<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JANUARY 14, 1999
AT HOME CORPORATION
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE
- -------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
000-22697 77-0408542
- ----------------------------- ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
425 Broadway Street, Redwood City, California 94063
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(650) 569-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
-----------------------------------------
The following documents appear as Exhibit 99.01 to this current report on
Form 8-K/A and are incorporated herein by reference:
Narrative Communications Corp. audited financial statements as of
December 31, 1997 and 1996 and for the years ended December 31, 1997,
1996, the period from inception (September 29, 1995) through December
31, 1995 and the period from inception (September 29, 1995) through
December 31, 1997 and unaudited financial statements as of September 30,
1998, for the nine months ended September 30, 1998 and 1997 and the
period from inception (September 29, 1995) through September 30, 1998.
(b) Unaudited Pro Forma condensed combined financial information
------------------------------------------------------------
The following documents appear as Exhibit 99.02 to this Current Report on
Form 8-K/A and are incorporated herein by reference:
(i) Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1998
(ii) Unaudited Pro Forma Condensed Combined Statement of Operations for
the year ended December 31, 1997
(iii) Unaudited Pro Forma Condensed Combined Statement of Operations for
the nine months ended September 30, 1998
(iv) Notes to the Unaudited Pro Forma Condensed Combined Financial
Information
(c) Exhibits
--------
<TABLE>
<S> <C>
23.01 Consent of Ernst & Young LLP, Independent Auditors
99.01 Financial Statements of Narrative Communications Corp
99.02 Unaudited Pro Forma Condensed Combined Financial Information
</TABLE>
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: February 19, 1999 AT HOME CORPORATION
By: /s/ KENNETH A. GOLDMAN
-------------------------------------
Kenneth A. Goldman,
Senior Vice President and
Chief Financial Officer
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<S> <C>
23.01 Consent of Ernst & Young LLP, Independent Auditors
99.01 Financial Statement of Narrative Communications Corporation
99.02 Unaudited Pro Forma Condensed Combined Financial Information
</TABLE>
<PAGE> 1
EXHIBIT 23.01
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Form 8-K/A of At Home
Corporation dated February 19, 1999, of our report dated January 19, 1999 with
respect to the consolidated financial statements of At Home Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1998, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
February 19, 1999
<PAGE> 1
Exhibit 99.01
Narrative Communications Corp.
Index to Financial Statements
Report of PricewaterhouseCoopers, LLP. .............................. 2
Balance Sheet ....................................................... 3
Statement of Operations ............................................. 4
Statement of Stockholders' Equity (Deficit) ......................... 5
Statement of Cash Flows ............................................. 6
Notes to Financial Statements ....................................... 7
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Narrative Communications Corp.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Narrative
Communications Corp. (a development stage enterprise) at December 31, 1997 and
1996, and the results of its operations and its cash flows for the years then
ended, for the period from inception (September 29, 1995) to December 31, 1995
and for the period from inception (September 29, 1995) through December 31,
1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1, the Company anticipates that it will require additional
financing to fund its future operations.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 23, 1998
<PAGE> 3
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997 1996
(UNAUDITED)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,015,564 $ 105,448 $ 5,464,643
Accounts receivable, net of allowance for doubtful
accounts of $15,200, $7,000 and $0 at September 30,
1998, December 31, 1997 and 1996, respectively 137,023 29,742 --
Prepaid expenses and other current assets 105,523 109,696 212,031
------------ ------------ ------------
Total current assets 1,258,110 244,886 5,676,674
Fixed assets, net 575,286 630,062 349,582
Other assets 144,181 132,449 131,867
------------ ------------ ------------
$ 1,977,577 $ 1,007,397 $ 6,158,123
============ ============ ============
Liabilities, Redeemable Preferred Stock and
Stockholders' Deficit
Current liabilities:
Current portion of long-term debt $ 697,108 $ 666,588 $ 88,268
Note payable -- 100,000 --
Accounts payable 308,491 313,607 408,801
Accrued expenses 641,238 390,488 257,135
Deferred revenue 15,969 21,276 --
------------ ------------ ------------
Total current liabilities 1,662,806 1,491,959 754,204
------------ ------------ ------------
Long-term debt -- -- 176,535
------------ ------------ ------------
Redeemable preferred stock:
Series C redeemable convertible preferred stock, $.01 par value; 848,896
shares authorized, issued and outstanding
at September 30, 1998, stated at redemption value 4,999,997 -- --
Series B redeemable convertible preferred stock,
$.01 par value; 848,140 shares authorized,
issued and outstanding, stated at redemption value 5,249,987 5,249,987 5,249,987
Series A redeemable convertible preferred stock,
$.01 par value; 1,371,185 shares authorized,
issued and outstanding, stated at redemption value 2,750,597 2,750,597 2,750,597
