Financials

2005 Second-Quarter Financial Statements

ENTRUST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

(in thousands, except per share data)

Three Months Ended
June 30

Six Months Ended
June 30

2005

2004

2005

2004

(unaudited)

(unaudited)

Revenues:

Product

$9,400

$4,645

$17,467

$11,889

Services and maintenance

15,410

14,874

32,249

30,639
Total revenues

24,810

19,519

49,716

42,528

Cost of revenues:

Product

1,009

1,310

1,980

2,127

Services and maintenance

7,503

7,183

16,214

14,836

Amortization of purchased product rights

190

23

385

23

Total cost of revenues

8,702

8,516

18,579

16,986

Total gross profit:

16,108

11,003

31,137

25,542

Operating expenses

Sales and marketing

7,577

6,430

14,771

12,835

Research and development

4,476

4,282

8,638

8,916

General and administrative

2,934

3,156

5,856

6,488

Total operating expenses

14,987

13,868

29,265

28,239

Income (loss) from operations

1,121

(2,865)

1,872

(2,697)

Other income (expense):

Interest income

577

281

1,105

545

Gain on sale of asset

-

-

200

-

Foreign exchange gain (loss)

(58)

133

31

558

Loss from equity investments

(221)

(168)

(451)

(377)

Total other income (expense)

298

246

885

726

Income (loss) before income taxes

1,419

(2,619)

2,757

(1,971)

Provision for (benefit from) income taxes

321

(66)

695

63

Net income (loss)

$1,098

$(2,553)

$2,062

$(2,034)

Weighted average common shares used

Basic

61,123

63,147

61,707

63,364

Diluted

62,347

63,147

62,833

63,364

Net income (loss) per share

Basic

$0.02

($0.04)

$0.03

($0.03)

Diluted

$0.02

($0.04)

$0.03

($0.03)

Reconciliation of net income (loss) per GAAP to Pro forma net income (loss):

Net income (loss) per GAAP

1,098

(2,553)

2,062

(2,034)

Adjustment to Pro forma net income (loss):

Amortization of non-contractual customer relationships

19

-

37

-

Amortization of purchased product rights

190

23

385

23

Pro forma net income (loss)

$1,307

$(2,530)

$2,484

$(2,011)

Pro forma net income (loss) per share

Basic

$0.02

($0.04)

$0.04

($0.03)

Diluted

$0.02

($0.04)

$0.04

($0.03)

ENTRUST, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

Jun. 30, 2005

Dec. 31, 2004
(unaudited)

ASSETS

Cash and marketable investments

$86,612

$99,319

Accounts receivable, net of allowance for doubtful accounts

17,361

16,203

Other current assets

5,159

3,832

Property and equipment, net

3,534

5,168

Purchased product rights and purchased non-contractual customer relationships, net

2,416

2,887

Goodwill, net

12,713

12,713

Long-term equity investment

3,963

4,028

Other long-term assets, net

1,658

1,733

Total assets

$133,416

$145,883

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable and accruals

$13,466

$15,394

Accrued restructuring charges

28,013

30,090

Deferred revenue

23,880

22,975

Long-term liabilities

1,418

1,426

Total liabilities

66,777

69,885

Shareholders' equity

66,639

75,998

Total liabilities and shareholders' equity

$133,416

$145,883
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