid, including direct costs of the
acquisition, and the estimated fair value of the assets acquired and liabilities
assumed. However, the Company does not believe the impact of these changes will
be material.
The pro forma adjustments are described in the accompanying notes and are
based upon available information and various assumptions that management
believes are reasonable. These adjustments give effect to events directly
attributable to the transaction and do not reflect any restructuring or
integration costs, or any potential cost savings or other synergies that
management expects to realize as a result of the transaction. The accompanying
unaudited pro forma consolidated financial information should be read in
conjunction with the historical financial statements and the related notes
thereto of VASCO, included in its Annual Report on Form 10-K, and the historical
financial statements and the related notes thereto of A.O.S., included elsewhere
in this Current Report on Form 8-K/A.
The unaudited pro forma combined financial information is not necessarily
indicative of the operating results or financial position that would have
occurred if the transaction had been consummated on the dates indicated, nor is
it necessarily indicative of the future financial position and the results of
operations of VASCO.
VASCO DATA SECURITY INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 2004
(IN THOUSANDS)
VASCO Data
Security AOS- Pro Forma Pro Forma
International, Inc. Hagenuk B.V. Adjustments Notes Consolidated
------------------- ------------ ----------- ----- ------------
ASSETS
Current assets:
Cash $ 8,138 $ 9418 (4,374) 1 $ 4,705
Restricted cash 82 -- 82
Accounts receivable, net 5,965 187 6,152
Inventories, net 1,346 80 1,426
Prepaid expenses 791 204 995
Deferred income taxes 23 -- 23
Foreign sales tax receivable 313 -- 313
Other current assets 464 619 (616) 1 467
-------- ------ --------
Total current assets 17,122 2,031 14,163
Property and equipment
Furniture and fixtures 1,683 -- 1,683
Office equipment 2,008 395 (395) 3 2,196
188 3
-------- ------ --------
3,691 395 3,879
Accumulated depreciation (2,853) (206) 206 3 (2,853)
-------- ------ --------
Net property and equipment 838 188 1,025
Intangible assets, net 1,134 735 (735) 2 1,134
367 2 367
Goodwill, net 250 -- 5,997 5 6,247
Note receivable and investment in SSI 760 -- 760
Other assets 146 -- 146
-------- ------ --------
TOTAL ASSETS $ 20,250 $ 2,955 $ 23,843
======== ====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,065 45 $ 3,110
Deferred revenue 620 1,933 (862) 4 1,691
Accrued wages and payroll taxes 1,602 -- 1,602
Income taxes payable 435 31 466
Other accrued expenses 1,345 170 150 1 1,665
-------- ------ --------
Total current liabilities 7,067 2,178 8,533
Deferred warranty revenues 152 -- 152
Stockholders' equity :
Series D Convertible Preferred Stock 1,504 -- 1,504
Common stock 34 25 (25) 6 34
Additional paid-in capital 51,825 682 (682) 6 53,953
2,128 1
Retained earnings (accumulated deficit) (40,672) 71 (71) 6 (40,672)
Accumulated other comprehensive income -
cumulative translation adjustment 340 -- 340
-------- ------ --------
Total stockholders' equity 13,031 777 15,158
-------- ------ --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,250 $ 2,955 $ 23,843
======== ====== ========
See accompanying notes to the unaudited consolidated
pro forma financial statements.
VASCO DATA SECURITY INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN THOUSANDS EXCEPT PER SHARE DATA)
VASCO Data
Security
International AOS-Hagenuk Pro Forma Pro Forma
Inc. B.V. Adjustments Notes Consolidated
------------ ----------- ----------- ----- ------------
Net revenues $ 29,893 $ 5,418 $ (862) 7 $ 34,449
Cost of goods sold 9,184 3,194 12,378
-------- -------- -------- --------
Gross profit 20,709 2,224 (862) 22,071
-------- -------- -------- --------
Operating costs:
Sales and marketing 9,160 1,007 10,167
Research and development 2,835 840 3,675
General and administrative 3,194 217 367 8 3,778
Restructuring expenses (32) - (32)
-------- -------- -------- --------
Total operating costs 15,157 2,063 367 17,587
-------- -------- -------- --------
Operating income from continuing operations 5,552 160 (1,229) 4,483
Interest income (expense), net 120 (2) (87) 9 31
Other income (expense), net (539) - (539)
-------- -------- -------- --------
Income before income taxes 5,133 158 (1,316) 3,975
Provision for income taxes 1,880 30 (30) 10 1,880
-------- -------- -------- --------
Net income from continuing operations 3,253 128 (1,286) 2,095
Preferred stock accretion and dividends (232) - (232)
-------- -------- -------- --------
Net income available to common shareholders $ 3,021 $ 128 $ (1,286) $ 1,863
======== ======== ======== ========
Basic net income per common share: $ 0.09 $ 0.06
======== ========
Diluted net income per common share: $ 0.09 $ 0.06
======== ========
Weighted average common shares outstanding:
Basic 32,216 263 32,479
======== ======== ========
Dilutive 33,128 263 33,391
======== ======== ========
See accompanying notes to the unaudited consolidated pro forma
financial statements.
