EXHIBIT 99.2
PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements give effect
to the NetSchools acquisition using the purchase method of accounting.
The following unaudited pro forma condensed consolidated balance sheet of the
combined entity as of April 30, 2002 gives effect to the NetSchools acquisition
as if it was completed on April 30, 2002. The following unaudited pro forma
consolidated statements of earnings for the year ended October 31, 2001 and for
the six months ended April 30, 2002 give effect to the NetSchools acquisition as
if it was completed on November 1, 2000.
We present the unaudited pro forma consolidated financial statements for
illustrative purposes only and they are not necessarily indicative of our
financial position or results of operations that would have actually been
reported had the acquisition occurred as of the dates indicated, nor are they
necessarily indicative of our financial position or results of operations on a
consolidated basis in the future.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
APRIL 30, 2002
-------------------------------------------------------------
(1) (2) PRO FORMA
--------------------------------
PLATO NETSCHOOLS ADJUSTMENTS RESULTS
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ASSETS
Current assets:
Cash and cash equivalents $ 59,122 $ 164 $ (6,000) (3) $ 50,943
(2,343) (4)
Accounts receivable, net 25,803 700 - 26,503
Prepaid expenses and other current assets 1,296 2,289 - 3,585
Deferred income taxes 2,468 - - 2,468
------------- ------------- -------------- -------------
Total current assets 88,689 3,153 (8,343) 83,499
Equipment and leasehold improvements, net 4,116 935 - 5,051
Product development costs, net 11,274 - - 11,274
Deferred income taxes, net 7,926 - (2,613) (3) 5,313
Goodwill, net 16,171 - 23,799 (3) 39,970
Identified intangible assets, net 3,122 - 6,700 (3) 9,822
Other assets 3,173 136 - 3,309
------------- ------------- -------------- -------------
Total assets $ 134,471 $ 4,224 $ 19,543 $ 158,238
============= ============= ============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 248 $ 10,854 $ (8,440) (5) $ 319
(2,343) (4)
Accounts payable 1,486 2,470 - 3,956
Accrued employee salaries and benefits 4,182 816 - 4,998
Accrued liabilities 2,757 831 700 (3)
3,448 (6) 7,736
Deferred revenue 9,601 3,864 - 13,465
------------- ------------- -------------- -------------
Total current liabilities 18,274 18,835 (6,635) 30,474
Long-term debt 590 69 - 659
Deferred revenue 1,398 - - 1,398
Other liabilities 36 - - 36
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Total liabilities 20,298 18,904 (6,635) 32,567
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Redeemable convertible preferred stock - 89,843 (89,843) (5) -
Stockholders' equity:
Common stock 110,362 2,128 (2,128) (5)
10,528 (3)
970 (3) 121,860
Retained earnings 4,726 (106,651) 106,651 (5) 4,726
Accumulated other comprehensive loss (915) - - (915)
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Total stockholders' equity 114,173 (104,523) 116,021 125,671
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Total liabilities and stockholders' equity $ 134,471 $ 4,224 $ 19,543 $ 158,238
============= ============= ============== =============
See notes to unaudited pro forma condensed consolidated balance sheet
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(1) Amounts are derived from our unaudited historical balance sheet at April
30, 2002.
(2) Amounts are derived from the unaudited historical balance sheet of
NetSchools at April 30, 2002.
(3) We acquired all the outstanding shares of NetSchools for $6,000 in cash,
800,000 shares of our common stock, 200,000 warrants to purchase shares of
our common stock, assumed liabilities and transaction expenses, and
additional consideration of up to approximately $6,000, contingent on the
NetSchools product and services revenues generated through October 2004.
The purchase price consisted of the following components:
<Table>
Common stock issued $ 10,528
Cash paid 6,000
Direct acquisition costs 700
Liabilities assumed 10,464
Accrual of additional liabilities (see note (6)) 3,448
Common stock warrants issued 970
--------
$ 32,110
========
</Table>
The allocation of the total purchase price was as follows:
<Table>
Estimated fair value of tangible assets acquired $ 4,224
Estimated fair value of identified intangible assets 6,700
Goodwill 23,799
Deferred tax liabilities (2,613)
--------
$ 32,110
========
</Table>
The NetSchools acquisition will be accounted for under SFAS 141 using the
purchase method of accounting. Acquired assets and liabilities are recorded
at their estimated fair values on the acquisition date. An independent
appraisal firm performed the valuation of identified intangible assets,
which consist of a customer list, tradename and acquired technology.
Goodwill and identified intangible assets are subject to the provisions of
SFAS 142. Goodwill and identified intangible assets with indefinite lives
will not be amortized and will be reviewed for impairment on an annual
basis. Identified intangible assets with definite lives will be amortized
over five to seven years.
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(4) Bank note payable was paid off concurrent with the acquisition.