------------ ------------ ------------
Total redeemable preferred stock 13,000,581 8,000,584 8,000,584
------------ ------------ ------------
Stockholders' deficit:
Common stock, $.01 par value; 10,000,000 shares authorized; 2,314,060,
2,357,326 and 2,250,000 shares issued and
outstanding at September 30, 1998, December 31, 1997 23,140 23,573 22,500
and 1996, respectively
Additional paid-in capital 52,558 3,188 --
Deficit accumulated during the development stage (12,761,508) (8,511,907) (2,795,700)
------------ ------------ ------------
Total stockholders' deficit (12,685,810) (8,485,146) (2,773,200)
------------ ------------ ------------
Commitments (Note 11) -- -- --
------------ ------------ ------------
$ 1,977,577 $ 1,007,397 $ 6,158,123
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(SEPTEMBER 29, (SEPTEMBER 29,
1995) THROUGH NINE MONTHS ENDED 1995) THROUGH
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1997 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Services $ 347,579 $ 263,533 $ 44,093 $ 84,046
Software licenses 118,030 -- 55,081 118,030
------------ ------------ ------------ ------------
465,609 263,533 99,174 202,076
------------ ------------ ------------ ------------
Cost of revenue:
Services 809,262 752,525 13,847 56,737
Software licenses 22,619 -- -- 22,619
------------ ------------ ------------ ------------
831,881 752,525 13,847 79,356
------------ ------------ ------------ ------------
Gross profit (loss) (366,272) (488,992) 85,327 122,720
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 3,676,507 987,965 1,336,856 2,688,542
Selling and marketing 6,034,918 1,904,820 2,468,308 4,130,098
General and administrative 2,712,831 823,764 944,906 1,889,067
------------ ------------ ------------ ------------
12,424,256 3,716,549 4,750,070 8,707,707
------------ ------------ ------------ ------------
Loss from operations (12,790,528) (4,205,541) (4,664,743) (8,584,987)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 292,557 105,496 113,672 187,061
Interest expense (153,759) (94,537) (29,983) (59,222)
------------ ------------ ------------ ------------
138,798 10,959 83,689 127,839
------------ ------------ ------------ ------------
Net loss $(12,651,730) $ (4,194,582) $ (4,581,054) $ (8,457,148)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 29,
YEAR ENDED 1995) THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
Revenue:
Services $ 84,046 $ -- $ --
Software licenses 118,030 -- --
------------ ------------ ------------
202,076 -- --
------------ ------------ ------------
Cost of revenue:
Services 56,737 -- --
Software licenses 22,619 -- --
------------ ------------ ------------
79,356 -- --
------------ ------------ ------------
Gross profit (loss) 122,720 -- --
------------ ------------ ------------
Costs and expenses:
Research and development 1,777,222 911,320 --
Selling and marketing 2,818,334 1,308,187 3,577
General and administrative 1,314,891 541,906 32,270
------------ ------------ ------------
5,910,447 2,761,413 35,847
------------ ------------ ------------
Loss from operations (5,787,727) (2,761,413) (35,847)
------------ ------------ ------------
Other income (expense):
Interest income 118,207 68,854 --
Interest expense (46,687) (12,535) --
------------ ------------ ------------
71,520 56,319 --
------------ ------------ ------------
Net loss $ (5,716,207) $ (2,705,094) $ (35,847)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 29, 1995) THROUGH DECEMBER 31, 1997 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES PAR VALUE CAPITAL STAGE
<S> <C> <C> <C> <C>
Issuance of common stock 2,250,000 $ 22,500 $ (13,500)
Net loss (35,847)
---------- ------------ ------------ ------------
Balance at December 31, 1995 2,250,000 22,500 (49,347)
Accretion of Series A preferred stock
to redemption value (9,075)
Accretion of Series B preferred stock
to redemption value (32,184)
Net loss (2,705,094)
---------- ------------ ------------ ------------
Balance at December 31, 1996 2,250,000 22,500 (2,795,700)
Exercise of common stock options 107,326 1,073 $ 3,188
Net loss (5,716,207)
---------- ------------ ------------ ------------
Balance at December 31, 1997 2,357,326 23,573 3,188 (8,511,907)
Issuance of Series C preferred stock, issuance
costs of $55,019 (unaudited) (55,019)
Exercise of common stock options (unaudited) 19,734 197 4,755
Repurchase of common stock (unaudited) (63,000) (630) 378
Issuance of warrants to purchase common stock (unaudited) 44,237
Net loss (unaudited) (4,194,582)
---------- ------------ ------------ ------------
Balance at September 30, 1998 (unaudited) 2,314,060 $ 23,140 $ 52,558 $(12,761,508)
========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
<S> <C>
Issuance of common stock $ 9,000
Net loss (35,847)
-----------
Balance at December 31, 1995 (26,847)
Accretion of Series A preferred stock
to redemption value (9,075)
Accretion of Series B preferred stock
to redemption value (32,184)
Net loss (2,705,094)
-----------
Balance at December 31, 1996 (2,773,200)
Exercise of common stock options 4,261
Net loss (5,716,207)
-----------
Balance at December 31, 1997 (8,485,146)
Issuance of Series C preferred stock, issuance
costs of $55,019 (unaudited) (55,019)
Exercise of common stock options (unaudited) 4,952
Repurchase of common stock (unaudited) (252)
Issuance of warrants to purchase common stock (unaudited) 44,237
Net loss (unaudited) (4,194,582)
------------
Balance at September 30, 1998 (unaudited) $(12,685,810)
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(SEPTEMBER 29, (SEPTEMBER 29,
1995) THROUGH NINE MONTHS ENDED 1995) THROUGH
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1997 1997