VASCO DATA SECURITY INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1 ACQUISITION OF AOS-HAGENUK B.V.
In accordance with the Purchase Agreement, on February 4, 2005, VASCO
acquired all of the outstanding shares of AOS-Hagenuk B.V. ("AOS"). The
aggregate purchase price was $7,268, consisting primarily of $4,374 cash, 263
shares of common stock valued at approximately $2,128, the assumed liability due
to AOS of $616 and estimated direct costs of the acquisition of $150. As of
April 20, 2005, $105 of the direct costs have been paid. The fair value of the
common stock issued was determined based on the average market price of the
Company's common stock over the period including five days before and after the
terms of the Purchase Agreement was signed and closed.
In accordance with the Statement of Financial Accounting Standards No. 141,"
Business Combinations", the Company allocated the consideration given to the
assets acquired and the liabilities assumed based on their estimated fair values
at date of acquisition. The following table summarizes the estimated fair value
of the assets acquired and the liabilities assumed at December 31, 2004:
Cash $ 941
Accounts receivable, net 187
Inventory 80
Prepaid expenses 204
Other current assets 619
Property and equipment, net 188
Intangible asset 367
Goodwill 5,997
------
Total assets acquired 8,583
------
Accounts payable 45
Deferred revenue 1,071
Income taxes payable 31
Accrued expenses 170
------
Total liabiltites assumed 1,317
------
------
Net assets acquired $7,266
======
The balance sheet of AOS was translated to US dollars using the historical
EURO to US Dollar rate on December 31, 2004. The statement of operations of AOS
was translated using the average historical EURO to US Dollar rate for the year
2004.
NOTE 2 - INTANGIBLE ASSETS
An intangible asset of $367 related to customer purchase commitments was
recorded at the date of acquisition at its estimated fair value. This intangible
asset will be amortized as the goods are shipped and is expected to be fully
amortized within a twelve-month period. The intangible asset recorded by AOS of
$735 was estimated to have a fair value of $0 at the date of acquisition as its
future realization was uncertain. The effect was to increase goodwill recorded.
VASCO DATA SECURITY INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS)
NOTE 3 - OFFICE EQUIPMENT
The office equipment was recorded at its net book value at the date of
acquisition which approximates the fair value of that equipment. Historical
accumulated depreciation was eliminated.
NOTE 4 - DEFERRED REVENUE
The deferred revenue assumed from AOS was recorded at its estimated fair
value of $1,071 at the date of acquisition.
NOTE 5 - GOODWILL
Goodwill represents the amount of consideration paid not specifically
allocable to purchased assets or assumed liabilities.
NOTE 6 - EQUITY
The historical value of AOS' common stock, retained earnings and additional
paid-in capital were eliminated at the date of acquisition.
NOTE 7 - REVENUE
Adjustment to record a reduction in revenue related to the difference
between the deferred revenue liability recorded by AOS and the assumed deferred
liability recorded by VASCO in the purchase.
NOTE 8 - AMORTIZATION OF INTANGIBLE ASSET
Adjustment to record the amortization expense of the acquired intangible
asset recorded in the purchase.
NOTE 9 - INTEREST INCOME
Adjustment to reduce interest income of $87 as a result of the cash paid for
the purchase of AOS.
NOTE 10 - INCOME TAXES
Adjustment to eliminate the AOS tax provision as a result of the pro forma
adjustments.
NOTE 11 - ADJUSTMENT TO THE VALUE OF THE PURCHASE
Twelve (12) months after the Closing Date and five days prior to the
expiration of the Escrow Agreement (the "Re-measurement Date") the value of the
Consideration Shares, 263, will be subject to a re-measurement, providing the
Seller has not paid Euro 1,250 into the escrow account against the release of
the Consideration shares. The effect of this potential re-measurement will be to
adjust goodwill and additional paid-in capital.
NOTE 12 - EARN OUT CONSIDERATION
In addition to the base purchase price, a variable amount related to the
gross profits collected on the sales of certain equipment will be paid to the
Seller over a period of two years following the Closing. The Company will record
any earn out payments as commission expense in the period earned.