<PAGE> 1
EXHIBIT 99.2 (INTERIM FINANCIAL STATEMENTS)
MINESHARE, INC.
CONDENSED BALANCE SHEET
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 470 $ 761
Accounts receivable, net 293 654
Prepaid expenses and other current assets 77 39
-------- --------
Total current assets 840 1,454
-------- --------
Property and equipment, net 944 1,316
Other assets 54 70
-------- --------
Total assets $ 1,838 $ 2,840
======== ========
LIABILITIES, PREFERRED STOCK
AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 497 $ 562
Accrued liabilities 369 464
Deferred revenue 494 241
Current portion of long term debt 2,270 323
-------- --------
Total current liabilities 3,630 1,590
-------- --------
Long term debt, less current portion 476 623
-------- --------
Total liabilities 4,106 2,213
-------- --------
Convertible preferred stock 21,192 21,179
Shareholders' deficit:
Common Stock 1,041 (12)
Unearned stock-based compensation (470) --
Stock subscription receivable (1) (1)
Accumulated deficit (24,030) (20,539)
-------- --------
Total shareholders' deficit (23,460) (20,552)
-------- --------
Total liabilities, preferred stock and
shareholders' deficit $ 1,838 $ 2,840
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE> 2
MINESHARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------
2000 1999
------- -------
<S> <C> <C>
Revenues $ 512 $ 1,297
Cost of revenues 473 503
------- -------
Gross margin 39 794
Operating expenses:
Research and development 1,336 2,044
Sales and marketing 538 4,686
General and administrative 623 751
Stock-based compensation 571 --
------- -------
Total operating expenses 3,068 7,481
------- -------
Loss from operations (3,029) (6,687)
Interest and other expenses, net (449) (32)
======= =======
Net loss $(3,478) $(6,719)
======= =======
Net loss per common share -
basic and diluted $ (0.85) $ (1.47)
======= =======
Shares used in net loss per
common share calculation -
basic and diluted 4,112 4,582
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE> 3
MINESHARE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities
Net loss $(3,478) $(6,719)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 174 137
Warrants issued for services 9 --
Amortization of unearned stock-based compensation 571 --
Loss on disposal of fixed assets 336 --
Changes in operating assets and liabilities
Accounts receivable 361 566
Prepaid expenses and other current assets (37) (142)
Other assets 16 (90)
Accounts payable (65) 11
Accrued liabilities (95) (426)
Deferred revenue 253 63
-------- --------
Net cash used by operating activities (1,955) (6,600)
-------- --------
Investing activities
Acquisition of property and equipment (138) (429)
-------- --------
Net cash used in investing activities (138) (429)
-------- --------
Financing activities
Proceeds from debt 70 143
Principal payments on long-term debt (147) 425
Proceeds from bridge loan 1,877 --
Proceeds from exercise of common stock options and
warrants 8 21
Repurchase of common stock (6) --
Proceeds from issuance of convertible preferred stock,
net of issuance costs -- 12,141
-------- --------
Net cash provided by financing activities 1,802 12,730
-------- --------
Net increase (decrease) in cash and cash equivalents (291) 5,701
Cash and cash equivalents at beginning of year 761 1,070
-------- --------
Cash and cash equivalents at end of period $ 470 $ 6,771
======== ========
Supplemental noncash information
Assets acquired under capital leases $ -- $ 15
Unearned stock-based compensation $ 672 $ --
Accretion of redemption rights on Series B and C
redeemable preferred stock $ 13 $ 11
Stock issued in lieu of compensation $ 369 $ --
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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<PAGE> 4
MINESHARE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. The Company
MineShare, Inc., ("MineShare" or the "Company") a California corporation,
develops, markets and sells a suite of Enterprise Business Intelligence software
for medium and large sized businesses. The Company's software is designed to
provide access to corporate information via an interactive reporting tool and
intelligent information portal built on an integrated architecture, using a
common scalable systems architecture.
