<PAGE>
U.S. 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): December 1, 1999
Commission File 000-22688
MACROMEDIA, INC.
(A Delaware Corporation)
I.R.S. Employer Identification No. 94-3155026
600 TOWNSEND ST., SAN FRANCISCO, CA 94103
(415) 252-2000
1
<PAGE>
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
On December 15, 1999, Macromedia, Inc. ("Macromedia") filed a Form 8-K to report
its acquisition of Andromedia, Inc. ("Andromedia"). Pursuant to Item 7 of Form
8-K, Macromedia indicated that it would file certain financial information no
later than the date required by Item 7 of Form 8-K. This Amendment No. 1 is
filed to provide the required financial information.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
ANDROMEDIA, INC.
INDEX TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1999
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Consolidated Condensed Balance Sheet as of September 30, 1999 3
Unaudited Consolidated Condensed Statement of Operations for the nine
months ended September 30, 1999 and 1998 4
Unaudited Consolidated Condensed Statements of Cash Flows for the nine
months ended September 30, 1999 and 1998 5
Notes to Unaudited Consolidated Condensed Financial Statements 6
</TABLE>
2
<PAGE>
ANDROMEDIA, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEET
As of September 30, 1999
(in thousands)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,343
Accounts receivable, net 2,025
Prepaid expenses and other current assets 2,270
--------------
Total current assets 9,638
Property and equipment, net 2,365
Other long-term assets 1,495
--------------
Total assets $ 13,498
--------------
--------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 2,966
Deferred revenue 1,979
Current lease obligations 960
Other current liabilities 76
--------------
Total current liabilities 5,981
Long-term debt and lease obligations, less
current 489
--------------
Total liabilities 6,470
--------------
Mandatorily redeemable convertible preferred stock 30,048
--------------
Commitments
Stockholders' deficit:
Common Preferred stock 2,070
Common stock 4,220
Deferred stock compensation (1,613)
Accumulated other comprehensive loss (38)
Accumulated deficit (27,659)
--------------
Total stockholders' deficit (23,020)
--------------
Total liabilities and shareholders' deficit $ 13,498
--------------
--------------
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
3
<PAGE>
ANDROMEDIA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1999 and 1998
(in thousands except per share data)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revenue $ 4,953 $ 1,066
Cost of revenue 3,199 435
------------ ------------
Gross profit 1,754 631
Operating expenses:
Sales and marketing 7,892 3,409
Research and development 2,834 1,715
General and administrative 2,602 1,425
Amortization of intangible assets 758 -
Non-cash stock compensation 822 153
------------ ------------
Total operating expenses 14,908 6,702
------------ ------------
Loss from operations (13,154) (6,071)
Other income, net 23 85
------------ ------------
Net loss (13,131) (5,986)
------------ ------------
Preferred stock accretion (1,234) (52)
------------ ------------
Net loss attributable to common
stockholders $ (14,365) $ (6,038)
------------ ------------
------------ ------------
Net loss per share
Basic and diluted $(2.54) $(1.63)
Weighted average common shares
outstanding, basic and diluted 5,648 3,696
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
4
<PAGE>
ANDROMEDIA, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1999 and 1998
(in thousands except per share data)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (13,131) $ (5,986)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,285 175
Deferred stock compensation 831 153
Changes in operating assets and liabilites:
Accounts receivable, net (912) (386)
Prepaid expenses and other current assets (2,110) (167)
Accounts payable and accrued liabilities 1,753 436
Unearned revenue 1,234 554
------------ ------------
Net cash used in operating activities (11,050) (5,221)
------------ ------------
Cash flows from investing activities:
Capital expenditures (1,504) (982)
Foreign translation adjustment - -
------------ ------------
Net cash used in investing activities (1,504) (982)
------------ ------------
Cash flows from financing activities:
Net proceeds from issuance of convertible
redeemable preferred stock 15,216 9,937
Net proceeds from issuance of common stock 66 8
Proceeds from borrowings, net of payments 769 310
------------ ------------
Net cash provided by financing activities 16,051 10,255
Foreign translation adjustment (35) 13
------------ ------------
Increase in cash and cash equivalents 3,462 4,065
Cash and cash equivalents, beginning of period 1,881 696
------------ ------------
Cash and cash equivalents, end of period $ 5,343 $ 4,761
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
5
<PAGE>
ANDROMEDIA, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. BASIS OF PRESENTATION
The unaudited consolidated condensed financial statements included
herein have been prepared by the Company in accordance with generally
accepted accounting principles and reflect all adjustments, consisting
only of normal recurring adjustments which in the opinion of management
are necessary to fairly state the Company's financial position, results
of operations, and cash flows for the periods presented. The results of
operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for any subsequent
quarter or for the entire fiscal year ended December 31, 1999.
2. NET LOSS PER SHARE
Basic and diluted net loss per share are computed using the weighted
average number of common shares outstanding. The effect of
outstanding preferred stock, stock options, warrants, and common
stock subject to repurchase is excluded from the computation as
their inclusion would be anti-dilutive. Approximately 11.2 million
and 6.9 million preferred shares, as converted into common, were
excluded from the diluted calculation as of September 30, 1999 and
1998, respectively. For the nine months ended September 30, 1999 and
1998, 2.7 million and 1.4 million options and .2 million and .02
million warrants were excluded from the diluted calculations. The
average price of the options is $1.50 and $.27 for the nine months
ended September 30, 1999 and 1998, respectively. The average price
of warrants is $4.87 and $3.02 for the nine months ended September
30, 1999 and 1998, respectively.
3 SUBSEQUENT EVENT
On October 6, 1999, Andromedia entered into a definitive agreement to
merge with Macromedia, Inc. The agreement closed on December 1, 1999.
Under the terms of the agreement, each outstanding share of
Andromedia common stock and convertible preferred stock was exchanged
for newly issued shares of common stock of Macromedia. This resulted
in the issuance of approximately 5.2 million additional shares of
Macromedia's common stock. In addition, all outstanding stock options
of Andromedia were converted into the right to acquire Macromedia's
common stock at the same exchange ratio, with a corresponding
adjustment to the exercise price. The transaction was accounted for as
a pooling of interests.
6
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ANDROMEDIA, INC. PAGE
----
<S> <C>
Report of Independent Accountants 8
Consolidated Balance Sheets 9
Consolidated Statements of Operations 10
Consolidated Statements of Shareholders' Equity (Deficit) 11
Consolidated Statements of Cash Flows 12
Notes to Consolidated Financial Statements 13
</TABLE>
7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholders' equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Andromedia, Inc. at December 31, 1997 and 1998, and the
consolidated results of their operations and their cash flows for the three
years in the period ended December 31, 1998 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.
