EX-99.2 2 ex992e3.txt 109813.00100/11447211v.2 Exhibit 99.2 PRO-FORMA FINANCIAL INFORMATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION On June 30, 2005, we entered into an asset purchase agreement with INDUS Corporation pursuant to which we sold substantially all of the assets and certain liabilities of our secure network services business. The purchase price was approximately $12.5 million, subject to adjustments described in the asset purchase agreement based on the net assets of the business on the date of closing. The asset purchase agreement provides that $3.0 million of the purchase price be held in escrow. Of this amount, $625,000 is held as security for the payment of our indemnification obligations pursuant to the asset purchase agreement, if any, and will be released to us eighteen (18) months following the date of the asset purchase agreement unless a certain key government contract, referred to as the Key Contract, is not assigned (referred to as a novation) as of such time. A portion of the escrow amount equal to $2,000,000 (which includes the portion referenced above for indemnification obligations), plus any interest or other income earned thereon, will also serve as security for a payment obligation we have to INDUS Corporation if the novation of the Key Contract from us to INDUS Corporation is not approved by such government customer and received within two years from the date of the asset purchase agreement. The transaction was completed on June 30, 2005. The unaudited pro forma financial information presented reflects the estimated pro forma effect of the sale of the secure network services business. Two unaudited pro forma condensed consolidated financial statements are included herein, as follows: (a) an unaudited pro forma condensed consolidated statements of operations for the nine months December 31, 2004 giving effect to the sale of the secure network services business as if it occurred on April 1, 2004 and the year ended March 31, 2004, giving effect to the sale of the secure network services business as if it occurred on April 1, 2003; and (b) an unaudited pro forma condensed consolidated balance sheet at December 31, 2004, giving effect to the sale of the secure network services business as if it occurred on April 1, 2004. The unaudited pro forma condensed consolidated financial statements include specific assumptions and adjustments related to the sale of the secure network services business. These pro forma adjustments have been made to illustrate the anticipated financial effect of the sale of the secure network services business. The adjustments are based upon available information and assumptions that we believe are reasonable as of the date of this filing. However, actual adjustments may differ materially from the information presented. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial statements. These pro forma condensed consolidated statements of operations do not include anticipated gain on the sale of the secure network services business of approximately $5.0 million. The unaudited pro forma financial statements are presented for informational purposes only and do not purport to be indicative of the financial position which would actually have been obtained if the transaction had occurred in the periods indicated below or which may exist or be obtained in the future. The information is not representative of future results of operations or financial position. The unaudited condensed pro forma financial information is qualified in its entirety by and should be read in conjunction with the more detailed information and financial data appearing in the Company's historical consolidated financial statements and notes thereto included herein the latest annual report on Form 10-K. In the opinion of management, all material adjustments necessary to reflect the disposition of the secure network services business by us have been made. The unaudited pro forma consolidated financial information should be read in conjunction with the notes hereto and any historical consolidated financial statements and notes thereto included in an annual report on Form 10-K for the year ended March 31, 2004.
Halifax Corporation and Subsidiaries Pro forma Condensed Consolidated Statement of Operations (unaudited) For the nine months ended For the year ended December 31, 2004 March 31, 2004 Actual Adjust- Proforma As Adjust- Proforma ments reported ments (amounts in thousands, except share data) Revenues $ 43,847 $(9,336) (1) $34,511 $49,537 $ (9,481) (1) $40,056 Operating (loss) income (917) (1,745) (2) (2,662) 1,054 (1,040) (2) 14 Interest Expense 462 (3) 124 576 526 (3) 50 338 (Loss) income before income (1,379) (1,407) (2) (2,786) 478 (514) (2) (36) taxes Income tax (benefit expense (479) (4) (986) (3,750) (185) (4) (3,935) (507) Net (loss) income $(900) $ (900) $(1,800) $ 4,228 $ 329 $ 3,899 (Loss) income per share - $(0.30) $(0.60) $ 1.60 $ 1.48 basic Loss income per share - $(0.30) $(0.60) $ 1.54 $ 1.40 diluted
The pro forma adjustment to the historical financial statements are: (1) Reflects the elimination of in revenues attributable to the secure network services business as a result of its sale. (2) Reflects the reduction of gross margin attributable to the secured networks services business as a result of the sale. (3) Reflects the elimination of interest expense of $338 thousand and 526 thousand as a result of proposed reduction in the principal balance of notes payable of approximately $9.0 million for the nine months ended December 31, 2004 and year ended March 31, 2004, respectively. (4) Reflects the income tax effect of the foregoing adjustments.
Halifax Corporation and Subsidiaries Pro forma Condensed Consolidated Balance Sheet (unaudited) (amounts in thousands) At December 31, 2004 As reported Adjustments Pro forma ASSETS CURRENT ASSSETS Cash $ 100 $ 12,500 (2) $ 3,256 (9,344) (5) Trade accounts receivable, net 11,747 (1,949) (1) 9,798 Inventory, net 5,872 5,872 Prepaid expenses and other current assets 834 (16) (1) 818 Deferred tax asset 1,148 (1,148) (3) - TOTAL CURRENT ASSETS 19,701 43 19,744 PROPERTY AND EQUIPMENT, net 1,624 (64) (1) 1,560 GOODWILL AND OTHER INTANGIBLE ASSETS (net) 7,235 7,235 OTHER ASSETS 144 144 DEFERRED TAX ASSET 3,231 (1,580) 1,651 TOTAL ASSETS $ 31,935 $ (1,601) $ 30,334 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 4,298 $ (500) (1) $ 3,798 Accrued expenses 3,839 (229) (1) 5,732 725 (3) 1,747 (4) (350) (5) Deferred maintenance revenues 3,796 3,796 Current portion of long-term debt 23 23 Bank Debt 9,698 (6,100) (5) 3,598 Notes payable 494 (494) (5) - TOTAL CURRENT LIABILITIES 22,148 (5,201) 16,947 OTHER LONG-TERM DEBT 172 172 SUBORDINATED DEBT - AFFILIATE 2,400 (1,400) (5) 1,000 DEFERRED INCOME 293 - 293 TOTAL LIABILITIES 25,013 (6,601) 18,412 STOCKHOLDERS' EQUITY (DEFICIT) Common Stock 825 825 Additional paid in capital 9,003 9,003 Accumulated deficit (2,694) 5,000 (6) 2,306 Less treasury stock at cost (212) - (212) TOTAL STOCKHOLDERS' EQUITY 6,922 5,000 11,922 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,935 $ (1,601) $ 30,334
(1) Reflects the elimination of net assets sold in connection with the sale of the secure network services business. (2) Reflects the cash proceeds received from the sale of $12.5 million and includes amounts held in escrow at closing of $3.0 million, which is reflected in the cash balance. (3) Records the provision for income taxes utilizing the net operating loss carryforward and estimated additional income taxes. (4) Reflects estimated transaction costs, fees and expenses of $1.7 million (5) Reflects the approximate use of $9.0 of the proceeds to repay indebtedness (6) Reflects the estimated gain on sale of secure network services business, net of taxes and transaction costs.