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(12,651,730) $ (4,194,582) $ (4,581,054) $ (8,457,148)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 499,453 213,768 166,766 285,685
Amortization of debt discount 44,237 44,237 -- --
Changes in assets and liabilities:
Accounts receivable (137,023) (107,281) (50,476) (29,742)
Prepaid expenses and other current assets (105,523) 4,173 103,009 (109,696)
Other assets (144,181) (11,732) 68,299 (132,449)
Accounts payable 308,491 (5,116) (116,194) 313,607
Accrued expenses 641,238 250,750 111,566 390,488
Deferred revenue 15,969 (5,307) 11,296 21,276
------------ ------------ ------------ ------------
Net cash (used for) provided by operating
activities (11,529,069) (3,811,090) (4,286,788) (7,717,979)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (1,074,739) (158,992) (511,751) (915,747)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (154,469) (66,201) (66,200) (88,268)
Proceeds from long-term debt 851,577 96,721 464,345 754,856
Principal payments on note payable (100,000) (100,000) -- --
Proceeds from note payable 100,000 -- -- 100,000
Proceeds from issuance of preferred stock, net 12,904,303 4,944,978 -- 7,959,325
Proceeds from issuance of common stock 18,213 4,952 3,408 13,261
Repurchase of common stock (252) (252) -- --
------------ ------------ ------------ ------------
Net cash provided by financing activities 13,619,372 4,880,198 401,553 8,739,174
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 1,015,564 910,116 (4,396,986) 105,448
Cash and cash equivalents at beginning of period -- 105,448 5,464,643 --
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 1,015,564 $ 1,015,564 $ 1,067,657 $ 105,448
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 109,522 $ 50,300 $ 29,983 $ 59,222
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 29,
YEAR ENDED 1995) THROUGH
DECEMBER 31, DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,716,207) $ (2,705,094) $ (35,847)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 233,295 52,390 --
Amortization of debt discount -- -- --
Changes in assets and liabilities:
Accounts receivable (29,742) -- --
Prepaid expenses and other current assets 102,335 (212,031) --
Other assets (582) (131,867) --
Accounts payable (95,194) 392,562 16,239
Accrued expenses 133,353 227,098 30,037
Deferred revenue 21,276 -- --
------------ ------------ ------------
Net cash (used for) provided by operating
activities (5,351,466) (2,376,942) 10,429
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (513,775) (390,779) (11,193)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (88,268) -- --
Proceeds from long-term debt 490,053 264,803 --
Principal payments on note payable -- -- --
Proceeds from note payable 100,000 -- --
Proceeds from issuance of preferred stock, net -- 7,959,325 --
Proceeds from issuance of common stock 4,261 -- 9,000
Repurchase of common stock -- -- --
------------ ------------ ------------
Net cash provided by financing activities 506,046 8,224,128 9,000
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (5,359,195) 5,456,407 8,236
Cash and cash equivalents at beginning of period 5,464,643 8,236 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 105,448 $ 5,464,643 $ 8,236
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 46,687 $ 12,535 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Narrative Communications Corp. (the "Company"), a Delaware Corporation,
was incorporated on September 29, 1995. The Company is engaged in the
development and marketing of software service solutions that combine the
Company's Internet advertising and electronic commerce technologies with
comprehensive advertising campaign management and reporting services.
Since its inception, the Company has devoted substantially all of its
efforts to research and development, business planning, market
development, raising financing and recruiting employees. Accordingly,
the Company is considered a development stage enterprise as defined in
Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting
and Reporting by Development Stage Enterprises".
The accompanying financial statements have been prepared on a basis
which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. The
Company has incurred operating losses since inception and has an
accumulated deficit of approximately $8.5 million at December 31, 1997.
The future viability of the Company is dependent on its ability to
obtain necessary additional financing and to generate cash from
operations. Management believes the Company has the ability to do so.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed in the preparation of these
financial statements are as follows:
REVENUE RECOGNITION
Revenue from the sale of software products is recognized at the time of
shipment provided that no significant post-shipment obligations or
uncertainties remain relating to the sale and that collection of the
related receivable is probable. Revenue from technical support
agreements are recorded as deferred revenue and recognized as revenue
ratably over the contract period. Service revenue is derived principally
from short-term Internet advertisement hosting contracts in which the
Company sells hosting services on a per impression basis. Revenue from
hosting is recognized as the impressions are served. Four customers
accounted for approximately 21%, 20%, 13% and 12% of revenue during
1997, respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The
Company invests its excess cash in money market funds of major financial
institutions that are subject to minimal credit and market risk. At
December 31, 1997 and 1996, the Company has classified its cash
equivalent investments, totaling $19,027 and $5,464,643, respectively,
as available-for-sale. These investments are carried at cost which
approximates fair market value.