(5) Elimination of NetSchools notes payable, mandatorily redeemable convertible
preferred stock and stockholders' equity accounts. The notes payable and
mandatorily redeemable convertible preferred stock was converted to capital
stock immediately prior to the acquisition.
(6) Accrual of additional liabilities, primarily for separation benefits and
lease termination costs.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars and number of shares in thousands)
FOR THE YEAR ENDED OCTOBER 31, 2001
-------------------------------------------------------------
(1) (2) PRO FORMA
--------------------------------
PLATO NETSCHOOLS ADJUSTMENTS RESULTS
------------- ------------- -------------- --------------
Revenues $ 70,107 $ 11,920 $ - $ 82,027
Cost of revenues 6,920 12,282 - 19,202
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Gross profit 63,187 (362) - 62,825
------------- ------------- -------------- --------------
Operating expenses:
Selling, general and administrative 44,226 12,647 - 56,873
Product development and customer support 8,686 5,003 360 (3) 14,049
Goodwill and intangible amortization 2,112 - 766 (4) 2,878
Special charge 1,260 - - 1,260
------------- ------------- -------------- --------------
Total operating expenses 56,284 17,650 1,126 75,060
------------- ------------- -------------- --------------
Operating profit (loss) 6,903 (18,012) (1,126) (12,235)
Interest expense (585) (1,152) - (1,737)
Interest income 817 - - 817
Other expense (income), net (125) - - (125)
------------- ------------- -------------- --------------
Earnings (loss) before income taxes 7,010 (19,164) (1,126) (13,280)
Income tax expense (benefit) 3,505 - (10,145) (5) (6,640)
------------- ------------- -------------- --------------
Net earnings (loss) $ 3,505 $(19,164) $ 9,019 $ (6,640)
============= ============= ============== ==============
Earnings (loss) per share:
Basic $ 0.26 $ (0.47)
============= ==============
Diluted $ 0.24 $ (0.47)
============= ==============
Weighted-average common shares outstanding:
Basic 13,364 800 (6) 14,164
============= ============== ==============
Diluted 14,383 (219) (7) 14,164
============= ============== ==============
See notes to unaudited pro forma consolidated statements of earnings
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars and number of shares in thousands)
FOR THE SIX MONTHS ENDED APRIL 30, 2002
---------------------------------------------------------------
(1) (2) PRO FORMA
--------------------------------
PLATO NETSCHOOLS ADJUSTMENTS RESULTS
-------------- -------------- -------------- --------------
Revenues $ 31,259 $ 5,236 $ - $ 36,495
Cost of revenues 4,123 5,692 - 9,815
-------------- -------------- -------------- --------------
Gross profit 27,136 (456) - 26,680
-------------- -------------- -------------- --------------
Operating expenses:
Selling, general and administrative 23,476 3,917 - 27,393
Product development and customer support 5,358 1,668 - 7,026
Goodwill and intangible amortization 362 - 383 (4) 745
-------------- -------------- -------------- --------------
Total operating expenses 29,196 5,585 383 35,164
-------------- -------------- -------------- --------------
Operating profit (loss) (2,060) (6,041) (383) (8,484)
Interest expense (73) (587) - (660)
Interest income 557 - - 557
Other expense (income), net (109) - (109)
-------------- -------------- -------------- --------------
Earnings (loss) before income taxes (1,685) (6,628) (383) (8,696)
Income tax expense (benefit) (625) - (2,600) (5) (3,225)
-------------- -------------- -------------- --------------
Net earnings (loss) $ (1,060) $ (6,628) $ 2,217 $ (5,471)
============== ============== ============== ==============
Earnings (loss) per share:
Basic and diluted $ (0.06) $ (0.32)
============== ==============
Weighted-average common shares outstanding:
Basic and diluted 16,430 800 (6) 17,230
============== ============== ==============
See notes to unaudited pro forma consolidated statements of earnings
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands)
(1) Amounts are derived from our audited historical statement of earnings for
the year ended October 31, 2001 and from our unaudited historical statement
of earnings for the six months ended April 30, 2002.
(2) Amounts are derived from the audited historical statement of operations of
NetSchools Corporation for the year ended December 31, 2001 and from the
unaudited historical statement of operations for the six months ended April
30, 2002. The months of November and December 2001 are included in both the
fiscal year and the interim period presented. Revenue and net loss for
these two months were $1,144 and $(2,494), respectively.
(3) Adjustment to reflect the write-off of in-process research and development
costs.
(4) Amortization of identified intangible assets with definite lives (five to
seven years).
(5) Adjustment to reflect our historical effective income tax rate on the pro
forma earnings (loss) before income taxes.
(6) Adjustment for the shares issued in this acquisition.
(7) Adjustment for the shares issued in this acquisition and to remove the
potential common shares which are antidilutive with the pro forma net loss.
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