PricewaterhouseCoopers LLP
San Jose, California
August 10, 1999
8
<PAGE>
ANDROMEDIA, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION> AS OF
DECEMBER 31,
--------------------------------
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 696 $ 1,881
Accounts receivable, net 229 1,113
Prepaid expenses and other current assets 132 160
------------ ------------
Total current assets 1,057 3,154
Property and equipment, net 332 1,399
Intangible assets, net - 2,242
------------ ------------
$ 1,389 $ 6,795
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 184 $ 561
Accrued liabilities 187 729
Deferred revenue 70 745
Current portion of debt and lease obligations 67 290
------------ ------------
Total current liabilities 508 2,325
------------ ------------
Long-term debt and lease obligations less current 84 390
------------ ------------
Commitments (Note 5)
Mandatorily Redeemable Convertible Preferred Stock:
9,365,285 shares authorized; 1,627,269 and 4,928,689 shares
outstanding as of December 31, 1997 and 1998, respectively
(aggregate liquidation preference of $13,580, unaudited) 3,548 13,591
------------ ------------
SHAREHOLDERS' DEFICIT:
Convertible Preferred Stock: no par value; 744,910
shares authorized, issued and outstanding (aggregate
liquidation preference of $2,130) as of December 31, 1997
and 1998 2,070 2,070
Common Stock: no par value; 20,000,000 shares
authorized; 4,000,000 and 5,942,125 shares issued as of
December 31, 1997 and 1998, respectively 155 3,602
Deferred stock compensation - (651)
Accumulated deficit (4,976) (14,532)
------------ ------------
Total shareholders' deficit (2,751) (9,511)
------------ ------------
$ 1,389 $ 6,795
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
9
<PAGE>
ANDROMEDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Licenses $ - $ 413 $ 1,153
Services and maintenance - 36 816
------------ ------------ ------------
Total revenues - 449 1,969
------------ ------------ ------------
COST OF REVENUES:
Licenses - 25 69
Services and maintenance - 18 946
------------ ------------ ------------
Total cost of revenues - 43 1,015
------------ ------------ ------------
Gross profit - 406 954
OPERATING EXPENSES:
Sales and marketing 387 1,512 5,199
Research and development 884 1,446 2,337
General and administrative 365 857 2,106
Amortization of acquired intangible
assets - - 247
Non-cash stock compensation - - 287
Write off of acquired in process
technology - - 455
------------ ------------ ------------
Total operating expenses 1,636 3,815 10,631
------------ ------------ ------------
Loss from operations (1,636) (3,409) (9,677)
Interest income, net 10 59 121
------------ ------------ ------------
Net loss (1,626) (3,350) (9,556)
Preferred stock accretion - - (104)
Net loss attributable to common
stockholders $ (1,626) $ (3,350) $ (9,660)
------------ ------------ ------------
------------ ------------ ------------
NET LOSS PER SHARE:
Basic and diluted $ (0.49) $ (0.95) $ (2.35)
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares 3,344 3,531 4,105
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
10
<PAGE>
ANDROMEDIA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)
<TABLE>
<CAPTION>
CONVERTIBLE DEFERRED
PREFERRED STOCK COMMON STOCK STOCK ACCUMULATED
----------------- ------------------- COMPENSATION DEFICIT TOTAL
SHARES AMOUNT SHARES AMOUNT ------------ ----------- ---------
-------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock to founders - $ - 4,000,000 $ 109 $ - $ - $ 109
Issuance of Series A Convertible Preferred
Stock net of issuance costs 248,120 1,143 - - - - 1,143
Issuance of Series B Convertible Preferred
Stock net of issuance costs 365,211 682 - - - - 682
Net loss - - - - (1,626) (1,626)
-------- -------- --------- -------- ------------ ----------- ---------
Balance at December 31, 1996 613,331 1,825 4,000,000 109 - (1,626) 308
Issuance of Series B Convertible Preferred
Stock net of issuance costs 131,579 245 - - - - 245
Issuance of Common Stock Options - - - 46 - - 46
Net loss - - - - - (3,350) (3,350)
-------- -------- --------- -------- ------------ ----------- ---------
Balance at December 31, 1997 744,910 2,070 4,000,000 155 - (4,976) (2,751)
Issuance of Common Stock upon
acquisition of LikeMinds, Inc. - - 1,856,672 2,600 - - 2,600
Deferred stock compensation - - - 938 (938) - -
Amortization of deferred stock
compensation - - - 16 287 - 287
Exercise of stock options - - 85,453 (3) - - 16
Foreign translation adjustment - - - (104) - - (3)
Preferred Stock accretion - - - - - - (104)
Net loss - - - - - (9,556) (9,556)
-------- -------- --------- -------- ------------ ----------- ---------
Balance at December 31, 1998 744,910 $ 2,070 5,942,125 $3,602 $ (651) $(14,532) $ (9,511)
-------- -------- --------- -------- ------------ ----------- ---------
-------- -------- --------- -------- ------------ ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
ANDROMEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,626) $ (3,350) $ (9,556)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 36 106 547
Acquired in-process technology - - 455
Non-cash stock compensation - - 287
Other 85 46 8
Changes in assets and liabilities,
excluding effect of acquisition:
Accounts receivable, net - (229) (865)
Prepaid expenses and other current assets (51) (81) (28)
Other assets (62) 62 -
Accounts payable 200 (16) 76
Accrued liabilities 102 85 464
Deferred revenue - 70 675
------------ ------------ ------------
Net cash used in operating activities (1,316) (3,307) (7,937)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (135) (105) (1,072)
------------ ------------ ------------
Net cash used in investing activities (135) (105) (1,072)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Mandatorily
Redeemable Convertible Preferred
Stock, net - 3,548 9,927
Proceeds from issuance of Convertible
Preferred Stock, net 1,623 245 -
Proceeds from issuance of Common Stock 18 - 16
Proceeds from borrowings 202 - 425
Principal payments on borrowings (9) (68) (174)
------------ ------------ ------------
Net cash provided by financing
activities 1,834 3,725 10,194
------------ ------------ ------------
Net increase in cash and cash equivalents 383 313 1,185
Cash and cash equivalents at beginning
of period - 383 696
------------ ------------ ------------
Cash and cash equivalents at end of period $ 383 $ 696 $ 1,881
------------ ------------ ------------
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 1 $ 11 $ 43
NON-CASH FINANCING AND INVESTING
TRANSACTIONS:
Shares of Common Stock issued for
acquisition of LikeMinds - - 2,600
Property and equipment acquired under
capital leases 27 201 279
Conversion of Convertible note to Series A
Convertible Preferred Stock 202 - -
Convertible Preferred Stock Warrants issued - - 12
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
12
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Andromedia, Inc. (the "Company" or "Andromedia"), was incorporated in
California on January 10, 1996. The Company provides a comprehensive e-marketing
solution that combines advanced Web site monitoring, personalization and
analysis capabilities. The Company's Solution monitors and analyzes Web site
activity and visitor behavior data and, in real-time helps its customers improve
the effectiveness of their Internet marketing and selling efforts.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in the consolidation process.
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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company's revenues are derived from licenses for its software
products and related services, which include maintenance, training and
consulting.
Effective January 1, 1998, the Company adopted the provisions of the
American Institute of Certified Public Accountants (AICPA) Statement of Position
97-2 ("SOP 97-2"), "Software Revenue Recognition," as amended by Statement of
Position 98-4, "Deferral of the Effective Date of Certain Provisions of SOP
97-2."
For agreements which do not require significant installation and
configuration services, license revenues are recognized upon shipment of the
product if no significant vendor obligations remain and collection of the
resulting receivable is probable. Maintenance revenues consist of ongoing
support and unspecified product enhancements and are recognized ratably over the
maintenance period, which is typically one year. Revenues from consulting and
training are recognized as the services are performed. For the multiple-element
agreements, the revenue is allocated to each individual element based on the
vendor-specific objective evidence of its fair value.
13
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company's software licensing agreements may include more extensive
configuration, modification or customization services. Under such circumstances,
the combined license and service revenues are recognized under contract
accounting with labor days as the basis for determining percentage complete.
When reliable estimates of costs to be incurred are available, revenue is
recognized using the percentage of completion method based upon the level of
effort required to complete the project. The completed contract method is used
where reliable estimates to complete are not feasible.
Payments received in advance of revenue recognition are recorded as
deferred revenue. Revenue recognized in advance of billings is recorded as
unbilled receivable
Prior to the adoption of SOP 97-2, license revenue was recognized upon
shipment of products to customers, if no significant vendor obligations remained
and collection of the resulting receivable was probable.
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. At December
31, 1998 and 1997, approximately $200,000 and $275,000 of certificates of
deposits, the fair value of which approximate cost, are included in cash and
cash equivalents, respectively. The Company deposits cash and cash equivalents
with high credit quality financial institutions.