Restricted cash of $123,878 at December 31, 1997 and 1996 included in
other assets consists of certificates of deposits held as collateral for
the letters of credit issued by a bank. The certificates of deposits are
carried at cost which approximates fair market value (Note 11).
<PAGE> 8
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
FIXED ASSETS
Fixed assets are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Maintenance and
repair costs are expensed as incurred.
SOFTWARE DEVELOPMENT COSTS
The Company incurs software development costs for the planning, design
and improvement of software to be licensed to customers and for systems
which support content and delivery of the Company's services. SFAS No.
86, "Accounting for the Costs of Computer Software to Be Sold, Leased or
Otherwise Marketed", requires capitalization of such software
development costs incurred subsequent to the establishment of
technological feasibility of the software and the completion of all
other associated research and development activities. Costs incurred by
the Company between completion of such activities and the point at which
the software or services incorporating the Company's software are ready
for delivery to customers have been insignificant.
ADVERTISING EXPENSE
The Company recognizes advertising expense as incurred. Advertising
expense was approximately $370,000, $9,000 and $0 for 1997, 1996 and
1995, respectively, and is included in selling and marketing expenses.
ACCOUNTING FOR STOCK-BASED COMPENSATION
Stock options issued to employees under the Company's stock option plan
are accounted for in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. The Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation", through disclosure only (Note 8).
FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments, which
include cash, cash equivalents, accounts receivable, accounts payable,
accrued expenses, note payable and long-term debt, approximates their
fair value at the balance sheet dates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
INTERIM FINANCIAL DATA (UNAUDITED)
The interim financial data for the nine months ended September 30, 1998
and 1997 included in the accompanying financial statements are
unaudited; however, in the opinion of the Company, the interim financial
data include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the
interim periods. The interim financial data are not necessarily
indicative of the results of operations for a full fiscal year.
<PAGE> 9
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE DECEMBER 31,
(YEARS) 1997 1996
<S> <C> <C> <C>
Computer equipment 3 $432,480 $280,331
Furniture and fixtures 5 288,329 78,288
Office equipment 3 155,763 43,353
Leasehold improvements Lease term 39,175 --
-------- --------
915,747 401,972
Less - accumulated depreciation and amortization 285,685 52,390
-------- --------
$630,062 $349,582
======== ========
</TABLE>
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
Compensation and related taxes $174,709 $ 72,417
Professional services 38,912 125,205
Other 176,867 59,513
-------- --------
$390,488 $257,135
======== ========
</TABLE>
5. BORROWINGS
EQUIPMENT LINES OF CREDIT
On May 9, 1996, the Company entered into a $500,000 equipment line of
credit with a bank (the "Creditor"). The line of credit is
collateralized by all of the Company's assets. Borrowings under the
equipment credit line are payable over three years and bear interest at
the bank's prime rate plus 1.5% (10% at December 31, 1997). The
Company's ability to draw down on this line of credit expired on
December 31, 1996 and payments mature as follows: $88,268 in 1998 and
$88,267 in 1999.
On May 21, 1997, the Company entered into a $1,000,000 equipment line of
credit with the Creditor. Borrowings under the line of credit, which
totaled $490,053 at December 31, 1997, are
<PAGE> 10
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
collateralized by all of the Company's assets, bear interest at the
bank's prime rate plus 1% (9.5% at December 31, 1997) and are payable
over a three-year period beginning in January 1999. The Company's
ability to draw down on this line of credit expires on December 31,
1998.
Under the terms of these agreements, the Company is required to comply
with certain covenants, including minimum amounts of liquidity. The
Company obtained a waiver from the Creditor which waived these liquidity
requirements as of December 31, 1997. However, because the Company may
not be able to meet the required liquidity levels throughout 1998, the
borrowings under the above agreements have been classified as a current
liability in the accompanying balance sheet at December 31, 1997.
NOTE PAYABLE
In December 1997, the Company entered into a Loan Agreement with the
Creditor which provided for financing of up to $1.5 million through
April 30, 1998. As of December 31, 1997, the Company had borrowed
$100,000 which bears interest at the bank's prime rate plus 1% (9.5% at
December 31, 1997). In conjunction with the Loan Agreement, the Company
agreed to issue a warrant in January 1998 to the Creditor to purchase
12,733 shares of the Company's common stock at an exercise price of
$5.89 per share. The value ascribed to the warrant of approximately
$44,000 was recorded in 1998 as additional paid-in-capital and as a debt
discount, which will be amortized to interest expense over the remaining
term of the loan.
