<PAGE>
Exhibit 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On March 27, 2000, Liberate Technologies ("Liberate" or the "Company")
entered into a Plan and Agreement of Reorganization (the "MoreCom Merger") to
acquire via merger MoreCom, Inc. ("MoreCom") for approximately 8,030,059 shares
of Liberate's common stock. The MoreCom Merger closed on June 22, 2000, and will
be accounted for as a purchase.
On March 2, 2000, Liberate acquired SourceSuite LLC ("SourceSuite"),
which owned and operated the Virtual Modem business of Source Media, Inc. for
approximately 1,772,000 shares of Liberate's common stock and cash of
approximately $12.6 million (the "Virtual Modem Merger"). The historical
financial statements of SourceSuite LLC, along with the pro forma condensed
combined financial statements reflecting the Virtual Modem Merger, are included
in Liberate's form S-1 Registration Statement that was filed with the Securities
and Exchange Commission on February 17, 2000.
The following unaudited pro forma condensed combined financial
statements give effect to both mergers and should be read in conjunction with
the historical financial statements and accompanying notes for Liberate,
SourceSuite and MoreCom, which are incorporated by reference or included
elsewhere herein.
The unaudited pro forma condensed combined statements of operations
give effect to both mergers as if the acquisitions were consummated as of the
beginning of each of the periods presented. The unaudited pro forma condensed
combined statement of operations for the year ended May 31, 1999, combines the
Company's statement of operations for the year ended May 31, 1999, with
SourceSuite's and MoreCom's unaudited statement of operations for the twelve
months ended May 31, 1999. The unaudited pro forma condensed combined statement
of operations for the nine months ended February 29, 2000, combines the
Company's statement of operations for the nine months ended February 29, 2000
with the same period for SourceSuite and MoreCom. Such statements of operations
do not include the estimated effect of the approximately $1.8 million
nonrecurring charge for the write off of in-process research and development
costs acquired as part of the MoreCom Merger or the $22 million write-off of
in-process research and development costs acquired as part of the Virtual Modem
merger. These amounts will be written off in the quarter during which the
respective merger closed. The unaudited pro forma condensed combined balance
sheet has been prepared as if the acquisition was consummated as of February 29,
2000.
The purchase price allocation and pro forma adjustments for the MoreCom
Merger reflected in the accompanying pro forma condensed combined financial
statements are based upon currently available information and upon certain
assumptions that we believe are reasonable. There can be no assurances that the
actual effect will not differ significantly from the pro forma adjustments
reflected in the pro forma condensed combined financial statements presented.
This method of combining the historical financial statements for the
preparation of the pro forma condensed combined financial statements is for
presentation only. Actual statements of operations of the companies will be
combined from the closing date with no retroactive restatements. The unaudited
pro forma condensed combined financial statements are provided for illustrative
purposes only and are not necessarily indicative of the combined financial
position or combined results of operations that would have been reported had
either merger occurred on the dates indicated, nor do they represent a forecast
of the combined financial position or results of operations for any future
period.