CONCENTRATION OF CREDIT RISK AND CERTAIN RISKS
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and cash equivalents and accounts
receivable. The Company's accounts receivable are derived from revenue earned
from customers located primarily in the United States. The Company performs
credit evaluations of its customers' financial condition and, generally,
requires no collateral from its customers. The Company maintains an allowance
for doubtful accounts receivable based upon the expected collectibility of
accounts receivable.
At December 31, 1997, one customer accounted for 20% of total accounts
receivable. At December 31, 1998, two customers accounted for 28% and 11% of
total accounts receivable.
The market in which the Company competes is characterized by changing
customer needs, frequent new software product introductions and rapidly evolving
industry standards. Significant technological change could adversely affect the
Company's operating results.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Software development costs are included in research and development and
are expensed as incurred. Software development costs incurred subsequent to
establishment of technological
14
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
feasibility are capitalized, if material. To date, the period between achieving
technological feasibility, which the Company has defined as the establishment of
a working model and the general availability of such software has been short,
and software development costs qualifying for capitalization have been
insignificant. Accordingly, the Company has not capitalized any software
development costs.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
generally 3 years, or the lease term, if shorter for leased assets.
INTANGIBLE ASSETS
Intangible assets include goodwill, patent and workforce associated
with business acquisitions and are being amortized over their weighted average
useful life of 2.5 years.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements
in accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). Under APB No. 25,
compensation expense is based on the difference, if any, between the fair value
of the Company's stock and the exercise price of the option on the measurement
date, which is typically the date of grant.
The Company accounts for options granted to non-employees under SFAS
No. 123. Under SFAS No. 123, options are recorded at their fair value on the
measurement date, which is typically the date of grant.
PREFERRED STOCK ACCRETION
Shares of Series C, D and E Mandatorily Redeemable Convertible
Preferred Stock are redeemable at the higher of original issuance price or fair
market value at or any time after February 1, 2004. Accordingly, the Company is
increasing the carrying amount of the instruments through periodic accretions,
using the interest method, so that the carrying amount will equal the mandatory
redemption amount on February 1, 2004. The Company recorded preferred stock
accretion of $104,000 for the year ended December 31, 1998.
15
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NET LOSS PER SHARE
Basic and diluted net loss per share are computed using the
weighted average number of common shares outstanding. Options, warrants and
preferred stock were not included in the computation of diluted net loss per
share because the effect would be antidilutive.
The following table sets forth the computation of basic and diluted
net loss per share for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
HISTORICAL:
Numerator:
Net loss $(1,626) $(3,350) $ (9,556)
Accretion of Series C and D Mandatorily
Redeemable Convertible
Preferred Stock - - (104)
---------- ---------- ----------
Net loss attributable to common stockholders $(1,626) $(3,350) $ (9,660)
---------- ---------- ----------
Denominator:
Weighted average shares 4,000 4,000 4,475
Weighted average unvested common shares subject
to repurchase (656) (469) (370)
---------- ---------- ----------
Total weighted average shares 3,344 3,531 4,105
---------- ---------- ----------
Net loss per share:
Basic and diluted $ (0.49) $ (0.95) $ (2.35)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
COMPREHENSIVE INCOME (LOSS)
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
and is effective for periods beginning after December 15, 1997. The Company
adopted this statement as of the first quarter of 1998. Comprehensive loss
approximated net loss for all periods presented.
FOREIGN CURRENCY TRANSLATION
Financial statements of the Company's foreign subsidiary are translated
into U.S. dollars at current rates, except that revenues, costs and expenses are
translated at weighted-average rates in
16
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
effect during the year. Translation adjustments for the periods presented were
not significant.
INCOME TAXES
The Company accounts for income taxes under the liability method, which
requires, among other things, that deferred income taxes be provided for
temporary differences between the tax basis of the Company's assets and
liabilities and their financial statement reported amounts. In addition,
deferred tax assets are recorded for the future tax benefits of utilizing net
operating losses and research and development credit carryforwards. A valuation
allowance is provided against deferred tax assets if it is more likely than not
that they will not be realized.
ADVERTISING EXPENSE
The Company expenses all advertising expenses as incurred. The
Company's advertising expenses were none in 1996 and $587,000 and $991,000 for
1997 and 1998, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivatives and Hedging Activities" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards of derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In July 1999, the Financial Accounting Standards Board
deferred the effective date of SFAS 133 until the first fiscal quarter ending
June 30, 2000. The Company will adopt SFAS 133 in its quarter ending June 30,
2000 and does not expect such adoption to have an impact on the Company's
results of operations, financial position or cash flows.
In December 1998, the AICPA, issued Statement of Position 98-9 ("SOP
98-9"), "Modification of SOP 97-2, `Software Revenue Recognition,' with respect
to certain transactions." SOP 98-9 amends SOP 97-2 to require that an entity
recognize revenue for multiple element arrangements by means of the "residual
method" when (1) there is vendor-specific objective evidence ("VSOE") of the
fair values of all the undelivered elements that are not accounted for by means
of long-term contract accounting, and (2) VSOE of fair value does not exist for
one or more of the delivered elements, and (3) all revenue recognition criteria
of SOP 97-2 has been met. SOP 98-9 will be effective for transactions that are
entered into in fiscal years beginning after March 15, 1999. Retroactive
application is prohibited. The Company does not expect SOP 98-9 to have a
material effect on its financial position, results of operations or cash flows.
17
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
2. BALANCE SHEET COMPONENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
-------- --------
<S> <C> <C>
ACCOUNTS RECEIVABLE, NET:
Accounts receivable $ 250 $1,212
Less: Allowance for doubtful accounts (21) (99)
-------- --------
$ 229 $1,113
-------- --------
-------- --------
PROPERTY AND EQUIPMENT, NET:
Computer equipment $ 427 $1,497
Furniture and fixtures 24 34
Leasehold improvements 23 309
-------- --------
474 1,840
Less: Accumulated depreciation and amortization (142) (441)
-------- --------
$ 332 $1,399
-------- --------
-------- --------
INTANGIBLE ASSETS, NET:
Patent $ - $133
Assembled workforce - 895
Goodwill - 1,461
-------- --------
- 2,489
Less: Accumulated amortization - (247)
-------- --------
$ - $2,242
-------- --------
-------- --------
ACCRUED LIABILITIES:
Payroll and related expenses $ 167 $ 495
Other 20 234
-------- --------
$ 187 $ 729
-------- --------
-------- --------
</TABLE>
Property and equipment includes $228,000 and $507,000 of computer
equipment under capital leases at December 31, 1997 and 1998, respectively.
Accumulated amortization of assets under capital leases totaled $45,000 and
$155,000 at December 31, 1997 and 1998, respectively.
3. ACQUISITION
On October 8, 1998, the Company acquired all the outstanding shares of
LikeMinds, Inc. ("LikeMinds") for 1,856,672 shares of common stock. The
transaction was accounted for under the purchase method. The shares of common
stock issued in connection with the LikeMinds acquisition were valued at $2.00
per share based on an independent appraisal obtained by the Company. The total
purchase price of approximately $2,980,000 (including $380,000 of liabilities
acquired and merger related expenses) was assigned, based on the independent
appraisal, to the fair value of the assets acquired including $36,000 to
tangible assets acquired, $455,000 to in-process research and development,
$1,028,000 to other identified intangibles and the remainder of $1,461,000 to
goodwill. The in-process research and development was expensed at the
acquisition date. Goodwill and other identified acquired intangibles are being
amortized over their weighted average life of approximately 2.5 years. The
Company's consolidated financial statement include the results of operations of
18
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
LikeMinds from the date of acquisition.