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK
ISSUANCES
During 1996, the Company issued 1,371,185 shares of Series A redeemable
convertible preferred stock for $2,741,522, net of issuance costs of
$9,075. Also during 1996, the Company issued 848,140 shares of Series B
redeemable convertible preferred stock for $5,217,803, net of issuance
costs of $32,184.
CONVERSION RIGHTS
The Series A and B preferred stock is convertible, at the option of the
holder, into common stock of the Company based upon a formula which
would result in a 1-for-1 exchange at December 31, 1997. The Series A
and B preferred stock will automatically convert into common stock upon
the closing of an initial public offering for which proceeds equal or
exceed $15,000,000 at a price per share equal to or greater than $4.01
and $12.38 per share, respectively. In addition, all outstanding Series
A and B preferred stock shall automatically convert to common stock at
the request of at least two thirds of the holders of Series A and B
preferred stock, respectively.
DIVIDEND RIGHTS
The holders of Series B preferred stock are entitled to receive
dividends, when and if declared by the Board of Directors, of $0.62 per
share per annum, in preference to the holders of Series A preferred
stock and common stock. The holders of Series A preferred stock are
entitled to receive dividends, when and if declared by the Board of
Directors, of $0.20 per share per annum, in preference to the holders of
common stock. Both the Series A and B preferred stock dividends are
non-cumulative and as of December 31, 1997, no dividends have been
declared or paid by the Company.
<PAGE> 11
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
VOTING RIGHTS
Holders of the Series A and B preferred stock are entitled to one vote
for each share of common stock into which the respective share of Series
A and B preferred stock is then convertible.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution, merger, sale or winding up
of the Company, the holders of Series B preferred stock, in preference
to the holders of Series A preferred stock and common stock, and the
holders of Series A preferred stock, in preference to the holders of
common stock, are entitled to receive an amount equal to $6.19 and $2.01
per share, plus any dividends declared but unpaid on such shares,
respectively.
REDEMPTION RIGHTS
On December 15, 2001, the Company will redeem all shares of Series B and
Series A preferred stock. The Series B preferred stock is redeemable at
a price equal to $6.19 per share, plus any dividends declared but
unpaid. The Series A preferred stock is redeemable at a price equal to
$2.01 per share, plus any dividends declared but unpaid.
The Company's obligation to redeem shares of Series B and/or Series A
preferred stock may be waived at the request of a majority of the
respective stockholders.
SERIES C PREFERRED STOCK
In January 1998, the Company sold 848,896 shares of its newly authorized
Series C Convertible Preferred Stock (the "Series C preferred stock"),
$.01 par value per share, for net proceeds of approximately $5 million.
The Series C preferred stock has voting rights, dividend preference,
liquidation preference, mandatory conversion and Company redemption
terms similar to the Company's existing Series A and Series B preferred
stock. Series C preferred stock has a liquidation preference over the
Series B and Series A preferred stock and common stock. Series C
preferred stock is convertible into shares of common stock at a
conversion price of $5.89 per share. In conjunction with the Series C
preferred stock financing, the Series B preferred stock conversion ratio
was modified to equal an exchange ratio of 1.01 shares of common stock
for each share of Series B preferred stock.
7. COMMON STOCK
Each share of common stock entitles the holder to one vote on all
matters submitted to a vote of the Company's stockholders. Common
stockholders are entitled to receive dividends, when and if declared by
the Board of Directors, subject to any preferential dividend rights of
the preferred stockholders. The majority of the Company's common stock
is subject to a stock restriction agreement which gives the Company the
right of first refusal to acquire all shares to which a stockholder has
received an arms-length purchase offer at the lesser of the offer price
or fair market value.
At December 31, 1997, the Company had 3,111,999 shares of its common
stock reserved for issuance upon conversion of preferred stock and
exercise of options. In June 1996, the Board of Directors authorized a
five-for-one stock split of the Company's Series A preferred and common
stock in the form of a stock dividend. All Series A preferred and common
share amounts included in the accompanying financial statements have
been retroactively adjusted to reflect the stock split.
<PAGE> 12
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
In connection with the resignation as a full time employee in December
1997 of one of the founding stockholders of the Company who was party to
a stock restriction agreement, the Company repurchased 63,000 shares of
common stock that were unvested at December 31, 1997 for $252 in 1998.
8. 1995 STOCK OPTION PLAN
During December 1995, the Board of Directors adopted the 1995 Stock
Option Plan (the "Plan"). The Plan provides for the grant of incentive
stock options ("ISO's") as well as non-statutory options. The Stock
Option Committee administers the Plan and has sole discretion to grant
options to purchase shares of the Company's common stock. The Board of
Directors determines the term of each option, option price, number of
shares for which each option is granted, whether restrictions will be
imposed on the shares subject to options, and the rate at which each
option is exercisable. The exercise price for options granted will be
determined by the Board of Directors, except that for ISO's the exercise
price shall not be less than the fair market value per share of the
underlying common stock on the date granted (110% of fair market value
for ISO's granted to holders of more than 10% of the voting stock of the
Company). The term of the options shall be set forth in the applicable
option agreement, except that in the case of ISO's the option term shall
not exceed ten years (five years for ISO's granted to holders of more
than 10% of the voting stock of the Company). The maximum number of
shares of common stock that have been reserved for issuance in
accordance with the Plan increased to 1,000,000 shares during 1997.