<PAGE>
Exhibit 99.2 (1)
LIBERATE, SOURCESUITE AND MORECOM
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR NINE MONTHS ENDED FEBRUARY 29, 2000
(in thousands except share data)
<TABLE>
<CAPTION>
LIBERATE AND
SOURCESUITE
PRO FORMA PRO FORMA
LIBERATE SOURCESUITE ADJUSTMENTS COMBINED
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
License and other......................... $ 6,525 $ - $ - $ 6,525
Development funds from SourceMedia LLC.... - 1,080 (1,080)(a)
Service................................... 12,368 - 12,368
------------ ------------ -------------
Total Revenue......................... 18,893 1,080 18,893
------------ ------------ -------------
COST OF REVENUES:
License and other......................... 1,618 - 1,618
Service................................... 15,269 - 15,269
------------ ------------ -------------
Total Cost of Revenue................. 16,887 - 16,887
------------ ------------ -------------
GROSS MARGIN................................. 2,006 1,080 2,006
------------ ------------ -------------
OPERATING EXPENSES:
Research and development.................. 21,275 821 22,096
Sales and marketing....................... 12,118 - 12,118
General and adminstrative................. 5,550 373 5,923
Amortization of purchase intangibles...... 4,563 671 48,000 (b) 53,234
Amortization of warrants.................. 5,092 - 5,092
Amortization of deferred stock
compensation.............................. 1,547 - 1,547
------------ ------------ -------------
Total operating expenses.............. 50,145 1,865 100,010
------------ ------------ -------------
Loss from operations.................. (48,139) (785) (98,004)
Interest and other income, net.......... 4,433 - -
------------ ------------ -------------
LOSS BEFORE INCOME TAX BENEFIT (43,706) (785) (98,004)
INCOME TAX BENEFIT(PROVISION)................ (61) - -
------------ ------------ -------------
NET LOSS..................................... $(43,767) $ (785) $ (98,004)
============ ============ =============
BASIC AND DILUTED NET LOSS PER SHARE......... $(0.68) $ (1.48)
============ =============
SHARES USED TO IN COMPUTING
BASIC AND DILUTED NET LOSS PER SHARE.... 64,530 1,772 (d) 66,302
============ =============
PRO FORMA BASIC AND DILUTED NET
LOSS PER SHARE..................... $ (0.56)(c) $ (1.23)
============ =============
SHARES USED TO IN COMPUTING
PRO FORMA BASIC AND DILUTED
NET LOSS PER SHARE............... 77,776 (c) 1,772 (d) 79,548
============ =============
<CAPTION>
TOTAL
PRO FORMA PRO FORMA
MORECOM ADJUSTMENTS COMBINED
------------ ------------ --------------
<S> <C> <C> <C>
REVENUES:
License and other.................. $ - $ - $ 6,525
Development funds from
SourceMedia LLC.................... - -
Service............................ - 12,368
------------ --------------
Total Revenue.................. - 18,893
------------ --------------
COST OF REVENUES:
License and other................... - 1,618
Service............................. - 15,269
------------ --------------
Total Cost of Revenue........... - 16,887
------------ --------------
GROSS MARGIN........................... - 2,006
------------ --------------
OPERATING EXPENSES:
Research and development............ 2,150 23,425
Sales and marketing................. - 12,118
General and adminstrative........... 1,623 7,173
Amortization of purchase intangibles.. - 130,000 (b) 134,563
Amortization of warrants.............. - 5,092
Amortization of deferred stock
compensation.......................... - 1,547
------------ --------------
Total operating expenses.......... 3,773 183,918
------------ --------------
Loss from operations.............. (3,773) (181,912)
Interest and other income, net...... 137 4,570
------------ --------------
LOSS BEFORE INCOME TAX BENEFIT (3,636) (177,342)
INCOME TAX BENEFIT(PROVISION)............ - (61)
------------ --------------
NET LOSS................................. $(3,636) $ (177,403)
============ ==============
BASIC AND DILUTED NET LOSS PER
SHARE............................... $ (2.39)
==============
SHARES USED TO IN COMPUTING
BASIC AND DILUTED NET LOSS
PER SHARE........................... 8,030 (e) 74,332
==============
PRO FORMA BASIC AND DILUTED NET
LOSS PER SHARE...................... $ (2.03)
==============
SHARES USED TO IN COMPUTING
PRO FORMA BASIC AND DILUTED
NET LOSS PER SHARE.................. 8,030 (e) 87,578
==============
</TABLE>
(a) Elimination of revenues from SourceSuite that will not be part of the
ongoing operations of the Virtual Modem business.
(b) Reflects amortization of the acquired intangibles over an estimated life of
three years.
(c) Pro Forma shares assume that convertible preferred shares and convertible
long-term debt were converted into common shares upon their original
issuance date.
(d) Reflects the issuance of 1,772,000 shares of Liberate Common Stock.
(e) Reflects the issuance of 80,000 share of Liberate Common Stock.
