<PAGE> 1
DIGITAL IMPACT, INC.
PRO FORMA COMBINED BALANCE SHEET
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, 2000
---------------------------------------------------------------
Digital Pro Forma
Impact MineShare Adjustments Combined
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 59,958 $ 470 $ -- $ 60,428
Accounts receivable, net 6,995 293 -- 7,288
Prepaid expenses and other
current assets 686 77 -- 763
--------- --------- --------- ---------
Total current assets 67,639 840 -- 68,479
--------- --------- --------- ---------
Property and equipment, net 8,300 944 -- 9,244
Restricted cash 108 -- -- 108
Goodwill -- -- 26,273 26,273
Intangible assets -- -- 4,590 4,590
Other assets 197 54 -- 251
--------- --------- --------- ---------
Total assets $ 76,244 $ 1,838 $ 30,863 $ 108,945
========= ========= ========= =========
LIABILITIES, PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,097 $ 497 $ -- $ 1,594
Accrued liabilities 3,239 369 -- 3,608
Deferred revenue 256 494 750
Current portion of long term
debt 574 2,270 -- 2,844
--------- --------- --------- ---------
Total current liabilities 5,166 3,630 -- 8,796
--------- --------- --------- ---------
Long term debt, less current
portion 603 476 -- 1,079
--------- --------- --------- ---------
Total liabilities 5,769 4,106 -- 9,875
--------- --------- --------- ---------
Convertible preferred stock -- 21,192 (21,192) --
Stockholders' equity (deficit):
</TABLE>
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<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C>
Common Stock 25 1,041 (1,039) 27
Additional paid-in capital 109,964 -- 33,868 143,832
Accumulated other
comprehensive loss (15) -- -- (15)
Unearned stock-based
compensation (8,447) (470) (372) (9,289)
Stock subscription receivable -- (1) -- (1)
Accumulated deficit (31,052) (24,030) 19,598 (35,484)
--------- --------- --------- ---------
Total stockholders' equity
(deficit) 70,475 (23,460) 52,055 99,070
--------- --------- --------- ---------
Total liabilities,
preferred stock and
stockholders' equity (deficit) $ 76,244 $ 1,838 $ 30,863 $ 108,945
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
23
<PAGE> 3
DIGITAL IMPACT, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
------------------------------------------------------------
Digital Pro Forma
Impact MineShare Adjustments Combined
-------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 8,474 $ 185 $ -- $ 8,659
Cost of revenues 3,713 207 -- 3,920
-------- -------- -------- --------
Gross margin 4,761 (22) -- 4,739
Operating expenses:
Research and development 3,226 597 -- 3,823
Sales and marketing 4,224 340 -- 4,564
General and administrative 2,300 414 -- 2,714
Amortization of goodwill and
intangibles -- -- 2,572 2,572
Stock-based compensation 2,035 571 -- 2,606
-------- -------- -------- --------
Total operating expenses 11,785 1,922 2,572 16,279
-------- -------- -------- --------
Loss from operations (7,024) (1,944) (2,572) (11,540)
Interest income (expense), net 968 (240) -- 728
-------- -------- -------- --------
Net loss $ (6,056) $ (2,184) $ (2,572) $(10,812)
======== ======== ======== ========
Net loss per common share -
basic and diluted $ (0.27) $ (0.47) $ (0.45)
======== ======= ========
Shares used in net loss per
common share calculation -
basic and diluted 22,160 4,617 24,017
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
24
<PAGE> 4
DIGITAL IMPACT, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended March 31, 2000
--------------------------------------------------------
Digital Pro Forma
Impact MineShare Adjustments Combined
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 12,991 $ 2,331 $ -- $ 15,322
Cost of revenues 6,178 1,078 -- 7,256
-------- -------- -------- --------
Gross margin 6,813 1,253 -- 8,066
Operating expenses:
Research and development 7,452 3,888 -- 11,340
Sales and marketing 7,630 8,361 -- 15,991
General and administrative 5,633 1,952 -- 7,585
Amortization of goodwill and
intangibles -- -- 10,288 10,288
Stock-based compensation 9,228 -- -- 9,228
-------- -------- -------- --------
Total operating expenses 29,943 14,201 10,288 54,432
-------- -------- -------- --------
Loss from operations (23,130) (12,948) (10,288) (46,366)
Interest income (expense), net 1,477 (54) -- 1,423
-------- -------- -------- --------
Net loss $(21,653) $(13,002) $(10,288) $(44,943)
======== ======== ======== ========
Net loss per common share -
basic and diluted $ (2.28) $ (2.84) $ (3.95)
======== ======== ========
Shares used in net loss per
common share calculation -
basic and diluted 9,510 4,578 11,366
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
25
<PAGE> 5
Note 1. Basis of Presentation
The pro forma combined financial information gives effect to Digital Impact's
merger with MineShare (the Merger), which was consummated on July 31, 2000. The
Merger was accounted for as a purchase. MineShare shareholders, option holders,
and warrant holders received an aggregate total of approximately 2.0 million
shares of Digital Impact common stock. The pro forma combined financial
information has been prepared on the basis of assumptions described in the
following notes and include assumptions relating to the allocation of the
consideration paid for the assets and liabilities based on estimates of their
fair values. The Unaudited Pro Forma Combined Statements of Operations for the
year ended March 31, 2000 and the three months ended June 30, 2000 give effect
to the Merger as if it had taken place on April 1, 1999. The pro forma combined
financial information is not necessarily indicative of what the actual financial
results would have been had the Merger taken place on April 1, 1999 and do not
purport to be indicative of the results of the future operations.
Note 2. Purchase Price Allocation
The unaudited pro forma combined information reflects a total purchase price for
the Merger of $31.9 million including the value of the Digital Impact shares
issued upon the consummation of the Merger and transaction costs. The allocation
of the purchase price using balances as of June 30, 2000 is summarized below:
The allocation of the purchase price was based on the estimated fair value of
the following items (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net assets at the date of acquisition $ (3,368)
Goodwill 26,273
In-process technology 4,432
Developed technology 1,930
Other intangibles 2,660
--------
$ 31,927
========
</TABLE>
The amount allocated to the purchased in-process technology was determined based
on an appraisal completed by an independent third party using established
valuation techniques and was expensed upon acquisition, because technological
feasibility had not been established and no future alternative uses existed. The
percentage of completion of the purchased in-process technology was estimated to
be approximately 65%. The value of this in-process technology was determined by
estimating the costs to develop the purchased in-process technology into a
commercially viable product, estimating the resulting cash flows from the sale
of the product resulting from the completion of the in-process technology and
discounting the net cash flows back to their present value.
Note 3. Unaudited Pro Forma Combined Net Loss Per Share
The net loss per share and shares used in computing the net loss per share for
the year ended March 31, 2000 and the three months ended June 30, 2000 are based
upon the Digital Impact historical weighted average common shares outstanding
together with the shares issued in the transaction as if such shares were issued
April 1, 1999.
Note 4. Purchase Adjustments:
The following adjustments were applied to the pro forma combined financial
information: (A) To reflect amortization of the goodwill, purchased technology
and other intangibles related to the MineShare merger over the estimated useful
lives of three years, as if the acquisition occurred on April 1, 1999. (B) To
reflect the issuance of shares in the MineShare merger and to record estimated
26
<PAGE> 6
transaction costs and other assets and liabilities at their fair values. This
has been recorded net of the write-off of the amount allocated to in-process
research and development which was expensed in the period the merger was
consummated.
27