During the latter part of 1999, the Company completed the development of
software that enables the use of the Company's legacy suite of software to
provide customer management solutions to e-Businesses to profile, attract,
classify, convert, retain and optimize interactions with their e-Customers. The
Company began providing these services under application service provider
agreements in the year 2000.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed financial statements of MineShare at June 30, 2000 and
for the six month period then ended reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results for the
interim periods. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in these interim statements
under the rules and regulations of the Securities and Exchange Commission (the
"SEC").
Comprehensive Income
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. Through June 30, 2000, the Company has not had any
transactions that are required to be reported in other comprehensive income.
Note 3. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, or SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS 133 requires that all derivatives be recognized at fair value
in the statement of financial position, and that the corresponding gains or
losses be reported either in the statement of operations or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
SFAS 133 will be effective for fiscal years beginning after June 15, 2000. The
Company does not currently hold derivative instruments or engage in hedging
activities.
In December 1999, the SEC issued Staff Accounting Bulletin No.101, "Revenue
Recognition in Financial Statements," or SAB 101, which provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements
filed with the SEC. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. In June 2000, the SEC issued SAB 101B which defers the
effective date of SAB 101 to the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. The Company believes that the impact of SAB 101 will
have no material effect on the Company's financial position or results of
operations.
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<PAGE> 5
In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44") "Accounting
for Certain Transactions involving Stock Compensation," an interpretation of APB
Opinion No. 25. FIN 44 clarifies the application of Opinion 25 for (a) the
definition of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000,
but certain conclusions cover specific events that occur after either December
15, 1998, or January 12, 2000. The adoption of certain of the provisions of FIN
44 prior to June 30, 2000 did not have a material impact on the consolidated
financial statements. Management does not expect that the adoption of the
remaining provisions will have a material effect on the financial statements.
Note 4. Stock-based Compensation
During the six months ended June 30, 2000, the Company recorded unearned
stock-based compensation totaling $672,000 which is being amortized to expense
over the period during which the options vest, generally four years in
accordance with FASB Interpretation No. 28. Amortization expense recognized
during the six months ended June 30, 2000 was $202,000.
EXHIBIT 99.3 (PRO FORMA FINANCIAL INFORMATION)
The following unaudited pro forma combined financial statements of Digital
Impact have been prepared to give effect to the merger (the "Merger") of Digital
Impact and MineShare.
The definitive terms of the Merger were agreed to on July 19, 2000 and the
Merger was consummated on July 31, 2000. The former shareholders of MineShare
received approximately 1,855,700 shares of Digital Impact common stock.
Additionally, each outstanding option or warrant to purchase MineShare's common
stock was assumed by Digital Impact and became an option or warrant to purchase
Digital Impact common stock, with appropriate adjustments made to the number of
shares issuable thereunder and the exercise price thereof. Digital Impact
reserved approximately 132,700 shares of its Common Stock for issuance upon
exercise of these options and warrants. The unaudited pro forma combined
statements of operations for the year ended March 31, 2000 and for the three
months ended June 30, 2000 give effect to the Merger as if it had occurred on
April 1, 1999 by consolidating the results of operations of MineShare with the
results of operations of Digital Impact.
As a result of differing year-ends of Digital Impact and MineShare, results of
operations for different year-ends have been combined. Digital Impact's
historical statement of operations for the fiscal year ended March 31, 2000 has
been combined with the consolidated statement of operations of MineShare for the
fiscal year ended December 31, 1999 and Digital Impact's balance sheet as at
June 30, 2000 has been combined with MineShare's balance sheet as at June 30,
2000.
The unaudited pro forma combined statements of operations are not necessarily
indicative of the operating results that would have been achieved had the
transactions been in effect as of the beginning of the periods presented and
should not be construed as being representative of future operating results.
These statements should be read in conjunction with the audited financial
statements and notes thereto included in Digital Impact's annual report on Form
10-K for the fiscal year ended March 31, 2000 and the historical consolidated
financial statements and notes thereto of MineShare included herein.
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