<PAGE>
Exhibit 99.2 (2)
LIBERATE, SOURCESUITE AND MORECOM
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1999
(in thousands except share data)
<TABLE>
<CAPTION>
LIBERATE AND
SOURCESUITE
PRO FORMA PRO FORMA
LIBERATE SOURCESUITE ADJUSTMENTS COMBINED
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES:
License and other...................... $ 5,281 $ 321 $ (321)(a) $ 5,281
Development funds from
SourceMedia LLC........................ - 2,965 (2,965)(a) -
Service................................ 12,032 - 12,032
--------- ----------- -----------
Total Revenue...................... 17,313 3,286 17,313
--------- ----------- -----------
COST OF REVENUES:
License and other...................... 2,279 263 (263)(a) 2,279
Service................................ 8,247 - 8,247
--------- ----------- -----------
Total Cost of Revenue.............. 10,526 263 10,526
--------- ----------- -----------
GROSS MARGIN............................. 6,787 3,023 6,787
--------- ----------- -----------
OPERATING EXPENSES:
Research and development.............. 18,171 2,635 20,806
Sales and marketing................... 11,730 - 11,730
General and adminstrative............. 3,975 2,236 6,211
Amortization of purchase intangibles.. 6,084 2,290 61,730(b) 70,104
Amortization of warrants.............. 18 - 18
Amortization of deferred stock
compensation.......................... 507 - 507
Acquired in-process reasearch and
development........................... - -
--------- ----------- -----------
Total operating expenses.......... 40,485 7,161 109,376
--------- ----------- -----------
Loss from operations.............. (33,698) (4,138) (102,589)
INTEREST AND OTHER INCOME
(EXPENSE), net...................... 59 (1,178) 1,178(c) 59
--------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT (33,639) (5,316) (102,530)
INCOME TAX BENEFIT....................... 586 - 586
--------- ----------- -----------
NET LOSS................................. $(33,053) $ (5,316) $(101,944)
========= =========== ==========
PREFERRED STOCK DIVIDENDS - 328 (328)(c)
BASIC AND DILUTED NET LOSS PER
SHARE............................... $ (56.60) $ (43.27)
========= ===========
SHARES USED IN COMPUTING
BASIC AND DILUTED NET LOSS
PER SHARE........................... 584 1,772(e) 2,356
========= ===========
PRO FORMA BASIC AND DILUTED NET
LOSS PER SHARE...................... $ (0.58)(d) $ (1.75)
========= ===========
SHARES USED IN COMPUTING PRO
FORMA BASIC AND DILUTED NET
LOSS PER SHARE..................... 56,586(d) 1,772(e) 58,358
========= ===========
<CAPTION>
TOTAL
PRO FORMA PRO FORMA
MORECOM ADJUSTMENTS COMBINED
---------- ----------- ----------
<S> <C> <C> <C>
REVENUES:
License and other....................... $ - $ 5,281
Development funds from
SourceMedia LLC......................... - -
Service................................. - 12,03
----------- -----------
Total Revenue....................... - 17,313
----------- -----------
COST OF REVENUES:
License and other....................... - 2,279
Service................................. - 8,247
----------- -----------
Total Cost of Revenue............... - 10,526
----------- -----------
GROSS MARGIN............................... - 6,787
----------- -----------
OPERATING EXPENSES:
Research and development................ 1,455 22,261
Sales and marketing..................... - 11,730
General and adminstrative............... 1,011 7,222
Amortization of purchase intangibles.. - 173,400(b) 243,504
Amortization of warrants................ - 18
Amortization of deferred stock
compensation............................ - 507
Acquired in-process reasearch and
development............................. - -
----------- -----------
Total operating expenses............ 2,466 111,842
----------- -----------
Loss from operations................ (2,466) (105,055)
INTEREST AND OTHER INCOME
(EXPENSE), net........................ 54 113
----------- -----------
LOSS BEFORE INCOME TAX BENEFIT (2,412) (104,942)
INCOME TAX BENEFIT........................ - 586
----------- -----------
NET LOSS................................... $ (2,412) $(104,356)
=========== ===========
PREFERRED STOCK DIVIDENDS
BASIC AND DILUTED NET LOSS PER
SHARE................................. $(10.05)
===========
SHARES USED IN COMPUTING
BASIC AND DILUTED NET LOSS 8,030(e) 10,386
PER SHARE............................. ===========
PRO FORMA BASIC AND DILUTED NET $ (1.57)
LOSS PER SHARE........................ ===========
SHARES USED IN COMPUTING PRO 8,030(e) 66,388
FORMA BASIC AND DILUTED NET ===========
LOSS PER SHARE........................