The value assigned to acquired in-process technology was determined by
identifying research projects in areas for which technological feasibility had
not been established as of the acquisition date. These include projects
(primarily major version upgrades) for the LikeMinds product line. The value was
determined by estimating the revenue contribution of each of these products and
the amount of the revenues attributable to the core/developed technology and the
in-process technology. The net cash flows were then discounted utilizing a
weighted average cost of capital of 26.5%. This discount rate takes into
consideration the inherent uncertainties surrounding the successful development
of the in-process research and development, the expected profitability levels of
such technology and the uncertainty of technological advances which could
potentially impact the estimates described above. The completion level of
acquired in process technology was estimated based on the time and related costs
incurred in development before the close of the acquisition in relation to
aggregate estimated costs of completing the project. The average percentage of
completion of the projects was 59% at the date of the acquisition. Revenues are
projected to be generated in 1999 for the versions in development at the
acquisition date. If these projects are not successfully developed, future
revenues and profitability of the Company may be adversely affected.
Additionally, the value of other intangible assets acquired may become impaired.
The following unaudited pro forma consolidated financial information
reflects the results of operations for the years ended December 31, 1997 and
1998, as if the acquisition had occurred on January 1, 1997 and 1998 and after
giving effect to purchase accounting adjustments but excluding the impact of
write off of acquired in-process technology. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
what operating results would have been had the acquisition actually taken place
on January 1, 1998 and may not be indicative of future operating results (in
thousands, except per share data).
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------- --------
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues $ 697 $ 2,537
Net loss (4,980) (10,111)
Net loss attributable to common stockholders (4,980) (10,215)
Net loss per share (basic and diluted) $ (0.94) $ (1.87)
Weighted average shares (basic and diluted) 5,270 5,468
</TABLE>
4 BORROWINGS
LINE OF CREDIT
In September 1997, the Company entered into a revolving line of credit
agreement with a bank which provided for borrowings of up to $500,000. In
conjunction with this line of credit, the Company issued warrants for 6,667
shares of Series C Convertible Preferred Stock. The line of credit expired in
December 1998.
19
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In February 1999, the Company entered into a revolving accounts
receivable based line of credit agreement with a bank which provides for
borrowings of up to $2,000,000. The line of credit requires compliance with
certain financial tests, prohibits payment of dividends, charges interest at the
bank's prime rate and expires in February 2000. Borrowings are collateralized by
all of the assets of the Company.
EQUIPMENT LINE OF CREDIT
The Company has a term loan outstanding which requires monthly
payments, is collateralized by all the assets of the Company and bears interest
at the bank's prime rate plus 0.5%. As of December 31, 1998, outstanding
borrowings under this loan aggregated $411,000.
The loan requires the Company to meet certain financial tests and to
comply with certain other covenants. The Company was in compliance with such
covenants at December 31, 1998.
Future principal payments under the loan as of December 31 ,1998 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C> <C>
1999 $170
2000 170
2001 71
-----
$411
-----
-----
</TABLE>
In February 1999, the Company entered into an equipment financing line
with a bank which provides for borrowings of up to $1,000,000. The equipment
loan is repayable in monthly installments through August 2002 and February 2003
and bears interest at the bank's prime rate plus 0.5%.
BRIDGE LOAN AGREEMENT
In February 1999, the Company entered into a bridge loan agreement (the
"1999 Bridge Loan") with a bank to borrow up to $2,400,000. The loan was due at
the earlier of May 31, 1999 or the receipt of the Series E Preferred Stock
financing. In February 1999, the Company borrowed $1,003,000 against the line.
Approximately $550,000 of principal amount, plus accrued interest, was
subsequently repaid in March 1999 and the remaining $453,000 of loan balance was
rolled into the aforementioned February 1999 equipment line of credit.
20
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. COMMITMENTS
LEASES
The Company leases office space and equipment under noncancelable
operating and capital leases with various expiration dates through December
2002. Rent expense for the years ended December 31, 1996, 1997 and 1998 was
$38,000, $60,000 and $230,000, respectively.
In February 1998, the Company entered into a new office lease agreement
for its San Francisco facility which expires in July 2003. The Company has the
right to request a five year extension at the end of the original lease term. As
of December 31, 1998, the Company had provided a $100,000 of letter of credit to
the landlord, as security for faithful performance of the lease. The balance of
the letter of credit will decline by $20,000 each year.
Future minimum lease payments under noncancelable operating and capital
leases as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1999 $ 137 $ 406
2000 99 330
2001 57 220
2002 - 225
2003 - 125
------- ---------
Total minimum lease payments 293 $1,306
Less: amount representing interest (24) ---------
------- ---------
Present value of capital lease obligations 269
Less: Current portion (120)
-------
Long-term portion of capital lease obligations $ 149
-------
-------
</TABLE>
6. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND CONVERTIBLE
PREFERRED STOCK
Mandatorily Redeemable Convertible Preferred Stock consists of the
following (in thousands, except share data):
<TABLE>
<CAPTION>
SHARES
OUTSTANDING AMOUNT
----------- -----------
<S> <C> <C>
Issuance of Series C Preferred Stock 1,627,269 $ 3,548
----------- -----------
Balance at December 31, 1997 1,627,269 3,548
Issuance of Series D Preferred Stock 3,301,420 9,927
Issuance of Series D Preferred Stock Warrants - 12
Preferred Stock accretion - 104
----------- -----------
Balance at December 31, 1998 4,928,689 13,591
----------- -----------
----------- -----------
</TABLE>
21
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has 248,120 shares of Series A Convertible Preferred Stock
and 496,790 shares of Series B Convertible Preferred Stock authorized, issued
and outstanding at December 31, 1997 and 1998.
The holders of Mandatorily Redeemable Convertible Preferred Stock and
Convertible Preferred Stock have various rights and preferences as follows:
REDEMPTION
Upon written notice of at least a majority of the holders of Series C,
Series D or Series E Convertible Preferred Stock, at any time subsequent to
February 1, 2004, the Company must redeem a specified percentage of Series C, D
and E Convertible Preferred Stock at a price equal to the greater of (i) $2.20
(Series C), $3.029 (Series D) and $3.533 (Series E) per share, respectively,
plus all declared but unpaid dividends on such shares or (ii) the per share fair
market value as determined by mutual agreement between a majority of the holders
of the applicable series of redeemable preferred and a majority of the Board of
Directors.
VOTING
Each share of Series A, B, C, D and E Convertible Preferred Stock has
voting rights equal to an equivalent number of shares of Common Stock into which
it is convertible and votes together as one class with the Common Stock.
As long as 300,000 shares of Series C Convertible Preferred Stock are
outstanding, the holders of the shares of such series voting together as a
separate series, are entitled to elect one member of the Board of Directors. So
long as there remain outstanding 540,000 shares of Series D Convertible
Preferred Stock, the holders of the Series D Convertible Preferred Stock, voting
together as a separate series, shall be entitled to elect two members of the
Board of Directors. So long as there remain outstanding 690,000 shares of Series
E Convertible Preferred Stock, the holders of Series E Convertible Preferred
Stock voting together as a separate series, shall be entitled to elect one
member of Board of Directors. The remaining directors shall be elected by the
holders of Common and Preferred Stock voting as a single class.
