<PAGE>
HomeSeekers.com
Unaudited Pro Forma Combined Condensed Financial Statements
The following unaudited pro forma combined condensed financial statements give
effect to the merger of HomeSeekers.com, Incorporated ("HomeSeekers") and
Immediate Results Through Intuitive Systems, LLC ("IRIS") pursuant to the
Purchase Agreement (the "Merger"). The unaudited pro forma combined condensed
balance sheet gives effect to the Merger as if it occurred on June 30, 2000. The
unaudited pro forma combined condensed statement of operations gives effect to
the Merger as if it occurred on July 1, 1999.
The pro forma combined condensed financial statements are based on the
historical financial statements of HomeSeekers and IRIS, giving effect to the
Merger applying the purchase method of accounting and the assumptions and
adjustments as discussed in the accompanying notes to the pro forma combined
condensed financial statements. The pro forma combined condensed statement of
operations for the year ended June 30, 2000 has been prepared by HomeSeekers'
management based upon the audited consolidated financial statements of
HomeSeekers for the year then ended and the unaudited financial statements of
IRIS for the year then ended. The pro forma combined condensed balance sheet as
of June 30, 2000 has been prepared by HomeSeekers management based upon the
audited consolidated balance sheet of HomeSeekers and the unaudited balance
sheet of IRIS as of June 30, 2000.
The Merger will be accounted for using the purchase method of accounting. The
unaudited pro forma combined condensed financial statements have been prepared
on the basis of assumptions described in the notes thereto and include
assumptions relating to the allocation of the consideration paid for the assets
and liabilities of IRIS based on preliminary estimates of their fair value. The
actual allocation of such consideration may differ materially from that
reflected in the unaudited pro forma combined condensed financial statements. In
the opinion of HomeSeekers, all adjustments necessary to present fairly the
unaudited pro forma condensed combined financial statements have been made based
on the terms and structure of the Merger.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the Merger had been consummated on July 1, 1999 or June 30,
2000, respectively, nor is it necessarily indicative of future operating results
or financial position.
These pro forma combined condensed financial statements should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of HomeSeekers and IRIS incorporated by reference and
included herein, respectively.
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HomeSeekers.com
Unaudited Pro Forma Balance Sheet
June 30, 2000
(In thousands)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PRO FORMA REFLECTING
HOMESEEKERS IRIS ADJUSTMENTS MERGER
---------------- ----------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,078 $ 41 $ (25) (A) $ 2,094
Accounts receivable, net 1,023 182 - 1,205
Accounts receivable, related parties 159 - - 159
Prepaid expenses 897 30 - 927
---------------- ----------------- ---------------- ------ -----------------
Total current assets 4,157 253 (25) 4,385
Investments, net 3,535 - - 3,535
Investments in foreign affiliate 7,517 - - 7,517
Property and equipment, net 4,163 423 (169) (B) 4,417
Purchased intangible assets, net 20,531 35 1,911 (C) 22,477
Other assets 123 - - 123
---------------- ----------------- ---------------- ------ -----------------
$ 40,026 $ 711 $ 1,717 $ 42,454
================ ================= ================ ====== =================
</TABLE>
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<TABLE>
<CAPTION>
HomeSeekers.com
Unaudited Pro Forma Balance Sheet (continued)
June 30, 2000
(In thousands)
PRO FORMA
COMBINED
PRO FORMA REFLECTING
HOMESEEKERS IRIS ADJUSTMENTS MERGER
---------------- ----------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,570 $ 204 $ - $ 1,774
Accrued payroll and other liabilities 1,479 208 400 (D) 2,087
Liability under purchase agreement 1,500 - - 1,500
Long-term obligations, current portion 99 - - 99
Current portion of capital lease obligations - 97 - 97
Line of credit - 159 - 159
Deferred revenue 4,162 1,651 (1,651) (E) 4,162
---------------- ----------------- ---------------- ------ -----------------
Total current liabilities 8,810 2,319 (1,251) 9,878
Total long-term liabilities:
Long-term obligations 153 - - 153
Deferred revenue 862 507 (507) (E) 862
Capital lease obligations - 110 - 110
---------------- ----------------- ---------------- ------ -----------------
Total long-term liabilities 1,015 617 (507) 1,125
Equity (deficit):
Common stock 21 - 1 (C) 22
Members' deficit - (2,225) 2,225 (C) -
Additional paid in capital 72,113 - 1,249 (C) 73,362
Accumulated deficit (40,960) - - (40,960)
Notes receivable from officer/stockholder (320) - - (320)
Accumulated other comprehensive loss (653) - - (653)
---------------- ----------------- ---------------- ------ -----------------
Total equity (deficit) 30,201 (2,225) 3,475 31,451
---------------- ----------------- ---------------- ------ -----------------
$ 40,026 $ 711 $ 1,717 $ 42,454
================ ================= ================ ====== =================
</TABLE>
(A) Reflects cash paid to the members of IRIS.
(B) Reflects the reclassification of internally developed software to purchased
intangibles.