</TABLE>
(a) Elimination of revenues and cost of revenues from SourceMedia that will not
be part of the ongoing operations of the Virtual Modem business.
(b) Reflects amortization of the acquired intangibles over an estimated life of
three years.
(c) Elimination of SourceSuite income and expenses that do not
relate to the ongoing Virtual Modem business.
(d) Pro forma shares assume that convertible preferred shares and convertible
long-term debt converted into common shares upon their original issuance
dates.
(e) Reflects the issuance of 1,772,000 shares of Liberate common stock for the
Virtual Modem merger and 8,030,059 shares of Liberate common stock for the
MoreCom merger.
<PAGE>
Exhibit 99.2 (3)
LIBERATE, SOURCESUITE AND MORECOM
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF FEBRUARY 29, 2000
(in thousands)
<TABLE>
<CAPTION>
LIBERATE AND
SOURCESUITE
PRO FORMA PRO FORMA
LIBERATE SOURCESUITE ADJUSTMENTS COMBINED
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 332,735 $ 8,784 $(8,832) (a) $332,687
Short-term investments 94,474 - 94,474
Accounts receivable, net 1,583 71 1,654
Accounts receivable, SourceSuite - 46 46
Receivable from affiliate 1,044 - 1,044
Prepaid warrants 1,032 - 1,032
Prepaid expenses and other current assets 3,964 95 4,059
----------- -------- ---------
Total current assets 434,832 8,996 434,996
PROPERTY AND EQUIPMENT, net 9,694 421 10,115
OTHER ASSETS
Advanced royalties 541 - 541
Purchased intangibles, net 3,042 13,361 178,595 (a,b,c,d) 194,998
Restricted cash 8,788 - 8,788
Long-term warrants 93,192 - 93,192
Other 77 - 77
----------- -------- ---------
Total assets $ 550,166 $ 22,778 $742,707
========== ======== =========
CURRENT LIABILITIES
Note payable to SourceMedia Inc $ - $ - $ -
Short-term portion of capital leases 379 15 394
Accounts payable 2,920 - 2,920
Accrued payroll and related expenses 2,714 - 2,714
Accrued liabilities 12,615 133 3,738 (b,d) 16,486
Deferred taxes - 1,793 1,793
Deferred revenues 47,802 - 47,802
----------- -------- ---------
Total current liabilities 66,430 1,941 72,109
LONG-TERM DEBT -
Long-term portion of capital leases 690 - 690
Long-term debt - - -
----------- -------- ---------
Total liabilities 67,120 1,941 72,799
----------- -------- ---------
STOCKHOLDERS' EQUITY
Preferred stock - - -
Common stock 882 - 17 (a) 899
Contributed and paid-in-capital 610,009 - 190,528 (a) 800,537
Deferred stock compensation (6,231) - (6,231)
Warrants 71,857 - 71,857
Stockholder notes receivable (8) - (8)
Accumulated other comprehensive income 16 - 16
Accumulated deficit (193,479) 20,837 (24,520) (a,c) (197,162)
----------- -------- ---------
Total stockholders' equity 483,046 20,837 669,908
----------- -------- ---------
Total liabilities and stockholders' equity $ 550,166 $ 22,778 $ 742,707
========== ======== =========
<CAPTION>
TOTAL
PRO FORMA PRO FORMA
MORECOM ADJUSTMENTS COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,850 $ 339,537
Short-term investments - 94,474
Accounts receivable, net 100 1,754
Accounts receivable, SourceSuite - 46
Receivable from affiliate - 1,044
Prepaid warrants - 1,032
Prepaid expenses and other current assets 12 4,071
--------- ----------
Total current assets 6,962 441,958
PROPERTY AND EQUIPMENT, net 370 10,485
OTHER ASSETS
Advanced royalties - 541
Purchased intangibles, net - 515,189 (e,f,g,h) 710,187
Restricted cash - 8,788
Long-term warrants - 93,192
Other 17 94
--------- ----------
Total assets $ 7,349 $1,265,245
========= ==========
CURRENT LIABILITIES