The Company shall not, without first obtaining the affirmative vote or
written consent of the holders of not less than (1) a majority of the
outstanding shares of Series C Convertible Preferred Stock so long as there
remain outstanding 300,000 shares of Series C Convertible Preferred Stock, (2)
67% of outstanding shares of the Series D Convertible Preferred Stock so long as
there remain outstanding 540,000 shares of Series D Convertible Preferred Stock
and (3) 67% of outstanding shares of Series E Convertible Preferred Stock so
long as there remain outstanding 690,000 shares of Series E Convertible
Preferred Stock: enter into any merger, consolidation, reorganization,
recapitalization or sale of assets transaction or series of transactions which
results in the shareholders of the Company not owning a majority of the
outstanding shares of the surviving corporation; enter into or otherwise
22
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
become a party to any agreement whereby any shareholder or shareholders of
the Company shall transfer capital stock of the Company to an independent
third party or a group of independent third parties pursuant to which such
parties acquire capital stock of the Company possessing the voting power to
elect a majority of the Company's board of directors; declare any dividends
or distributions on any shares of capital stock of the Company, but this
restriction shall not apply to the repurchase of shares of Common Stock
pursuant to repurchase agreements or prevent the Company from entering into
an agreement, directly or indirectly with officers, employees, stockholders
or directors of the Company, unless approved by a majority of the Company's
disinterested directors on the Board of Directors; enter into any financial
commitments in excess of $500,000; dismiss or hire the Company's Chief
Financial Officer or other equivalent senior level financial officer; or
approve the annual budget of the Company.
DIVIDENDS
Holders of Series A, B, C, D and E Convertible Preferred Stock are
entitled to receive noncumulative dividends at the per annum rate of $0.24,
$0.10, $0.11, $0.15 and $0.18 per share, respectively, when and if declared by
the Board of Directors. The holders of Series A, B, C, D and E Convertible
Preferred Stock will also be entitled to participate in dividends on Common
Stock, when and if declared by the Board of Directors, based on the number of
shares of Common Stock held on an as-if converted basis. No dividends on
Convertible Preferred Stock or Common Stock have been declared by the Board from
inception through December 31, 1998.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the
Company, including a merger, acquisition or sale of assets where the beneficial
owners of the Company's Common Stock and Convertible Preferred Stock own less
than 50% of the resulting voting power of the surviving entity, the holders of
Series A, B, C, D and E Convertible Preferred Stock are entitled to receive an
amount of $4.78, $1.90, $2.20, $3.029 and $3.533 per share, respectively, plus
any declared but unpaid dividends prior to and in preference to any distribution
to the holders of Common Stock. The remaining assets, if any, shall be
distributed among the holders of Series C, D and E Convertible Preferred Stock
and Common Stock in the same manner as if all the shares of Series C, D and E
Convertible Preferred Stock had been converted into Common Stock until the
aggregate amount received by the holders of Series C, D and E Convertible
Preferred Stock is an amount equal to $4.40, $4.81 and $5.73 per share,
respectively; thereafter, any such of Series C, D and E Convertible Preferred
Stock shall have no further right to share in any remaining assets and surplus
fund of the Company. Should the Company's legally available assets be
insufficient to satisfy the liquidation preferences, the funds will be
distributed among the holders of Series A, B, C, D and E Convertible Preferred
Stock in proportion to the full preferential amount each such holder is
otherwise entitled to receive.
23
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONVERSION
Each share of Series A, B, C, D and E Convertible Preferred Stock is
convertible into Common Stock, at the option of the holder. Series A
Convertible Preferred Stock converts on a ratio of one share of Preferred
Stock to 4 shares of Common Stock subject to adjustment for dilution.
Series B, C and E Convertible Preferred Stock convert on a ratio of one share
of Preferred Stock to one share of Common Stock, subject to adjustment for
dilution. Each share of Series D Convertible Preferred Stock converts on a
ratio of 1 to 1.16 subject to adjustment for dilution. Each share of Series
A, B, C, D and E Convertible Preferred Stock automatically converts into the
number of shares of Common Stock at the then effective conversion ratio upon:
(i) the closing of a public offering of Common Stock at a per share price of
at least $7.10 per share with gross proceeds of at least $20,000,000, or
(ii) the consent of the holders of at least 67% of the shares of such series
of Preferred Stock, voting as a separate class. The conversion ratio of each
share of Series E Convertible Preferred Stock is subject to change in the
event of failure of the Company to achieve certain predefined revenue
milestones.
At December 31, 1998, the Company reserved an aggregate of 6,949,222
shares of Common Stock for issuance upon the conversion of Series A, B, C and D
Convertible Preferred Stock, respectively.
WARRANTS FOR MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
In 1998, in connection with securing a bridge loan, the Company issued
warrants to purchase 12,417 shares of Series D Convertible Preferred Stock at
$3.03 per share, which expire in February 2003. The Company recorded the bridge
loan at a discount of approximately $12,000 which discount was allocated to the
warrants and amortized as interest expense in 1998. The fair value of the
warrants was estimated on the date of grant using the Black-Scholes model.
7. COMMON STOCK
The Company's articles of incorporation authorize the Company to issue
20,000,000 shares of no par value Common Stock. Upon incorporation of the
Company in January 1996, the Company issued 4,000,000 shares of Common Stock to
three founders. Such shares are subject to the Company's right of first refusal
and a portion of which are also subject to a right of repurchase by the Company.
Approximately 353,820 shares issued to employees of LikeMinds, Inc. are also
subject to the Company's right of repurchase, which right lapses over an
eighteen month period. At December 31, 1998, approximately 541,820 shares were
subject to the Company's right to repurchase.
24
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
8. STOCK OPTION PLANS
1996 STOCK OPTION PLAN
The 1996 Stock Plan (the "Plan") provides for the issuance of up to
500,000 shares of Common Stock in connection with incentive and non-statutory
stock option awards granted to employees, directors and consultants to the
Company. Stock purchase rights may also be granted under the Plan. Options must
be issued at prices not less than 100 percent and 85 percent of the estimated
fair value of the stock on the date of grant for incentive and non-statutory
options, respectively, and are exercisable for periods not exceeding ten years
from the date of grant. Options granted to shareholders who own greater than 10
percent of the outstanding stock at the time of grant are exercisable for
periods not exceeding five years from the date of grant and must be issued at
prices not less than 110 percent of the estimated fair value at the date of
grant. Options granted under the Plan vest ratably over four years following the
date of grant, although the Board of Directors may issue options that vest over
shorter periods.
1997 STOCK OPTION PLAN
The Company adopted the 1997 Stock Option Plan in May 1997 and amended
it in April 1998. The terms under this plan are consistent with the 1996 Stock
Option Plan except for the vesting period. Under the 1997 Stock Option Plan, any
option granted shall be exercisable according to the terms determined by the
Board of Directors, but in no case at a rate of less than 20% per year over five
years from the date the option is granted. To date, options granted generally
vest 25% after one year of service and monthly for the three years thereafter.
The Company has reserved 3,270,000 shares of Common Stock for issuance under
this Plan.
The following is a summary of stock option activity under the 1996 and 1997
stock option plans:
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE
AVAILABLE OPTIONS EXERCISE
FOR GRANT OUTSTANDING PRICE
--------- ----------- ---------
<S> <C> <C> <C>
Shares authorized 500,000 - $ -
Options granted (489,072) 489,072 0.11
--------- ----------- ---------
Outstanding at December 31, 1996 10,928 489,072 0.11
Additional shares authorized 750,000 - -
Options granted (675,822) 675,822 0.26
Options canceled 16,438 (16,438) 0.19
--------- ----------- ---------
Outstanding at December 31, 1997 101,544 1,148,456 0.20
Additional shares authorized 1,320,000 - -
Options granted (1,368,449) 1,368,449 0.75
Options exercised - (85,453) 0.19
Options canceled 385,050 (385,050) 0.32
--------- ----------- ---------
Outstanding at December 31, 1998 438,145 2,046,402 0.54
</TABLE>
25
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT OPTIONS EXERCISABLE AT
DECEMBER 31, 1998 DECEMBER 31, 1998
----------------------------------------- --------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
NUMBER LIFE EXERCISE NUMBER EXERCISE
OUTSTANDING (IN YEARS ) PRICE OUTSTANDING PRICE
RANGE OF EXERCISE PRICE ----------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
$0.04-- $0.18 271,479 7.28 $0.06 185,146 $0.06
0.27-- 0.43 633,577 8.67 0.25 259,163 0.25
0.93-- 1.43 1,141,346 9.65 0.82 33,627 0.69
--------- -------
2,046,402 9.03 $0.54 477,936 $0.21
--------- -------
--------- -------
</TABLE>
The Company accounts for employee and board of director stock options
in accordance with the provisions of APB No. 25 and complies with the disclosure
provisions of SFAS No. 123.