Activity for the years ended December 31, 1997 and 1996 and the period
ended December 31, 1995 was as follows:
<TABLE>
<CAPTION>
1997 1997 1996 1995
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Shares price Shares price Shares price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 415,350 $ 0.12 25,000 $ 0.01 -- $ --
Granted 320,000 1.03 417,850 0.13 25,000 0.01
Exercised (107,326) 0.04 -- -- -- --
Canceled (155,700) 0.86 (27,500) 0.11 -- --
-------- ------- --------
Outstanding at end of year 472,324 0.51 415,350 0.12 25,000 0.01
======== ======= ========
Options exercisable at end of year 84,468 0.11 47,830 0.03 -- --
======== ======= ========
Weighted-average fair value of
options granted during the year $ 0.17 $ 0.03 $ --
======== ======= ========
Options available for future grant 420,350 326,340 716,690
======== ======= ========
</TABLE>
<PAGE> 13
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table summarizes information about stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING NUMBER OF
NUMBER OF CONTRACTUAL OPTIONS
EXERCISE PRICE OPTIONS LIFE EXERCISABLE
<S> <C> <C> <C>
$ 0.01 13,750 7.9 years 3,750
0.02 10,000 8.1 years 6,000
0.03 115,480 8.2 years 43,650
0.11 62,450 8.5 years 12,800
0.35 75,294 8.9 years 17,568
0.98 127,950 9.3 years 700
1.20 67,400 9.6 years -
------- --------- -------
472,324 8.8 years 84,468
======= ========= =======
</TABLE>
Since inception, no compensation expense has been recognized under the
Plan. Had compensation cost been determined based on the fair value of
the options granted to employees at the grant date consistent with the
provisions of SFAS No. 123, the Company's net loss for 1997, 1996 and
1995 would not have been materially different. Because options vest over
several years and additional option grants are expected to be made in
future years, the pro forma impact on 1997, 1996 and 1995 is not
necessarily representative of the pro forma effects of reported income
or loss for future years.
The fair value of each option grant is estimated on the date of grant
using the minimum value method with the following assumptions for grants
during 1997, 1996 and 1995: no dividend yield or volatility; risk-free
interest rate of 6.18%; and a weighted average expected option term of 5
years.
9. INCOME TAXES
The Company's 1995 election to be treated as a S Corporation for income
tax purposes automatically terminated in March 1996 with the issuance of
preferred stock. Prior to the termination of the Company's S Corporation
election, no provision or liability for federal income taxes had been
recorded in the financial statements because the federal income tax
effect of the Company's activities as a S Corporation accrued to the
stockholders.
<PAGE> 14
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Deferred tax assets at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Net operating loss carryforwards $ 3,291,000 $ 1,048,000
Research and development credit carryforwards 145,000 51,000
Other temporary differences and credits 98,000 41,000
------------ ------------
Gross deferred tax assets 3,534,000 1,140,000
Deferred tax asset valuation allowance (3,534,000) (1,140,000)
------------ ------------
$ -- $ --
============ ============
</TABLE>
The Company has provided a full valuation allowance for the deferred tax
assets since the realization of these future benefits is not
sufficiently assured as of December 31, 1997. If the Company achieves
future profitability, these deferred tax assets could be available to
offset future income taxes.
At December 31, 1997, available federal net operating loss and research
and development tax credit carryforwards were approximately $8,157,000
and $104,000, respectively. These carryforwards expire through 2012.
Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may result in a limitation on the
amount of net operating loss and tax credit carryforwards available
annually to offset future taxable income. The amount of this annual
limitation is determined based upon the Company's value prior to the
ownership changes taking place. Subsequent significant ownership changes
could further affect the limitation in future years.
10. DEFINED CONTRIBUTION PLAN
Effective January 1, 1996, the Company initiated a defined contribution
retirement savings plan (the "Savings Plan") under Section 401(k) of the
Internal Revenue Code. The Savings Plan covers substantially all
employees and allows participants to defer a portion of their annual
compensation on a pre-tax basis. The Company may make discretionary
contributions to the Savings Plan. There were no contributions to the
Savings Plan by the Company during 1997 or 1996.
<PAGE> 15
NARRATIVE COMMUNICATIONS CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. COMMITMENTS
The Company leases its facilities under noncancellable leases. Future
minimum lease obligations (net of committed sublease rental receipts of
$208,000, $210,000, $216,000, $223,000 and $37,500 for 1998, 1999, 2000,
2001 and 2002, respectively) at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 322,000
1999 326,000
2000 336,000
2001 336,000
2002 97,000
----------
Total minimum lease payments $1,417,000
==========
</TABLE>
Rental expense (net of sublease income of $39,000 in 1997) under
operating leases for 1997, 1996 and 1995 was approximately $448,000,
$81,000 and $0, respectively.