(C) Reflects the allocation of the purchase price, based on estimated fair
values, to the historical IRIS balance sheet. The adjustment includes the
elimination of the IRIS members' deficit, and initial issuance of 500,000
shares of HomeSeekers common stock at closing. HomeSeekers may be required
to issue additional shares to the members of IRIS in accordance with the
terms as described in Note 1.
(D) Reflects estimated costs attributable to transaction for HomeSeekers ($0.1
million), and an accrual of ($0.3 million) for the cost of providing post
customer support for the IRIS products sold prior to June 30, 2000.
(E) Reflects the elimination of IRIS' deferred revenue as of June 30, 2000.
<PAGE>
HomeSeekers.com
Unaudited Pro Forma Statement of Operations
For the year ended June 30, 2000
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
PRO FORMA REFLECTING
HOMESEEKERS IRIS ADJUSTMENTS MERGER
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ 11,090 $ 3,909 $ (1,267)(A) $ 13,732
Costs and expenses:
Cost of sales 6,097 1,294 525 (B) 7,916
Operating expenses 30,505 3,004 - 33,509
---------------- ----------------- ---------------- -----------------
Total costs and expenses 36,602 4,298 525 41,425
---------------- ----------------- ---------------- -----------------
Loss from operations (25,512) (389) (1,792) (27,693)
Other income (expense):
Interest expense (77) (43) - (120)
Interest income 290 - - 290
Other, net 265 - - 265
---------------- ----------------- ---------------- -----------------
Total other income (expense) 478 (43) - 435
---------------- ----------------- ---------------- -----------------
Net loss $ (25,034) $ (432) $ (1,792) $ (27,258)
================ ================= ================ =================
Basic and diluted net loss per common share $(1.47) $(1.55)
================ =================
Shares used in the calculation of basic and
diluted net loss per common share 17,031,852 500,000 (C) 17,531,852
================ ================ =================
</TABLE>
(A) Reflects the effect of eliminating revenue that had been deferred as of
June 30, 1999 but was recognized into revenue by IRIS during this period.
(B) Reflects the additional amortization of purchased intangible assets
identified in the purchase price allocation.
(C) Reflects the shares of HomeSeekers common stock issued in the transaction
and the increase in net loss per common share for the net loss of IRIS.
HomeSeekers may be required to issue additional shares to the members of
IRIS in accordance with the terms as described in Note 1.
<PAGE>
HomeSeekers.com
Notes to Unaudited Pro Forma
Combined Condensed Financial Statements
NOTE 1
The unaudited pro forma combined condensed balance sheet of HomeSeekers and IRIS
has been prepared as if the Merger, which is being accounted for as a purchase,
was completed as of June 30, 2000. Based on an average of closing prices per
share of HomeSeekers common stock just prior to and after July 21, 2000 (the
agreement and announcement date of the merger) such balance sheet reflects the
conversion of IRIS members' equity as of June 30, 2000 into 500,000 shares of
HomeSeekers common stock valued at approximately $1.2 million. The terms of the
Merger Agreement provide for additional consideration of up to $7.8 million
payable in HomeSeekers common stock depending on closing prices of the common
stock during future periods. If the value of the 500,000 shares of common stock
issued has not equaled or exceeded $8,975,000 on any day during the 180 day
period (the "First Maturity Date") subsequent to the acquisition, HomeSeekers
will provide to the members of IRIS the lesser of 400,000 shares of additional
HomeSeekers common stock, which when included with the initial 500,000 shares,
is equal to $8,975,000. If upon the first anniversary of the agreement date the
value of the common stock issued to the members of IRIS as of the First Maturity
Date has not equaled or exceeded $8,975,000, on any day during the preceding
year, HomeSeekers will deliver additional consideration to the members of IRIS
in the form of common stock equal to the lesser of 2.5 million shares, or the
difference on the first anniversary of the agreement date between $8,975,000 and
the combined value of all shares previously issued. The aggregate purchase price
to be allocated to the acquired assets and purchased intangibles will be
adjusted as such additional shares are issued or deemed probable to be issued.
The accompanying pro forma presentation has been presented using the value of
the 500,000 shares issued at the closing, as follows:
<TABLE>
<S> <C>
HomeSeekers common stock $ 1,250
Cash 25
Liabilities assumed 1,078
Estimated transaction costs 100
-------------------
$ 2,453
===================
A summary of the purchase price allocation is as follows:
Tangible assets acquired $ 507
Purchased intangibles 1,946
-------------------
$ 2,453
===================
</TABLE>
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NOTE 1 (CONTINUED)
The allocation of the IRIS purchase price is preliminary and is based on
management's estimate of the fair value of the assets and other purchased
intangibles. The final allocation of the purchase price could be materially
different from the current estimate.
The purchased intangibles will be amortized over 3 years from the date of
acquisition.
NOTE 2
The unaudited pro forma combined condensed statements of operations of
HomeSeekers and IRIS have been prepared as if the Merger was completed as of
July 1, 1999, and reflects the amortization of purchased intangibles for the
year ended June 30, 2000.
NOTE 3
The shares used in computing the unaudited pro forma combined net loss per share
for the year ended June 30, 2000 are based upon the historical weighted average
common shares outstanding adjusted to reflect the issuance, as of July 1, 1999,
of approximately 500,000 shares of HomeSeekers common stock as described in Note
1.