Under APB No. 25, compensation expense is recognized based on the
amount by which the fair value of the underlying common stock exceeds the
exercise price of the stock options at the measurement date, which in the case
of employee stock options is typically the date of grant. For financial
reporting purposes, the Company has determined that the deemed fair market value
on the date of grant of certain employee stock options was in excess of the
exercise price of the options. This amount is recorded as deferred compensation
and is classified as a reduction of stockholders' equity and is amortized as a
charge to operations over the vesting period of the applicable options. The
vesting period is generally four years. The fair value per share used to
calculate deferred compensation was derived by reference to the preferred stock
values and the Company's initial public offering price range. Consequently, the
Company recorded deferred stock compensation of $938,000 during the year ended
December 31, 1998. Amortization recognized for the year ended December 31, 1998
and totaled $287,000.
The weighted average fair values of the options granted in 1996, 1997
and 1998 were $0.03, $0.06 and $0.81, respectively.
Had compensation cost for option grants to employees been determined
consistent with SFAS No. 123, the Company's net loss would have been as follows
(in thousands, except per share data):
26
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Pro forma net loss $ 1,633 $3,376 $ 10,200
Pro forma net loss attributable to common
stockholders 1,633 3,376 10,304
Pro forma net loss per share, basic and diluted $ (0.49) $(0.96) $ (2.51)
</TABLE>
The above proforma disclosures are not necessarily representative of
the effects on reported income or loss for future years as additional grants are
made each year and options vest over several years.
The fair value of each option grant was estimated on the date of grant
using the minimum value options pricing model with the following weighted
average assumptions by year:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997 1998
-------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate 5.9% 5.4% 5.1%
Expected life 5 years 5 years 5 years
Dividends - - -
</TABLE>
Because the Company does not have actively traded equity securities,
volatility is not considered in determining the value of options granted to
employees.
9. INCOME TAXES
No domestic or foreign provision or benefit for income taxes has been
recognized for any of the periods presented as the Company has incurred net
operating losses and has no carryback potential.
The difference between the amount of income tax benefit recorded of
zero and the amount of income tax benefit calculated using the federal statutory
rate of 34% is primarily due to net operating losses being fully offset by a
valuation allowance.
During the years ended December 31, 1996, 1997 and 1998, substantially
all of the losses incurred by the Company related to its U.S. operations.
27
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Deferred tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 1,500 $ 4,850
Accruals and reserves 23 73
Research tax credits 150 455
Capitalized start-up costs 250 190
-------- --------
1,923 5,568
Valuation allowance (1,923) (5,568)
-------- --------
$ - $ -
-------- --------
-------- --------
</TABLE>
Management believes that, based on a number of factors including the
lack of a long history of profits and that the Company operates in a developing
market that is characterized by rapidly changing technology, it is more likely
than not that the deferred tax assets will not be utilized, such that a full
valuation allowance has been recorded.
At December 31, 1998, the Company had approximately $11,900,000 of
federal operating loss carryforwards, available to offset future taxable income
which expire in varying amounts through 2018. At December 31, 1998, the Company
had approximately $257,000 and $198,000 of federal and state research tax
credits which expire in varying amounts through 2013. Under the Tax Reform Act
of 1986, the amounts of and benefits from net operating loss carryforwards may
be impaired or limited in certain circumstances including as a result of a
cumulative ownership change of more than 50%, as defined, over a three year
period. The issuance of the Company's convertible preferred securities during
1996, 1997 and 1998 may have resulted in a limitation on utilization of such net
operating loss carryforwards.
10. SIGNIFICANT CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company has adopted the Financial Accounting Standards Board's
Statements of Financial Accounting Standards No. 131, or SFAS 131, "Disclosure
about Segments of an Enterprise and Related Information."
The Company has one reportable segment. Management uses one measurement
of profitability for its business. The Company markets its products and related
services to customers in many industries in the United States and Europe.
Revenue by geographic region is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
United States $ - $449 $1,813
Europe - - 156
------ ------ ------
$ - $449 $1,969
------ ------ ------
------ ------ ------
</TABLE>
28
<PAGE>
ANDROMEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Two customers individually accounted for 11% and 10% of revenues in
1997. One customer accounted for 13% of revenues in 1998.
11 SUBSEQUENT EVENTS (UNAUDITED)
During the quarter ended March 31, 1999, in connection with securing
the 1999 Bridge Loan agreement, the Company issued warrants to purchase 18,159
shares of Series E Convertible Preferred Stock at $3.53 per share to the lending
institution. These warrants will expire in the year 2009. The Company recorded
the bridge loan at a discount of approximately $60,000 which discount was
allocated to the warrants and amortized as interest expense during the six month
period ended June 30, 1999. The fair value of the warrants was estimated on the
date of grant using the Black-Scholes model with expected volatility of 70%,
risk-free interest rate of 5.5% and expected life of 10 years.
In March 1999, the Company issued warrants to purchase 90,000 shares of
Series C Convertible Preferred Stock at $2.20 per share to a vendor for services
to be rendered. These warrants will expire in March 2004. The fair value of the
warrants of $300,000 was estimated based on the value of the services to be
rendered by such vendor which also approximated the fair value under the
Black-Scholes model, with expected volatility of 70%, risk free interest rate of
5.5% and expected life of 5 years.
On August 12, 1999, the Company entered into a five year noncancelable
lease agreement. Aggregate future minimum payments under this lease total to
approximately $5,170,000. In connection with this agreement, the Company issued
a warrant to purchase 21,000 shares of the Company's Common Stock at an exercise
price of $21.43 per share. This warrant expires on August 12, 2001.
Additionally, the Company is required to deposit cash or maintain a letter of
credit in the amount of $1 million.
29
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
Pro Forma Combined Condensed Financial Information (Unaudited)
The following unaudited Pro Forma Combined Condensed Financial
Statements assume a business combination between Macromedia and Andromedia
accounted for on a pooling of interests basis. The Pro Forma Combined Condensed
Financial Statements are based on the historical financial statements and the
notes thereto of Macromedia included in the annual report on Form 10-K for the
years ended March 31, 1999, 1998, and 1997, the quarterly report on form 10-Q
for the quarter ended September 30, 1999, and the historical financial
statements and the notes thereto of Andromedia included herein.
Macromedia and Andromedia incurred direct transaction costs of
approximately $3.8 million associated with the Merger, all of which were
charged to operations during the quarter ended December 31, 1999. There can
be no assurance that Macromedia will not incur additional charges in
subsequent quarters to reflect costs associated with the Merger or that
management will be successful in its efforts to integrate the operations of
the two companies.
These Pro Forma Combined Condensed Financial Statements should be read
in conjunction with the historical condensed financial statements and the
related notes thereto of Macromedia and the financial statements and the notes
thereto of Andromedia included or incorporated by reference.
30
<PAGE>
MACROMEDIA, INC.