During 1996, the Company entered into two irrevocable letters of credit
with a bank as the security deposit on its leased office space. The
letters of credit, in the amount of $67,178 and $56,700, expire on
September 30, 2002.
12. SUBSEQUENT EVENTS (UNAUDITED)
On December 30, 1998, the Company consummated an Agreement and Plan of
Merger ("Merger Agreement") which was entered into on December 17, 1998
with At Home Corporation ("At Home"). Under the terms of the Merger
Agreement, At Home acquired all of the outstanding shares of the Company
and assumed all outstanding options and warrants in exchange for
1,346,621 shares of At Home common stock. The acquisition was accounted
for as a purchase and was considered a tax-free reorganization pursuant
to the Internal Revenue Code.
Prior to the merger, the Company's Series A, B and C preferred stock was
converted to common stock. The Series A and C preferred stock was
converted at a 1-to-1 ratio. The Series B preferred stock was converted
at a ratio of approximately 1.01 shares of common stock for each share
of Series B preferred stock.
In connection with the equipment line of credit agreements described in
Note 5, the Company is required to comply with certain covenants,
including minimum amounts of liquidity. The Company obtained a waiver
from the Creditor which waived these liquidity requirements as of
September 30, 1998. However, as of September 30, 1998, because the
Company may not be able to meet the required liquidity levels for the
twelve months subsequent to September 30, 1998, the borrowings under
these agreements have been classified as a current liability in the
accompanying September 30, 1998 balance sheet.
<PAGE> 1
EXHIBIT 99.02
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information of At Home
Corporation ("At Home") gives effect to the acquisition of Narrative. The
historical financial information has been derived from the historical financial
statements of At Home and Narrative, and should be read in conjunction with such
financial statements and the notes thereto included in or incorporated by
reference in this 8-K/A.
The unaudited pro forma condensed combined balance sheet has been prepared
assuming the Narrative acquisition took place as of September 30, 1998 and
allocates the total purchase cost to the fair values of the assets and
liabilities of Narrative.
The unaudited pro forma condensed combined statement of operations combines At
Home's and Narrative's historical statements of operations for the year ended
December 31, 1997 and the nine months ended September 30, 1998 and gives effect
to the merger, including the amortization of goodwill and other intangible
assets, as if it occurred on January 1, 1997.
The unaudited pro forma condensed combined 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 transactions had
been consummated as of the dates indicated, nor is it necessarily indicative of
future operating results or financial condition of At Home.
<PAGE> 2
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1998
-----------------------------------------------------------------------
(In thousands)
Pro Forma
At Home Narrative Combined Adjustments Pro Forma
--------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 105,131 $ 1,016 $ 106,147 $ -- $ 106,147
Short-term cash investments 98,608 -- 98,608 -- 98,608
--------------------------------------------------- ---------
Total cash, cash equivalents and short-term
cash investments 203,739 1,016 204,755 -- 204,755
Accounts receivable 3,867 137 4,004 -- 4,004
Accounts receivable - related parties 4,069 -- 4,069 -- 4,069
Other current assets 3,459 105 3,564 -- 3,564
--------------------------------------------------- ---------
Total current assets 215,134 1,258 216,392 -- 216,392
Property, equipment and improvements, net 44,243 576 44,819 -- 44,819
Distribution agreements, net 199,875 -- 199,875 -- 199,875
Intangible assets, net -- -- -- 92,354(1) 92,354
Other assets 7,219 144 7,363 -- 7,363
--------------------------------------------------- ---------
Total assets $ 466,471 $ 1,978 $ 468,449 $ 92,354 $ 560,803
=================================================== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,913 $ 309 $ 6,222 $ 419(2) $ 6,641
Accounts payable - related parties 2,623 -- 2,623 2,623
Accrued compensation and related expense 1,009 641 1,650 1,650
Accrued transport costs 1,839 -- 1,839 1,839
Deferred revenues 5,054 16 5,070 5,070
Other accrued liabilities 7,591 -- 7,591 7,591
Current portion of long-term obligations 12,175 697 12,872 12,872
--------------------------------------------------- ---------
Total current liabilities 36,204 1,663 37,867 419 38,286
Capital lease obligations, less current portion 13,521 -- 13,521 -- 13,521
Stockholders' equity:
Preferred stock -- 13,001 13,001 (13,001)(3) --
Common stock 581,728 76 581,804 93,305(2)/(3) 675,109
Notes receivable from stockholders (25) -- (25) -- (25)
Deferred compensation (3,634) -- (3,634) -- (3,634)
Accumulated deficit (161,323) (12,762) (174,085) 11,631(3)(4) (162,454)
--------------------------------------------------- ---------
Total stockholders' equity 416,746 315 417,061 91,935 508,996
--------------------------------------------------- ---------
Total liabilities and stockholders' equity $ 466,471 $ 1,978 $ 468,449 $ 92,354 $ 560,803
=================================================== =========
</TABLE>
See accompanying notes.
