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EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
OF TUT SYSTEMS, INC. AND XSTREAMIS LIMITED
The following unaudited pro forma combined financial information for Tut
Systems, Inc. (the "Company") consist of the Unaudited Pro Forma Combined
Statements of Operations for the three months ended March 31, 2000 and for the
year ended December 31, 1999 and the Unaudited Pro Forma Combined Balance Sheets
as of March 31, 2000. This pro forma financial information gives effect to
Tut's acquisition of Xstreamis Limited ("Xstreamis") to be accounted for as
purchase.
The Xstreamis acquisition was consummated on May 26, 2000. The stockholders
of Xstreamis received 439,137 shares of Tut common stock and $100,000 in cash on
a pro-rata basis among the shareholders in exchange for 16,843,253 shares of
Xstreamis. Additionally, Tut exchanged fully vested stock options to purchase
10,863 shares of Tut common stock for fully vested stock options to purchase
416,619 of Xstreamis shares.
The unaudited pro forma combined balance sheet at March 31, 2000 gives effect
to the acquisition as if it had occurred on March 31, 2000, by consolidating the
balance sheet of Xstreamis with the balance sheet of Tut at March 31, 2000.
The unaudited pro forma combined statement of operations for the three months
ended March 31, 2000 gives effect to the acquisition as if it had occurred on
January 1, 2000, by consolidating the results of Xstreamis with the results of
Tut.
The unaudited pro forma combined statements of operations for the year ended
December 31, 1999 gives effect to the acquisition as if it had occurred on
January 1, 1999, by consolidating the results of operations of Xstreamis with
the results of operations of Tut.
The unaudited pro forma combined statements of operations are not necessarily
indicative of the operating results that would have been achieved had the
transaction been in effect as of the beginning of the periods presented and
should not be constructed as being representative of future operating results.
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TUT SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 2000
------------------------------------------------------------------
Pro Forma
Tut Xstreamis Adjustments Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 157,248 $ 2,032 $ - $ 159,280
Short-term investments 9,246 - - 9,246
Accounts receivable, net 10,378 - - 10,378
Inventory 11,692 - - 11,692
Prepaid expenses and other current assets 3,007 78 - 3,085
----------- ----------- ----------- -----------
Total current assets 191,571 2,110 - 193,681
Property and equipment, net 4,188 158 - 4,346
Other assets 32,706 - 19,948 A 52,654
----------- ----------- ----------- -----------
Total assets $ 228,465 $ 2,268 $ 19,948 $ 250,681
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,286 $ 183 $ - $ 6,469
Accrued expenses and other payables 6,297 1,608 597 A 8,502
Lines of credit 1,571 - - 1,571
Deferred revenue 815 - - 815
----------- ----------- ----------- -----------
Total current liabilities 14,969 1,791 597 17,357
Deferred revenue, net of current portion 2,338 - - 2,338
Other liabilities 376 - - 376
----------- ----------- ----------- -----------
Total liabilities 17,683 1,791 597 20,071
----------- ----------- ----------- -----------
Stockholders' equity:
Common stock 15 679 (679) A 15
Additional paid in capital 275,037 8,146 11,682 A 294,865
Note receivable from stockholders (1,372) - - (1,372)
Deferred compensation (2,690) - - (2,690)
Accumulated comprehensive income 515 15 (15) A 515
Accumulated deficit (60,723) (8,363) 8,363 A (60,723)
----------- ----------- ----------- -----------
Total stockholders' equity 210,782 477 19,351 230,610
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 228,465 $ 2,268 $ 19,948 $ 250,681
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
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TUT SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
---------------------------------------------------------------------
Tut Xstremis Adjustments Pro Forma
---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product and services $ 16,164 $ - $ - $ 16,164
License and royalty 310 - - 310
---------- ---------- ---------- ----------
Total revenues 16,474 - - 16,474
Cost of goods sold 9,137 - - 9,137
---------- ---------- ---------- ----------
Gross margin 7,337 - - 7,337
---------- ---------- ---------- ----------
Operating expenses
Sales and marketing 4,819 247 - 5,066
Research and development 3,183 74 - 3,257
General and administrative 2,175 361 - 2,536
In-process research and development 800 - - 800
Amortization of intangibles 746 - 1,011 B 1,757
Noncash compensation expense 114 - - 114
---------- ---------- ---------- ----------
Total operating expenses 11,837 682 1,011 13,530
---------- ---------- ---------- ----------
Loss from operations (4,500) (682) (1,011) (6,193)
Interest expense (310) - - (310)
Interest income and other 575 30 - 605
---------- ---------- ---------- ----------
Loss before income taxes (4,235) (652) (1,011) (5,898)
Income tax expense 1 - - 1
---------- ---------- ---------- ----------
Net loss (4,236) (652) (1,011) (5,899)
Dividend accretion on preferred stock - - - -
---------- ---------- ---------- ----------
Net loss attributable to common stockholders $ (4,236) $ (652) $ (1,011) $ (5,899)
========== ========== ========== ==========
Net loss per share attributable to common
stockholders, basic and diluted $ (0.34) $ (0.04) $ (0.46)
========== ========== ==========
Shares used in computing net loss per share
attributable to common stockholders,
basic and diluted 12,435 16,718 439 12,874
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TUT SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------------------
Tut Xstreamis Adjustments Pro Forma