INDEX TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Balance Sheet as of September 30, 1999 32
Statement of Operations for the six months ended September 30, 33
1999
Statement of Operations for the year ended March 31, 1999 34
Statement of Operations for the year ended March 31, 1998 35
Statement of Operations for the year ended March 31, 1997 36
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements 37
</TABLE>
31
<PAGE>
MACROMEDIA, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
As of September 30, 1999
(in thousands)
<TABLE>
<CAPTION>
Historical
------------------------- Pro Forma Pro Forma
Macromedia Andromedia Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 35,132 $ 5,343 - $ 40,475
Short-term investments 92,558 - - 92,558
Accounts receivable, net 18,647 2,025 - 20,672
Inventory, net 1,139 - - 1,139
Prepaid expenses and other
current assets 8,590 2,270 (1,040) 9,820
Deferred tax assets, short-term 6,899 - - 6,899
---------- ---------- ----------- ----------
Total current assets 162,965 9,638 (1,040) 171,563
Land and building, net 19,302 - - 19,302
Other fixed assets, net 28,519 2,365 - 30,884
Other long-term assets 10,507 1,495 - 12,002
---------- ---------- ----------- ----------
Total assets $ 221,293 $ 13,498 (1,040) $ 233,751
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,853 $ 426 - $ 4,279
Accrued liabilities 35,910 3,576 2,756 42,242
Unearned revenue 6,605 1,979 - 8,584
---------- ---------- ----------- ----------
Total current liabilities 46,368 5,981 2,756 55,105
Deferred tax liabilities, long-term 222 - - 222
Other long-term liabilities - 489 - 489
---------- ---------- ----------- ----------
Total liabilities 46,590 6,470 2,756 55,816
Mandatorily redeemable convertible
preferred stock - 30,048 - 30,048
Stockholders' equity:
Preferred stock - 1 (1) -
Common stock 44 6 (4) 46
Treasury stock, at cost (33,649) - - (33,649)
Additional paid-in-capital 212,338 6,283 5 218,626
Deferred compensation (771) (1,613) - (2,384)
Accumulated other comprehensive
income (loss) 447 (38) - 409
Accumulated deficit (3,706) (27,659) (3,796) (35,161)
---------- ---------- ----------- ----------
Total stockholders' equity (deficit) 174,703 (23,020) (3,796) 147,887
---------- ---------- ----------- ----------
Total liabilities and
stockholders' equity (deficit) $ 221,293 $ 13,498 (1,040) $ 233,751
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma combined condensed
financial statements.
32
<PAGE>
MACROMEDIA, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
For the Six Months Ended September 30, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
Historical
------------------------- Pro Forma Pro Forma
Macromedia Andromedia Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $ 107,986 $ 3,875 - $ 111,861
Cost of revenues 10,620 2,379 - 12,999
---------- ---------- ----------
Gross profit 97,366 1,496 - 98,862
---------- ---------- ----------
Operating expenses:
Sales and marketing 42,942 5,930 - 48,872
Research and development 26,253 2,074 - 28,327
General and administrative 9,367 1,724 - 11,091
Acquisition related expenses 5,260 - - 5,260
Amortization of intangible assets - 509 - 509
Non-cash stock compensation - 650 - 650
---------- ---------- ----------
Total operating expenses 83,822 10,887 - 94,709
---------- ---------- ----------
Operating income (loss) 13,544 (9,391) - 4,153
Other income, net 2,305 86 - 2,391
---------- ---------- ----------
Income (loss) before taxes 15,849 (9,305) - 6,544
Provision for income taxes 4,592 - - 4,592
---------- ---------- ----------
Net income (loss) $ 11,257 $ (9,305) - $ 1,952
Preferred stock accretion - (1,181) - (1,181)
---------- ---------- ----------
Net income (loss) attributable to common
shareholders $ 11,257 $ (10,486) - $ 771
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per share
Basic $0.27 $(1.84) - $0.02
Diluted $0.23 $(1.84) - $0.02
Weighted average common share
outstanding
Basic 41,045 5,695 - 42,451
Diluted 48,012 5,695 - 49,417
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
33
<PAGE>
MACROMEDIA, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the year ended March 31, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
Historical
------------------------- Pro Forma Pro Forma
Macromedia Andromedia Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $ 151,274 $ 1,969 - $ 153,243
Cost of revenues 14,610 1,015 - 15,625
---------- ---------- ----------
Gross profit 136,664 954 - 137,618
---------- ---------- ----------
Operating expenses:
Sales and marketing 67,954 5,199 - 73,153
Research and development 39,214 2,337 - 41,551
General and administrative 14,634 2,106 - 16,740
Acquisition related expenses - 455 455
Amortization of intangible assets - 247 247
Non-cash stock compensation - 287 287
---------- ---------- ----------
Total operating expenses 121,802 10,631 - 132,433
---------- ---------- ----------
Operating income (loss) 14,862 (9,677) - 5,185
Other income, net 4,916 121 5,037
---------- ---------- ----------
Income (loss) before taxes 19,778 (9,556) - 10,222
Provision for income taxes 7,612 - - 7,612
---------- ---------- ----------
Net income (loss) 12,166 (9,556) - 2,610
Preferred stock accretion - (104) - (104)
---------- ---------- ----------
Net income (loss) attributable to common
shareholders $ 12,166 $ (9,660) - $ 2,506
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per share
Basic $0.31 $ (2.35) - $ 0.06
Diluted $0.27 $ (2.35) - $ 0.05
Weighted average common shares
oustanding
Basic 39,150 4,105 - 40,163
Diluted 45,801 4,105 - 46,814
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
34
<PAGE>
MACROMEDIA, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the year ended March 31, 1998
(in thousands except per share data)
<TABLE>
<CAPTION>
Historical
------------------------- Pro Forma Pro Forma
Macromedia Andromedia Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $ 113,354 $ 449 - $ 113,803
Cost of revenues 15,064 43 - 15,107
---------- ---------- ----------
Gross profit 98,290 406 - 98,696
---------- ---------- ----------
Operating expenses:
Sales and marketing 58,845 1,512 - 60,357
Research and development 35,407 1,446 - 36,853
General and administrative 12,336 857 - 13,193
Merger, relocation, and reorganization 7,658 - - 7,658
---------- ---------- ----------
Total operating expenses 114,246 3,815 - 118,061
---------- ---------- ----------
Operating loss (15,956) (3,409) - (19,365)
---------- ---------- ----------
Other income, net 4,556 59 4,615
---------- ---------- ----------
Loss before taxes (11,400) (3,350) - (14,750)
Provision for income taxes 828 - - 828
---------- ---------- ----------
Net loss $ (12,228) $ (3,350) - $ (15,578)
---------- ---------- ----------
---------- ---------- ----------
Net loss per share
Basic $(0.32) $(0.95) - $(0.40)
Diluted $(0.32) $(0.95) - $(0.40)
Weighted average common shares
oustanding
Basic 38,122 3,531 - 38,993
Diluted 38,122 3,531 - 38,993
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
35
<PAGE>
MACROMEDIA, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the year ended March 31, 1997
(in thousands except per share data)
<TABLE>
<CAPTION>
Historical
------------------------- Pro Forma Pro Forma
Macromedia Andromedia Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $ 108,954 $ - - $ 108,954
Cost of revenues 24,085 - - 24,085
---------- ---------- ----------
Gross profit 84,869 - - 84,869
Operating Expenses:
Sales and marketing 60,814 387 - 61,201
Research and development 32,159 884 - 33,043
General and administrative 9,114 365 - 9,479
Merger, relocation, and reorganization 350 - - 350
---------- ---------- ----------
Total operating expenses 102,437 1,636 - 104,073
---------- ---------- ----------
Operating loss (17,568) (1,636) - (19,204)
Other income, net 5,300 10 5,310
---------- ---------- ----------
Loss before taxes (12,268) (1,626) - (13,894)
Benefit for income taxes 3,477 - - 3,477
---------- ---------- ----------
Net loss $ (8,791) $ (1,626) - $ (10,417)
---------- ---------- ----------
---------- ---------- ----------
Net loss per share
Basic $(0.23) $(0.49) - $(0.27)
Diluted $(0.23) $(0.49) - $(0.27)
Weighted average common shares outstanding
Basic 37,491 3,344 - 38,316
Diluted 37,491 3,344 - 38,316
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
36
<PAGE>
MACROMEDIA, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1 PERIODS COMBINED
Macromedia, Inc.'s ("Macromedia") fiscal year ends on March 31.