<PAGE> 3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31, 1997
---------------------------------------------------------------------
(In thousands, except per share data)
Pro Forma
At Home Narrative Combined Adjustments Pro Forma
-------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 7,437 $ 202 $ 7,639 -- $ 7,639
Total Cost of Revenue -- 79 79 -- $ 79
------------------------------------------------- ---------
Gross margin 7,437 123 7,560 -- 7,560
Costs and expense:
Operating costs 22,459 -- 22,459 -- 22,459
Product development and engineering 11,984 1,777 13,761 -- 13,761
Sales and marketing 11,863 2,819 14,682 -- 14,682
General and administrative 10,635 1,315 11,950 -- 11,950
Amortization of distribution agreements 9,246 -- 9,246 -- 9,246
Amortization of intangible assets -- -- -- 26,387(A)/(B) 26,387
-------------------------------------------------- ---------
Total costs and expenses 66,187 5,911 72,098 26,387 98,485
Loss from operations (58,750) (5,788) (64,538) (26,387) (90,925)
Interest income, net 3,033 72 3,105 -- 3,105
-------------------------------------------------- ---------
Net loss $ (55,717) $ (5,716) $ (61,433) $ (26,387) $ (87,820)
================================================== =========
Basic and diluted net loss per share $ (0.54) (C) $ (0.84)
========= =========
Shares used in per share calculations 103,543 (C) 104,746
========= =========
</TABLE>
See accompanying notes.
<PAGE> 4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Nine months ended September 30, 1998
--------------------------------------------------------------------
(In thousands, except per share data)
Pro Forma
Business
Combination
At Home Narrative Combined Adjustments Pro Forma
--------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 28,808 $ 264 $ 29,072 $ -- $ 29,072
Total Cost of Revenue 753 753 -- 753
------------------------------------- --------- ---------
Gross margin 28,808 (489) 28,319 -- 28,319
Costs and expenses:
Operating costs 30,969 -- 30,969 -- 30,969
Product development and engineering 12,052 988 13,040 -- 13,040
Sales and marketing 12,834 1,905 14,739 -- 14,739
General and administrative 8,911 824 9,735 -- 9,735
Cost and amortization of distribution agreements 46,790 -- 46,790 -- 46,790
Amortization of intangible assets -- -- -- 19,790(A) 19,790
--------------------------------------------------- ---------
Total costs and expenses 111,556 3,717 115,273 19,790 135,063
Loss from operations (82,748) (4,206) (86,954) (19,790) (106,744)
Interest income, net 3,473 11 3,484 -- 3,484
--------------------------------------------------- ---------
Net loss $ (79,275) $ (4,195) $ (83,470) $ (19,790) $(103,260)
=================================================== =========
Basic and diluted net loss per share $ (0.70) (B) $ (0.90)
========= =========
Shares used in per share calculations 113,089 (B) 114,292
========= =========
</TABLE>
See accompanying notes.
<PAGE> 5
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The adjustments to the unaudited pro forma condensed combined balance sheet as
of September 30, 1998, have been calculated as if the merger occurred on
September 30, 1998 and are as follows:
1. Recognition of excess purchase costs of $92.4 million over the fair value
of net assets acquired, which has been recorded as goodwill and other
intangible assets.
2. To reflect the acquisition of all of the outstanding capital stock of
Narrative for a total estimated purchase cost of approximately $93.8 million.
The purchase consideration consists of the issuance of 1.2 million shares of
At Home's Series A Common Stock with a fair value of $84.2 million,
assumption of options and warrants to purchase 141,151 of its shares of
Series A Common Stock with a fair value of $9.2 million, and other related
merger costs of $419,000.
3. To reflect the elimination of the historical stockholders' equity accounts
of Narrative.
4. Recognition of purchased in-process research and development charge of $2.7
million.
The adjustments to the unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1997, assumes the merger occurred as
of January 1, 1997, and the adjustments to the unaudited pro forma condensed
combined statement of operations for the nine months ended September 30, 1998,
assumes the merger occurred as of January 1, 1998, and are as follows:
A. To reflect the amortization of goodwill and other intangible assets resulting
from the merger. The goodwill and other intangible assets are being amortized
over periods of approximately three and one half years.
B. The purchased in-process research and development charge of $2.7 million has
not been included in the unaudited pro forma statement of operations as it is
considered a non-recurring charge. The charge was recorded in the quarter
ended December 31, 1998.
C. Basic and diluted net loss per share have been adjusted to reflect the
issuance of 1.2 million shares of At Home's Series A common stock, as if the
shares had been outstanding for the entire year. The effect of stock options
and warrants of Narrative assumed in the merger have not been included as
their inclusion would be anti-dilutive.
