Exhibit 99.2
KANA SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
The following unaudited pro forma combined statement of operations has
been prepared to give effect to the merger of Kana and Broadbase using the
purchase method of accounting. For purposes of the pro forma data, Kana's
consolidated statement of operations for the six-months ended June 30, 2001 has
been combined with Broadbase's consolidated statement of operations for the
period from January 1, 2001 to June 29, 2001 (merger date), as if the merger had
occurred on January 1, 2001.
The unaudited pro forma combined statement of operations is presented
for illustrative purposes only and is not necessarily indicative of the results
of operations that would have actually been reported had the merger occurred as
of the beginning of the period, nor is it necessarily indicative of the future
results of operations. The unaudited pro forma combined financial statement
includes adjustments, which are based upon preliminary estimates, to reflect the
allocation of purchase consideration to the acquired assets and liabilities of
Broadbase. These estimates are subject to change.
This unaudited pro forma combined statement of operations is based upon
the respective historical consolidated financial statements of Kana and
Broadbase and should be read in conjunction with the historical consolidated
financial statements of Kana and Broadbase and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the reports and other information Kana and Broadbase have on file
with the Securities and Exchange Commission.
KANA SOFTWARE, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2001
(In thousands, except per share data)
Pro Forma
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Kana Broadbase Adjustments Combined
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Revenues:
License $ 21,444 $ 16,112 $ - $ 37,556
Service 23,198 10,365 - 33,563
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Total revenues 44,642 26,477 - 71,119
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Cost of revenues:
License 1,286 1,546 - 2,832
Service 22,823 11,251 (218) (c) 33,856
Amortization of acquired core and developed technology - 3,240 (3,240) (a) -
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Total cost of revenues 24,109 16,037 (3,458) 36,688
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Gross profit 20,533 10,440 3,458 34,431
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Operating expenses:
Sales and marketing 40,323 23,365 (583) (c) 63,105
Research and development 19,222 13,255 (1,009) (c) 31,468
General and administrative 8,591 8,989 (1,959) (c) 15,621
Amortization of goodwill and identifiable intangibles 6,362 57,833 (59,407) (a) 4,788
Amortization of stock-based compensation 100,582 14,403 5,722 (b) 120,707
Restructuring costs 54,257 3,947 - 58,204
Merger and transition related costs 6,676 16,962 - 23,638
Goodwill impairment 603,446 958,219 - 1,561,665
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Total operating expenses 839,459 1,096,973 (57,236) 1,879,196
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Operating loss (818,926) (1,086,533) 60,694 (1,844,765)
Other income (expense), net 50 3,659 3,709
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Loss from continuing operations (818,876) (1,082,874) 60,694 (1,841,056)
Discontinued operation:
Loss from operations of discontinued operation (125) - - (125)
Loss on disposal, including provision of $1.1 million
for operating losses during phase-out period (3,667) - - (3,667)
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Net loss $ (822,668) $ (1,082,874) $ 60,694 $ (1,844,848)
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Basic and diluted loss per share:
Loss from continuing operations $ (8.95) $ (13.22) $ (10.39)
Loss from discontinued operation $ (0.04) $ - $ (0.02)
Net loss $ (8.99) $ (13.22) $ (10.41)
Shares used in computing basic
and diluted net loss per share 91,526 81,909 177,247
The accompanying notes are an integral part of this unaudited pro forma combined
financial statement.
KANA SOFTWARE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
1. BASIS OF PRO FORMA PRESENTATION
On June 29, 2001, Kana Software, Inc. ("Kana") finalized the acquisition of
Broadbase. In connection with the merger, each share of Broadbase common stock
outstanding immediately prior to the consummation of the merger was converted
into 1.05 shares of Kana common stock (the "Exchange Ratio") and Kana assumed
Broadbase's outstanding stock options and warrants based on the Exchange Ratio,
issuing approximately 86.7 million shares of Kana common stock and assuming
options and warrants to acquire approximately 26.6 million shares of Kana common
stock. The transaction was accounted for using the purchase method of
accounting.
The unaudited pro forma combined statement of operations for the six-months
ended June 30, 2001 presents the effect of the merger of Kana and Broadbase as
if the merger had occurred on January 1, 2001. No separate unaudited pro forma
combined balance sheet as of June 30, 2001 is presented as the merger of Kana
and Broadbase was consummated on June 29, 2001 and the merger is already
reflected in the historical balance sheet of Kana as of the same date.
2. PRELIMINARY PURCHASE PRICE
The estimated purchase price was approximately $99.2 million, measured as
the average fair market value of Kana's outstanding common stock from April 5 to
April 11, 2001, two trading days before and after the merger agreement was
announced plus the Black-Scholes calculated value of the options and warrants of
Broadbase to be issued by Kana in the merger, and other costs directly related
to the merger as follows (in thousands):
Fair market value of common stock .......................... $ 81,478
Fair market value of options and warrants assumed .......... 12,586
Acquisition-related costs .................................. 5,107
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Total ...................................................... $ 99,171
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The preliminary allocation of the purchase price to assets acquired and
liabilities assumed, which is subject to change based upon Kana's final
analysis, is as follows (in thousands):
Tangible assets acquired ................................... $ 125,144
Deferred compensation ...................................... 20,234
Liabilities assumed ........................................ (36,761)
Deferred credit - negative goodwill ........................ (9,446)
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Net assets acquired ...................................... $ 99,171
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Deferred compensation acquired in connection with the merger will be
amortized over the remaining vesting period of the options issued by Kana.
Negative goodwill will be amortized through December 31, 2001 based upon its
estimated useful life of three years.
3. PRO FORMA ADJUSTMENTS
Statement of Operations
The accompanying unaudited pro forma combined statements of operations
has been prepared as if the merger of Kana and Broadbase was completed on
January 1, 2001 and reflects the following pro forma adjustments:
(a) To eliminate amortization of Broadbase historical goodwill and
other purchased intangible assets and to record the
amortization of deferred credit-negative goodwill resulting
from the merger of Kana and Broadbase on a straight-line basis
over a three-year period.
(b) To record amortization of deferred stock-based compensation
resulting from the merger of Kana and Broadbase.
(c) To eliminate depreciation expense of Broadbase for the period
from January 1, 2001 through June 29, 2001, due to the
reduction of the carrying amount of Broadbase's property and
equipment to $0 due to the fair value of the Broadbase
acquired assets exceeding the purchase price resulting in a
deferred credit-negative goodwill.