Andromedia's year ends on December 31. The accompanying unaudited pro
forma combined statement of operations information gives effect to the
merger of Macromedia and Andromedia as if such merger occurred as of
the beginning of the earliest year presented. The pro forma combined
statement of operations for the year ended March 31, 1999 reflects the
results of operations of Macromedia for the fiscal year ended March 31,
1999 combined with the results of operations of Andromedia for the year
ended December 31, 1998. The pro forma combined statements of
operations for the years ended March 31, 1998 and 1997 reflect the
results of operations of Macromedia for the fiscal years ended March
31, 1998 and 1997 with the results of operations of Andromedia for the
years ended December 31, 1997 and 1996. The pro forma combined
statement of operations for the six-months ended September 30, 1999
reflect the results of operations of Macromedia combined with the
results of Andromedia for the six-months ended September 30, 1999. The
financial information of Macromedia has been derived from Macromedia's
audited consolidated financial statements for the years ended March 31,
1999, 1998 and 1997, and Macromedia's unaudited consolidated financial
statements for the six-month period ended September 30, 1999, which are
included in the Company's September 30, 1999 Form 10-Q and should be
read in conjunction with such consolidated financial statements and the
notes thereto. The financial information for Andromedia has been
derived from Andromedia's audited financial statements for the years
ended December 31, 1998, 1997 and 1996, and unaudited financial
statements for the six-month period ended September 30, 1999.
The pro forma combined balance sheet as of September 30, 1999,
combines the assets, liabilities and stockholders' equity of
Macromedia with those of Andromedia as if Andromedia had been
acquired on September 30, 1999. The pro forma adjustments reflect
accruals for merger costs incurred and the write-off of assets
previously capitalized by Andromedia in anticipation of a public
offering. The pro forma information is not necessarily indicative of
the operating results or financial position that would have occurred
had the Merger been consummated at the beginning of the period
presented, nor is it necessarily indicative of future operating
results or financial position.
The operating results of Andromedia for the three-months ended March
31, 1999 (revenue and net loss of $1.1 million and $3.8 million,
respectively) are excluded in the unaudited pro forma statements of
operations for both fiscal years 2000 and 1999.
37
<PAGE>
2 BASIS OF PRESENTATION
PRO FORMA BASIS OF PRESENTATION. The unaudited pro forma combined
condensed financial statements reflect the issuance of 0.2467 of a
share of Macromedia common stock in exchange for each share of
Andromedia common stock. In addition, Macromedia issued options to
purchase 0.2467 of a share of Macromedia common stock in exchange for
each outstanding Andromedia option. The actual number of shares of
Macromedia common stock and stock options to be issued in the Merger
was determined at the effective time based on the exchange ratio and
the number of shares of Andromedia common stock and Andromedia options
then outstanding. The proforma statements also reflect Andromedia as a
Delaware corporation, consistent with Macromedia.
As of December 1, 1999, date of consummation of the merger, assuming
conversion of the preferred shares to common shares, Andromedia had
outstanding common stock of 17.6 million shares, and outstanding
warrants and options to purchase 0.2 million and 3.4 million shares,
respectively, of Andromedia common stock. Based on the exchange ratio
as described above, as of December 1, 1999, Macromedia issued
approximately 4.3 shares of Macromedia common stock in exchange for
all outstanding shares of Andromedia common stock. At this time,
Macromedia also issued warrants and options to purchase approximately
0.03 million and 0.8 million shares, respectively, of Macromedia
common stock in exchange for all outstanding Andromedia warrants
and options.
MERGER TRANSACTION COSTS. In conjunction with the merger, the
Company incurred direct merger-related expenses of approximately
$1.5 million, including investment banker fees, legal and other
professional fees, and severance. The Company also incurred costs of
$2.3 million relating to Andromedia's public offering process, which
was terminated upon the merger with Macromedia. A portion of these
costs were capitalized by Andromedia as of September 30, 1999, and
were therefore written off. These costs included investment banker
fees, legal and other professional fees, and printing costs. These
merger costs were charged to operations during the quarter ended
December 31, 1999. Following the Merger, the Combined Company may
incur additional costs associated with integrating the two companies.
These costs have not been reflected on the pro forma statement of
operations.
38
<PAGE>
3 PRO FORMA LOSS PER SHARE
Pro Forma Net Income per Share
The following table reconciles the number of shares used in the pro
forma earnings per share computations to the numbers set forth in
Macromedia's historical statements of operations (in thousands, except
the Exchange Ratio and per share amounts):
<TABLE>
<CAPTION>
Six months Year Ended Year Ended Year ended
ended September 30, March 31, March 31, March 31,
1999 1999 1998 1997
------------------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Shares used in basic per share computation:
Historical Andromedia
Weighted average
shares of common
stock outstanding 5,695 4,105 3,531 3,344
Exchange ratio 0.2467 0.2467 0.2467 0.2467
------------------- ---------- --------- ---------
1,405 1,013 871 825
Historical Macromedia 41,045 39,150 38,122 37,491
------------------- ---------- --------- ---------
Pro forma combined 42,451 40,163 38,993 38,316
------------------- ---------- --------- ---------
------------------- ---------- --------- ---------
Shares used in diluted per
share computation:
Historical Andromedia
Weighted average
shares of common
stock outstanding 5,695 4,105 3,531 3,344
Exchange ratio 0.2467 0.2467 0.2467 0.2467
------------------- ---------- --------- ---------
1,405 1,013 871 825
Historical Macromedia 48,012 45,801 38,122 37,491
------------------- ---------- --------- ---------
Pro forma combined 49,417 46,814 38,993 38,316
------------------- ---------- --------- ---------
------------------- ---------- --------- ---------
</TABLE>
39
<PAGE>
4 CONFORMING AND PRO FORMA ADJUSTMENTS
There were no adjustments required to conform the accounting policies
of Macromedia and Andromedia. Certain amounts for Andromedia have been
reclassified to conform with Macromedia's financial statement
presentation. There have been no other significant intercompany
transactions.
40
<PAGE>
(c) EXHIBITS
The following exhibits are filed herewith:
2.01 Agreement and Plan of Reorganization by and among Macromedia,
Inc. and Andromedia, Inc. dated October 6, 1999 as amended November
23, 1999 (previously filed with the Form 8-K filed on October 15,
1999).
23.01 Consent of PricewaterhouseCoopers, LLP, Independent Auditors
41
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this amendment to report to be signed on its
behalf by the undersigned thereunto duly authorized.
MACROMEDIA, INC.
DATE: February 14, 2000 By:
/s/ Elizabeth Nelson
-------------------------------
Elizabeth Nelson
Senior Vice President and
Chief Financial Officer
42
<PAGE>
Exhibit 23.01
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Andromedia, Inc.:
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-92233, 333-89247, 333-64141, 333-39285,
333-24713, and 333-08435) of Macromedia, Inc. of our report dated August 10,
1999, relating to the consolidated financial statements of Andromedia, Inc.,
which appears in the Current Report on Form 8-K/A of Macromedia, Inc. dated
February 14, 2000.
PricewaterhouseCoopers LLP
San Jose, California
February 11, 2000
- -------------
43