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Product and services $ 26,266 $ 12 $ - $ 26,278
License and royalty 1,541 - - 1,541
--------- ------- ------- -----------
Total revenues 27,807 12 - 27,819
Cost of goods sold 15,459 4 - 15,463
--------- ------- ------- -----------
Gross margin 12,348 8 - 12,356
--------- ------- ------- -----------
Operating expenses
Sales and marketing 10,523 469 - 10,992
Research and development 7,618 1,031 - 8,649
General and administrative 4,429 1,294 - 5,723
In-process research and development 2,600 - - 2,600
Amortization of intangibles 52 - 4,044 B 4,096
Noncash compensation expense 455 - - 455
--------- ------- ------- -----------
Total operating expenses 25,677 2,794 4,044 32,515
--------- ------- ------- -----------
Loss from operations (13,329) (2,786) (4,044) (20,159)
Interest expense (608) - - (608)
Interest income and other (2,204) 28 - 2,232
--------- ------- ------- -----------
Loss before income taxes (11,733) (2,758) (4,044) (18,535)
Income tax expense 1 - - 1
--------- ------- ------- -----------
Net loss (11,734) (2,758) (4,044) (18,536)
Dividend accretion on preferred stock 235 - - 235
--------- ------- ------- -----------
Net loss attributable to common stockholders $ (11,969) $(2,758) $(4,044) $ (18,771)
========= ======= ======= ===========
Net loss per share attributable to common
stockholders, basic and diluted $ (1.12) $ (0.19) $ (1.68)
========= ======= ===========
Shares used in computing net loss per
share attributable to common
stockholders, basic and diluted 10,729 14,447 439 11,168
========= ======= ======= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TUT SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - BASIS OF PRESENTATION:
The pro forma combined financial information give effect to Tut's acquisition
of Xstreamis consummated on May 26, 2000. The acquisition will be accounted for
as purchase. Xstreamis stockholders and optionholders received an aggregate
total of 450,000 shares of Tut common stock and shares subject to options.
The pro forma combined financial information has been prepared on the basis
of assumptions described in the following notes and include assumptions relating
to the allocation of the consideration paid for the assets and liabilities based
on estimated of their fair values.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1999 gives effect to the acquisition as if it had taken place on
January 1, 1999. The Unaudited Pro Forma Combined Balance Sheet as of December
31, 1999 gives effect to the acquisition as if it had taken place on December
31, 1999.
The Unaudited Pro Forma Combined Statement of Operations for the three months
ended March 31, 2000 gives effect to the acquisition as if it had taken place on
January 1, 2000. The Unaudited Pro Forma Combined Balance Sheet as of March 31,
2000 gives effect to the acquisition as if it had taken place on March 31, 2000.
The pro forma combined financial information is not necessarily indicative of
what the actual financial results would have been had the transaction taken
place as of the beginning of the periods presented and do not purport to be
indicative of the results of future operations.
NOTE 2 - PURCHASE PRICE ALLOCATION:
The unaudited pro forma combined information reflects a total purchase price
for the Xstreamis acquisition of $19.8 million. The Xstreamis acquisition was
consummated on May 26, 2000. The stockholders of Xstreamis received 439 shares
of Tut common stock and $100 in cash on a pro-rata basis among the shareholders
in exchange for 16,843 shares of Xstreamis. Additionally, Tut exchanged
fully vested stock options to purchase 11 shares of Tut common stock for fully
vested stock options to purchase 417 Xstreamis shares. The Company valued the
options using the Black-Scholes option pricing model, applying an average
expected life of four years, a weighted average risk free rate of 6%, an
expected dividend yield of zero percent, a volatility of 80% and a deemed fair
value of common stock of $41.75.
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TUT SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company's allocation of the aggregate purchase price to the tangible and
identifiable assets acquired in connection with the Xstreamis acquisition has
been based on a preliminary analysis by the Company:
March 31,
---------
2000
Net liabilities assumed $ (120)
Purchased technology 7,180
Assembled workforce 410
Goodwill 12,358
---------
Total purchase price $ 19,828
=========
Net liabilities assumed are derived as follows:
Total stockholders' equity $ 477
Transaction costs accrued (597)
---------
Total $ (120)
=========
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TUT SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3 - UNAUDITED PRO FORMA COMBINED NET LOSS PER SHARE:
The net loss per share and shares used in computing the net loss per share
for the three months ended March 31, 2000 and for the year ended December 31,
1999 is based upon the Tut historical weighted average common shares outstanding
together with the shares issued in the transactions as if such shares were
issued January 1, 2000 and January 1, 1999, respectively. Common stock issuable
upon the conversion of convertible preferred stock and exercise of Tut stock
options and warrants has been excluded as the effect would be anti-dilutive.
NOTE 4 - PURCHASE ADJUSTMENTS:
The following adjustments were applied to the pro forma combined financial
information:
(A) To reflect the issuance of shares in the acquisition and to record
estimated transactions costs and other assets and liabilities at their
fair values.
(B) To reflect amortization of goodwill and other intangibles related
to the acquisition over their estimated useful lives of five years for
goodwill and purchased technology and three years for assembled
workforce.
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