Note payable to SourceMedia Inc $ - $ -
Short-term portion of capital leases - 394
Accounts payable 126 3,046
Accrued payroll and related expenses - 2,714
Accrued liabilities 302 11,380 (g) 28,168
Deferred taxes - 1,793
Deferred revenues - 47,802
--------- ----------
Total current liabilities 428 83,917
LONG-TERM DEBT
Long-term portion of capital leases - 690
Long-term debt 150 150
--------- ----------
Total liabilities 578 84,757
--------- ----------
STOCKHOLDERS' EQUITY
Preferred stock 13 (13) (e) -
Common stock 10 70 (e) 979
Contributed and paid-in-capital 13,688 519,235 (e,h) 1,333,460
Deferred stock compensation (15) 15 (e) (6,231)
Warrants - 71,857
Stockholder notes receivable - (8)
Accumulated other comprehensive income - 16
Accumulated deficit (6,925) (15,498) (e,f,k) (219,585)
--------- ----------
Total stockholders' equity 6,771 1,180,488
--------- ----------
Total liabilities and stockholders' equity $ 7,349 $1,265,245
========= ==========
</TABLE>
(a) Reflects the acquisition of substantially all of the assets and assumption
of substantially all of the liabilities of Virtual Modem for total
consideration of cash of approximately $12.6 million and the issuance of
1,772,000 shares of Liberate Common Stock at an assumed price of
$215.06 per share. The excess of the purchase price over the net book
value of the assets acquired is approximately $194.1 million.
(b) Reflects transaction costs of the Virtual Modem Merger of $2.8 million.
(c) Reflects the write-off of in-process research and development of $2.0
million as it had not reached technological feasibility and
had no probable alternative future use.
(d) Reflects the liability associated with the Preferred Services agreement
between Liberate and Source Media, Inc. in the amount of approximately $0.9
million.
(e) Reflects the acquisition of MoreCom; the excess of purchase price over net
book value of assets acquired is approximately $520.1 million.
(f) Reflects the write-off of in-process research and development of $22.4
million as it not reached technological feasibility and had no probable
alternative future use.
(g) Reflects estimated transaction costs for the MoreCom merger of $11.3
million.
(h) Reflects the assumption of MoreCom stock options assumed by Liberate.
<PAGE>
EXHIBIT 99.2 (4)
LIBERATE TECHNOLOGIES AND MORECOM
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma condensed combined financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However
the Company believes that the disclosures are adequate to make the information
presented not misleading.
Note 2. Purchase Price Allocation
In accordance with Accounting Principles Board Opinion No. 16, the
MoreCom Merger will be accounted for as a purchase of all of the assets and
liabilities of MoreCom by Liberate. The purchase price will be allocated based
upon the fair value of the assets acquired and liabilities assumed, which
approximates book value. The following table summarizes the components of the
total purchase price and the estimated allocation. (in thousands, except share
amount):
<TABLE>
<CAPTION>
<S> <C>
Fair value of Liberate common stock (8,030,059 shares) $504,173
Assumed options 28,830
Transaction costs 11,380
----------
Estimated total purchase price 544,383
----------
Assets acquired and liabilities assumed:
Cash 1,500
Deposits and other 17
Property and equipment 825
Accrued liabilities (550)
-----------
1,792
-----------
Estimated acquired intangibles $542,591
===========
</TABLE>
5